Is corporate stalemate killing Taiwan's future?

The fastest way to gain an understanding of a company is to interview both senior management and employees on a one-by-one basis. As a brand strategist at DDG, this is something I do in every project. During these private exchanges, bosses and employees alike can share freely their thoughts on the company for which they work. In the past few years, I have witnessed an alarming trend. Bosses are increasingly expressing frustration with their employees, highlighting a lack of creativity, entrepreneurialism, and work ethic; while employees are increasingly raising grievances with their company’s lack of focus and direction, and dissatisfaction with performance.

To put it simply, bosses aren’t happy with employees, and employees aren’t happy with their employment. This is a serious issue. Not only for the competitiveness of Taiwanese companies, but also for the competitiveness of the nation of Taiwan. There is a cultural stalemate going on inside companies that is hindering them from achieving greater potential, at a time when transformation and advancement is an imperative for Taiwan’s small and medium-sized businesses and brands.

As Taiwanese companies are forced to compete in an increasingly high-paced marketplace, the dynamism of their corporate cultures is being put to the test. Frustration is evident at all levels of the organization, which, rather than driving a desire to transform, is, conversely, stoking pessimism and indifference inside too many organizations.

As I pointed out in a past article, this frustration can be attributed in part to the reality that the business model that once delivered prosperity—quality and a cheaper price—has run its course. The other ingredient contributing to this frustration, however, is connected to something deeper.

The frustration that bosses and employees are expressing today are symptoms of an invisible entity, not much unlike coughing and sneezing are symptoms of a microscopic virus. I believe that ‘virus’ causing symptoms of frustration inside many Taiwanese businesses is something called ‘power distance’.

Professor Geert Hofstede, a Dutch social psychologist, introduced the concept of power distance in studies he first published in the early 1980s. Power distance, as defined by Hofstede, is ‘the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally’. Professor Hofstede noted that nations experience varying levels of power distance. By way of example, nations such as Denmark, Austria and New Zealand have low power distances, and as a result less powerful members of an organization still see themselves as having similar levels of influence within an organization as those of the organization’s leaders. Taiwan, on the other hand, is described by Professor Hofstede as a nation with high power distance, where less powerful members of an organization see power as distributed unequally, believing that they have no right nor responsibility to influence outcomes.

What does this mean for Taiwanese companies? Companies in Taiwan are considerably more likely to experience situations where employees expect the company owner to lead in all issues related to the business. In effect, employees await the boss to make every decision. If the boss does not make a decision, then no decision is made. The risks, of course, are that when decisions are not being made the company can not advance, or, critical decisions default to the boss regardless of whether or not he/she is knowledgable enough to make the right decision.

In many cases, the bosses I meet wish that their employees would take a proactive role in making decisions, however the employees do not perceive it as their right or responsibility to take such action. These subordinates, meanwhile, are frustrated with the poor or lack of decision-making of the management, and with the inaction of their coworkers. The result is, in effect, a cultural stalemate.

This unfortunate situation has massive ramifications for three types of businesses. 1. The company where the owner wishes to involve employees in decision-making as part of organizational expansion and/or succession planning. 2. The company where innovation is critical to the competitive position of the company, and/or the company is transitioning from an ‘exploitative innovation’ business model to a model based on ‘exploratory innovation’. And 3. The company that is transitioning to a global organization with the addition of sales and marketing offices in overseas markets.

My observation is that the vast majority of Taiwan’s small and medium-sized businesses are in the middle of transitioning towards one of the three types of businesses described above. If, however, power distance is a factor in transition to these three types of business, then Taiwan must recognize the threat of high power distance to successful transition.

Some of course will question why power distance is a problem now, when it wasn’t a problem in the past. The answer is in Taiwan’s current transition away from an ‘exploitative innovation’ business model. The changing global economy is forcing Taiwan companies to adopt new business models, but the successful adoption of a new business model is being hindered by the cultural stalemate that results from high power distance. Without addressing the ‘virus’ of high power distance, Taiwan firms will be unsuccessful in their transition to new business models with higher growth and higher margins.

If one agrees with this hypothesis, what should be done? The immediate task is to recognize the existence of power distance, and to determine how it is impacting decision-making and action within the company. Bosses can help drive change by clearly defining roles and responsibilities for all individuals within the organization, and by making it clear that decisions must by made by those responsible for a given role. In meetings, the boss should strive to talk less, and to encourage greater and more open sharing by employees.

For employees, the task is to recognize that the health of the company is a result of the decision-making and action of every individual, and not just the boss. Employees should communicate more openly with the boss, as well as with colleagues across the organization. In particular, issues that are hindering the company’s performance should be brought into the open, and a plan of action should be developed collectively to address each obstacle.

At this point, the last thing Taiwan companies want is another challenge. But, in my opinion, the challenge that is power distance is at the root of many of the struggles facing Taiwan companies today. Addressing the cultural stalemate that is building inside Taiwan’s small and medium-sized businesses is paramount to the success Taiwan’s manufacturing industry, and to the nation of Taiwan.