“You can’t hurry love / No, you just have to wait / She said love don’t come easy / It’s a game of give and take.
You can’t hurry love / No, you just have to wait / You got to trust, give it time / No matter how long it takes.”
Setting up operations in a new country can be a challenging task for multinational companies. This is no exception for a German auto maker who is re-establishing its manufacturing presence in the United States. In what has developed into a solid case study about foreign market expansion, the eyes of the American (heck, the global) business world have been focusing in on how Volkswagen is progressing with developing its North American car business.
Those of you who are following this story need no introduction to the topic, the rest of you may either want to skip this article or google the search terms “VW+Chattanooga+UAW” in order to get up to speed.
Dozens of reports and news stories have been written about the economic impact of Volkswagen’s investment in Tennessee and how the company’s German business model is being adapted to and applied in the U.S. While I take a big interest in the business side of this development, the purpose of this blog post is to analyze how the aspect of culture is making VW’s American Dream somewhat unpleasant and twitchy.
In fact, culture is at the very core of what has turned into the biggest challenge for Volkswagen’s U.S. expansion strategy.
What’s going on in the Tennessee Valley?
First, let’s take a quick look at the actors in this cross-cultural saga:
The company: Volkswagen AG is Europe’s biggest car maker and one of the largest employers in Germany. In the spring of 2011 VW began production at its newly built manufacturing plant in Chattanooga, TN – 23 years after it closed down a plant in Westmoreland, PA which had failed because of quality, economic, and labor issues. VW management have made the North American market one of the top priorities in their “Mach18″ strategy to become the number one car company by 2018. A competitive Chattanooga plant is one of the cornerstones of this strategy.
The market: The Southern United States, in this case the State of Tennessee, the City of Chattanooga, and Hamilton County have a very unique history – both politically and economically. Located in the Southeast, Tennessee was heavily involved in the Civil War and the Chattanooga area was an important battle ground during this difficult period in U.S. history. Despite the demise of the post-CW South, Chattanooga was one of the few Southern cities which was able to develop a fairly diverse economy which included some industry and manufacturing in the mix. Nothing compared to Northern, Steel Belt regions but more diverse than most other cities throughout the mostly agricultural, pre-industrial South. At its heart, the Tennessee Valley is a rather conservative region and, up until the 2000s, was a fairly isolated area in terms of cultural influences. Populated mainly by Scotch-Irish settlers and their descendents, many East Tennesseans kept much of their forefathers’ clan culture alive.
The German labor side: Within the huge VW AG corporation organized labor has a strong and powerful voice. This is part of VW’s DNA and their co-determination model has proven to be successful for the company. Volkswagen’s board is split between labor representatives and shareholder representatives. Thus, labor can either block shareholder initiatives or drive an agenda. Within the company labor is represented by the VW works council and by the IG Metall union. German labor and management, while at odds sometimes, do share a common goal: Company success as well as work place and job security.
The American labor side: The United Auto Workers union used to be very well represented at the “Big Three” American auto makers but throughout the past 20 years has lost significant portions of its membership base. On top of that the UAW has so far been unable to organize any of the foreign-owned car plants in the South. The UAW’s approach to the labor-management relationship is a lot more adversarial than that of the German unions.
Secondly, all these actors in our cross-cultural saga have positive intentions. Based on the information they have at any given moment, they act with the best in mind for their constituents. Here is how:
- VW leadership wants to grow the company and carve out a profitable and sustainable market share in North America.
- Leadership in Tennessee wants to create business friendly policies which help attract job-creating investment to the state.
- The global works council at VW wants to create an even playing field and streamline standards throughout the company and the IG Metall wants to protect labor interests (mainly German labor interests).
- The UAW wants to stay relevant and become the voice of auto workers in the South.
Now, why is there a conflict? In short: Because the IG Metall and its representatives within VW are leading a charge to organize the company’s Tennessee workforce, which runs against the interests of Tennessee leadership and, apparently, against the interests of a majority of the workers at VW in Chattanooga who voted against being represented by the UAW in February 2014.
Culture determines political action
Aside from the political struggle, there is also a significant cultural difference at play here between corporate America and the German business world. One of the reasons for the adversarial nature of the U.S. labor-management disconnect is the preference of American culture on individualism and self-reliance. In the current context this clashes with Germany’s ideal of co-determination and corporate social responsibility.
This contrast has been blown up even further by protagonists on both sides of the debate: First, by conservative U.S. politicians who were reproaching Volkswagen for entering into a dialog with the UAW and basically telling the company that they don’t know how to run their business – publicly. And secondly, by senior union officials in Germany who compared Tennessee and the U.S. to North Korea.
Add to that the confusion created by conflicting statements made by a Tennessee Senator and VW’s labor chief. Sen. Bob Corker claimed to have it on good authority that VW would expand the Chattanooga plant, if workers voted against UAW representation. Global works council head Bernd Osterloh countered that labor reps on the VW board might block further investment unless there’s a formal co-determination mechanism in place at the Chattanooga plant.
One can argue that this is a political conflict which eventually will work itself out over time. That is probably true but it is definitely worth looking at the underlying cultural values which are causing the conflicting behaviors. In this specific case several cultural dimensions stand out. For example: How individualistic or group-oriented different cultures are and whether their decision-making processes are based on short-term or long-term objectives.
These are probably the two cultural values were Germany and the U.S. display the biggest differences. By all empirical measures Anglo-Saxon cultures in general and specifically the North American culture are the most individualistic societies around the world. Germans are fairly individualistic themselves, however, they are so with a strong collectivist undertone. This means that they tend to not act against the interest of their group, if they feel this would hurt their members (and therefore each individual within the group).
Americans, while decent team players, are individualists first. Mission success often depends on each individual member of a group contributing his/her part to successfully complete a task. Team members who stand out in this process due to individually strong performance will be rewarded, those who don’t meet the expectations will be identified as well. Cohesion in a group is achieved by a common objective (sometimes, a common “enemy”).
Belonging to a group for an American is often motivated by the increased chances to achieve one’s individual goals quicker. This means, team membership can easily change, if a different team promises increased chances to succeed.
To German employers this may appear to be a lack of loyalty to the team or at least as a lack of interest in the team’s strategic goals. Here is where the individualism dimension connects with the short/long-term outlook on life. People in long-term motivated, fairly individualistic cultures like Germany tend to suppress their individual desires in favor of the group interest because they expect the prospect of the long-term goals to be of more value than the quick, short-term result.
Measuring cultural differences
There are several cultural assessment tools out on the market to identify cultural values and deduct behavioral preferences, based on empirical research. For simplicity reasons I am only referencing two, Dean Foster’s Culture Compass and Geert Hofstede’s dimensions. These instruments illustrate even more differences between the preferred behaviors in the U.S. and Germany.
Above you see a comparison of the United States and Germany along Hofstede’s cultural dimensional framework. What do these dimensions measure?
Individualism: The fundamental issue addressed by this dimension is the degree of interdependence a society maintains among its members. It has to do with whether people’s self-image is defined in terms of “I” or “We.” In individualist societies people are only supposed to look after themselves and their direct family. In collectivist societies people belong to “in-groups” that take care of them in exchange for unquestioning loyalty.
Uncertainty Avoidance: This dimension has to do with the way that a society deals with the fact that the future can never be known: should we try to control the future or just let it happen? This ambiguity brings with it anxiety and different cultures have learnt to deal with this anxiety in different ways. The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in this score.
Pragmatism: This dimension describes how people in the past, as well as today, relate to the fact that so much of what happens around us cannot be explained. In societies with a normative orientation, most people have a strong desire to explain as much as possible. In societies with a pragmatic orientation, most people don’t have a need to explain everything, as they believe that it is impossible to fully understand the complexity of life. The challenge is not to know the truth but to live a virtuous life.
Indulgence: One challenge that confronts humanity, now and in the past, is the degree to which children are socialized. Without socialization we do not become “human.” This dimension is defined as the extent to which people try to control their desires and impulses, based on the way they were raised. A tendency toward a relatively weak control over their impulses is called “indulgence,” whereas a relatively strong control over their urges is called “restraint.”
In combination with a low power distance index the U.S. are the most individualistic culture in the world. The American premise of “liberty and justice for all” is evidenced by an explicit emphasis on equal rights in all aspects of American society and government. Within American organisations, hierarchy is established for convenience, superiors are accessible and managers rely on individual employees and teams for their expertise. The society is loosely knit in which the expectation is that people look after themselves and their immediate families only and should not rely (too much) on authorities for support. Americans are accustomed to doing business or interacting with people they don’t know well. Consequently, Americans are not shy about approaching their prospective counterparts in order to obtain or seek information. In the business world, employees are expected to be self-reliant and display initiative. Also, within the exchange-based world of work we see that hiring, promotion and decisions are based on merit or evidence of what one has done or can do.
By contrast, German society is not as strongly individualistic. There is a strong belief in the ideal of self-actualization. Loyalty is based on personal preferences for people as well as a sense of duty and responsibility for the group. This is defined by the contract between the employer and the employee. Communication is among the most direct in the world following the ideal to be “honest, even if it hurts” – and by this giving the counterpart a fair chance to learn from mistakes.
If you apply the individualism dimension to our cross-cultural Chattanooga saga, you’ll see that independent Americans do not appreciate being told what to do from outsiders. This is especially true in the South where outsiders had told people 150 years ago what to do. This memory is deeply ingrained in Southern mentality. Introducing an idea from the outside has to be done very carefully – no matter if the idea might benefit people in Tennessee or not. Just because the Germans say “this will be good for you” doesn’t mean Tennesseans will simply accept and adopt it.
Looking at the pragmatism dimension, the United States scores rather low on the normative end of the spectrum, while Germany’s high score indicates that it is a pragmatic country. In cultures with a pragmatic orientation, people believe that truth depends very much on situation, context and time. They show an ability to adapt traditions easily to changed conditions, a strong propensity to save and invest, thriftiness, and perseverance in achieving results. More normative cultures like the U.S. are prone to analyse new information to check whether it is true. American businesses measure their performance on a short-term basis, with profit and loss statements being issued on a quarterly basis. This also drives individuals to strive for quick results within the work place. While not as pragmatic as the Germans, Americans are very practical, and have an almost proverbial “can-do” mindset.
Critical of new ideas from the outside, yet ready to get things done swiftly – this polarisation is strengthened by the fact that many Americans have strong ideas about what is “good” and “evil.” This may concern issues such as abortion, use of drugs, weapons, the size and rights of the government versus the States and versus citizens, and also the issue of labor representation.
Finally, the indulgence score highlights another difference between Germans and Americans. German culture is restrained in nature. Societies with a low score in this dimension have a tendency to cynicism and pessimism. Also, in contrast to indulgent societies, restrained societies control the gratification of their desires. People with this orientation have the perception that their actions are restrained by social norms and feel that indulging themselves is somewhat wrong. Much of the opposite can be said for U.S. culture which ranks fairly high on the indulgence side.
Above you see one of my comparison charts for the Culture Compass and I’d like to direct your attention to the bottom two dimensions.
Germans are more risk-averse than Americans. Going after a high-stakes, short-term goal may involve too much uncertainty; too many things may go wrong and jeopardize mission success. Germans are typically more comfortable with a long-term goal which perhaps has even higher stakes. But this type of risk is easier to bear since it is spread out over time and getting to that goal involves a process of incremental steps, taken as a team.
While Germans value their processes, Americans want to “git ‘er done.” They want results, they want them quick, and if that means they’ll have to leave the path of a proven and tested process so be it.
So, what gives?
As you make yourself aware of these cultural differences it will become obvious now that Volkswagen’s labor representatives prefer a solution (i.e. works council) that to them is a risk-minimizing concept for VW workers and management alike, which supports common interests of the workers group and provides a long-term perspective for the employees at the German auto maker. They are convinced that it will be good for everyone, contributing to long-term success of the company.
Opponents to the idea of labor representation view it as a potential subjection to the interests of a somewhat abstract group. This group’s objectives may clash with those of the individual worker. Most American employees want to have a choice and many fear that their individual right to choose will be restricted in such a group. Some long-term benefits envisioned by the German labor group do simply not appeal at all to many U.S. workers – they don’t even know if they’ll be working at VW a year from now. Short-term gain for them is often more important than long-term risk elimination.
What both sides of this cross-cultural saga don’t seem to understand (or, perhaps, fail to accept as reality) is that certain preferred “models” of human interaction – in this case labor-management interaction – cannot be universally applied. Or, in other words, neither side apparently knows what they don’t know.
Just because you’re right (or successful) at home doesn’t mean you’re right abroad. At the same time, just because you’ve always done things a certain way, doesn’t mean your way will always be the right way.
There is a lot of room for compromise. But that would require a concerted effort, a willingness to learn from and work with each other, and patience.
Because: You can’t hurry love.