MBA613-Cultural Distance and Change Management Case Study – Management Assignment Help

Cultural Distance and Change Management Case Study 

Managing Change in Transnational Companies: Does Cultural Distance Matter?

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1. Introduction
Workplaces constantly face change (Herscovitch & Meyer, 2002) and the pace at which organizations go through change has increased tremendously (Piderit, 2000). Hence, managing change has emerged as an important competence (Paton & McCalman, 2008). However, about half of change initiatives fail (Fay & Lührmann, 2004). Thus, the need for a better understanding of organizational change processes is evident (Stensaker & Langley, 2010; van Knippenberg,  Martin, & Tyler, 2006). The success of change initiatives depends largely on employees’ willingness to change their behaviours, attitudes, goals, and values (Ashforth & Mael, 1998; George & Jones, 2001; Whelan-Berry, Gordon, & Hinings, 2003) as change processes typically raise several concerns leading to resistance among employees. Fostering commitment to change among employees is therefore a fertile avenue for successfully managing change.

Globalization as a force pushing companies towards expanding their activities globally, opening up subsidiaries in different countries leads to a growing number of transnational companies. The transnational nature of companies might yield further complexities for change management initiatives. Thus, in order to plan and implement change effectively in transnational organizations, cultural aspects need to be taken into account, as leadership perception and effectiveness as well as communication effectiveness are determined by cultural differences (House, Javidan, Hanges, & Dorfman, 2002; Merkin, Taras, & Steel, 2014).

Managing change in a transnational organization is a particular challenge, as the headquarters has to rely on the foreign subsidiaries in implementing change. Change management literature has shown that two factors strongly influence the willingness of employees to change: Top management communication and leadership behaviour (Hill, Seo, Kang, & Taylor, 2012). What however complicates change management projects in transnational organizations is cultural differences. In this paper, we develop a conceptual model that links top management communication and direct manager’s transformational leadership behaviour to employees’ commitment to change in a transnational organization. The theoretical model and the empirical study yield two important insights: First, the greater the cultural distance between employees and headquarters, the more important is the leadership behaviour of the direct supervisor. 

In other words: the direct managers’ role as change agents increases with cultural distance. Second, top management (i.e. headquarters) communication is less effective the greater the cultural distance between the foreign subsidiary and the headquarters is. These are substantial additions to extant literature on change management, as we show that change management initiatives in transnational organizations follow their own rules. These findings have important theoretical and managerial implications.

The following section develops a research model, which is tested with a sample of 939 employees involved in a change initiative of a transnational technology company with its headquarters in Germany and manufacturing sites and sales offices in 35 countries. The aim of this change process was to implement a global operational excellence initiative. The final section of the paper will discuss the findings and derive conclusions, limitations and an outlook for future research initiatives.

2. Theoretical Framework
In this section, we develop the conceptual model for our study. We review literature on change management to conclude that the success of change initiatives strongly hinges on employee acceptance and support for organizational change. Therefore, during change implementation much effort is focused on shaping employees’ beliefs, attitudes, and intentions (Armenakis, Harris, & Mossholder, 1993; Herold, Fedor, & Caldwell, 2007) in general and commitment to change in particular. We also conclude that top management communication and the direct leader’s behaviour (transformational leadership) are of central importance for creating commitment to change. Cultural distance however is an important, so far neglected, variable in such a change management model, as it increases the role of direct managers as change agents and diminishes the effect of top management communication.

2.1. Commitment to change
Of all the literature discussing individual-level constructs reported to increase individual readiness to change (i.e. self-efficacy, commitment to change, perceived personal competence, and job satisfaction), commitment to change has received the most attention (Choi, 2011). Herscovitch and Meyer (2002, p. 475) define commitment to change as “a force (mind-set) that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative.” Thus, commitment to change usually reflects an employee’s approval of new regulations, policies, programs and so forth and constitutes a dynamic process (Jaros, 2010).  Commitment to change includes not only positive attitudes toward the change, i.e. the employees’ intentions to support it, but also their willingness to work on behalf of its successful implementation (Herold, et al., 2007).

Herscovitch and Meyer (2002), drawing on their general theory of workplace commitment (Herscovitch & Meyer, 2002), propose a three-dimensional model of commitment to change, consisting of normative commitment to change (obligation-based), continuance commitment to change (cost-based), and affective commitment to change (feelings-based). Numerous studies on change have used this conceptualization (for a review see for example Bouckenooghe, M.Schwarz, & Minbashian, 2015 or Jaros, 2010). Herscovitch and Meyer (2002) argued (later empirically confirmed by Meyer, Srinivas, Lal, and Topolnytsky (2007)) that, while all three dimensions would relate positively to compliance with the requirements of change, only affective and normative commitment would lead to higher levels of support. Building on Hill et al. 

(2012) and empirical studies that in fact showed that continuance commitment to change either had no or only a very weak impact on attitudinal and performance outcomes (Bouckenooghe, et al., 2015; Turner Parish, Cadwallader, & Busch, 2008), we focus on affective and normative commitment to change in this study. Affective commitment to change is defined as the “desire to provide support for the change based on a belief in its inherent benefits” and normative commitment to change as “a sense of obligation to provide support for the change” (Herscovitch & Meyer, 2002, p. 475).

Various researchers highlighted the overall importance of actions taken by leaders during change (Balogun & Johnson, 2004a; Huy, 2002). Hill et al. (2012) identify two top management– related variables that strongly influence employees’ commitment to change: transformational leadership and top management communication. Transformational leadership includes articulating and presenting a clear vision, displaying charisma, motivating employees through inspiration and intellectual stimulation derived from exposing them to new and complex ways of thinking, and being considerate of their individual needs and desires (Podsakoff, MacKenzie, Moorman, & Fetter, 1990). Thus, transformational leadership is “important during times of change because of the ability of transformational leaders to engage followers and motivate them to support the leader’s chosen direction” (Herold, Fedor, Caldwell, & Liu, 2008, p. 353). Furthermore, transformational leadership fosters absorptive capacity, organizational learning and innovation (García-Morales, Lloréns-Montes, & Verdú-Jover, 2008).

Regarding communication during change initiatives, employees expect the top management team to deliver credible information about the type and consequences of change, as it is the top management team which usually determines the direction and scope of change initiatives (Gersick, 1991; Romanelli & Tushman, 1994). The top management team shapes theorganization’s general communication style and credibility (Hill, et al., 2012; Pincus, Rayfield, & Cozzens, 1991).

However, the role of leaders in developing high levels of affective and normative commitment to change, as well as the specific mechanisms through which employee attitudes and behaviours are affected during change, have been rarely examined (for an exception see Herold, et al., 2008 or Hill, et al., 2012). Culture distinguishes leadership practices and values in different countries (House, Hanges, Javidan, Dorfman, & Gupta, 2004). Transnational companies therefore need to consider cultural influences when managing change. Thus, this study focuses on the influence of cultural differences on transformational leadership and top management communication in fostering commitment to change.

2.2. Transformational Leadership and Commitment to Change
Transformational leadership refers to the way leaders achieve a desired behaviour among their followers; it “includes individualized consideration, intellectual stimulation, idealized influence (charisma), and inspirational motivation” (Yukl, 1999, p. 286). Thus, a goal of transformational leaders is to transform “followers’ attitudes, beliefs, and values” (Rafferty & Griffin, 2004, p. 330) so that “followers feel trust, admiration, loyalty, and respect toward the leader, and they are motivated to do more than they originally expected to do” (Yukl, 1999, p. 286). Through their support and inspiration, transformational leaders promote trust and loyalty in their workgroup (Bommer, Rich, & Rubin, 2005; Podsakoff, et al., 1990). 

Such leaders articulate a clear vision of the future that is understood by followers, and motivate followers to accept it (Burns, 1978). Employees are more likely to accept change and to view it as legitimate when they perceive a climate of trust, feel loyal and attached to the employer, and other members of their workgroup accept the change (Rousseau & Tijoriwala, 1999). Furthermore, a climate of trust reduces the belief in dysfunctional reasons for change (e.g. self-serving reasons on the part of leadership) and promotes beliefs in functional reasons (e.g. business-related reasons) (Rousseau & Tijoriwala, 1999). Hence, it should follow that transformational leadership is strongly related to managerial effectiveness during organizational change (Bass & Riggio, 2006; Pawar & Eastman, 1997).

While there is abundant literature on the positive consequences of transformational leadership (for meta-analytic studies see for example Judge & Piccolo, 2004 or Wang, Oh, Courtright, & Colbert, 2011), and some work that studies its influence on employees’ commitment to an organization (e.g. Avolio, Zhu, Koh, & Bhatia, 2004; Bass & Riggio, 2006; Pillai & Williams, 2004), there is surprisingly little research focusing on the effects of transformational leadership on employees’ commitment to change (Herold, et al., 2008).

Discussing the role of leadership during organizational change, Burke (2013, p. 279) concludes that “what has not been as clear from the literature is the impact of leadership on organization change … there has been little evidence that scientifically demonstrates the leader’s impact. It is reasonable to assume, nevertheless, that because there is mounting evidence that leaders affect organizational performance in general, surely they have an impact on organizational change in particular.” Only very limited empirical research explicitly addresses the relationship between transformational leadership and employees’ commitment to change (Carter, Armenakis, Feild, & Mossholder, 2013; Herold, et al., 2008; Hill, et al., 2012; van der Voet, 2014). This is surprising, as the effects of transformational leadership on commitment to change are evident (see Herold, et al., 2008; Hill, et al., 2012). 

Transformational leadership behaviours create conditions in which followers are more likely to commit to a change by designing a positive vision for the future (beyond the vision for the specific change), inspiring followers, attending to their needs in a way that helps them in coping with concerns regarding change, and building trust (Herold, et al., 2008; Hill, et al., 2012). Affective and normative commitment to change drive employees’ supporting behaviour with respect to change initiatives (Herscovitch & Meyer, 2002). Affective commitment to change builds on employee devotion to support change because immanent benefits are expected. Normative commitment to change has its foundation in an employee’s sense of duty (Herscovitch & Meyer, 2002). 

Based on the capability of transformational leaders to promote loyalty and trust (Yukl, 1999), communicate vision (Burns, 1978), and to create a sense of moral duty so that meeting a company’s requirements is valuable to employees (Meyer & Parfyonova, 2010), we expect transformational leadership to positively influence affective and normative commitment to change. This assumption is also backed by empirical findings showing transformational leadership is positively related to affective (Herold, et al., 2008; Hill, et al., 2012) and normative commitment to change (Hill, et al., 2012).

In this study, we investigate the transformational leadership of direct managers (in the local subsidiary of the transnational organization) of employees involved in a change process. Transnational companies need to implement change promoted by their headquarters in subsidiaries dispersed in different countries. Thus, direct mangers located in the subsidiary have an unique opportunity to trigger commitment to change because of “their physical and psychological proximity to the members of their workgroup” (Hill, et al., 2012, p. 761). Therefore, we put the following hypotheses forward.

4. Discussion and Conclusion
This study contributes to theory and practice by investigating the role of cultural distance in the development of commitment to change in transnational companies. The importance of this topic is evident, as organizations in general increasingly face challenges involved in change management (Herscovitch & Meyer, 2002; Piderit, 2000), and because the number of transnational companies is increasing as the world economy globalizes (UNCTAD, divers volumnes). Thus, more and more organizations are forced to implement change processes spanning a global network of subsidiaries. Employees’ commitment to change is a central construct to explain success and failure of change initiatives (Choi, 2011). 

Previous literature has extensively studied antecedents of commitment to change such as content and nature of the change initiative (e.g. extent and 
turbulence of change), the organizational context (e.g. previous experiences with change, employee-manager relationships), the change process itself (e.g. participation, fairness), and individual, employee-related factors (e.g. job satisfaction, motivation) (for an extensive review see Choi, 2011). With this study we contribute to existing literature on commitment to change by first, investigating the role of transformational leadership of the direct manager and the headquarters (i.e. top management) communication and second, by studying the moderating effect of cultural distance.

Leadership in terms of leader behaviour and communication are salient means of implementing change initiatives (DiFonzo & Bordia, 1998; Hill, et al., 2012; Jaros, 2010; Richardson & Denton, 1996). While transformational leadership and top management communication are rather obvious antecedents of commitment to change (Bouckenooghe, 2012; Hill, et al., 2012), so far it has been unclear how they work in an international context. We hypothesized that cultural distance, as “the degree to which the cultural norms in one country are different from those in another country” (Morosini, et al., 1998, p. 139) influences employees’ reactions (i.e. their commitment to change) to their direct managers’ transformational leadership style and top management’s communication from and to the headquarters. 

The results of this study indicate that cultural distance is an important contingency factor: first, the role of the direct manager for creating affective (feelings-based) commitment to change increases with increasing cultural distance and second, the effectiveness of the headquarters (i.e. top management’s) communication for creating normative (obligation-based) commitment to change diminishes with increasing cultural distance. These results are important contributions to literature that studies the role of direct managers in change initiatives (e.g. DiFonzo & Bordia, 1998; Ellis & Shockley-Zalabak, 2001; Hill, et al., 2012; Stensaker & Langley, 2010; Young & Post, 1993) and the role of communication in change initiatives (e.g. Bouckenooghe, 2012). Existing change research primarily emphasizes the role of top-management (e.g. Kotter, 1995) or, to a less extent, middle management (Balogun & Johnson, 2004b), but the role of the direct manager has been widely neglected (Hill, et al., 2012). 

By showing that in terms of affective commitment the role of the direct manager (i.e. their transformational leadership style) increases with increasing cultural distance (and that the top management’s communication diminishes), we point the researchers’ attention to the important, so far largely neglected, role of direct managers. Finally, we also contribute to the vast literature on cultural distance by showing that this construct also influences one of the most challenging and important topics in management: mastering change. Two of the proposed hypotheses were not supported: cultural distance does not moderate the path from direct manager’s transformational leadership to normative commitment and the path from top management communication to affective commitment. These findings are unexpected and require additional research.

This study also has some important managerial implications. First, many popular change management concepts almost solely focus on the role of top management (e.g. Kotter, 1995). Our findings however indicate that transnational companies with culturally dispersed subsidiaries should especially target local, direct managers in the subsidiaries in order to make change acceptable and favourable among employees. Especially, in yielding positive feelings and affect towards a change. It seems that employees in transnational companies rely more on their direct managers for leadership during change when company headquarters are culturally distant. Another important finding is that the effectiveness of top management communication in creating normative commitment to change is dampened when the recipients of this communication are culturally distant. Top management communication must be facilitated through cultural adaptations, or perhaps also through local management communication, in the subsidiaries when change initiatives need to span different cultures.

Than write a report answering the following questions-


Identification of the Overall Case Study 

Question One (How does culture determine appropriate leadership approaches in order to create sustaining change?)

Question Two (When implementing a change management strategy in a local and global environment, what processes or theories could be used to reduce resistance and risks to change?) 

Question Three (How do you manage change in a chaotic and unpredictable environment across the different industries and geographies?) 


Reference List (Using the Kaplan Harvard Referencing Convention throughout your report and reference list at the end) Structure

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