long term, directive–participative and inner and outer locus of con - trol can be reconciled in an integrated culture. A good example is the all-employee stock option plan at Cisco. The organizational leadership stresses that the program alone does not create an ownership culture; it is just a manifestation of it. Cisco’s corporate culture stimulates teams whose individual employees are empowered to make significant decisions, linking short-term actions with long-term strategies. Moreover, employees can’t be motivated by options if they don’t understand them, so the company runs an education program. And there is no cultural environment where that doesn’t work (Figure 7.7). It is striking how many research findings have indicated that money is not a motivator. But Etzioni wrote about this in the nineteenth century when he said that there were three ways of controlling people: by force, by money, and through normative controls and that only the third was a motivator. Money is in fact a “dissatisfier.” Employees quickly get used to the good feeling and jump to the next expectation. 269 MANAGING HR DILEMMAS ACROSS CULTURES 10/1 Hiding behind the back of high performers 10/10 The well-informed co-decisive employee who owns the company in the long term 5/5 Preferent stocks, where there are different types of owners 1/10 Short-term gains at the cost of long-term company productivity Rewarding individual performance 10 0 Rewarding by company share options 10 Figure 7.7 The pound in your pocket The process of internationalization forces us to adapt much of the existing logic in management thinking. There are some options that do not work as well. You can choose a reward system stimulating team spirit. People from Japan excel at that, but it often leads to col - lective mediocrity. Even worst is the compromise – rewarding the small team. Both the individualist and the team player feel demotivated. The classic solution is “co-opetition,” meaning cooper - ating in order to compete. Such reward schemes are aimed at having creative individualists molding teams that achieve beyond expecta - tion. THE NECESSARY ROLES OF A SUCCESSFUL TEAM Belbin (1996) described an effective team as a group of people that aim for a shared goal through four phases: forming, storming, norming, and performing. In reality, however, the dynamic of a team is a function of the differences in the contributing team roles of indi- viduals. It is these tensions that flow from the range of resources available to the team to different skills and thinking that have to be reconciled. But even more, the contributions from individual mem- bers are not restricted to their primary team role, but to changes and flexing to other roles as the members of the team influence and inter - act with each other as they try to perform. In the transitions between each of the four phases the differences between the roles become even clearer, and the reconciliation of the different orientations becomes essential. Thus there is the potential for tension between any two primary roles. When these manifest as dilemmas and are not reconciled, the team remains in the storming phase. When the dilemmas are recon - ciled, the team can move to the higher levels of the “performing” mode. 270 BUSINESS ACROSS CULTURES Dilemmas are necessarily played out between people and it is the job of the HR professional to provide an environment in the organi - zation in which such dilemmas can be reconciled. At the meta-level, the overall task for HR is to reconcile the tension between the organi - zational perspective and the individual perspective of each employee. 271 MANAGING HR DILEMMAS ACROSS CULTURES Finance and accounting across cultures CHAPTER 8 FINANCE AND ACCOUNTING ACROSS CULTURES I n their classic work May, Mueller and Williams (1976) define accounting as a “language.” If so, perhaps it is not surprising that it is afflicted by the curse of Babel. Not only do countries have their own rules, but so do industries and even individual companies. As in the other functional areas discussed in this book, this brings about a whole series of different dilemmas. As we will see, many dilemmas owe their origin to rules (universalism), which will be difficult to reconcile with company-specific needs (particularism) when we are faced with unaccommodating agencies and foreign governments. Accounting exists to provide comparisons over time and between companies for three main purposes. The first is to provide informa- tion to the shareholders to know how and where their investment is represented, the second is for the market, and the third is so that management can manage. Whilst these purposes are different, the source information, although not its presentation, will be substan- tially the same. COMPARABILITY VERSUS COMPLIANCE We all recognize that accounting rules can be used to deliberately distort the activities of an organization and that this remains a prob - lem. The BBC’s Money Programme frequently asserts that “profit is just a number, it depends on the accounting policies employed.” International accounting standards exist to reduce the variation between sets of accounts. Other standards exist, but are more like conventions and don’t necessarily have the force of local law, let alone international law. And of course a global company has to rec - oncile the differences between the rules of the country where its HQ is based and its subsidiary companies in their own local setting. Management Accounts, as opposed to Financial Accounts, may be 275 easier to reformat to provide a common basis for reporting and deci - sion making. Many regulations make comparability difficult. International Stand - ard 17 recommends the capitalization of leases in line with the principle that substance should take precedence over form. German accounting rules, for example, require accounts to be prepared on a tax basis and prohibit this treatment – thus making comparability difficult unless multiple sets of accounts are prepared for different purposes. A fundamental dilemma is thus between the need for compliance versus the degree of de jure and de facto harmony (com - parability). A variation of this dilemma is that the fundamental principle of fair presentation is found to compete with compliance. In the European Union, many directives have been developed to which individual nations must now comply. Difficulties can occur as a once-only problem when new rules are introduced (like a required change in liquidity following the specification of a new solvency margin that is different to previous practice), or can be ongoing. In many ways, the origin of these problems comes from the notion of historic cost accounting because this is open to different interpreta- tions. Thus LIFO (last in, last out) stock valuation is not common in Europe because there are no tax advantages. During inflation using LIFO, the cost of goods sold is higher and the value of stock lower than under FIFO (first in, first out). In contrast share prices rise in the US when LIFO is introduced, despite a short-term reduction in reported earnings. This is because the effect of LIFO is not to reduce the value of the company, but to increase it by reducing tax pay - ments without changing the added value of the company’s basic trading activities in any way. Some research suggests that the market place gives insufficient attention to the detail behind the accounting policies of published accounts – although of course, there are 276 BUSINESS ACROSS CULTURES specialist analysts who study such detail carefully to provide infor - mation to stock market traders and other clients. The question of whether it is possible to define a universal set of accounting policies has been posed may times. Demski (1976) debated this at length and concluded that accounting is necessarily “particularistic.” Chambers (1976) then stated that if Demski’s prin - ciple was true, we should immediately abandon the pretence that accounting is disciplined. Demski’s reply to that was that it is the user’s needs that differ and that each user is best served by a differ - ent (particularistic) set of accounts. However, there will always be market forces that will disclose information in the absence of regula- tion and it is becoming common practice to enforce contractual restraint on employees to prevent disclosure that might otherwise be to a competitor’s advantage or influence the perceived value of the company in the market. The practical aspect of disclosure is determined to a large extent by accounting standards, which are embodied in the principle that those who read and use financial accounts should be aware of the basic assumptions on which they are based. However, this approach is far too simple. We have to consider issues that derive from: 1. Objective versus subjective presentation 2. Different meanings (especially in different cultures) 3. Political will in different countries. OBJECTIVE VERSUS SUBJECTIVE PRESENTATION Accounting policies are the rules which companies use to determine the manner in which they prepare their accounts. They are usually 277 FINANCE AND ACCOUNTING ACROSS CULTURES based on the premise that the policy to be adopted is that judged to be the most suitable. But most suitable for whom? One area for improvement is that disclosure of accounting policy is virtually use - less and it is often difficult to determine exactly what bases and assumptions have been employed. There is often considerable infor - mation but little explanation. In many situations, not only is there no single standard in place, but often no simple choice between alternatives. But recall that it is the responsibility of management to choose the optimum accounting policy for their business. It would not be surprising therefore if a manager, planning to take on a loan which required a covenant, chose accounting policies which made it easier for his company to comply with that covenant. Often published accounts are summarized in a few pages, though they are supported by extensive supplementary information, which is often unintelligible. Even if the basis on which the accounts are prepared is stated overtly, we might still draw different conclusions from the same data. Let’s give a simple example to illustrate the point. If only one alter- native is published or available, the reader may not consider that an alternative presentation could have been made. Note that exactly the same data is used to tell two different stories. Before the acquisition, it is projected that HQ will double its revenue from its current performance, partly because some of the customers from the new subsidiary will be included in HQ’s sales. The pro - jected revenue for the subsidiary acquired by HQ will as a consequence fall, and the total projected revenue is forecast to drop to one half of its current performance. As Figure 8.1 shows, there is a projected overall mean gain of 25 percent from the acquisition. A year later, the past CEO of the acquired company claims that the 278 BUSINESS ACROSS CULTURES [...]... is offset by his subsidiary company losing half of its revenue and that therefore the total effect of the acquisition was an overall 200% Decline in revenue of subsidiary 125% Overall performance 100% 50% Increase in performance of HQ Now Before Figure 8.2 Looking back on the unsuccessful acquisition 279 BUSINESS ACROSS CULTURES decline by 25 percent from 125 percent of the total current level a year... physical and social to psychological characteristics, and the success with which they perform their task It was particularly Bennis et al who claimed to have found a relation between the effectiveness of leaders and properties such as logical thinking (translating ideas into simple forms), persistence (learning from errors and swimming against the flow), empowerment (enabling and enthusing others), and. .. fiscal year 283 BUSINESS ACROSS CULTURES It is not the role of agencies or governments to impose their imperialistic dictats across countries The need is rather, through monitoring exceptions and difficulties of implementation, to continuously improve accounting standards in order to reconcile the need for a standard framework to provide a common language with a diverse range of needs across countries... the 289 BUSINESS ACROSS CULTURES same item from an invoice and secondly from a purchase ledger statement, yet which appear to be in conflict (or different), and working to find accounting errors to bring them to the same value Therefore, accountants should already have a built-in propensity for reconciling business dilemmas Their problem, if any, is that they believe their work is a science and not...FINANCE AND ACCOUNTING ACROSS CULTURES Performance of HQ 200% Overall performance 125% 100% 50% Performance of subsidiary Projected Now Figure 8.1 Projecting successful acquisition acquisition was not successful He could argue (using the identical data) that the parent company may have increased its revenue from 50 percent a year ago to where it is now but, as shown in Figure 8.2, this is offset by his... actions earned by the activities and the profit earned We could consider that ABCM is a specific function, whereas BPR is the all-embracing diffuse opposite • Throughput Accounting (TA) This analysis involves continually synchronizing and adjusting the manufacturing (or service) 286 FINANCE AND ACCOUNTING ACROSS CULTURES process around relative bottlenecks and focusing on resource capacity, time, and added... existing systems and what improvements are required, versus those managers empowered to action decisions and make change happen Communication, involvement, training, and anxiety reduction are a priori requirements for reconciling this dilemma Integration versus stand-alone Many consider that ABCM systems should not be seen as an extension to the financial systems but as a total business system and not purely... sound international financial system that we all desire must include sound and resilient national financial systems throughout the world, regulated and supervised according to a set of internationally consistent, transparent standards, and codes of good practice Establishing an 282 FINANCE AND ACCOUNTING ACROSS CULTURES environment for sustainable capital flows will also require that countries wishing... fraud, the more attractive it becomes as a locale for would-be securities law violators and the proceeds of their illegal transactions The IMF has been actively involved in efforts, on both a country -by- country basis 280 FINANCE AND ACCOUNTING ACROSS CULTURES Who is calling whom immoral? As soon as we go international, we have to remember that different cultures may apply different meanings to events... recognized the need for new systems that would drive the pursuit towards being “world class” and co-incident with the other changes such as TQM and BPR Roselender (1995) demanded a need for “relevant management accounting” that could provide the information necessary to achieve a competitive advantage In many cases, however, a priority was survival, let alone sustainable growth Even before the Balanced . each employee. 271 MANAGING HR DILEMMAS ACROSS CULTURES Finance and accounting across cultures CHAPTER 8 FINANCE AND ACCOUNTING ACROSS CULTURES I n their classic work May, Mueller and Williams. versus those managers empowered to action decisions and make change happen. Communication, involvement, training, and anxiety reduction are a priori requirements for recon- ciling this dilemma. Integration. next expectation. 269 MANAGING HR DILEMMAS ACROSS CULTURES 10/1 Hiding behind the back of high performers 10/10 The well-informed co-decisive employee who owns the company in the long term 5/5 Preferent