Labyrinth- the Art of Decision-Making

by Pawel Motyl

  Hofstede’s team defined four key dimensions distinguishing social groups and directly influencing the choice of decision-making methods. These dimensions, named as indexes, were power distance, individualism, masculinity, and uncertainty avoidance in the original research.

  Power Distance (PDI)

  Power distance was defined by Hofstede’s team as a given nation’s acceptance that power and resources are not equally distributed. 1 Societies with a high power distance index (PDI) accept it as the norm and see nothing unnatural about the fact that some people are rich and powerful and others not. Citizens of nations with a low level of PDI take the opposite approach: they aspire to minimize the differences and to redistribute power, influence, and wealth more equitably. The five countries with the highest PDI are (in descending order) Slovakia, Malaysia, Panama, Guatemala, and Russia. The five with the lowest PDI are (in ascending order) Austria, Israel, Denmark, New Zealand, and Switzerland, followed by the Scandinavian countries.

  The PDI translates into key expectations of decision-makers. In countries with a high PDI, hierarchy and the formal attributes of authority, such as the right to make decisions, are enormously significant. Organizations that exhibit a high PDI are typically run centrally, are autocratic, and concentrate decision-making within a small group of high-ranking managers. In this case, there are clear threats to an inquiry approach—even if, for cultural reasons, subordinates feel no need to get involved in the decision-making process and don’t feel slighted by the decision-makers ignoring them, the authority trap and dangerously shallow analysis both lurk in the background. In black swan situations, this combination of obedience to authority and superficial analysis can be a very poor advisor. Conversely, the lower the PDI, the greater the expectations across the organization that lower-ranking employees will be involved in the decision-making process; if this doesn’t happen, it can be seen as unjust and as displaying indifference to the competence and experience of the staff. Here, though, other dangers appear, because excessive discussions and consultations, typical characteristics of a democratic decision-making style, can lead to missing time-sensitive opportunities.

  Individualism versus Collectivism (IDV)

  The individualism index (IDV) has a very interesting influence on the decision-making process. Individualistic cultures (those with a high IDV) are seen as focusing on the individual, and a degree of selfishness and concern with your own wealth and that of your nearest and dearest is socially understood and accepted. Collectivist countries (those with a low IDV) set the interest of the group above that of the individual. 2 Among the most individualistic societies, the USA tops the rankings, in second place comes Australia, with Great Britain hot on its heels. The most collectivist countries are found in Latin America: Guatemala, Ecuador, Panama, Venezuela, and Colombia.

  Professor Hofstede’s team’s research revealed a seemingly surprising correlation: countries with a collectivist culture typically also display a high PDI and the strong hierarchy that results from it. Explaining this, though, is not difficult. In collectivist countries, “authority” is deferred to the group to which the individual belongs, with group interests being viewed as overriding. The consequences for decision-making are similar: collectivist countries often make irrational and uneconomic decisions, because the group takes precedence. An example of this is the classic business situation where a manager decides not to release an inefficient worker because he’s been there a long time and is an integral part of the company’s social network.

  An additional source of poor decisions in collectivist cultures can stem from people not being open to discussion, for fear of disturbing the status quo. This can be illustrated using a story in the Gospel According to Matthew: A man with two sons instructed them to go and work in the vineyard. The first son replied, “Yes, Father,” but didn’t go near the vineyard. The second son refused the order, but finally changed his mind and went to work on the winemaking. So, which of the sons obeyed his father’s will? The Bible, obviously, indicates that the second one did. Hofstede, though, relates the tale of a Dutch missionary who told the tale in Indonesia, a very strongly collectivist nation. To the surprise of the missionary, the Indonesians all picked the first son, as in their opinion, even if he didn’t ultimately carry out his father’s instructions, he hadn’t upset the status quo in the family, which is the most important of all social groupings.

  A large part of communication in collectivist countries is what’s known as high-context communication, which is composed not solely of words but also of their accompanying nonverbal language, the tone of voice, and the entire context of the conversation. In situations where decisions have to be made quickly, decoding such a message can be time-consuming and result in misinterpretation. The challenge of making quick decisions in such groups becomes worse when a decision-making team includes representatives of both individualistic and collectivist cultures: the first group will be far more extroverted, expressing their views far more boldly and assertively and making those in the other group feel uncomfortable, as they are likely to prefer to back down rather than openly oppose. A hybrid group will have little chance of engaging in open debate and conducting a thorough, multifaceted inquiry approach. RCAs will also be emotionally colored, and analyzing the causes of failure will be extremely awkward for those from a collectivist culture (after all, we’re talking about mistakes made within our social group, toward which we should be loyal).

  Masculinity (MAS)

  Hofstede’s team also divided cultures into masculine and feminine. In strongly masculine cultures, with a high masculinity (MAS) index, the emphasis is on achievement, winning, progress, and earnings, and men are expected to meet these expectations. In predominantly feminine cultures (with a low MAS index), cooperation, quality of life, and relationships, as well as care for the weak and vulnerable are more important, with both sexes being expected to display these priorities. 3 The leading masculine cultures are Slovakia, which ranked first, then Hungary, Austria, and the German-speaking part of Switzerland, followed by Japan and Venezuela. Feminine cultures were headed by Sweden, which scored the lowest MAS index, Norway, Denmark, Latvia, and the Netherlands.

  As you might imagine, masculine societies are more confrontational. You can see the difference clearly in negotiations: while feminine nations aim for compromise and consensus (win-win), masculine societies prefer to win from a position of power. This had tragic consequences in two almost identical international conflicts, one of which was resolved peacefully, and the other ended in an unnecessary loss of life.

  The Åland and Falkland Islands have much in common. The Åland Islands are a group of about 6, 500 small islands lying in the Gulf of Bothnia in the Baltic Sea; the Falklands are composed of about 800 islands in the Atlantic Ocean, almost 300 miles off the coast of Argentina. Both island groups have been contested territories at various times. In the case of the Åland Islands, both Finland and Sweden lay claim to them, which is hardly surprising, as they are almost equidistant to the two countries. The Falklands, also known by their Spanish name the Malvinas, have been argued over by the UK and Argentina for many years.

  The problem of the Åland Islands was resolved very rapidly. Although they had been settled by Swedes since the Middle Ages, and the majority of people who live on them still speak Swedish, from the beginning of the nineteenth century, they fell under the rule of various countries. In 1809, on the basis of a peace treaty signed in Friedrikshamn, the Åland Islands were given to Russia, which lost control of them half a century later as a result of the Crimean War. At the beginning of the twentieth century, there was a serious political squabble between Finland and Sweden, with both countries laying claim to the islands. The two sides decided to resolve the dispute through international law. A special commission was set up, composed of lawyers representing France, Switzerland, and the Netherlands. After much discussion, the Council of the League of Nations awarded the Åland Islands to Finland on
June 24, 1921, on the condition that they remained neutral. To this day, although about 90 percent of the inhabitants are Swedish, the Åland Islands remain a demilitarized autonomous territory belonging to Finland. A potentially dangerous international crisis was averted through negotiation.

  The battle for sovereignty of the Falklands ran a totally different course, despite their backstory resembling that of the Åland Islands. The Falklands also changed hands frequently. Discovered in the sixteenth century by the British, they fell under French rule; the first colony on the islands was established by Louis de Bougainville in 1764 and was called Port Louis. The French didn’t enjoy the Falklands for long. A mere three years later, they were taken over by the Spanish, who wasted no time in changing the name of Port Louis to Puerto Soledad. This wasn’t the end of the drama, though. In 1771, the islands once again became the property of Great Britain, although Argentina stated its claim to the islands at the beginning of the nineteenth century, and eventually, the Falklands were declared a British colony. The Argentinians never accepted this, and in March 1982, the military junta that was currently in power under the leadership of Leopoldo Galtieri, decided to launch Operación Rosario. On April 2, Argentina sent armed forces to the islands, which were inhabited by fewer than fifteen hundred people. The United Nations Security Council condemned Argentina’s actions, but the military ignored the resolution. The British obviously had no intention of standing idle, and they sent a major task force to the Falklands. Open conflict broke out, which despite the efforts of the international community (including the Secretary-General of the UN, Javier Pérez de Cuéllar), lasted for over two months and claimed the lives of almost one thousand people.

  What distinguishes the two events? The MAS index of the countries involved. Finland and Sweden are strongly feminine countries, where decisions are made via mediation and by seeking consensus, while the UK and Argentina are masculine nations and favor direct confrontation.

  Uncertainty Avoidance (UAI)

  Avoiding uncertainty is an interesting and yet decidedly counterintuitive factor. 4 It is difficult to establish the value of this index simply by observing the daily behavior of a group of foreign nationals. Countries with a high uncertainty avoidance index are those where the fact that the future is highly unpredictable is a source of deep unease. This creates a need to control, which means being less open to innovation. Nations with a low UAI accept uncertainty, working on the assumption that some things can’t be controlled, so whatever will be, will be. At the top of the UAI rankings come Greece, Portugal, Guatemala, and Uruguay, while the countries with the lowest scores—where people cope with the uncertainty of tomorrow with relatively little stress or concern—are Singapore, Jamaica, Sweden, Denmark, and Hong Kong. It’s worth remembering that a high UAI leads to unease, not to fear. Fear is an emotion that has a clear cause (we are afraid of something); unease, however, is unjustified.

  Countries with a high UAI display numerous unpleasant social phenomena as a result of this deep level of internal stress. Research has shown, for example, a strong correlation between UAI and suicide rates. It should also come as no surprise that high UAI countries score a lower rating in the World Happiness Report.

  In decision-making, people from a country with a high UAI will try to make choices that shore up the status quo and don’t lead to significant change, because change leads to uncertainty, which in turn makes the decision-maker uneasy. However, attempting to control reality fosters the adoption of the inquiry approach, as the deeper the analysis of a given situation, the more comfortable the decision-maker feels. We can see a similar mechanism in operation during purchasing decisions. Those who avoid uncertainty will prefer to buy new items, from authorized dealers and stores, and will employ specialists to perform any work that requires special competencies, as this puts them at ease. In countries with a low UAI, the secondhand goods market is far more robust, and many people try to perform small jobs around the house themselves (even if, ultimately, they hire an expert, when they eventually discover they have two left thumbs). This index, and its influence on decision-making, also affects the speed with which major innovations spread: they are adopted far more rapidly in nations that have a low uncertainty avoidance and are therefore more open to trying something new. The development and uptake of new technologies such as cell phones, the Internet, online and mobile banking, and so on illustrates this rather neatly.

  At the company level, the situation is even more intriguing.

  The mechanisms underlying the building and shaping of an organizational culture are almost identical to those of building and shaping a national culture. Individual companies create their own, unwritten approaches to the dimensions outlined by Geert Hofstede’s team. In some, decisions will generally be made at the top of the management ladder, while others will favor decentralization. Some companies will culturally apply a policy of “up or out,” and others will allow an employee to remain in the same position for their entire career. There are companies that approach planning and forecasting in an extremely scrupulous and restrictive fashion, and there are others that take a laid-back, almost stereotypical Jamaican approach to things—it’ll work out somehow, so don’t worry about it. In some companies, teamwork is everything; others foster outstanding individuals. Every organization has its own aura, its own way of looking at the world, which translates into distinctive attitudes and behavior.

  Organizational cultures are shaped, though, by slightly different factors than nations are. A tremendously significant role is played by a company’s mission statement and its position in relation to the competition, because it is knowing how we want to differentiate ourselves that shapes many of our behaviors. Exceptional customer service, amazingly low prices, top-quality products or services—each of these attributes will influence the attitudes of employees to one another and to the market context. The motivational tools used to encourage employees to act in line with the organizational culture are a little different. Businesses have a vast array of carrots and sticks at their disposal. Those who operate in accordance with the company’s expectations may not only receive financial rewards, but also advance up the hierarchy. Those who don’t follow the written, or unwritten, rules of the culture may find their pay packet is lighter or, in extreme cases, be excluded from the social group—in other words, get sacked.

  In the case of national cultures, the only reward or punishment on offer is the sense of belonging to a given group, or of being ostracized. Interestingly, the majority of companies dream of achieving the first (our employees are motivated to work simply because they are employed by us!) while retaining an entire arsenal of business sticks to beat you with (if you’re not excited to work for us, then say goodbye to that bonus...). Despite these differences, organizational cultures, just like national ones, significantly affect the decision-making process.

  The influence of organizational culture on the decision-making process is, in fact, one of the key topics of this entire book. I am analyzing the attitudes of leaders and key moments, looking at the behavior of teams, and discussing ways of introducing an organization to a new normal and instilling into employees novel approaches to coping with the chaos of life. Organizational culture is one of the basic forces that shapes the competence (or incompetence) of a company when it comes to making business decisions. That is where phenomena such as individualism versus teamwork in decision-making, the tendency (or reluctance) to adopt an inquiry approach, boldness (or timidity) in decision-making, a sense of personal responsibility (or not), and the desire to understand the causes of both failure and success and propensity for risk are manifested.

  This last element is, in business, one of the most important, as demonstrated most dramatically in the expeditions led by Rob Hall and Scott Fischer on Mount Everest. In that extreme case, the boundaries of acceptable risk were pushed too far by the quest for greater profit and ultimately compromised safety, which should never be considered accepta
ble. A converse example of this was the decision taken by Eurocontrol in 2010, where risk was minimized (or more accurately, eliminated), which later turned out to have been a very poor business decision. The ability to set the parameters of acceptable risk is a crucial competence in a leader, but it can be subjected to enormous pressure from the organizational culture, which may encourage us to take unnecessary risks or to be overly cautious. The key is not only to remain objective, so we can set the applicable limits, but also to consciously shape an organization’s culture in such a manner that the decision-making capacity of all employees is improved and the appropriate approach to the process adopted.

  That lesson was learned in the hardest way imaginable by NASA.

  The astonishing effort, described earlier, to rescue the crew of Apollo 13 did not constitute a success, as far as the US Congress was concerned. Despite the happy outcome, the incident was viewed as an unsuccessful realization of the mission’s goals, which resulted in budget cuts for NASA. As a result of this, the organization set its sights on a bold, new target: following the Moon landing, the next milestone in the conquest of space would be the construction of an orbiting space station, to facilitate further research. In 1971, a project and a budget were prepared and presented to Congress, which rejected the proposal, horrified by the sums involved. Struggling for financial survival, NASA decided to adopt the salami method and embarked on a process of getting the funding bit by bit, splitting the budget into successive stages of building the station. The first stage was the construction of a space shuttle, whose job was to carry successive parts of the space station into orbit. The tactic was successful: Congress approved the Space Transportation System (STS) program, which was officially inaugurated on January 5, 1972. The space shuttle was presented by President Richard Nixon as a means of cheap, routine space travel, and in the decade to come, NASA tried to realize this bold vision.