Management Style and Productivity in Two Cultures

Author(s): Tom Morris and Cynthia M. Pavett

Source: Journal of International Business Studies, Vol. 23, No. 1 (1st Qtr., 1992), pp. 169-179
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 MANAGEMENTSTYLE AND PRODUCTIVITY
IN TWO CULTURES

Tom Morris* and Cynthia M. Pavett**

Universityof San Diego
Abstract.Globalcompetitionhas motivatedan increasingnumber
of United States firms to set up productionfacilities in Mexico.
This study examines productivity and management style differ-
ences in a Mexican maquiladora operation and its U.S. parent
plant. Likert's System 4 Theory was used as the theoretical basis
of comparison. As hypothesized, significant differences were
found in the managementsystems while productivity at the two
facilities was equal.

Mexico is one of the fastest growing "production sharing" countries in the

world [McCray and Gonzalez 1989]. In response to internationalcompetitive
pressures and the fact that the U.S. has one of the highest average direct
labor rates in the world [WorldDevelopment Report 1989], hundreds of U.S.
companies have taken their labor-intensiveoperationsto Mexico. Labor costs
are lower in Mexico than in the U.S. and quality of output can be maintained
[Gruben 1990]. Currently, there are more than 1,300 Mexican production
facilities or "maquiladoras" [Jarvis 1990] along the two-thousandmile U.S.-
Mexican border. The rapid increase in the use of Mexico as a production
partnerhas occurredin partbecause of the Mexican government'sliberalization
of certaintarifflaws and laws pertinentto foreign ownershipof manufacturing
enterprises [Gruben 1990].
Maquiladoras are Mexican production facilities that use raw materials,
which have been temporarilyimported,to manufactureor assemble products
in Mexico [Greene 1989]. The materials are moved back and forth across
the bordertax free and dutyfree, allowing U.S. companiesaccess to inexpensive
Mexican labor. While the U.S. is not the only country using maquiladoras,
it is estimated that U.S.-owned plants account for between 65%-98% of all
maquiladoras in Mexico [Greene 1989]. Although these plants are owned
and often operatedby U.S. nationals,businesscustoms,businesslaws, appropriate

*Tom Morris(Ph.D.,Universityof Denver)is AssistantProfessorof International

Business at the Universityof San Diego School of Business. Currentresearch
interestsincludethe management of foreignsubsidiariesandinternational
technology
transfer.
**CynthiaM. Pavett (Ph.D., Universityof Utah) is Professorof Managementat
the Universityof San Diego School of Business.Herpresentresearchis primarily
on the topic of internationalcomparativemanagement.
Received: February 1991; Revised: June 1991; Accepted: September 1991.

169
170 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1992

human resource practices, culture and values differ significantly between

the two countries [Jarvis 1990; Stinson 1989; Kras 1989; Kras and Whatley
1990]. As a logical outcome of these differences, it seems that the predomi-
nant management style within a maquiladora should also differ from the
style employed by the U.S. partner.
The purpose of this paper is to compare management styles and productivity
of a U.S. plant and its maquiladora subsidiary in Mexico. The general
hypothesis is that the management styles used in the two plants will differ
as a reflection of cultural differences. The following discussion on culture
and management styles provides a rationale for this general hypothesis.

Culture
Many management theorists and researchers contend that management
styles are culturally determined and hence vary markedly from culture to
culture (e.g., Aram and Piriano [1978]; Burger and Bass [1979]; Kras
[1989]; Wright [1981]). While there are a number of recent cross-cultural
studies (e.g., Baird, Lyles and Wharton [1990]; Black [1990]; Elias [1991];
Kras [1989]; Kras and Whatley [1990]; Lie [1990]; Posner and Low [1990];
Masters and Gibbs [1990]; Vertinsky, Tse, Wehrung and Lee [1990]) that
examine managerial attitudes, adjustment, risk taking, values and organiza-
tional design norms, only two such studies look at management style in
Mexico. Elias [1991] published a brief report of her consulting work that
compared U.S. and Mexican managers across six skill areas. This very
ethnocentric study indicated that Mexican managers needed skill training.
The second study, conducted by Kras [1989] and summarized in Kras and
Whatley [1990], is quite instructive since it takes a relatively objective look
at the Mexican culture, its management-relatedpractices and values, and its
predominant management styles. In her observational and interview-based
research, Kras describes the culturalnorms of both U.S. and Mexico as they
relate to differences in managerial behavior. Earlier psycho-cultural work,
such as thatof Ramos [1962], and the laterwork of Condon [1985], corroborate
most of Kras' cultural observations. While her research is purely descriptive
and lacks the benefit of a theoreticalmodel for describingmanagerialbehavior,
it is unique because of its focus on management-relatedcultural differences
between the U.S. and Mexico. Consequently, her research will be used to
describe some of the salient cultural differences that serve as the basis for
the hypotheses of the present study.
According to Kras [1989], family life in Mexico is more important than it
is in the U.S., where work often takes priority over the family. Within the
Mexican family, the father is the undisputed authorityfigure. It is the father
who makes the majordecisions and sets disciplinarystandards.While children
are protected and loved, they are very dependent on both the moral support
of the family as well as the authority figure to make the decisions. As a
result, the maturing child entering the work place expects supervisors to
MANAGEMENT STYLE AND PRODUCTIVITY 171

make the decisions, take responsibility, and assume all accountability. In

essence, the employee expects father-like behaviors. In contrast, the U.S.
father is not unquestionably the sole wielder of family authority. Authority
is often shared with the mother who is frequently employed outside the
home. This family structure contributes to the values and behaviors of
self-sufficiency, independence and individualism that are admired in the
U.S. society. Young American workers display a readiness to question,
criticize and change those things they dislike in society or the work place
and can thereforebe characterizedas low on authoritarianism.Unquestioning
acceptance of orders and dependence on a father-figure type of supervisor
are not typical in the U.S.
This observation on the authoritative orientation of Mexico and the U.S. is
corroboratedby Condon [1985], Ramos [1962] and the multi-country cross-
cultural research of Hofstede [1980]. Hofstede found that, in comparison to
the other countries he studied, the U.S. ranked relatively low on power
distance whereas Mexico ranked fairly high. Power distance is a measure
of the extent to which less powerful members of organizations accept the
unequal distribution of power.

Management Styles
In additionto examiningculturaldifferences,Kras'researchdesctibeddifferences
in what was defined as "management styles." Included in this eclectic
definition were: traditionalmanagerial functions of controlling, staffing, and
planning; work values such as work/leisure and loyalty; and macro-level
practices such as centralization, training, and development. Within this
broad spectrum of organizational behaviors, numerous cultural differences
emerged from Kras' interviews. For example, Mexican executives indicated
that there is no tradition of delegation of authority. Power and authority are
concentratedin the upperlevels of the organization.In contrast,U.S. executives
described much less autocratic work environments. Mexican executives
were portrayed as much more loyal to the organization than Americans.

Likert's System 4
Likert's System 4 Theory of management was developed from data that
were collected from thousands of managerial personnel in hundreds of dif-
ferent organizations [Likert 1967; Likert and Likert 1976]. The theory is
named after an ideal model of how to run an organization. Four different
broad styles of management have been identified by Likert as forming a
continuum, with autocratic, task-centered leadership at one end and demo-
cratic, participative, employee-centered at the other. The autocratic end of
the continuum represents System 1; the participative end of the continuum
is called System 4. Table 1 provides the names of all four systems and a
brief description of the key components of each system. It should be noted
that the systems are described in terms of six managerial or organizational
172 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1992

dimensions: leadership, motivation, communication, decisions, goals, and

control. According to Likert, the type of management system prevalent in
an organization can be determined by having organizational members fill
out a diagnostic questionnairecalled the Profile of OrganizationalCharac-
teristics [Likert 1967]. Likert's survey, which will be described below, was
administered in both the U.S. and Mexican-maquiladora plants.
Based upon the above discussion on culture, management style, and Likert's
theory, it is hypothesized that the Mexican organization will be significantly
more authoritative [tend toward System 1] than its U.S. counterpart.This
hypothesis will apply to both the overall management system and the six
individual dimensions that define the system.

OrganizationalProductivity
According to Likert and his colleagues, organizations should strive to be-
come System 4 organizations because they are the most productive. He
suggests that a participative management system, or a System 4, will be
more productive in any culture [Likert and Likert 1976].
Contraryto Likert, we and most contingency theorists argue that there is no
"universal" management system. Management systems reflect cultural dif-
ferences. It is suggested that efficient systems are dependent upon cultural
factors. Even though the system may differ from country to country, effi-
ciency and productivity do not necessarily vary as a function of these dif-
ferences if the system is compatible with the culture. This view is supported
by several researchers and theoreticians. For example, Oberg [1963], an
early cross-cultural researcher,flatly states that "a universal claim [that one
management system is superior] is hardly warrantedby the evidence." Our
contention is that a participative management system is not necessarily a
more productivesystem. What is important,however, is that the management
system fits the cultural context. If the system is appropriate,then similar
organizations in different cultures could use very different management
systems and be equally productive. This contention reflects the systems
theory notion of equifmality [Katz and Kahn 1978]. Briefly, equifmalitystates
that a system can reach the same final state from differing initial conditions
and by a variety of paths.Therefore,in contrastto Likert's theorizing,it is also
hypothesized that there will be no statistical differences between productivity
levels of the two plants. This hypothesis reflects the culture-management
style match notion because the factors (other than management systems)
that determine differences in productivity between the two organizations
have been minimized due to the nature of the participating organizations.

METHOD
Our researchwas designed not only to use a theoreticalmodel but also to take
advantage of a "naturally" occurring cross-culturalcomparative situation-
a parent plant and its subsidiary. Specifically, the present study uses Likert's
MANAGEMENT STYLE AND PRODUCTIVITY 173

TABLE1
Description of Likert's Four Systemsa

System Description Scale Value

System 1 The system utilizes an autocratic, top-down approach to 0-4.9
Exploitative leadership. Employee evaluation is based on punishment
Authoritative and occasionally on rewards. Downward communication
is predominantand there is little lateral interactionor
teamwork. Both controland decisionmakingreside at the
top levels of the organization.(Likerthypothesizes mediocre
organizational performance for the System 1 style.)

System 2 This system is similar to 1 but management tends to be 5.0-9.9

Benevolent more paternalistic. Employees are given a little more
Authoritative freedom than in System 1. Management defines the
limited boundaries for interaction,communication, and
decisionmaking.

System 3 Employees have more interaction,communication and 10.0-14.9

Consultative decisionmaking than in System 2. Although employees
are consulted about problemsand decisions, management
makes the final decisions. (Likerthypothesizes "good"
productivityfor this type of organization.)

System 4 This system makes extensive use of employer 15.0-20.0

Participative participation,involvement and groups. The groups are
Group highlyinvolvedin setting goals, makingdecisions, improving
methods and appraisingresults.Communicationoccurs
both laterallyand vertically.The linking-pinconcept is
used. (Likerthypothesizes high levels of productivity).
aScore of 0-4.9=System 1; 5.0-5.9=System 2; 10.0-14.9=System 3; 15.0-20.0=System 4.

System 4 Management Theory to compare management styles of U.S. and

Mexican managers working in virtually identical plants-one in Mexico,
the other in the U.S.

Participants
The two plants used in this study were owned by a U.S. multinational
corporation that produced labor-intensive, disposable plastic products. Both
plants produced identical products. The Mexican operation was modeled
exactly after the U.S. operation. The parent organization believed that the
best way to assure a smooth transitionof technology was to avoid introducing
any changes in the production process. Consequently, a great deal of effort
was made to exactly duplicate the operating policies, product design, raw
materials,manufacturingmethods, tooling, type of facility, work place layout,
test fixtures, packaging, and training. For example, all tooling and fixtures
used in Mexico were utilized and validated in the U.S. process prior to
transfer. All raw materials were purchased from the same suppliers and all
training was done by the same bilingual trainingpersonnel in both locations.
174 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1992

Each plant employed approximately 120 direct labor personnel. There were
forty-three management personnel in the U.S. facility and thirty-seven man-
agement personnel in the Mexican facility. Thus, the direct labor-management
ratio was very similar. The manufacturingmethods were very labor intensive
so thatthe outputwas operator-pacedratherthanmachine paced. Demographi-
cally, the direct labor operators were very similar in terms of gender, age,
experience and training. They were predominantly single females, aged
17-24, with two years of experience. All employees received identical train-
ing in their respective languages.
Likert's [1976] Profile of Organizational Characteristics survey was filled
out during a meeting of all forty-threemanagersat the U.S. plant. The survey
was also filled out by all thirty-seven Mexican plant managers during a
management meeting. The survey was translated into Spanish and back-
translatedto assure identical meaning in both languages. This group included
thirty-four Mexican nationals and three American expatriates. The three
Americans were included in the survey group because they were key man-
agers who had an impact on the overall management system. The first
author personally collected the survey data at each facility.

Survey
The Profile of Organizational Characteristics, which is described in detail
in Likert and Likert [1976], consists of eighteen items, each with a 20-point,
verbally anchored response scale. Between two and four of these eighteen
items are used to measure the degree of participation in each of the six
organizational dimensions: leadership (three items), motivation (three
items), communication (four), decisionmaking (three), goal-setting (two),
and control (three). For example, one of the four items that assesses com-
munication is as follows: "How well do superiors know problems faced by
subordinates?". Responses range from 0 (not very well) to 20 (very well).
A low score, on the survey, indicates an authoritativeorientation (low par-
ticipation) whereas a high score reflects a participativeorientation.According
to Likert, organizations are classified into one of four systems based upon
the linear summation of the eighteen items.
The Likert survey was selected for use because it had previously been
validated in a large-scale study at General Motors [Taylor and Bowers
1979]. In addition, Likert's theory, upon which the survey is based, is
familiar to numerous management researchers. The survey has been used
to measure management systems in the U.S., Western Europe, Eastern
Europe, Asia and Latin America [Likert 1976].

Labor Productivity
Labor productivity was defined as the ratio of direct labor hours per unit
produced.This definitionwas used because it is consistentwith the company's
standardcost accounting system. The data used to calculate productivity for
MANAGEMENT STYLE AND PRODUCTIVITY 175

each organization were obtained from corporate records. Data consisted of

a random sampling of fifty days' worth of production data (direct labor
hours and number of units produced) from a one-year period for each plant.

RESULTS
Student's t-test and profile analysis were used to examine the hypothesized
differences in management systems. Table 2 contains both the results of the
t-tests and information about five of the six organizational dimensions. As
seen in the first column of Table 2, the internal reliabilities of the system
scale and the organizational dimension scales are more than acceptable.
Cronbach's alphas [Cronbach 1951] for these scales range from .77 to .94.
The internal reliabilities of the subscales for the individual countries are
somewhat lower than those of the total sample. These lower alpha scores
are expected given the small sample sizes and small number of items per
scale. It should be noted that the two-item goal-setting scale produced very
low internal reliabilities (total sample=.39, subsamples=.37, and .23) indi-
cating that respondents did not answer the two items in a similar manner.
Because of these low reliabilities,this "scale" was droppedfrom the analysis.
However, the two items will be retained as a part of the eighteen-item
summation score.
The data in Table 2 stronglysupportthe first hypothesis. Specifically, Mexican
managers respond significantly differently from the U.S. managers on the
summation of the eighteen survey items. This mean summation score, which
represents the plant's overall management system, was significantly higher
(t=16.09; p<.001) in the U.S. (12.39) than in Mexico (7.89). According to
Likert's interpretationof these scores (see Table 1), the Mexican plant is
reported as having a significantly more authoritative management system
than the U.S. plant.
Similar results were obtained for the subscales. Across all five scales, the
scores from the U.S. managers were significantly higher than those from
the Mexican managers. Again, differences between these scores indicate the
use of a more authoritative management style in Mexico than in the U.S.
Profile analysis was conducted on the scores associated with the five organ-
izational dimensions to examine the similarity between the response profiles
of the two plants. Specifically, we were interested in determining if the
profile of means from the two groups were parallel. Profile analysis tests
this parallel means (similarity of vectors) hypothesis (hypothesis #1) along
with the null hypotheses that: (2) assuming parallelism, there is not a sig-
nificant difference between the groups on the mean level of the dimensions
(differences in vector elevation) and (3) assuming parallelism, there are no
significant differences between groups on the individual scales (differences
in vector shape) [Bernstein 1988]. A plot of these responses is displayed in
Figure 1.
176 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1992

TABLE 2
Likert's Management System and Organizational Dimensions
for Mexico and U.S.

a Number
Organizational of Mexico U.S.
Dimension Questions Alpha Mean S.D. Alpha Mean S.D. t-valueb
Total Management 18 (.84)c .82 7.89 1.26 .79 12.39 1.20 16.10
System
1. Leadership 3 (.89) .80 8.42 2.04 .72 11.98 1.55 8.63
2. Motivation 3 (.90) .93 8.62 2.27 .84 11.17 1.73 5.52
3. Communication 4 (.77) .84 10.11 1.59 .78 14.03 1.90 10.01
4. Decisionmaking 3 (.95) .82 3.14 1.06 .69 12.87 1.55 33.06
5. Control 3 (.81) .74 7.27 1.53 .77 11.16 1.61 10.85
aScore of 0-4.9-System 1; 5.0-5.9-System 2; 10.0-14.9-System 3; 15.0-20.0-System 4.
bAllare significantat p<.001.
CAlphacoefficients for the total sample.

Results led to the rejection of all three hypotheses. The multivariate tests
of significance led to the rejection of the parallel hypothesis. Exact values
for these tests are as follows: Pillais=.80; Hotellings=4.20; and Wilks=.19.
All are significant at the .001 (df=4,74) level indicating a lack of parallel-
ism. The test of significant differences between groups on vector elevation
indicated that the two plants were significantly (F=243.00; p=.000; df= 1,78)
different across the mean levels of the dimensions. Lastly, when examining
exactly where (among the five dimensions) significant differences occurred,
the results clearly indicated that all five dimensions contributedto the over-
all difference between the data from the two plants. The F-test values here
range from 5.79 (p=.02) to 288.59 (p=.00). Given the lack of parallelism,
this profile analysis is, in effect, a simple MANOVA that confirms the
results presented in Table 2. The lack of parallelism,however, is informative
since it suggests that the differences between the two data sets are not caused
by systematic response bias. That is, American managers did not system-
atically mark higher numbered responses than did the Mexican managers.
The hypothesis aboutlaborproductivityis also supportedby data.As indicated
in Table 3, the direct labor hours per unit in the U.S. plant is statistically
the same as that of the Mexican plant. This number was obtained by aver-
aging the daily productivity statistics across the fifty days. Hence, for each
of the fifty days, direct labor hours were divided by the number of units
produced that day. The resulting means and standarddeviations were used
to compute a t-statistic.

DISCUSSION
With the increasing popularity of the maquiladora, the issue of how to
productively manage Mexican employees has become fairly critical for
American managers. In labor-intensive, worker-pacedassembly plants, such
MANAGEMENT STYLE AND PRODUCTIVITY 177

FIGURE 1
Organizational Dimensions

Exploitative Benevolent Consultative Participative

Authoritative Authoritative Management Management

Leadership I' 1..,,,v,........ .. ......, 1 .1 .,1. I

o 5 1 10 15 20

Motivation l lI I......... ll. I

0 5 \1O0 15 20
Communication I l .... ..... ... . \......
o 5 10 / 15 20

Decisionmaking I _-II... I..

o 5 1 15 20
Control I................................I............
..................... ... ...............................
0 5 10 15 20

Mexico U.S._

as the ones used in our study, an acceptable culturally appropriatemanage-

ment system could be a major determinant of success or failure. The way
in which employees are managed could give the firm the competitive cost
advantage necessary to succeed in a global market or it could contribute to
the firm's demise. The implicit assumption here is that the management
system will have an impact upon productivity(e.g., Likert and Likert [1976]).
Given the validity of this assumption in certain situations, the issue for the
American manager is whether or not to use U.S. management techniques/
systems in the maquiladora. The research findings of the present study
suggest that U.S. managementsystems do not necessarily have to be used in
the Mexican plant to elicit the same level of productivity as the U.S. Plant.
The management systems that were used in each plant reflect some of the
salient cultural differences between the U.S. and Mexico. Americans have
been characterizedas less accepting of authority, autocratic decisionmaking
and unequal power distributions than are the people of Mexico [Hofstede
1980; Kras 1989]. These differences are evident in the relative value or
meaning placed upon family, father figure and work. In addition, the cultures
vary with respect to the mastery of decisionmaking skills [Kras 1989]. In
the work place, American employees are characterized as desiring partici-
pation in decisionmaking and as having the training(via the U.S. educational
system) to make those decisions. Mexican workers are characterized as
expecting an authority figure to make decisions and assume responsibility.
Yet, because of the strong family orientation, paternalism is also a desirable
178 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FIRST QUARTER 1992

TABLE3
ComparativeProductivityResults Across Fifty Days

Mexico U.S. t-value

Total Direct Labor Hours 23,716.4 Hrs. 23,781.0 Hrs.
Total Units Produced 200,531 Units 196,420 Units
Average D/L Hours per Unit .118 Hrs.IUnit .121 Hrs.IUnits .88(N.S.)
Standard Deviation .0053 .0032

managerial characteristic in Mexico. These cultural differences, in tandem,

mirror the results of our study. The managers at the U.S. plant reported
using a Consultative system (System 3). In contrast, the managers of the
Mexican plant were paternalistic, yet were authority figures as reflected in
reported use of System 2 (Benevolent Authoritative)management practices.
While our study does not specifically measure the congruence between
managementsystems and culture,it does suggest that specific elements of the
cultures are prominent in the management of the work force. Contrary to
Likert and Likert's [1976] intemationalfindings that "The higher-producing,
more successful enterprises, departments,or offices tend to fall toward the
System 4 end of the range... ." [p. 89], we found thata System 2 organization
was quite productivein Mexico whereas the System 3 was equally productive
in the U.S. We maintainthat these findings are due to the congruence between
management systems and culture in the two locations.
Our conclusions and implications should be interpretedwith the following
limitations in mind. First, there is the possibility that some significant,
unidentified variable, such as managerial experience of the respondents,
confounded the results of this study. Second, the study was done within a
single multiational corporation(MNC) and its subsidiary.While this subsidiary
arrangement represents a typical Mexican-U.S. maquiladora relationship,
the results of the study may not be generalizable to all U.S. firms and their
Mexican partners.
There are several considerations for work in the future. First, studies looking
at management systems should include a large representative sample of
Mexican maquiladoraoperations and their U.S. counterparts.Given a large
sample, compansonscould be made between Mexican fnns thatuse indigenous
Mexican managers as compared with those firms that use U.S. expatriates.
Another interesting and appropriatearea of investigation would include a
longitudinal study measunrngchange in the indigenous management system
as a function of industrial development. If interactionisttheorists are correct,
we would expect a change. Indeed, as the Mexican-U.S. trade continues to
grow, Mexican companies have already begun to modernize their manage-
ment systems. At the same time, they wish to preserve their cultural values.
This will undoubtedly result in a unique management system worthy of our
continued study.
 STYLEAND PRODUCTIVITY
MANAGEMENT 179

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