Cultural Dimensions Theory Of Hofstede

1. Introduction

Czech Republic was the first country from the region of Central Europe that, after more than 50 years of planned economy, in 15 years was able to change its status of developing country, being included in the developed economy group (Klapalová et al., 2014), collecting the heritage of the old Czechoslovakia, that was in the 20’s the 6th world economic power.

Most of this progress arises from the ability of the Czech Republic to attract Foreign Direct Investment (FDI) since 1990, thanks to the central location, in the heart of Europe, close and well connected to all the most major European Business centres; to the technical skilled workforce and to the lower labour cost (KPMG, 2016).

Thus, many multinational companies have

Theoretical review: Hofstede’s Cultural Dimensions Theory

One of the most cited model to analyse the cross-cultural aspects is the Hofstede’s Cultural Dimensions Theory (Hofstede, 1980): he proposed four value dimension through which a culture can be distinguished and evaluated, power distance, uncertainty avoidance, individualism, masculinity, long term orientation. In 1998, Schuler and Rogovsky applied the model to explain compensation practice.

Although scholars have questioned the validity of Hofstede’s model as a representation of national culture (as obtained from a specific company), it is the most widely recognized and cited cultural model (Newman and Novell, 1996, cited in Schuler and Rogovsky, 1998).

To give an overview, we are about to briefly describe the five dimension and how they can be connected to the reward system.

The first value is Power Distance, it refers to the level of acceptance of inequity, which means the degree to which subordinates accept unequal power (Deresky, 2011). In organizations with low power distance, employees are more involved in the decision-making processes, while in societies with high power distance employees are dependent on the boss’s authority and respect strictly the

It describes the degree on which societies are more future-oriented and tend put effort on long-term goals rather than short-term profits (Hofstade, 2010; Deresky, 2011).

According to Schuler and Rogovsky’s study (1998), societies with high level of uncertainty avoidance are more likely to use seniority-based and skilled-based compensation system, and fixed pay are preferred to compensation based on individual bonuses or commission. Performance related pay are characteristics, instead, of societies with high individualism and high levels of masculinity, where also the use of flexible work benefits, workplace childcare programmes, career break schemes and maternity leave are less common; stock-ownership are used in society with high levels of uncertainty avoidance and power distance.

As Schuler and Rogovsky themselves argue, to have a complete pattern it is important to also consider not only culture, but also institutions, company size and sector of industry, economic conditions. The model nevertheless is the best starting point to analyse the reward system in Czech