DDBA 8524 Week 4 Culture Explanation Test Example

Before Blaming Culture, Try the Rivals: Testing the Labor Code, Ownership History and Market Maturity as Explanations for a French Subsidiary's Cool Reception of Performance-Related Pay

Student Name

Walden University

DDBA 8524: Seminar in Multicultural Management

Instructor Name

Month Day, Year

Before Blaming Culture, Try the Rivals: Testing the Labor Code, Ownership History and Market Maturity as Explanations for a French Subsidiary's Cool Reception of Performance-Related Pay

The Puzzle and the Default Explanation

A composite American maker of laboratory instruments introduced a performance-related pay plan across its subsidiaries in 2024. Under the plan, up to 15 percent of salaried employees' annual pay depends on individual performance ratings. Subsidiaries in the United Kingdom, Singapore and Brazil adopted it within a year. The French subsidiary, a manufacturing and sales unit of about 420 employees near Lyon, adopted it only for 30 senior managers, and only after eighteen months. Headquarters' human resources team explained the delay in one word: culture. This paper withholds that explanation until three rivals have been tested. Gerhart and Fang (2005) argued that national culture explains less of the variation in human resource practices than is often assumed, and that institutional and organizational factors frequently account for differences attributed to culture.

Rival One: The Labor Code

French employment law requires consultation of the company's employee representative body, the social and economic committee, before changes that affect working conditions, pay structures or the organization of work. The subsidiary's records show that the committee was formally consulted in March 2024, requested an independent expert's report, as French law allows, and issued an opinion against applying the plan to non-managerial staff in October 2024. In addition, many of the subsidiary's employees are covered by a sector-wide collective agreement that sets pay scales. Changing variable pay for those employees requires negotiation within the framework of that agreement.

How far does this rival get? It explains the timing of the delay well: the consultation process accounts for about eight of the eighteen months. It explains why non-managerial staff were excluded, since their pay is governed partly by the collective agreement. It does not fully explain why senior managers, who are not covered by the agreement, took a further ten months to accept the plan.

Rival Two: Ownership History

The subsidiary was acquired in 2016 from a French family-owned firm. Under the family owners, managers received fixed salaries plus a share of company profits distributed equally. Kostova and Roth (2002) found that subsidiaries' adoption of headquarters practices depends on the institutional environment of the host country and on relationships between the subsidiary and the parent, including trust and identification with the parent. Interviews with six senior managers suggest that several still identify more with the former family firm than with the American parent and saw individual pay as an attempt to replace a collective reward they valued. That explains part of the senior managers' reluctance. Two managers said they accepted the plan only after the parent agreed to keep the existing profit-sharing alongside it.

Rival Three: Market Maturity

The French unit sells mainly to public research laboratories and hospitals in a mature, slow-growing market where sales depend on long relationships and team effort across sales, service and application specialists. Individual performance is hard to separate. The British and Singapore units sell in growing markets where individual salespeople can win new accounts. Managers in Lyon argued, with some evidence, that individual ratings fit their work poorly. Sales records support them: in the French unit, most large orders involved four or more staff.

What Is Left for Culture

After the three rivals, little of the puzzle remains unexplained. The labor code explains the timing and the exclusion of non-managerial staff; ownership history and market structure explain most of the managers' reluctance. Culture may still play a part, in attitudes toward individual comparison, but the evidence does not require it. Tsui et al. (2007) urged researchers to test alternative explanations before attributing differences to national culture, and this case shows why.

Testing the Culture Claim Directly

If headquarters still wished to test culture's part, it could compare the French unit with other French firms owned by foreign parents in similar markets. If those firms adopted individual pay readily after consultation, culture would explain little; if most resisted even where profit sharing was kept, it would explain more. Such a comparison would take the explanation out of the realm of assertion and into evidence.

What the Senior Managers Said

In the interviews, no senior manager described individual pay as foreign to French values. Their objections were concrete: the ratings would be set by managers who did not see much of their staff's work, the profit share would disappear, and team sales would be split arbitrarily. Each objection ties to a rival above, not to culture.

Implications for Headquarters

Headquarters' one-word explanation would have led it to treat the French unit as resistant by nature. The rivals point to practical steps: plan consultations into rollouts in countries with strong employee representation, keep collective rewards where they are valued and design team-based variable pay where individual contributions are hard to separate.

References

Gerhart, B., & Fang, M. (2005). National culture and human resource management: Assumptions and evidence. International Journal of Human Resource Management, 16(6), 971-986. https://doi.org/10.1080/09585190500120772

Kostova, T., & Roth, K. (2002). Adoption of an organizational practice by subsidiaries of multinational corporations: Institutional and relational effects. Academy of Management Journal, 45(1), 215-233. https://doi.org/10.2307/3069293

Tsui, A. S., Nifadkar, S. S., & Ou, A. Y. (2007). Cross-national, cross-cultural organizational behavior research: Advances, gaps, and recommendations. Journal of Management, 33(3), 426-478. https://doi.org/10.1177/0149206307300818