Power Distance in the Time of Financial Uncertainty

Monthly Archives: August 2015

Power Distance in the Time of Financial Uncertainty

Exchange Rates

Power Distance is relative.

Power Distance, a cultural dimension as defined by Geert Hofstede, is the “degree to which the less powerful members of a society accept and expect that power is distributed unequally. The fundamental issue here is how a society handles inequalities among people. People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalise the distribution of power and demand justification for inequalities of power.”[1]

Reading today’s (August 28, 2015) WSJ article, China’s Reckoning, by Orville Schell, immediately made me think of how our normative values affect our perception of “other.” If the U.S. has a Power Distance index (on a scale of 0-100) of 40 and China is 80, we compare our need for control against another. However, to Austria (PD 11) the U.S. (at PD 40) is higher on the need to equalize the distribution of power.

Hofstede’s theory of cultural dimensions is a framework for helping us understand the values that a society places on behavior–in this framework group (vs. individual) values are compared statistically to show how societies differ from each other. The premise underlying cultural dimensions is that there are differences between cultures (or groups of people) and that we all see the world through our own normative standards.

What is playing out currently with the Chinese yuan devaluation is a challenge for all leaders – so how do you, as a global business leader, respond to the financial dip as once again stock values fall and the shock reverberates around the world? Is this an “us against them” situation? It doesn’t have to be. This article describes Beijing as wielding high power distance regarding its economic policies, but according to whom? How can we step back and analyze the situation from outside our normative perceptions?  How can we better understand how other countries deal with their economic policies and why?

One thing for sure, we live in an interconnected world and it is critical to try and understand the perspective of “other.” This doesn’t mean that we change our values or beliefs; rather it means that we have the nerve to try and see things from another perspective as someone else sees it. Midway into his article, Schell quotes a Tsinghua University professor on the Chinese model of ‘socialism with Chinese characteristics’ (as former leader Deng Xiaoping coined “socialist-oriented market economy”) who says, “It [this Chinese model] has broken down the universe of discourse of the old market style of economy and proven that there is no single narrative that is suitable for the whole world.”

We need perspective, as the narrative has changed!

Who has the power?

What does this mean for your organization? How can you respond to the uncertainties of the fluctuating global economy as you navigate the rough waters of the unknown?  And how can you understand Power Distance from the perspective of “other?”

Let us know what you think.  Visit http://www.globalbizleader.com

[1] http://geert-hofstede.com/