Journal of International Financial Management and Accounting 5:3 1994

The Influence of Culture on Organizational

Design and Planning and Control in Australia
and the United States Compared with
Singapore and Hong Kong

Graeme L. Harrison*, Jill L. McKinnon*, Sarala Panchapakesan**

and Mitzi Leung***
*Macquarie University, **Hong Kong Polytechnic,
***Hong Kong Technical Colleges Planning Team

Abstract
This study draws oti the tiational cultural ditnensiotis of power distatice, individualism,
atid Confucian dynamism to predict and explain differences in philosophies for, and
approaches to organizational design and management planning and control systems in
Australia and the US, representing Anglo-American nations, and Singapore and Hong
Kong, representing the 'five dragons' of East Asia. Data were gathered by survey
questionnaires mailed to senior accounting and finance executives in 800 organizations.
The results were largely as predicted and, in general, provide support for the importance
of national culture in influencing organizational design and management planning and
control systems. In particular, the cultural values of Anglo-American society relative to
East Asian society are associated with a greater emphasis on decentralization and
responsibility centres in organizational design, and a greater emphasis on quantitative and
analytical techniques in planning and control. By contrast, the cultural values of East
Asian society are associated with a greater emphasis on long-term planning and on group
centred decision-making. The results are important to managers in global organizations
who need to understand the cultural bases of observed differences in organizational
and management planning and control practices in Anglo-American and East Asian
nations.

I. Introduction
The transferability of organizational and management planning and
control systems across nations is an issue of increasing importance as
movement towards the globalization of business and economies con-
tinues. In particular, the questions of whether and how different national
cultures give rise to differences in philosophies for, and approaches to.

The United States data for this project were gathered while the Macquarie University authors were
Visiting Researchers in the Graduate School of Management, University of California, Irvine in 1991.
The assistance of Professor Dennis Aigner, Dean of the Graduate School is gratefully acknowledged
in facilitating the collection of these data. We would also like to thank the two anonymous reviewers
for their helpful comments and suggestions..

© Basil Blackwell Ltd. 1995, 108 Cowley Road. Oxford 0X4 IJF. UK and 238 Main Street. Cambridge, MA 02142, USA.
 Influence of Culture on Organizational Design and Planning 243

organizational design and planning and contrQl systems have been the
subject of a number of studies in recent years (Daley et al., 1985; Chow et
al., 1991; Shields et al., 1991; Frucot and Shearon, 1991; Harrison, 1992,
1993).
A significant early study in this area was that of Daley et al. (1985),
who examined the attitudes of Japanese and United States (US) managers
and controllers towards twelve aspects of budgeting and control systems
design. Daley et al. found differences in attitudes in respect of some of the
budget and control systems practices, but similarity of attitudes in respect
of others. Importantly, Daley et al.'s findings contradicted their hypotheses
in respect of the predicted direction of difference in attitudes between the
Japanese and US managers and controllers in 7 of the 12 aspects. The
authors noted, in possible explanation of this, that their hypotheses had
been based on 'fairly common statements about attitudes in the US and
Japan' (Daley et al., 1985, p. 105), and that these statements may not have
been valid.
Another characteristic of the Daley et al. (1985) study is that, while it
was highly insightful in raspect of differences and similarities in attitudes
between Japan and the US, its findings were restricted to those two nations
alone. This is because the hypotheses were based on prior statements and
assertions about observed differences in attitudes between Japan and the
US, rather than on the instrinsic and componential cultural determinants
of those differences.
In the absence of working from componential determinants, cross-
national studies are restricted to describing differences between practices
and/or attitudes in the nations actually studied. Such studies cannot explain
the reasons for the differences (or similarities), nor can they predict or
seek to generalize their results to other nations which may have similar or
different cultural components.
In recognition of this limitation, many subsequent cross-national
studies in both the financial and management accounting areas have been
based on the explicit incorporation and examination of the cultural vari-
able (see, for example, Soeters and Schreuder, 1988; Chow et al., 1991;
Frucot and Shearon, 1991; Harrison, 1992, 1993). In particular, these
studies have heeded the call in the cross-cultural psychological and
organizational literature that cross-cultural research should 'unbundle' or
'unpackage' the cultural variable into its subcomponents, which can then
provide the basis for theoretical prediction and explanation of relations
between culture and other variables of concern (Bhagat and McQuaid,
1983; Child, 1981).
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244 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

This study is set within that framework, and examines the way in which
national culture, 'unbundled' into appropriate components, is associated
with differences in philosophies for and approaches to, organizational
design and management planning and control systems in different nations.
The organizational design issues that we examine are concentration of
authority (decentralization/centralization), and use of responsibility centres.
In respect of management planning and control systems, we examine the
effect of national culture on; (i) the emphasis on quantitative techniques,
(ii) the planning time horizon (short-term and long-term planning), (iii)
group or individual centred decision-making, and (iv) formalization of
control. These issues of organizational design and planning and control
systems are drawn from Khandwalla (1977) and Daley et al. (1985), and
are not exhaustive of such systems. Other important issues, such as
budgetary participation, emphasis on budgets in performance evaluation,
compensation, etc., have been the subject of other cross-cultural research
(Frucot and Shearon, 1991; Harrison, 1992, 1993; Chow et al., 1991).
The nations we examine are Australia, the US, Singapore, and Hong
Kong. Taken together, Australia and the US represent western societies of
Anglo-American origin, and Singapore and Hong Kong constitute two of
what are sometimes called the 'five dragons' of East Asia (Hofstede and
Bond, 1988, p. 5).' As such, Australia and the US combined, compared to
Singapore and Hong Kong combined, represent important clusterings of
nations which share many cultural characteristics within the clusterings,
but contrast on many such characteristics across the clusterings.^
The concept of culture, and the cultural components and characteristics
which distinguish Australia and the US on the one hand, and Singapore
and Hong Kong on the other, are discussed in the next section of the paper.
Following that, hypotheses about differences in philosophies and approaches
to organizational design and planning and control systems in Australia/US
compared to Singapore/Hong Kong are developed, based on the cultural
components and characteristics. The method is then presented, followed
by a discussion of the results and conclusions of the study.

IL The Concept and Components of Culture

The concept of culture used in this paper is based on the work of Rohner
(1984) and Hofstede (1980). Rohner (1984, pp. 119-120) defined culture
as 'the totality of equivalent and complementary learned meanings
maintained by a human population, or by identifiable segments of a popu-
lation, and transmitted from one generation to the next'. More informally,
©Basil Blackwell Ltd. 1995.
 Influence of Culture on Organizational Design and Planning 245

he (1984, p. 113) referred to culture as 'a system of meanings in the heads

of multiple individuals within a population'. Hofstede (1980, p. 25)
defined culture similarly as 'the collective programming of the mind which
distinguishes the members of one human group from another'. He went
on to describe the content of mental programmes as values. In a major
survey of employee attitudes in the world-wide subsidiaries of IBM (a
survey which took place initially between 1968 and 1973, and involved
20 languages and 117,000 questionnaires), Hofstede identified four norm
values which he termed 'dimensions' of culture. These were power dist-
ance, individualism, uncertainty avoidance, and masculinity. In a subsequent
study (Hofstede and Bond, 1988), a fifth norm value was identified,
termed Confucian dynamism.
Power distance (PD) refers to the way in which societies handle the
problem of human inequality. Some societies are characterized by a norm
value that inequalities between people should be minimized; and to the
extent that hierarchies exist within society and its organizations, they exist
only for administrative convenience (Hofstede, 1980, p. 122). These
societies would be classified as low PD. In low PD societies, subordinates
and superiors regard each other as like (or equivalent) people, who have
equal rights (Hofstede, 1980, p. 122), and subordinates expect to be
consulted on decisions or actions that affect them (Child, 1981, p. 327;
Perera and Mathews, 1990; Hofstede, 1980, p. 110). By contrast, other
societies are characterized by the acceptance of inequality and its institu-
tionalization in hierarchies, which locate people in their 'rightful places'.
Here the hierarchy reflects and reinforces inequality. These societies,
would be classified as high PD. In high PD societies, superiors are expected
to lead, to make decisions autocratically and patemalistically, and subord-
inates are generally afraid and unwilling to disagree with their superiors
(Hofstede, 1980, p. 92; Child, 1981, p. 327).
The cultural dimension of individualism (IDV) 'describes the degree to
which individuals are integrated into groups' (Hofstede and Bond, 1988,
p. 10). Hofstede (1983, p. 79) distinguishes societies on this dimension as
follows:
At one end of the scale wefindsocieties in which the ties between individuals
are very loose. Everybody is supposed to look after his or her own self-interest
and maybe the interests of his or her immediate family ... At the other end of
the scale wefindsocieties in which the ties between individuals are very tight.
People are bom into collectivities or ingroups. Everybody is supposed to look
after the interest of his or her own ingroup.

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246 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

The former societies in this quotation would be regarded as high indi-

vidualism (or individualist) societies, and the latter as low individualism
(alternatively termed coUectivist). An individualist culture is characterized
by a focus on the individual as having a self-identity which is both unique
and whole, and by an emphasis on the individual's interests and attributes,
rather than on the interest of the group(s) to which individuals may
belong. By contrast, under the perspective of collectivism, a person is seen
as whole only when considered in terms of an ingroup affiliation. It is the
group, not the individual, that is seen as the basic unit of survival (Hui,
1984, p. 28),
Uncertainty avoidance (UA) is related to how a society confronts the
uncertainty of the future. A high UA society maintains a shared belief that
'the uncertainty inherent in life is felt as a continuous threat that must be
fought' (Hofstede, 1980, p. 184) by 'adhering to strict laws and rules, safety
and security measures, and (on the philosophical and religious level) a
belief in absolute Truth' (Hofstede and Bond, 1988, p. 11). A low UA
society is one in which life's uncertainty 'is more easily accepted and each
day is taken as it comes' (Hofstede, 1980, p. 184), Masculinity (MAS)
(versus femininity) is concerned with the ways in which the biological
differences between the sexes become perpetuated in differences in social
and organizational roles played by men and women, 'Masculine cultures
.,. expect men to be assertive, ambitious, and competitive, to strive for
material success .., and expect women to care for the nonmaterial quality
of life, for children and for the weak. Feminine cultures ... define
relatively overlapping social roles for the sexes, in which neither men nor
women need to be ambitious or competitive' (Hofstede, 1984, p. 390).
Considerable support has been provided for the four dimensions of
culture described above. First, these dimensions were also found in an
independent survey of the values of 1000 psychology Students in ten
nations using the Rokeach Value Survey (Ng et al., 1982; Hofstede and
Bond, 1988, pp. 14—15). Second, Hofstede's classification and measures
have been replicated and supported for validity and reliability in sub-
sequent studies (Bosland, 1984; Hofstede and Bond, 1984; Ronen and
Schenkar, 1985).
Despite this support, however, Hofstede was concerned that both
his questionnaire and the Rokeach Value Survey were developed by re-
searchers in western nations, and may therefore have been culturally
biased by the (western) mental programming of the researchers who
conceived and designed the questions in the instrument. As such, the
instrument might have included questions (about values and attitudes) that
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 Influence of Culture on Organizational Design and Planning 247

were irrelevant to respondents in other cultures, particularly eastern

cultures, and might have excluded questions (about values and attitudes)
that would have been relevant to those cultures (Hofstede and Bond, 1988,
p. 15). Consequetitly, therefore, a subsequent study was conducted based
on a questionnaire developed by researchers in eastern nations. This
instrument was called the Chinese Value Survey (GVS) (Hofstede and
Bond, 1988, p. 15).
The administration of the GVS questionnaire produced the following
results. First, the dimensions of power distance, individualism and mascu-
linity, identified in the original study, were also present in the second.
Hofstede and Bond (1988, pp. 15-16) note that these three dimensions
refer to 'three types of expected social behavior: behavior toward senior
or juniors, toward the group, and as a function of one's sex'. They (1988,
p. 16) argue that these are cultural choices 'so fundamental to any human
society that they are found regardless of whether the values surveyed were
designed by a Western or an Eastern mind'. Second, the uncertainty
avoidance dimension was not found, and third, a new dimension was found
which Hofstede and Bond (1988) termed Confucian dynamism.
The Confucian dynamism (GD) dimension was identified as polarizing
societies on a set of values derived from the teaching of Gonfucius. Speci-
fically, societies were found to differ between those that regarded as relat-
ively important the four values of perseverance, thrift, the observation of
relationships ordered by status, and having a sense of shame; and those
that regarded as relatively important the four values of personal steadiness
and stability, the protection of face, respect for tradition, and the reci-
procation of greetings, favours and gifts (Hofstede and Bond, 1988, p. 17).
Societies which regarded the first four as relatively important tended to
regard the second four as relatively unimportant, and vice versa. Hofstede
and Bond (1988, p. 16) contended that the first four values reflect an
orientation toward the future, while the latter four reflect an orientation
toward the past and the present. Hofstede and Bond (1988, pp. 12-13)
ranked 22 nations on this dimension, contending that those ranked high
reflected 'a dynamic future-oriented mentality', while those ranked low
reflected 'a more static, tradition-oriented mentality' (Hofstede and Bond,
1988, p. 16).
The results of the two surveys have implications for research comparing
western and eastern nations. Those results suggest that the dimensions of
power distance, individualism, masculinity, and Confucian dynamism are
relevant to such comparisons; the first three because of their universality
(i.e. applicable to within western, within eastern, and across western/eastern
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248 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

nations), and the fourth because of its particular potential to polarize and
distinguish nations in eastern and western groupings. By contrast, the
results of the surveys suggest that uncertainty avoidance is not a dimen-
sion applicable to western/eastern comparative studies, but rather is re-
stricted to those studies comparing western nations only.
Hofstede and Bond (1988, pp. 19-20) contend that the non-universality
of uncertainty avoidance and Confucian dynamism reflects a philosophical
divide between western and eastern nations, based on the acceptance or
rejection of an ultimate truth. They argue that western societies believe in
the existence of an ultimate truth and, therefore, are stimulated to search
for such truth. They cite the tenets of the religions of Judeaism, Christ-
ianity and Islam as reflections of such a belief. By contrast, eastern societies
are argued to reject the assumption of an ultimate truth.

Human truth is seen as partial, so that one truth does not exclude its opposite.
This is why people in the East can readily adhere to more than one religion or
philosophical school at the same time (Hofstede and Bond, 1988, p. 20).

The studies of Hofstede (1980) and Hofstede and Bond (1988) scored and
ranked each of 53 nations on power distance (PD), individualism (IDV),
uncertainty avoidance (UA) and masculinity (MAS), and 20 on Confucian
dynamism (CD). The studies show that Australia and the US are high IDV
and low PD, contrasting sharply with Singapore and Hong Kong, which
are low IDV and high PD. The latter two nations are high CD compared
to a low score and ranking for Australia/US. The difference between
Australia/US on the one hand, and Singapore/Hong Kong on the other, are
sharpest for these three cultural dimensions.'

III. Theory Development and Hypotheses Formulation

In this section, hypotheses are developed for expected differences in
philosophies for, and approaches to, organizational design and manage-
ment planning and control systems in Australia and the US (hereafter
grouped together and abbreviated to A/US) compared to Singapore and
Hong Kong (similarly grouped together and abbreviated to S/HK). The
hypotheses are based on differences in the cultures of A/US and S/HK
along each of the dimensions of culture identified and described in the
previous section as relevant to cross-national studies involving western
and eastern countries.
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 Influence of Culture on Organizational Design and Planning 249

Organizational design

The aspects of organizational design that we examined were concentration

of authority (decentralization versus centralization) and use of respons-
ibility centres. The two cultural dimensions relevant to concentration of
authority are power distance (PD) and individualism (IDV). Because PD
is directly concerned with the acceptance (high PD) or the rejection
(low PD) of the unequal distribution of power, Hofstede (1980, p. 107)
contends that high PD will be associated with greater centralization in
organizational design, and low PD with greater decentralization.
Individualism (IDV) is relevant in that it encompasses attributes of
freedom, autonomy, initiative and challenge; attributes which are also at
issue in the decentralization decision. Hofstede (1980, p. 166) contends
that, in high IDV societies; (i) more importance is attached to freedom and
challenge in jobs, (ii) managers aspire to leadership and variety, (iii)
managers rate having autonomy as more important, and (iv) individual
initiative is socially encouraged, compared to low IDV societies in which
such initiative is 'socially frowned upon'. Because decentralization is fre-
quently advocated as an organizational mechanism to promote these
attributes, it is expected that high IDV will be associated with greater
decientralization and low IDV with greater centralization. Based on their
relative levels of PD and IDV, we expect S/HK to demonstrate greater
centralization and A/US to demonstrate greater decentralization.
Associated with decentralization is the use of responsibility centres.
Responsibility centres, whether they be investment, profit, or cost centres,
are organizational design vehicles for assigning or allowing decisional
autonomy and accountability to discrete and individual organizational
units, and to the managers thereof. Although the decisional scope may be
different across types of responsibility centres, with profit centres containing
a greater number of performance influencing variables compared to cost
centres, and thereby providing the profit centre manager with greater
decisional scope; nonetheless the use of responsibility centres of which-
ever type reflects the choice to devolve decision autonomy, and is therefore
more consistent with a high IDV, low PD society than its converse.
Additionally, the compartmentalization of the organizational collective
whole, produced by the use of discrete responsibility centres, emphasises
the individual identity of those units within the collectivity, rather than the
collectivity itself. The fact that much attention has been paid in western
organizational literature and research to the issue of how discrete organ-
izational units interdepend (as in the work of Thompson, 1967, on pooled.
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250 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

sequential and reciprocal interdependence) is evidence of the perceived

emphasis in western (high IDV) society on the individual units them-
selves. The formality of unit interdependencies is less likely to be at issue
in low IDV (collectivist) societies.
The hypotheses to be tested for the directional relation between national
culture and organizational design are as follows.
HI: There is a greater degree.of decentralization in organizations in
A/US compared to S/HK.
H2: There is a greater use of responsibility centres in organizations in
A/US compared to S/HK.

Planning and control

The aspects of planning and conbol that we examined were: (i) the
emphasis on quantitative techniques, (ii) the planning time horizon (short-
term versus long-term), (iii) group or individual centred decision-making,
and (iv) formalization of control.

Emphasis on Quantitative Techniques: Hofstede and Bond (1988, p. 20),

in explaining the CD cultural dimension, argue that an outcome of the
difference between western thinking which accepts the existence of, and
searches for, an ultimate truth, and eastern thinking which rejects such a
circumstance, is that 'Western thinking is analytical, while Eastern
thinking is synthetic'. This suggests an expectation that A/US will place
greater emphasis on the use of quantitative techniques in the planning and
control process thati will S/HK. Hypothesis 3 is as follows.
H3: There is a greater extent of use of quantitative techniques in
planning and control in A/US compared to S/HK.

The Planning Time Horizon: It is expected that S/HK will place greater
emphasis on long-term planning than will A/US. The cultural dimensions
of CD and IDV are both relevant here. A major distinguishing feature of
nations high on CD, compared to those which are low, is their greater
orientation to the future (Hofstede and Bond, 1988, p. 16). S/HK are two
of the five highest ranking nations on this dimension, while A/US have
low rankings.
A major distinguishing feature of high and low IDV societies is the
perceived pre-eminence of the interests and welfare of the individual over
the group in the former society, and the belief in the subjugation of
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 Influence of Culture on Organizational Design and Planning 251

individual interests to those of the group in the latter. Hofstede (1980,

p. 166) notes that this gives rise to a calculative basis of involvement of
the individual in an organization in a high IDV society, and a moral basis
of involvement in a low IDV nation. This circumstance is relevant to the
preparedness of individuals in organizations to plan long-term, and to take
decisions that are in the best long-term interests of the organization. Many
such decisions (the introduction of a new product or service, or the entry
into an export market, for example) frequently involve a sacrifice in short-
term performance and profits to obtain the long-term benefits. A con-
sequence of this is that an individual associated with such a decision
may see his/her unit's performance decline in the short-term, and may have
moved on from that unit before the benefits are captured in unit performance.
It is expected that such a situation will be accepted by individuals in
low IDV societies with the consequence of a greater prepardness to em-
phasize long-term planning. By contrast, individuals in high IDV societies
are expected to be more concerned with the effects of decisions on unit
performance in the short-run; and to be reluctant to take decisions that
may provide long-term benefits if those decisions prejudice the unit's and
unit manager's performance in the short-run. Empirical support for this
expectation is provided by Daley et al. (1985). They (1985, p. 102) found
that Japanese managers believed more strongly than did US managers that
long-range plans were more valuable than short-range plans. Although
Daley et al. did not draw on a cultural explanation, Japan is ranked higher
on CD and lower on IDV than is the US (Hofstede and Bond, ^1988,
pp. 12-13). Shields et al. (1991) also note the greater orientation of
Japanese managers to the future compared to US managers. Hypothesis 4
is as follows.

H4: There is a greater emphasis on long-term planning in S/HK

compared to A/US (H4.1), and a greater emphasis on short-term
planning in A/US compared to S/HK (H4.2).

Group or Individual Centred Decision-making: It is expected that there

will be a greater emphasis on group centred decision-making in S/HK
compared to A/US deriving from a low versus high ranking on IDV. In the
latter countries, there will be greater emphasis on individualistic decision-
making. This expectation is directly in accord with the connotation of a
low IDV society being one where 'group decisions are considered better
than individual decisions' (Hofstede, 1980, p. 166); contrasted with the
beliefs in a high IDV society that 'decisions made by individuals are
usually of higher quality than decisions made by groups' (Hofstede, 1980,
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252 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

p. 160) and 'policies and practices should allow for individual initiative'
(Hofstede, 1980, p. 173). Hypothesis 5 is as follows.
H5: There is a greater emphasis on individual (versus group) centred
decision-making in A/US compared to S/HK.

Formalization of Planning and Control: The higher PD in S/HK com-

pared to A/US leads us to expect that the processes of planning and
control will be more formalized, more rule-oriented, and more rigidly and
tightly administered from top management down in S/HK than in A/US.
The acceptance of, and emphasis on the retention of power at top man-
agement levels, and the taller organizational pyramids of high PD
societies (Hofstede, 1980, p. 107) are expected to translate into more
formalized, mechanistic planning and control systems' characteristics in
S/HK than in A/US. By contrast, low PD is expected to translate into less
formalized, more organic-styled planning and control systems.'' Hypo-
thesis 6 is stated as follows.
H6: There is a greater degree offormalization of planning and control
in organizations in S/HK compared to A/US.

IV. Method
Data were gathered by survey questionnaires mailed to senior accounting
and finance executives in 800 organizations, 200 in Australia, the US,
Singapore and Hong Kong. The organizations were randomly selected
from the relevant business directories.^* The US data were gathered in the
latter months of 1991 and the data for the other three countries in 1992.
The business directories provided both functional/positional titles and
the names of the incumbents of those positions, and all questionnaires
were addressed personally to the selected respondents. For the Australian
and US samples, 'phone calls were made to each organization prior to the
mailing to confirm names and positions. In those instances where there
had been a change of personnel since the printing of the directory, the
name ofthe new incumbent was obtained and used. This confirmation was
not feasible economically for the Singapore and Hong Kong samples.
The questionnaire elicited the required data and measures in the fol-
lowing way.^ The cultural dimensions of power distance, individualism,
uncertainty avoidance, and masculinity were measured using the relevant
questions from Hofstede's Value Survey Module (Hofstede, 1980,
pp. 419^22). No measure of the Confucian dynamism dimension can be
made from the Values Survey Module. This dimension cannot be scored
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 Influence of Culture on Organizational Design and Planning 253

except for a multi-country administration of the 40-item Chinese Value

Survey. Aspects of organization design and planning and control were
measured using questions drawn from Khandwalla's (1977) Senior
Executive's Questionnaire.*
Concentration of authority was measured by a question asking respond-
ents to rate, on a seven-point scale, the emphasis placed on 'greater cent-
ralization in decision-making, with most operating decisions made at the
top' (anchored on 1) through to 'greater decentralization, with most
operating decisions made at lower management levels' (anchored on 7)
(Khandwalla, 1977, p. 681). Responsibility centre type was measured by
two questions asking respondents to rate the extent to which profit centres
and cost centres respectively were used in their firm, anchored on 1, 'not
used at all', and 7, 'used to a very great extent' (Khandwalla, 1977,
pp. 675-6).
The emphasis on quantitative techniques was measured with three
questions drawn from Khandwalla (1977, p. 674) asking respondents to
rate the extent to which their organization used quantitative and analytical
techniques in the control of production and inventories, and the evaluation
of capital investment proposals. A seven-point scale ranging from 'not
used at all' to 'used to a very great extent' was used. The planning time
horizon was assessed by asking how much emphasis was placed on (a)
short-terrn planning (1 year or less), (b) medium-term planning (1 to
5 years), and (c) long-term planning (greater than 5 years) on a scale from
1 ('very low emphasis') to 7 ('very high emphasis').
Group or individual centred decision-making was assessed by a ques-
tion asking the extent to which emphasis was placed on 'strong group
or committee oriented decision-making; consensus-seeking, participative
decision-making' (anchored 1) compared to 'strongly individualistic
decision-making by the formally responsible executive' (anchored 7)
(Khandwalla, 1977, p. 682).
Finally, formalization of planning and control was measured by five
questions drawn from Khandwalla (1977, pp. 6 8 1 ^ ) asking respondents
to rate, on a seven-point scale, the emphasis placed by top management in
their organization on each of five aspects of planning and control. For each
aspect, two anchor statements were given. These are shown below. The
first statement was anchored 7 and the second statement was anchored 1.

(a) Tight formal control of most operations by sophisticated control and

information systems; Loose informal control, heavy dependence on
informal relationships and cooperation.
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254 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

(b) Strong emphasis on always getting personnel to follow the formally

laid down procedures; Strong emphasis on getting things done even
if this means disregarding formal procedures.
(c) Strong insistence on a uniform managerial style throughout the firm;
Managers' operating styles allowed to range freely from the very
formal to the very informal.
(d) Strong emphasis on getting line and staff personnel to adhere closely
to formal job descriptions; Strong tendency to let the requirements of
the situation and the individual's personality define appropriate
behaviour on the job.
(e) Strong emphasis on detailed rules and procedures and their docu-
mentation; Little emphasis on detailed rules and procedures and their
documentation.

V. Results
Of the 200 questionnaires distributed in each of Australia, the US,
Singapore and Hong Kong, the numbers (percentages) returned were 140
(70%), 104 (52%), 65 (32.5%) and 55 (27.5%) respectively. These response
rates were obtained from one mailing only. Cost and the preservation of
confidentiality precluded a follow-up mailing, and it was not possible to
assess any potential non-response bias. The higher response rates in
Australia and the US are likely to have resulted in large part from the
telephone calls made to each company prior to mailing to confirm the
currency, names and titles of the respondents drawn from the directories.
This telephone confirmation was not feasible for Singapore and Hong
Kong.
The lower response rate for these latter nations is not inconsistent with
the comments and findings of Seah (1991) and Ang et al. (1986), cited in
Gul and Chia (1993, p. 12). Seah (1991, p. 12) notes an 'expected retum
of 25% for most postal surveys' in Singapore, and Ang et al. (1986)
attribute low retum rates in Singapore and, by extension, other high power
distance societies, to the cultural orientatipn of companies in those nations.
Although our response rates for Singapore and Hong Kong are consistent
with these findings, nonetheless the potential affect on generalizability of
the results from these samples must be acknowledged.
To verify that the respondent samples were drawn from A/US and S/HK
cultures, measures of the cultural dimensions of PD, IDV, UA, and MAS
were taken. Table 1 shows the country scores calculated from the respond-
ent samples, and compares them with the country scores reported by
e Basil Blackwell Ud. 1995.
 Influence of Culture on Organizational Design and Planning 255

Hofstede (1980). The PD and IDV scores calculated from the present
sample are generally in accord with those of Hofstede (1980), and provide
support that the respondent samples were representative of their nations'
cultures. The IDV scores computed for A/US and S/HK are not as far
apart as those of Hofstede (1980), with the scores for Australia and the US
being lower than Hofstede (1980) and those for Singapore and Hong Kong
being higher. This is consistent with the recent studies of Chow et al.
(1991) and Harrison (1992, 1993). Harrison, for example, reported IDV
scores of 69 and 36 for Australia and Singapore respectively.'
The UA scores do not demonstrate the higher A/US and lower S/HK
effect found by Hofstede (1980). This variation may reflect the probable
inapplicability, discussed earlier in the paper, of the western developed
instrument for, and the concept of, uncertainty avoidance in eastern nations.
The MAS calculations show some similarity with Hofstede's (1980) scores,
although the score for Singapore is at variation. As noted earlier, no
measure of the CD dimension could be made. Here, we must rely on the
demographic data obtained from the respondents, and on Hofstede and
Bond (1988) to support that the samples were representative of low CD
(A/US) and high CD (S/HK) cultures.
For the purposes of the present study, the general consistency of the PD
and IDV scores is important as these, together with CD, are the main
cultural characteristics drawn on in the development of the hypotheses.
Neither UA nor MAS are relied on in the theory development. However,
the general similarity of UA and MAS scores across the respondent
samples for all four countries lends comfort that these dimensions are
unlikely to influence the results of the study.

Table 1, Cultural Dimension Scores for Australia, US, Singapore and

Hong Kong

Australia US Singapore Hong Kong

Power Distance 32 11 13 59
[Range = 11 to 94]* (36)** . (40) (74) (68)
Individualism 78 75 46 50
[Range = 12 to 91] (90) (91) (20) (25)
Uncertainty avoidance 61 55 52 63
[Range = 8 to 112] (51) (46) (8) (29)
Masculinity 47 50 14 54
[Range = 5 to 95] (61) (62) (48) (57)
* Numbers in square brackets are the range of scores reported by Hofstede (1980) for each
dimension.
** Numbers in parentheses are the scores reported by Hofstede (1980) for the sample nations.
©Basil Blackwell Ud. 1995.
256 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

Organizational design
Table 2 shows the mean, observed range, and standard deviation for each
organizational design variable in hypotheses 1 and 2 for each of the
grouped nations, A/US and S/HK. As a single item question was used for
each variable, no reliability statistics can be computed. The t-statistics
calculated for a comparison of means between A/US and S/HK for each
variable are also shown, as are the predicted directions of differences.
As predicted in HI, a greater emphasis was placed on decentralization
in A/US compared to S/HK (t = 2.64, p = 0.005). Also, as predicted in H2,
A/US demonstrated greater incidence of responsibility centres than S/HK
in both profit centre (t = 5.70, p = 0.000) and cost centre (t = 6.47,
p = 0.000) form.

Planning and control

The results for H3 to H6, which relate to specific aspects of planning and
control, are shown in Table 3 and are discussed in turn. Again, as single
item questions were used to measure short-term and long-term planning,
group versus individual centred decision-making, and each of the three
aspects of quantitative techniques, no reliability statistics could be com-
puted.'" For the formalization of planning and control variable, which was
measured using a five-item instmment, the alpha reliability measure
(Cronbach, 1951) was 0.87.

Table 2. Organizational Design in Singapore/Hong Kong versus Australia/US

Variable Group Mean Min Max Std t-stat

(Expected direction) dev (prob
1-tail)

Concentration of Authority

Greater emphasis on decentralization A/US 3,55 1 1 1,62 2,64

(A/US > S/HK) S/HK 3,08 1 1 1,48 (0.005)

Responsibility Centre Type

Use of profit centres A/US 5.44 1 1 1.70 5,70

(AAJS > S/HK) S/HK 4,25 1 1 2,14 (0.000)
Use of cost centres A/US 5,73 1 1 1,42 6.47
(AAJS > S/HK) S/HK 4.55 1 1 2.00 (0,000)

© Basil Blackwell Lid. 1995.

 Influence of Culture on Organizational Design and Planning 257

The results for use of quantitative techniques were in accordance with

H3. Each of the three questions designed to capture differences in the use
of quantitative techniques in production control, inventory control, and
capital investment appraisal, produced a significantly higher mean for the
A/US group compared to the S/HK group. The t-statistics were 2.21, 1.66,
and 2.92, and the significance levels were p = 0.014, 0.049, and 0.002 for
production control, inventory control, and capital investment appraisal
respectively.
Results were also in accordance with predictions in respect of the
planning time horizon hypothesis (H4). The A/US sample reported greater
emphasis on short-term planning than the S/HK one (t = 6.38, p = 0.000),
while the S/HK sample reported greater emphasis on long-term planning

Table 3. Planning and Control - Other Aspects

Variable Group Mean Min Max Std t-stat

(Expected direction) dev (prob
1-tail)

Use of Quantitative Techniques

In the control of production A/US 4,98 1,60 2,21

(A/US > S/HK) S/HK 4,56 1,80 (0,014)
In the control of inventories A/US 3,55 2,04 1,66
(A/US > S/HK) S/HK 3,18 1,95 (0.049)
In capital investment appraisal A/US 4,73 2.07 2,92
(A/US > S/HK) S/HK 4,07 1.98 (0,002)

Planning time horizon

Emphasis on short range planning A/US 6,11 1,12 6,38

(A/US > S/HK) S/HK 5,13 1,76 (0,000)
Emphasis on medium range A/US 4,32 1,50 1,01
planning (no direction predicted) S/HK 4,49 1,56 (0,155)
Emphasis on long range planning A/US 2,14 1,31 5,58
(S/HK > A/US) S/HK 3,05 1,74 (0,000)

Group versus Individual Decisions

Emphasis on individualistic versus A/US 4.32 1 1,55 2,83

group decisions (A/US > S/HK) S/HK 3,82 1 1,69 (0,003)

Formalization of Planning and Control

Emphasis on formal control and A/US 14,41 5 35 5,59 1,03

rules (S/HK > AAJS) S/HK 15,12 5 35 7,17 (0,152)

© Basil Blackwell Ud. 1995.

258 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

than the A/US sample (t = 5.58, p = 0.000). A by-product result is that

both A/US and S/HK reported a greater emphasis on short-term compared
to long-term planning.
The results for group versus individual centred decision-making (H5)
were as predicted with the A/US sample perceiving greater emphasis on
individualistic decision-making by the formally responsible executive
than the S/HK sample (t - 2.83, p = 0.003). With respect to formalization
of planning and control (H6), the scores on the five questions were
aggregated and compared for A/US and S/HK. The aggregate scores were
not significantly different, although the direction of a higher aggregate
mean score in S/HK relative to A/US was as hypothesized. Examination
of the five individual questions showed that the mean scores for each
question were in the hypothesized direction of greater formalization in plan-
ning and control in S/HK compared to A/US, but none was significant.

VI. Conclusions
The results of this study generally provide support for the influence of
national culture on philosophies for, and approaches to, organizational
design and management planning and control systems. In particular,
differences in the cultures of Anglo-American and East Asian nations were
shown to be associated with differences in organizational design charac-
teristics and the design characteristics of planning and control systems.
Of six hypotheses relating the differential cultural components of Aust-
ralia and the US (as Anglo-American nations), and Singapore and Hong
Kong (as East Asian nations), to specific design characteristics, the results
for five were significant and in the predicted direction. These were the
greater use of decentralization and responsibility centres in organizational
design in Australia and the US compared to Singapore and Hong Kong;
and the greater emphasis on long-term planning, the greater emphasis on
group centred decision-making, and the lesser emphasis on quantitative
techniques in Singapore and Hong Kong compared to Australia and the
US. The result for the other hypothesis (the formalization of planning and
control) was in the predicted direction, although not significant.
The results of this study have implications for management practice and
research. There is a practical relevance to managers in Anglo-American
nations interested in understanding the differences they see in approaches
to organizational design and planning and control systems in East Asian
countries (and vice-versa). Although the study examined only four nations,
the fact that it was based on the components of culture in those nations
© Basil Blackwell Ud. 1995.
 Influence of Culture on Organizational Design and Planning 259

means that the results are not restricted to the four nations alone. Rather,
they can be extrapolated to understand or explain similarities and differ-
ences in organizational design and planning and control systems in other
nations which cluster with the nations studied in respect of their cultural
components.

Notes
1, The other three dragons are Taiwan, South Korea and Japan,
2, Hofstede (1983) notes the cultural commonalities existing among the Asian nations
including not only the 'five dragons', but also Thailand, the Philippines, Malaysia and
Indonesia. The cluster including Australia and the US also includes Great Britain, Canada
and New Zealand,
3, Hofstede (1984) provides a number of useful graphs which depict the relative
location of a variety of nations on the cultural dimensions,
4, The characteristics chosen to represent formalization of planning and control are
drawn from Khandwalla (1977, p. 649, pp. 684-5), and are detailed in the Method section,
5, The Australian sample was drawn from companies in the Sydney metropolitan area
listed in Riddell's The Business Who's Who ofAustralia (\99\). The US sample was drawn
from the Orange County Business and Industrial Directory (1990/91) and the Southern
California Business Directory and Buyer's Guide (1991), published by the Orange County
and Los Angeles Area Chambers of Commerce respectively, and covering Southern
California from Los Angeles to San Diego, The Singapore sample was drawn from the
Times Business Directory of Singapore (1992), and the Hong Kong sample from Dun's
Guide: Registry of Hong Kong Traders (1991/92),
6, The organizations were drawn from a wide range of industries in each country in
order to randomize out any confounding effect of industry on organizational design or
planning and control systems.
7, A copy of the questionnaire is available from the Macquarie University authors.
8, Khandwalla's (1977) questions have also been drawn on in other studies of organ-
izational and accounting systems design. See, for example, Gordon and Narayanan (1984),
9, The higher IDV scores found for Singapore and Hong Kong in recent studies
compared to Hofstede's original study may be associated with changes in the wealth of
those nations over the last quarter century, Hofstede (1983, pp, 79-80) notes the statistical
relation between IDV and wealth, and Hofstede and Bond (i988, p. 5) note the substantial
increase in wealth in Singapore and Hong Kong over the 20 years since Hofstede's data
were gathered in the late 1960s and early 1970s,
However, Franke et al, (1991, p, 169) note that while Hofstede (1980) found a statistical
association between IDV and level of attained wealth, no relation was found between IDV
and economic growth in the decade prior to IDV measurement. They suggest that while
the first of these associations 'supports an interpretation of individualism as a dependent
variable, a cultural quality determined by economic attainment, but not by recent changes
in it' (Franke et al., 1991, p, 169), the absence ofthe second relation supports the altern-
ative view of culture as an independent variable in the process of economic growth. Con-
sequently, Franke et al, (1991) examine and find support for an association between cultural
factors and subsequent, rather than prior economic growth.
Therefore, although the increased wealth in Singapore and Hong Kong over the last
20 to 25 years may be a reason why respondent samples in contemporary studies produce
higher scores for IDV than previously, the Franke et al, (1991) paper demonstrates that the
© Basil Blackwell Lid. 1995.
260 G. Harrison, J. McKinnon, S. Panchapakesan and M. Leung

direction and timing of causation in the relations among culture, wealth, and wealth
creation through economic growth, are complex. It should also be noted that the sample
sizes used in Hofstede's original survey were much larger than those in the current study
and in the studies of Chow et al, (1991) and Harrison (1992, 1993).
10, The three aspects of quantitative techniques were analysed separately for produc-
tion control, inventory control, and capital investment analysis. Although a combined measure
was not used in the analysis, the alpha reliability coefficient (Cronbach, 1951) for the three
items was 0,64.

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