Differences and local (non-) adaptations

This chapter will outline differences between the countries and respective subsidiaries, e. g. the legal system, language, business practice, and culture. Moreover, the areas of local adaptations and non-adaptations will be analyzed.

Country differences, business practice and culture

It was found out that the project team is aware of the differences between countries. The rules for the COC are mostly standardized in Europe. HQ1 explained that e. g. Russian

suppliers would confirm that they had acted in alignment with local regulations, but in case headquarters request more details, it might become a problem. Examples are environmental as well as social standards and working conditions. All subsidiaries might comply with local regulations but might have difficulties to fulfill higher standards. That was one reason why the COC had been implemented. HQ2 explained that developing countries do not have the necessary financial resources to improve these standards quickly. Therefore, the company sets long- and short-term scenarios that these plants have to fulfill. This would be checked during the audit. To build up on the differences between countries, HQ3 stated:

“The challenges were also the cultural differences.”

Here HQ3 declared cultural differences as a challenge. It was a discussion prior the code’s implementation, but the project team got along with it. There are no exceptions based on cultural differences and again, in case of a grey area, a team needs to discuss and analyze the situation.

Some topics are more relevant in some countries than in others, which does not mean that these topics are less important than others. The section about free choice of employment is very important in some Asian countries whereas prohibition of discrimination is more relevant in the US. Expat 2 shared that discrimination is an important and sensitive topic in the US. Many large corporations in the US already have a strong COC and US-Americans favor rules and strict guidelines. Therefore, the COC is an important topic in the US.

Expat2 differentiated between customer demands in the US and Europe. He mentions that the relationship is very important in the US while in Europe people prefer to buy a well-known brand. This is part of the culture and business practice. Regarding the comparison of behavior between Europe and US he stated:

“…when I compare North America to Europe, I don’t think that there is a general difference in understanding.

Is there? The specific incidents might be discussed, might be different, because PALFINGER has a different position in Europe than in America, a much stronger brand, a much stronger dealer network, also a different sponsoring strategy, different…just a generally different way, in North America we need to build an organization and kind of try to come to the same development level of what we have in Europe, but I don’t think there were significant differences that I could name.”

With this statement, Expat2 outlined that there are minor differences between the countries. Furthermore, the interviewee outlined that the market position in North America has to be further developed in order to achieve European standards. This means that Europe has the highest standards regarding dealer and supplier networks and the market position in general.

Expat3 defined the biggest difference between the countries which is that the rules of the COC are standardized in Austria. No one questions these rules, and it is easy to fulfill and comply with the code whereas in other countries, typically outside Europe, this COC is necessary to create a change.

Brazilians favor informality. Expat1 explained that there is a Portuguese word that described exactly this behavior: Jeitinho. Jeitinho means to do things informally. Expat1 explained:

“Sometimes you risk to not know all the transactions going on between you and a third party. Sometimes you don’t know if some information flows which shouldn’t flow, you don’t know if there are some favors which people are exchanging. These kinds of issues sometimes need to be put on the table and it has to be said:

‘People let’s do business seriously, if there are some issues talk to each other first.’”

This statement shows that the Austrian expat favors a direct communication and confronts employees directly in case of doubtful activities. On the contrary, Brazilians use indirect communication, which can partly relate to a stronger hierarchy. Expat1 further evaluated:

“Brazilians are very creative, this creativeness I really sometimes admire, how they solve problems, but then you sometimes, you really get crazy because the solutions they find to solve problems, would violate rules.

That is why it is important that they come and talk to me in case they are unsure about a topic.”

Austrians favor clear guidelines and work according to them. Brazilians might have a different work attitude. The statement above clearly shows that their working mentality, which is part of their culture, is a challenge to comply with the COC. Furthermore, Expat1 outlines differences based on the market position of PALFINGER:

“…the size which PALFINGER has in central Europe is significant. If you go abroad PALFINGER is not that big, so the situation is inverted, it is not us [PALFINGER] who somehow define the rhythm of how we do business, we do not have the professional environment...If you negotiate with suppliers, sometimes you have to go for small suppliers because your purchase volume is smaller than in central Europe, which means that outside of central Europe, you deal with a…less mature environment…”

Expat1 further elaborated on Brazil being different to Austria because of the culture. He defined Austria and central Europe as very professional. This level of professionality decreases in countries located more south. He reasoned this fact with the corruption perceptions index. Later he mentioned that:

“…with the fact that you have a more challenging situation when implementing a COC and maintaining it.”

This statement shows that it is challenging to introduce a COC in Brazil. Expat1 further mentioned that the degree of corruption is much higher and the educational level is lower in Brazil than in Austria. Furthermore, the political situation challenges the implementation of ethical guidelines:

“…many politicians are pretty much corrupt. The level of corruptness brings you up in the hierarchy of politicians. If you see that the whole society depends on a corrupt parliament, what do you expect from the people living in that country? It is difficult to somehow punish and go with, challenge people to do it right when many people do it wrong. And this is the situation we have for example in Brazil.”

The expat linked a society’s unethical behavior to the misbehavior of the government. He basically explained that the behavior is transmitted top-down from the government to residents; thus, it is more difficult for a company to direct employees on the right path.

This is confirmed by Expat4, as he mentioned that the influence of headquarters has to be strong since the mentality in Brazil is completely different. Therefore, it is an ongoing-process and many things still have to be developed. Expat4 continued with Russia:

“Same thing in Russia. The mentality and the philosophy, strategies are completely different out of the past, we need to go over these companies, so we still need to do a lot of efforts on that. So it is not that much developed there.”

He explains that in Russia people are used to a strong hierarchy, this is due to past events and political situations. In Austria, it is completely different:

“So bringing in that mentality, that we have a complete different approach here in Europe, to them, it takes time because you have to really change their mindset and that is a very good example there because they are used out of history to have very strong persons above them and that is the law, they are telling them what to do inside and they are president inside of the company and they are telling everybody what to do.”

This statement reveals the differences between Austria and Russia. Furthermore, it outlines that the aim of the company is to introduce European values to the plant in Russia.

Expat5 confirmed this statement. In Canada, the same PALFINGER production system

was implemented, which consists of different teams with a low hierarchy, whereas in Russia various supervisors are employed. Furthermore, Russian companies have a strong general director, who overlooks all processes and has to sign all documents.

Flexible work times are not possible in Russia, as employees need a predefined start and end.

Another difference between the countries is waste management. It is handled stricter in Canada than in Austria. Waste is separated according to more categories. Expat5 stated that Canada is a democratic country with a good social system. The social system in Russia needs to be further developed. Therefore, the highest priority is that people have enough energy and gas in the winter; thus, waste management is not prioritized. However, Expat5 said:

“…there is some rethinking [in Russia] based on this that you can see on special local minds in the city that they start with different waste containers, glass, plastic, paper, it is a starting point.”

The expat compared the two countries and explained the difference in waste management exists due to different development status. Expat5 also mentioned the diverse mentality.

Team thinking in Russia is insufficiently developed, partly because of historical and political events in the past. He stated a comparison between Austria and Russia:

“Completely different in Russia to Austria is that we have our workers law in Austria, we have also workers laws in Russia, but on the...only if we focus on the climate situation that we have in Austria and Russia, the Russians are still working when in Austria we stop working. They are still working under minus 25, 30 degrees. It is impossible in Austria…”

This difference exists due to the climate. In Russia winters are colder and last longer than in Austria, since the countries are located in different climate zones. National norms also vary due to the climate. Based on Russian norms, steel has to be usable until minus 40 degrees whereas in Europe the norm prescribes only minus 20 degrees. Furthermore, the legal and technical norm system is completely different in Russia and Austria. In case there is a conflict between an Austrian group norm and Russian norms, the Russian norms have to be used. This is regulated by law. Expat4 mentioned that another difference is visible in the tax situation between Austria, Russia and Brazil.

As already mentioned, different countries are marked by distinct cultures. Although HQ3 mentioned that cultural differences were a challenge, the cultural aspect was mainly mentioned by the expatriates. Expat2 shared that:

“Whenever we do videos, we did not do a video for the US, but there is the COC which is a global set of principles and it is also a global video. This will then be provided in all global languages, this is something that we have implemented. Otherwise you cannot make sure that the understanding of the COC…well…this is the best you can do to make sure that the understanding of the COC in Russia and America and South America and Asia is similar, because what is still there is the cultural variation between different cultures.”

This shows that Expat2 is aware of different cultures and people receiving a message differently depending on the culture. Expat3 particularly focused on China and stated that corruption is deeply ingrained in Chinese culture. He mentioned some frustrations based on these cultural-differences. Although he has worked in China for some time, it is still difficult sometimes to understand Chinese culture. Expat3 said:

“Even myself sometimes don’t know how to fully understand them, how to figure out what they are thinking and why they are doing what they are doing.”

He further mentioned that trust is very important in Chinese culture. This is the reason why he once fired someone who did not comply with the COC. He said that once there is mistrust in China there will never be trust again, and you will never be able to trust that person. Expat3 further explained:

“…in Brazil everybody I think after explaining it, they are still similar to our [Austrian] culture, they have a Portuguese history, they have a European history. Chinese don’t have a western history, they are a completely different culture…”

He compared different cultures based to his own Austrian nationality. This is how he tries to justify cultural differences. Furthermore, he reasoned why he sometimes does not completely understand Chinese culture. Expat4 explained that a strong hierarchy is part of Russian culture, and this is the way they are used to work. In Austria, people want to take responsibility and feel responsible for everything they do. However, in Russia, the supervisor tells every subordinate exactly what to do. He shared an example taken from the Brazilian plant. He forgot to put his protection glasses on, and a subordinate asked him to put it on. Although this situation did not happen in Russia, Expat4 thought that:

“…in Russia it might happen because you are, they are so respectfully thinking about you as a president inside that when you are going there outside in the plant without ear and glass protection, they would say no, because it is the president, we cannot blame him, we cannot explain him what to do because he is the president.”

This shows that Russians follow a strict hierarchy and would not dare to blame the supervisor. It could be the case that the subordinates want to avoid that their supervisor loses his/her face by not following the rules. Thus, in this culture it is better not to mention mistakes directly. Expat5 confirmed this:

“…the organization in Russia is in this way that you always have a strong general director. The Russian system is working in this way that it is really strongly hierarchically organized. And there is only one general director who is telling you the direction…They are able to tell something like ‘I would like to make it in a different way’ – it is starting now but it takes a lot of time that you give them the self-sufficient/confidence to do it in this way. So it takes time…”

The culture at the plant in Russia is changing. Russians are used to have a strong hierarchy and would not confront the supervisor. The expatriate sent from headquarters has probably influenced the change, since now people start talking directly to the supervisor. He further mentioned that it is also easier to implement a standard document from headquarters in Canada than in Russia. This is partly due to the differences in cultures. He stated that:

“…the social life in Canada as you know it from the US, they are friendly but superficial. The social life in Russia is much more friendly and familiar.”

This is again a comparison of cultures. Expat4 elaborated on the relationship of the COC and the culture in Brazil:

“A COC is important for the company to secure ethical behavior. It is very important for the people in Brazil because they do not want to make mistakes. Although the country is very corrupt, people do not want to break laws. Therefore, the COC is important for the employees in Brazil to know how to behave the right way.”

People do not want to break laws, which could be part of the country’s culture. Therefore, it is important to provide guidance. In a Canadian context, Expat5 experienced that:

“…when workers told me I should inform them about this and this, it was always open, we could organize some dates and times and it was easy to handle…”

Canadians use a direct approach and probably have a lower hierarchy. Otherwise, they would not directly come to their supervisor and confront him/her with specific topics.

Business practices can differ depending on the country or market, and are part of a country’s culture. HQ1 shared an example:

“I definitely remember that we had some discussions with Asia. So there were some rules in there where they said, it is quite common, for example I can remember there was one example regarding visits of night clubs with potential customers. Colleagues in Asia said this is quite common in this area all the other competitors do it as well, and we need to think about how we can live with that. I collected this feedback and discussed it again with the board and with my colleagues in the project group, but then all together we decided, no we do not want to have that and we don’t want to pay for some services like that”

This quote shows that countries differ in the way they do business. In Asia, it is quite common to visit night clubs with potential customers. The competition is adapting to this behavior. However, in Austria, visiting night clubs is not common practice, and this would breach the COC. A similar example was mentioned by Expat1: In Brazil, competitors are adapting to do improper documentation for the customers to receive governmental financing. This would be a clear breach of the COC; thus, PALFINGER had not adapted to that behavior and had lost some potential customers. The business practice of Brazilians was explained by Expat1 as followed:

“In Brazil I had the experience that people always looked at how competitors are doing it or how they used to do it in other companies. So they always had a different reference on how you can do it.”

In Brazil, it is common business practice to observe how competitors are doing business.

This is quite different to Austrian standards and might contradict COC’s values. However, PALFINGER does not generally prohibit different business behavior. It always depends on the context. HQ3 stated that accepting or giving gifts until the value of 40 euros is standard in Germany. However, the company is aware of practices in other countries where a dinner might be necessary to form a relationship:

“So if for example and now it is just an example I would not even know the actual value in India, if it is very common that you invite somebody to a meal with followed by something else then they would not say no, for example, but they have to make sure that the COC is not being breached. So they have to make sure that for example more people are involved that the transparency is being given, what happened and what has been done there at the event for example and if it does not follow for example a business where another one would not have been given the business to because he was not invited. That just have to be aware it is always on a four-eye principle, or more eye principle.”