Formal and Informal Business Cultures, Part II: the Hidden Hierarchy

11/14/2016 11:11 am ET

Co-authored by Karin van der Auwera

In Part I of this series, we discussed how throughout much of the business world, pyramidal-shaped hierarchies exist with clear, often rigid levels of respect and authority. But this is only half of the story. In parts of the West, particularly Scandinavia, Australia and the USA business structures can be extremely informal, resembling more a gentle wavy line rather than a sharp triangle. At first glance, it appears that there is no hierarchy at all. This, however, is a flawed and dangerous assumption.

Informal business cultures are egalitarian: from boss to receptionist, communication might be open with apparently little concern about status, job title or hierarchical position. The boss may present her/himself as your “friend.” Eye contact is usually direct, as is language where the use of “No!” is valued for its clarity and simplicity. Furthermore, employees feel a strong personal responsibility for their tasks and the company´s objectives. Used to defining their own priorities, their decision making scope is broad.

This is unbelievable, even shocking for those from top-down hierarchies, such as in Asia, India, Latin America, the Middle East, etc., where the boss is a lofty figure standing firmly at the tip of a tall and mighty pyramid. Those from such formal business cultures will often perceive an informal communication style as impolite, rude and disrespectful. While Westerners tend to believe that equality creates societal stability, hierarchical people think inequality creates stability because everyone knows their roles and status levels and they adhere to the delicate rules. At its extreme, informal business cultures are perceived as being deeply disruptive of corporate, even societal, harmony. Equally, in its extreme version, the hierarchical value system -- strongly influenced by Confucian ideas -- is virtually incompatible with the egalitarian notions of informal societies.

In one of our multi-cultural business workshops a Finnish boss – Finland is an extremely egalitarian country -- kept explaining how exhausting and time-consuming it is to democratically convince his employees to implement new company goals. As he droned on, a South American manager sitting next to him burst out, “Aye! What a waste of time! Just slam your hand down on the table y basta! they will do what you say!” The Finn stared at him in disbelief: if he dared to use this approach, he calmly explained, he would provoke a host of problems ranging from de-motivation to anger to insubordination and open resistance.

At the other end of the formal-informal scale, a US American businessman visiting Cairo, Egypt, found his Egyptian business partner’s chauffeur so charming that he habitually chatted with him in the typical open and friendly US American manner. He even presented him with a small gift at the end of his visit. One week later, the Egyptian manager complained to the American, “I don’t understand what’s wrong with Amir, my driver. He’s become cheeky and yesterday when I told him to drop my daughter off at school, he told me he was busy! Can you imagine that? I hope he comes to his senses or I’ll be forced to replace him.” Imagine the American’s shock when he suddenly realized his faux-pas in breaking one of the Golden Rules of Formal Hierarchies: never fraternize with the staff. When the Egyptian manager realized this, he was annoyed with his American partner for causing what was for him an obvious, unnecessary and damaging conflict.

The USA – especially the West Coast – creates an additional challenge: the use of first names, even when addressing the boss, the in-your-face friendliness, the easy-going manner of the people and the use of humor even in “serious” discussions often confuse people into believing that hierarchies do not exist there. In reality, nothing could be further from the truth. US Americans love titles, ranging from Chief Sanitation Engineer to Executive Vice-President on up and are extremely respectful of the power and rank of superiors. In meetings, only the brave, foolish or well-connected dare to correct or disagree with the boss; the use of “No!” is often replaced by exuberant enthusiasm for virtually every idea presented. In this ambiguous “hidden hierarchy,” US Americans intuitively understand and respect title and position, even when bosses repeatedly exhort staff, “I want frank and open discussions!”

If an innocent foreigner, oftentimes from a direct-language culture such as the Netherlands or Germany, takes this literally and actually tells the boss what he really thinks, he runs a high risk of being fiercely reprimanded by the manager for having a “bad attitude,” not being a team player and not knowing his place. In our intercultural coaching sessions we have had cases where highly qualified employees were fired or transferred to lower-level positions by their superiors because they had unknowingly violated the invisible rules of the Hidden Hierarchy.

When people from informal and hierarchical business cultures meet, the inherent contradictions within both systems can create much confusion, tension, hurt feelings and even conflict. Those from informal business cultures err when they define egalitarianism as a universal good which can be transplanted into every culture; those from formal business cultures are wrong in assuming that their international partners can read the often invisible behavioral rules of the hierarchy. Neither system can blithely be exported into host cultures without meeting resistance. Neither system is “right” or “wrong,” “better” or “worse,” “normal” or “weird.” But savvy international business people realize that they have to up their intercultural radar to skillfully and smoothly glide around the hidden dips and depths of the business world’s various hierarchical systems.

  <em>The “hidden hierarchy” presents many traps for unsuspecting international business people. </em>
The “hidden hierarchy” presents many traps for unsuspecting international business people.
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