High Power Distance kills Entrepreneurship

by Didier Marlier on Friday April 15th, 2016

Those of you who follow this blog know how much I support the ideas of Innovation & Entrepreneurship “guru”, Prof. Jay Rao from Babson. He has produced two short and excellent clips (displayed and commented on this blog, “If you wish to kill innovation, hand it over to R&D!” and “Prediction logic vs Creation logic“)

Yesterday, I discovered another very interesting blog, from Anwar Jumabhoy, a Malaysian executive, turned author and consultant. I know Anwar from our 1988 MBA at IMD and remember thoroughly disliking him as he was so brilliant when I looked so basic! He kindly allowed me to replicate his blog here below. I found it very interesting as it links leadership and entrepreneurship and show how “Power Distance” stifles innovation.

The “Power Distance Index” (PDI) was a concept introduced by Prof Geert Hofstede to explain the cultural differences in society that explain the level of deference to authority. Wiki’s definition is “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.”

Malaysia has the highest index (100) in the world, possibly as a result of the colonial times and the legacy of the Malay feudal system. We also seem to have a fondness for the various titles that are given out with regularity by each of the states and the Federal government. It has become customary for titled persons to insist on being called by titles rather than given names. The Hofstede Centre© offers this explanation for Malaysia; “Malaysia scores very high on this dimension which means that people accept a hierarchical order in which everybody has a place and which needs no further justification.” In short, the people in power can expect a high level of compliance from their subordinates.

The scores for other Asian countries are also relatively high; Philippines at 94, Indonesia – 78, India – 77 and Singapore – 74. The Nordic countries are at the other end of the spectrum, with Norway and Sweden at only 31. The PDI for United States is 40, whilst United Kingdom and Germany are at 35.

What is the practical implication of a high index?

The higher the index, the greater the hierarchy and the less likely that a junior person in that society will be willing to raise issues with a superior. In simple terms this means that “the boss is always right”, so given that context, it is unlikely that new ideas or suggestions will filter up from lower to senior management. In a discussion, the junior is not going to argue with her senior, or any other “important person”. This will hardly create a fertile environment for innovation or a high performing culture.

It’s quite different in an entrepreneurial environment, where discussions, conflicts and debates are judged on the quality of the information and not the title of the protagonist. No wonder that young people are drawn to working in less traditional companies or startup environments and employee engagement remains low in the larger companies.

Plane crash due to fuel outage

It does seem remarkable that a pilot and co-pilot on a regular flight would not raise the alarm if they are mid-air and are repeatedly asked by air-traffic control to delay a landing. Yet that is exactly what has happened and more than once. In 1997 Korean Air Flight 801 crashed in Malta during an approach to the airport. The investigators determined that the co-pilot was aware of the critical condition of the aircraft yet was not able or willing to override the decision of the pilot. Malcolm Gladwell in his book, Outliers: The Story of Success, writes about the poor safety record of Korean airliners as a result of the hierarchical society in Korea. Hence the reluctance of the co-pilot to question the decision of the pilot. He goes on to say that once they had identified the issue, they were able to fix it.

The importance of Learning

It seems pretty obvious that when an organization, or business fails to address the power issue, they remain vulnerable to failure. This is most easily seen in an authoritarian military environment where a subordinate is not likely to challenge a wrong decision by a superior. In business, if parts of your organization are afraid to provide honest, timely feedback, you had better prepare for the end. Typically entrepreneurs don’t have this problem. Ben Horowitz speaks often about his clashes and arguments with Marc Andreessen, his former boss at Netscape and now partner at Andreessen Horowitz, the venture fund. So in an entrepreneurial environment, this is never a problem as the team is focused on getting a result or an outcome through a path that is not certain and hence importance is placed on listening, learning and arguing!.

How can we summarize entrepreneurial traits?

In our search to understand entrepreneurs, through research and over 80 interviews, what we did uncover were, what we call nine entrepreneurisms (9Es), which describe what successful entrepreneurship is all about. Not all entrepreneurs have all the 9Es, but at least a few of these, you are not going to find success. The 9Es are; Self-efficacy, Risk Taking, Passion, Learning, Realism, Persuasiveness, Opportunism, Innovation, and Energy-Action-Bias. What is equally interesting is that whilst these traits might seem to be personal or more natural in startup companies, they can be successfully adopted by larger companies. However the nine entrepreneurisms have conflicts and tensions. So for example if they company is too grounded in realism, it might miss out on opportunism. In order to achieve results the company needs to go through a structured process to identify the required entrepreneurisms and how they will be adopted.

How much fuel do you have in your aircraft?

If you are a CEO of a large company, you need to ask yourself this question; Are your circling in the air in your aircraft, not realizing fuel is about to run out?  A chilling thought, indeed, so our suggestion us that you embrace entrepreneurship as a management practice – and do it soon!

This article appeared in the The Edge Malaysia, April 11, 2016

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4 Responses to “High Power Distance kills Entrepreneurship”

  1. Didier I liked a lot this article. Thank you.
    Democracy goes through here. The culture of a country marked by hierarchy, the culture of an organization marked by the distance to power are, in my opinion, decisive contributions to poor democratic practice. Countries and organizations are for all who live and dream in its interior. The success of these lives and dreams only materializes with more sharing and proximity of decisions.
    I will also be in Brussels April 21st and 22nd.

    Reply
    • Interesting parallel dear Victor. In a short and superficial study, I used the concept of “Senso civico” in Portuguese to note that, in Europe, countries with a high “Civil sense” (Germany, Nordics, Switzerland…) were surfing the crisis much better that those (which will remain nameless;) with a lower Civil Sense. Maybe PDI and Civil sense also have a strong link, when I rad your comment…

      Reply
  2. I do endorse the idea that blind follow for hyerarchy path may conduct wrong decision ,however , respect live experiences and past patterns also is important ,some western recent practices is forgetten those ones. Moreover besides 9Es mentionned may be add the most important thst is ` motivation and intention ` of business should be considered . Enterprise mobilize money ,people , intelligence and technology , the intention should be meaningfull for society.

    Reply
    • Thank you Herberto… “The intention should be meaningful for society”…I love this very much…
      Abraço

      Reply

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