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Business Management in Armenia

Abstract: The workforce of the 21st century is increasingly diverse and multicultural. Every society generates its own cultural values. It creates its own vision of the world to explain man’s destiny, and organizations and management systems compatible with that vision. To effectively manage and lead in this environment, business managers must be knowledgeable about cross-cultural factors-on both the domestic and global fronts especially in human resource management. This paper shows the importance of adapting training seminars and management methods of the Armenian cultural context. This means not only taking into account a different economic regime but also accounting for Armenian cultural values.

1 Introduction
As a concept and as a reality, culture is broad and multifaceted. On a daily basis, culture influences who we are as individuals, families, communities, professions, industries, organizations and nations–and how we interact with each other within and across regional and national borders. Defined as a set of values and beliefs with learned behaviors shared within a particular society, culture provides a sense of identity and belonging. From language, communication styles, history and religion to norms, values, symbolism and ways of being, “culture” is everywhere.

Companies are not managed in the same way in all countries. In order to predict what management style would emerge from the post-Communist era in Armenia, we had to gain some very practical knowledge about the concrete problems faced by Soviet company directors on one hand, and begin to examine the basic values which make up Armenian culture on the other.

In domestic and global workplace settings, people in organizations reflect their respective cultures. As shifting demographics bring together people of many cultural backgrounds, human resource management (HRM) must be thoughtfully examined and sometimes altered to support organizational goals. SHRM Special Expertise Panel members point out that for sustainability, organizational leaders must expand their perspectives from a local to a worldly view. SHRM’s 2008 Workplace Forecast highlights several trends in culture that will likely have a major impact on the workplace: 1) heightened awareness of cultural differences in domestic and global workplaces; 2) greater need for cross-cultural understanding/savvy in business settings; 3) managing talent globally; 4) greater emphasis on global leadership competencies; and 5) increased use of virtual global teams.

Thus, HR professionals experienced in workplace diversity and cross-cultural communication are well-positioned to develop and implement culturally appropriate HRM strategies, policies and practices. While not exhaustive, this Research Quarterly focuses on selected cross-cultural factors in HRM in today’s workplace and provides insights for HR to better serve the needs of the organization.

With the advent of globalization, research on cross-cultural organizational behavior has become a pathway to understand the dynamics of multicultural domestic and international workplaces. In fact, successful organizations of the 21st century require leaders who understand culturally diverse work environments and can work effectively with different cultures that have varying work ethics, norms and business protocols. Yet, diverse cultures create HRM challenges. As Lisbeth Claus, Ph.D., SPHR, GPHR, associate professor of global HR at Willamette University, points out, that the HRM challenges lie between the various types of cultures–the cultures of emerging and developed countries and the growing heterogeneity of the workforce in terms of multiculturalism.

Gaining cross-cultural competence takes time, education, experience, openness and sensitivity. When people lack intercultural skills, miscommunications can damage business relationships, deadlines can be missed, projects may fail and talented people will go to the competition. Key HR responsibilities are to understand how cross-cultural factors interact with HRM, be the conduit for organizational learning for cross-cultural intelligence and foster cross-cultural communication throughout the organization.
Cultural Value Dimensions: Cross-cultural intelligence is the ability to switch ethnic and/or national contexts and quickly learn new patterns of social interaction with appropriate behavioral responses. This competence is essential to work effectively in multicultural environments. Thus, linking future career paths and global business success with cultural competence is important for HR to emphasize, with the goal that managers are motivated to acquire new behaviors and skills and understand the benefits of learning from different cultures.

To become culturally competent, the first step is to have a solid understanding of one’s own values and how they shape cultural identity. Within this process, it is also important to realize that different cultures often exhibit different values.
There are 5 cultural value dimensions (according to Hofsted’s theory):
1. Power distance
2. Individualism/Collectivism
3. Masculinity/Femininity
4. Uncertainty Avoidance
5. Long/Short Term Orientation
1) High power distance indicates that hierarchy is important 2) Uncertainty avoidance is achieved by behavior that results in fewer unforeseen consequences 3) High-context cultures rely upon an internalized social context and/or physical environment (such as body language) and face-to-face communication for all or a large part of the message (e.g., indirect, subtle, ambiguous), whereas low-context cultures rely on direct messages (e.g., clear, stated in words, with emphasis on time management, punctuality and deadlines). 4) Collectivism refers to societies in which the group is valued over the individual and the individual’s responsibility to the group overrides the individual’s rights; individualism refers to societies that emphasize individual achievements and rights. 5) Long-term orientation indicates that cultural values are future-looking, including thrift, perseverance, humility/shame, and observe hierarchical relationships, whereas short term orientation values look to the past, such as respecting tradition.

The culture of an organization’s headquarters may highly influence the overall organizational culture. Specific factors determine the shape of corporate culture: 1) the relationship between employees and the company; 2) the hierarchical system of authority; and 3) the overall view of employees about the company’s future, including its mission and goals, and their respective roles in the organization. (12) According to cross-cultural researchers and management consultants Fons Trompenaars and Charles Hampden-Turner, there is a link between corporate and national cultures. Organizations can be classified into four different ideal-types of corporate culture, based on their focus on tasks/relationship and the extent of hierarchy: 1) the family; 2) the Eiffel Tower; 3) the guided missile; and 4) the incubator. These models of corporate culture provide insights as to why HRM policies and programs differ.

Building Business Relationships: Building optimal business relationships requires global fluency. Global fluency defined as facility with cultural behaviors that help an organization thrive in an ever-changing global business environment is a competitive advantage to establish and maintain good business relationships. To promote people working effectively with those of other cultures, cross-cultural training assists employees in becoming knowledgeable about cross-cultural communication in terms of their own cultural values, behaviors and assumptions, and those of other cultures. Cross-cultural communication also includes global business etiquette from greeting behaviors, exchanging business cards and toasting at business dinners to work attitudes, appropriate work attire and nonverbal communication. To not cause offense, it is helpful to be aware of differences in greetings, such as the handshake. Another differing communication style is the use of silence, a form of nonverbal communication. In high-context cultures, such as in Asian countries, silence indicates thoughtfulness in decision-making. In contrast, people in low-context cultures, such as the dominant culture in the United States, are uncomfortable with silence and tend to fill the void with ‘small talk,’ such as comments about the weather.

People establish rapport in accordance with their cultural values. Based on social capital theory and the importance of social networks, a recent study explored intercultural communication strategies for business relationship building through interviews with business executives in Armenia. The findings indicate that building a business relationship is defined within the socio-cultural and economic contexts of the respective cultures and that depending on the culture, different strategies are used to build and maintain business relationships. The following mini-case study demonstrates a success story from the viewpoint of the Armenian culture.

2 Case Study: The Armenian Story
A senior manager works at an Armenian company that sells a broad array of products (groceries, liquor, durable goods) and describes his philosophy about relationship building with an example from his company:

As he says – to successfully achieve our business goals, establishing and maintaining relationships with distributors is an essential strategy. Some of our customers are large firms, managed by graduates from the elite university I attended. This link creates strong networking opportunities. Once this connection is made, it is critical to invest time in this relationship, and I always counsel my subordinates on the importance of relationship building. One employee in particular is very good at maintaining relationships. He works hard to do so, even going to the airport or train station without prior arrangement to meet clients upon their arrival, once at 5 a.m. This effort shows that he is sincere and demonstrates how far he will go to maintain this valuable relationship. This personalized service adds to our commitment to nurture a long-term business relationship.
Effective cross-cultural communication is necessary to build and maintain business relationships. To support their organizations, HR professionals can develop HRM practices and policies that promote cross-cultural training and reward managers for their part in educating employees on effective cross-cultural communication.

3 Methodology
Analysis and identification of basic values prevailing in Armenian society was made by international consultant. After having gained some insight into the country’s mentality was determined what type of business management would evolve. This article deals with the findings of the second of these investigations. They are the result of a small study carried out in Armenia among 55 executives and directors in training at the HCYS in Yerevan.

The questionnaire used in this research was based on Hofstede’s studies examining company executives’ and directors’ cultural values, which included 116,000 questionnaires in 20 languages, administered in 72 countries across five continents. The methodology used and detailed results for all the countries surveyed may be found in the book Culture’s Consequences.

4 Results
4.1 Position of Armenian culture in four main cultural values
4.1.1 Power distance: This perception varies a great deal from country to country, and so the concept of power distance is an important key to identifying differences between them. Armenia rated 76, placing it among the countries with high power distance. This score is as high as, India, Sub-Saharan Africa and a little higher than France (68). By way of comparison, the US scored 40 and Scandinavian countries have an even lower rating (e.g. 30 for Finland). This value constitutes a permanent part of Armenian mentality.

One of the findings of investigation is that 42 per cent of our interviewees’ direct superiors are described as autocratic and 22 per cent as paternalistic.
4.1.2 Uncertainty Avoidance: The measure of uncertainty avoidance is in direct proportion to the degree of freedom in the country. Anxiety leads to accepting ways of limiting uncertainty, which in turn leads to accepting restrictions on individual liberty. Numerous observers have recorded the Armenian need to control uncertainty.

According to the survey, Armenian executives display a high level of anxiety about the future which manifests itself in a tendency to be nervous, emotional and aggressive. Armenia has a similar rating to France (86) on uncertainty avoidance.

It is therefore not surprising to find that 78 per cent of Armenian executives questioned say that they feel “constantly” or “often” tense or strained at work. Job stability is uppermost in everyone’s mind: 66 per cent hope that they will continue to work in their present company for more than five years or up until retirement.
4.1.3 Individualism: Today, there are both collective societies who value time spent within the group and individualist societies who value time spent by individuals in their personal lives. With a factor of 26, Armenia falls into the groups of countries with a collective mentality.

How things are done in business is related to this dimension. For example, in a country with a collective mentality, employees expect their firm to take care of them like a family does. In countries with a more individualist mentality, the company does not get involved in the personal lives of its employees.
In the Soviet system, the main role of a factory director consists of looking after the workers’ situation: building housing, managing shops where workers can find products unavailable elsewhere, organizing children’s playgrounds, looking after the medical centre and sending workers on holidays in company owned apartments. Managing a business is based on loyalty and a sense of duty, and decisions are made on the basis of personal relationships with managers.
4.1.4 Masculinity: Armenia (although this certainly varies greatly from one region to another) is in the same group as Scandinavian countries on this dimension, it scores 28.

4.2 The implicit consequences for management systems in Armenian organizations
While management style overall is implicitly influenced by a country’s culture, there are three important areas where it is explicitly at work:
(1) Appropriate management style.
(2) Motivation.
(3) Implicit organizational structure.
1. Appropriate Management Style: Appropriate management style is dictated by subordinate expectations. A typology of management styles is established by crossing countries’ power distance ratings and individualism ratings.
The Armenian research showed high power distance and strong collective mentality. In this type of culture, employees expect an autocratic management style, offset by the support given to the subordinate’s family. Therefore, a system of management by objectives, which presupposes the confidence and independence to negotiate with one’s boss, a shared desire among bosses and subordinates to take risks and a desire to achieve, is incompatible with Armenian culture.
2. Motivation: We obtain a typology of motivations by crossing the masculinity value with uncertainty avoidance. In this respect, Armenia is similar to France. For this group of countries, security and a sense of belonging are the strongest motivators. Group solidarity is even more important than individual wellbeing.

Today’s Armenia is fundamentally reactionary, in the sense that the priority is to protect achievements, rather than take risks in an uncertain future.
3. Implicit Organizational Structure: The organizational structure of companies differs from one country to another. Once again, two cultural values can help explain the differences:
– The power distance rating explains the degree to which decision-making is centralized in a country: the more pronounced the power distance is, the more likely it is that power will be centralized.
– The uncertainty avoidance rating is an indication of how companies perceive and control their environments. Controlling uncertainty can explain the extent to which roles are formalized in a firm.

5 Conclusion

In practice, the implicit organizational model found in Armenia is the same as that found in Japan or in France. High power distance combined with high uncertainty avoidance gives rise to a pyramid-shaped bureaucratic structure, which is both formal and centralized. Work procedures and the relationships between individuals are formally established, either through strict regulations and laws, or through custom and tradition.
All of the above basic information should be taken into account when defining the structure of new Armenian firms and developing internal processes.


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(2) Society for Human Resource Management. Glossary of human resources terms. Retrieved, 2008
(3) Gelfand, M. J., Erez, M., & Aycan, Z. Cross-cultural organizational behavior. Annual Review of Psychology, 2007, 479-514.
(4) Hofstede, G. Culture’s consequences: International differences in work-related values. Newbury Park, 1980, 89 – 134
(5) Alon, I., & Higgins, J. M. (2005, November/December). Global leadership success through emotional and cultural intelligence, Business Horizons. 2005, 501 – 542.