HSBC Cuture

1.0: Introduction

According to Tylor (1871) culture plays a very important role in operations of organization

and has unanticipated assortments of significance. Culture is explained broadly in terms of

knowledge, beliefs, morals, laws, and customs and also entails the competences and

behaviours assimilated by individual as an associate of society. Geert Hofstede defines

culture as “the collective programming of the mind that distinguishes the member of one

category of people from others” (Richard D. Lewis, 1996). Jackson, T (1995) noted the

necessities that culture not only marks the people who live in the society also it affects the

setup of organizations even the operation of businesses as well. Now a day, culture is a well-

demanded factor to hold the success element in the market. Sparrow, P. Brewster, C. Harris,

H (2004) indicates that globalization as a key notion of world business. Tjosvold, D. Leung,

K (2003) explains that globalization accelerates economic development and today businesses

accomplishing numerous benefits by having trade cross-nationally. That’s the reason that at

present time the leading cross national organizations is keeping an eye on intra-cultural and

cross-cultural management to generate opportunities with a healthy established corporate

culture. According to Hofstede (1991), fundamentally culture is defined on societal level

which influences the individual behaviour; culture could be intermediated by societal culture

and also explicit on individual character. The paper aims to investigate the interaction of

culture in HSBC. The case study is based on the relocation of HSBC Chief Executive Office

from London to Hong Kong. The study will be supported by Hofstede’s theoretical

framework which will identify national culture features as developed by Hofstede in 1980

and the framework will be back-up by Hofstede findings.

1 | P a g e C u l t u r e a n d O r g a n i s a t i o n s H R 0 3 7 2

2.0: Background of HSBC

The Hong Kong and Shanghai Banking Corporations (HSBC) is recognized for its global

banking and as a financial service corporation, controlled by its central office (headquarter) in

London, United Kingdom situated at the well-known Financial Centre. HSBC primarily

started its operation in March 1865 in Hong Kong and rapidly established a number of

branches all over the world to welcome customers “across the globe as the world’s local

bank” (HSBC, 2012). HSBC is acknowledged as a world second leading corporation

operating in 80 countries having 7,200 offices approximately serving 120 million customers

around the world (HSBC, 2012). Most significantly HSBC is having strong networking

internationally; Europe, Asia-pacific region, Americas, Middle East and Africa (Frobes,

2011). HSBC, one of the leaders and most successful banking and financial company’s due to

its wide networking chain across the world having competitive advantages in the banking

industry. As reported in the third quarter of 2011, having profit of USD 7.2 billion before tax

and the entire assets raised at $2.418 trillion. According to HSBC (2012), carrying out its

business outstandingly despite the pressure of economic crisis of Italy and Europe with a

capital ratio of 10.6%. Though, HSBC suffered heavy loss in 2009 financial tsunami. As it

was reported at 31st December 2009, that HSBC suffered a financial deficit of USD 2058

million before paying tax. It was a great loss in the banking history of HSBC linked with its

deficit in 2008. In this critical situation an announcement was done by the CEO HSBC’s

Micheal Geonghegan that the Chief Executive office would relocate to Hong Kong (HSBC,

2009). As reported by BBC (2011), its focus is in the Asia-pacific market would change, so

that they could be able to handle the challenging economic period. But there will always a

dispute with the action of change in business focus as a result of moving from West to the

East would affect the business.

3.0: Theoretical framework

As revealed that HSBC, a multinational firm having central office located at the famous

financial centre in London, United Kingdom. The decision taken by the Chief Executive

about the CEO office relocation is interrelated with its cross cultural issues. This paper

practices Hofstede’s cultural dimension model to illuminate the CEO’s decision of relocating

office to Hong Kong and also how the HSBC’s culture fulfilled by Hong Kong culture.

Furthermore, this paper practiced Hofstede’s theory to compare HSBC with the cross-


national Citi Bank to show the success factor for the organization because of the cultural

influences.

The key significance of using Hofstede’s theoretical framework as compared to others is

because it defines and explains evidently that national culture and organizational culture are

different in nature (Hofstede, 1991). There are different other frameworks like Schein, Hall’s

and Halls etc. to conduct and calculate the cultural differences but framework used in this

area of research is Hofstede’s model of culture. Hofstede (1994, p.1) states that “managing

international business means handling both national and organizational cultures differences at

the same time”.

Adekola and serge (2007) argues that by using Hofstede’s framework it is possible to identify

the difference in management styles, motivation patterns and organizational preferences. This

framework also explains that how the managers from different cultural backgrounds act and

perform their duties in the organization and how the cultural difference can affect their

performance individually and in group. The five dimensions of Hofstede’s illustrates that the

cultural differences from different countries (Hofstede, 1991). This theory is suitable to be

applied on HSBC to analyse the cross-cultural issues of the multinational firm and the use of

national culture can be explained by using Hofstede’s theory.

As a comparison of Hofstede’s theoretical framework with the theoretical framework of

Harrison’s model, it is not suitable to analyse the HSBC cross-cultural issues case study

because considering HSBC’s there are some weaknesses in Harrison’s model. The

dimensions of Harrison’s model is summarised by Charles Handy and the model involves

task culture, role culture, person culture and power culture which is basically practiced for the

study of family owned businesses. This may be very large or small businesses and is adopted

by the firms for the purpose of solidification (strengthening) of their organizational culture.

Therefore, Harrison’s model is not appropriate to categorize the culture of multinational

organizations to examine the organizational setups need to have stable working environment.

4.0: Hofstede’s Theory

According to Adekola and serge (2007) only to understand the cultural differences is not

significant but the positive and negative effects that will be brought by the managers from

different cultures also needs to be identified. Hofstede study emphases by nations rather than

individuals to assess their job satisfaction and attitude towards work. Hofstede’s five


dimensions culture involves power distance, individualism, uncertainty avoidance,

masculinity and long term orientation (Hofstede, 1980).

4.1: Power Distance Dimension

Hofstede (1994, p.4) states power distance dimension as the extent to which members of the

organization accepts that the power is distributed unequally, in other words the power

distance is the measurement in which the employees interact freely with their superiors.

Elisabeth Liger (2002) argues that there is a tendency for the less powerful in cultures that

advocate high power distance to be more dictatorial. The power distance could be large or

small. In large power distance, the employees are unequal as compare to boss and only the

boss is independent, in small power distance; employees are equal as compared to boss and

everybody is encouraged to be independent (Punnett, 2004, p.28).

4.2: Individualism/Collectivism Dimension

Hofstede (1994) describes that individualism focuses on the degree of society reinforces

individual or collective achievements and impersonal achievements. A highly individualistic

ranking indicates that individual rights are dominant in the society. Individual in this society

may tend to form a large number of looser relationships. A lower individualism ranking

characterized society of a more collectivist nature with close ties between individuals. These

cultures reinforce extended families and collectives where everyone takes responsibility for

fellow members of their groups. People are likely to stand up for themselves and to choose

their own associations (Punnett, 2004, p.27).

4.3: Uncertainty Avoidance

According to Hofstede (1994, p.4), uncertainty avoidance is the other key dimension in

planning for a specific culture, uncertainty avoidance refers to how comfortable people feel

towards ambiguous situation. Cultures that ranked low uncertainty avoidance index indicate

that people have higher acceptance for uncertainties. High certainty avoidance cultures prefer

strict laws formal rules and any uncertainty can express itself in higher anxiety than those

from low uncertainty avoidance cultures. Cultures that have strong uncertainty avoidance

tends to be more aggressive and hardworking, while cultures that have week uncertainty

avoidance tends to be lay back and virtually stress free (Punnett, 2004, p.28).


4.4: Masculinity/Femininity Dimension

It refers to the degree of assertiveness; materialism and lack of concern of others, the culture

that scored high have the tendency to have very different expectations of gender role in the

society. The more feminine culture has the greater ambiguity in what is expected to each

gender (Hofstede, 1994). Masculinity and femininity are two more dimensions that play a

role in how to plan for a specific culture. Masculine culture primarily deal with men being the

most powerful gender in the workplace, while feminine cultures have more integration in

allowing women to hold the same position of power as man. (Punnett, 2004, p.28)

4.5: Long Term Orientation

Hofstede (1980) indicates that if a country is looking for long term orientation they will

determinant to practice for developing their economy stronger and will look after for their

future. For a short term oriented countries; they will respect their traditions and fulfil the

social commitments. The individuals of short term oriented countries involves significance on

fast results, protection of one’s face, share in mutual funds and trust in the principles of good

and evil with no grey area.

The significance for choosing the Hofstede model for cross-cultural management in HSBC is

that; according to Hofstede (1980) states that the dimensions of national cultures are not

relevant for comparing organisations within the same country. Though, Hofstede dimension

of national culture model is the best model in comparing and to make comments on issues

associated to cross-national organizations.

5.0: HSBC’s Analysis

As mentioned that HSBC has relocated its head office from London to Hong Kong through

which the culture of the organization must be influenced more or less by British culture. As

cited in the HSBC official website the culture of the company is a combination of high

standards of professionalism with ethical business principles and healthy entrepreneurial

spirit. It emphasizes on equality, respect and responsibility.

Hofstede (2009) shows that the UK score in power distance, uncertainly avoidance and long

term orientation is very low as compared to individualism and masculinity.


PDI 35

IDV 89

MAS 66

UAI 35

LTO 25

UK Score

(Hofstede’s cross culture dimension)

These scores illustrates that there is more importance of individual instead of the group in

UK. The low power index (PDI) shows that people will be democratic and believes in

equality. Also the high score of individualism (IDV) demonstrates that the individuals always

emphasis on their personal benefits instead of group results and the people are more self-

orientated. Moreover, the masculinity (MAS) score shows that people are having confidence

in their selves and thinks about money rather than anything else and aggressive in nature. The

low uncertainty avoidance (UAI) index expresses that people having the high power of

acceptance to the uncertainties and ambiguities. Furthermore, the long term orientation index

(LTO) shows that people do more respect of their traditions and have more focus on their

present rather than of future.

By using the Hofstede model, it clearly shows that the British culture emphasis much more

on respect, equality and responsibility. If British culture is linked with the HSBC

organizational cultural it will corresponds the same. Gray’s (1988) suggests that if a country

ranks higher on individualism and low on power distance and uncertainty avoidance then it

will be more obliviously in position of professionalism. Hence, with its organizational culture

matching with British culture so flawlessly that HSBC located its head office in London.

Though, as mentioned before that the economic crisis leads to a loss in profit for HSBC.

Accordingly, despite of the original culture of company, HSBC accepts the challenge and

focus on customers, community-driven and economically profitable which not match to its


original culture. HSBC suffered by a great loss of deficit of over USD 2000 million due to

which it was finally decided by the CEO to relocate his office from London to Hong Kong to

keep focus on Asia pacific market.


As revealed in the above Hong Kong Index graph, there is a very high index of long term

orientation (LTO) shows that the people of Hong Kong really focus on their economy and

future. The power distance (PDI) index shows that they are more likely to have imbalanced

circumstances and are flexible in nature. There is a lowest rate of individualism index (IDV)

which classifies that people of Hong Kong gives respect to their fellow members and loves to

work in a group and made every possible effort to carry out some fruitful results. As social

culture, they support and make good relationships with each other. For uncertainty avoidance

(UAI), people are much more familiar to uncertainty avoidance and hurdles and likely to take

the unhealthy situation easy and with calmness. Furthermore, the masculinity (MAS) index

shows that people are much more self-confident, money-oriented and aggressive in nature.


PDI 68

IDV 25

MAS 57UAI 29

LTO 96

Hong Kong Score


Country PDI IDV MAS UAI LTO

UK 35 89 66 35 25

HK 68 25 57 29 96

Comparing the score of the Hofstede five dimension models of UK and Hong Kong, the

major difference is in between the individualism and long term orientation index. The

individualism index of UK is very high from the Hong Kong and this low index rate of Hong

Kong shows that the people of Hong Kong give importance to the groups with which they are

affiliated. They give respect to group members and love to carry out work in groups and

make every possible effort to cover the hurdles in between group members. The people of

Hong Kong are very loyal with their belongings and take care of their fellow members.

Furthermore, long term orientation of Hong Kong is much higher than the UK one’s which

expresses that the people of Hong Kong are more future focus and makes full effort for their

future. According to the intermittent report of HSBC in 2011, it identifies the market position

by comparing the earnings of both the countries. Hong Kong HSBC earning was US $4,396


million before paying tax with that of global market was about USD $5,817 million that

specifies Hong Kong is a major and home market for HSBC.

In Asia, Hong Kong is known as a professional financial city, as the Hong Kong culture is in

line with HSBC’s organizational culture because they both worth the significance of respect

and responsibility for people in term of home culture and group members in terms of

organization. Through this, HSBC is able to maintain its professional image by operating

their head office in Hong Kong, as well as the long term orientation is a key factor involves

in Hong Kong culture will be fruitful for HSBC. Thrift and determination are vital factors in

staying afloat in difficult times. So, the decision of moving from London to Hong Kong taken

by the CEO of HSBC was a critical that results in success comes for the corporation. As in

financial report 2009, the earning was USD 11, 958 million, after the relocation of the head

office; in 2010 financial report the HSBC’s profit before paying tax was USD 19,037 million

which was an upsurge. HSBC becomes a very key player in global financial market because

of the culture that valued respect, responsibility and future-focused helped the company to

retain its position and made HSBC more a profitable organization than back in London.

According to Lee, P (2009) states that HSBC wants to expand its business in Asian market as

it is anticipated that the Asian and Middle Eastern economy will continue to rise. Hong Kong

culture is appropriate for HSBC to continue its business operation in Asia and also applicable

for HSBC to implement it in Asian market. It is reported in guardian that CEO Michael

Geoghegan says that are “at the hearts of HSBC’s business” (Guardian, 2009). Moreover, the

expert stated that HSBC can generate 60% of its profit from Asia in 10 years. By

implementing Hofstede’s theory, it is shown that Hong Kong culture has a great value to

cross-cultural collaboration of HSBC.

6.0: CitiBank’s Case

CitiBank is a cross-national bank having it’s headquarter in New York, USA. The bank

operates its business over 100 countries having more than 1,400 offices around the world.

The position of Citi bank was similar to that of HSBC. Correspondingly, in 2009 financial

crisis, the bank also suffered with a huge loss in subprime mortgage assets was reported. The

profit of CitiBank before paying tax in the session 2008 was USD -27,684 million and in

2009 was USD -1,606 million correspondingly (Citi Group, 2011). Founded on this

numerical, it shows that the bank suffered a huge loss in this financial crisis. To sort out this

problem it was required to get some help from the US government. The aftershocks of


financial crisis capture the clear picture of West financial system, in a mess. According to the

analysts and experts, it was recommended to invest in East to recover its financial loss.

Though, CitiBank suffered a heavy loss, there was no decision made to move its business to

worlds future star market (Asia).


Country PDI IDV MAS UAI LTO

HK 68 25 57 29 96

US 40 91 62 46 29

By comparing the score of the Hofstede five dimension models of Hong Kong and US, it is

illustrated that the US culture is similar to that of UK. The scores in terms of power distance,

uncertainty avoidance and long term orientation index are low. The individualism and

masculinity index are high in the US.


The individualism index of five dimension of Hofstede’s model in the US is 91which is the

world highest index which specifies that the people of US are very individualistic and they

got relatively very weak bonding with others. The next highest Hofstede dimension in US is

masculinity index which is 62 as compared with the world having average of 50. This index

indicates the higher degree of differentiation regarding to gender related roles is practiced.

The long term orientation index in US is 29 which is very low score as compared with the

world’s average score 45. This indicates about the US culture that they have certainty in

meeting their responsibilities by hook or crook and it’s deep-rooted in American society. The

power distance index of five dimension of Hofstede’s model in the US is 40 which are also

very low. It indicates that greater equality among different societal level is seen as important

by Americans. AT last, the uncertainly avoidance index in US is 46 which is very low score

as compared with the world’s average score of 64. From this, it shows that American’s have a

greater level of tolerance for a range of concepts, opinions and beliefs. Moreover, they have

fewer rules, and do not attempt to control all outcomes and results.

Being open is emphasised by the company culture at Citibank. Open and honest dialogues are

strongly encouraged by the bank in its fair and wide-ranging work environment. The growth

of its staff members is also strongly supported. The cultivation of the future life can create

advancement and personal well-being through its training programme. Furthermore, there are

equal opportunities in the workplace. The company offers Equal Employment opportunity to

everyone and aims to create a working environment that is free from discrimination and

provocation. In addition, everyone regardless of diverse conditions; disability, ethnicity,

gender and race - is encouraged to join the company.

CitiBank is recognized as the second largest banking and financial firm in the US. It involves

equality, openness and long term growth which are highlighted in the company’s culture.

Without any suspicion, it has been shown that the American society is equal and open.

Though, with regard to the long term growth and development of the company, the

Americans are still not on similar with the Hong Kong people. After the financial crisis,

unlike HSBC, Citi did not put more effort in the Asian market. The 2010 financial report

states that the profit before paying tax in Hong Kong was only USD 137 million (Citi Group,

2011), more than 25 times less than HSBC’s. Even though the profit before paying tax of

Citi’s rose back to USD 13,184 million in 2010, it was however still far lower than HSBC’s.


7.0: Conclusion

After studying all the perspectives, it is concluded that culture plays a significant role in the

success of organization and also in failure of the organization too. Managers always consider

their company’s culture as a finest one. Even in cross-national business firms, managers think

that a generic culture can increase the company’s productivity and value. Though, in dealing

with cross cultural issues a question arises, do generic cultures really work?

According to the Hofstede’s study, culture is always influenced by native elements. So, while

operating business in the market, national culture is considered as a key factor in success of

the business. In HSBC’s case, after hitting by the financial crisis, the focus of the company

was to stable its position in the market, recover the loss and look forward for its business

future. As Asia and China are in the core-emerging market, the CEO of the company has

taken the decision to relocate its office because it’s very necessary in doing business cross-

nationally; one’s have to follow the local culture to progress and also to capture its target

market. As the local culture of Hong Kong was more suitable to get its market share

according to the Hofstede’s 5 dimension cross-cultural scores and secondly the most

important factor was that the Hong Kong people loves to work in a group. After a huge loss,

as UK culture was not more suitable for the organization and it’s indeed by the CEO to make

employees work in a group to gain some fruitful results. The CEO Michael Geoghegan

relocated his office to Hong Kong. Therefore, HSBC can lead the world banking and

financial sector and will become in better position. Value is created in the company as a

result of the corresponding nature of both the British and Hong Kong cultures. Together with

the CEO’s understanding of cross cultural differences, HSBC is now one of the world’s

largest banking and financial institutions. Unlike HSBC, Citibank US also experiences a

different national culture in the UK. However, the macro environment cannot be disregarded

by the bank. The mismatch between the long term orientation of the company and the nation

leads to escape. Hence, it is concluded that any company culture is limited from nation to

nation. There is no one generic company culture that is competent enough to fit into an

international or cross national firm. Therefore, as a manager of a multinational company

should be flexible, keeping the knowledge of cross cultural differences is the best way to sort

out the problem related with company’s culture.


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HSBC Cuture