What is the Power-Distance Index - PDI
The power distance index (PDI), developed by Dutch social psychologist Geert Hofstede, is an index that measures the distribution of power and wealth between individuals in a business, culture, or nation. The PDI ultimately provides evidence of the extent to which regular citizens, or subordinates, will follow the whims of an authoritative figure. Hofstede’s PDI is lower in countries and organizations where authority figures are working closely with subordinates; the PDI is higher in places where a stronger hierarchy of authority exists.
BREAKING DOWN Power-Distance Index - PDI
Highly structured businesses, societies, and institutions often have high indices. A high index indicates that hierarchy is clearly defined, present, and unchallenged. A low index indicates a less rigid authoritarian system; members within a low index society or group challenge authority or readily interact with authority figures to make decisions.
The Cultural Dimensions Theory
Power distance and the PDI are one portion of Hofstede’s cultural dimensions theory, the earliest theory about the perceived differences between cultures to be quantified. This theory is applied extensively in a number of fields: cross-cultural psychology, cross-cultural communication, and international business. Driven by factor analysis, the cultural dimensions theory’s original form was based on the results of Hofstede’s global survey of IBM employee values. Testing and collection of results were conducted from 1967 to 1973. Using the results, Hofstede determined that there are six different dimensions to every culture: power distance, uncertainty avoidance, individualism vs. collectivism, short term vs. long term, masculinity vs. femininity, and self-restraint versus indulgence. Hofstede’s original model only had four dimensions but was redeveloped over time; long-term orientation (short-term versus long-term) was added after Hofstede performed independent research in Hong Kong, and indulgence versus self-restraint was added in 2010.
Business and the PDI
Hofstede gained significant notoriety because of his introduction of cultural differences, specifically in the arena of business. As the global economy integrates more and more, understanding the role that the PDI plays in the context of business becomes ever more significant. The idea of power relationships and how they are viewed affects an individual’s actions during business negotiations. For example, Austria has a power distance index of approximately 11, whereas most Arab countries have indices of around 80. Employing Austrian business practices or management styles in an Arab country may be counterproductive as it conflicts with the structure of the society. It is important to understand and adjust to the power distance index of a society or institution to effectively conduct business, interact with its members, and prevent culture shock.