Four Steps to Avoiding a Custody Battle on International Collaborations
Imagine you’re visiting proud parents of a new baby—say a dentist and an accountant—and one of them says, “We’re arguing over whether the baby will grow up to be a dentist or an accountant.” You’d probably think these options were a bit limiting. There are plenty of other professions, and new possibilities will open up during the baby’s lifetime.
As unlikely as this scenario might seem, it’s precisely what happens on international collaborations. Each partner expects the joint venture, subsidiary, or merged company to replicate a parental corporate culture. As with the baby example, this expectation imposes unnecessary tensions and limitations on the collaboration. For parents and corporate partners alike, “Who’s your daddy?” is the wrong question.
Your Corporate Culture Exists for a Reason. So Does Theirs.
The unique environment surrounding your company has shaped its corporate culture. This special environment offers a specific set of resources (such as component suppliers or a skilled workforce) that support the company’s growth and profitability. It also imposes specific constraints (such as a small local customer base or high energy costs) that inhibit the company’s success. These resources and constraints led your management to define success in a particular way and shaped the strategy it developed.
Your international partner’s corporate culture developed in a different environment offering different resources and constraints that led to a different definition of success and a different corporate strategy. So the more dissimilar your environment is from theirs, the more different your two corporate cultures will be.
So… given two partners with two different cultures, whose should dominate?
The Customer Is Not Always Right
Acquiring companies usually impose their own corporate cultures on their international acquisitions, one reason for the over-70% failure rate of international mergers and acquisitions. Outsourcing customers use home-country strategies to manage offshore suppliers, leading to confusion and low productivity. Companies expect their overseas subsidiaries to replicate home-country business models, resulting in weak international market penetration. Being the larger or more successful company does not mean you can successfully impose your corporate culture in your partner’s environment.
When your company teams up with an international partner, the new entity, like a new baby, will develop in a new and unique environment different from the ones that shaped its parents. The idea that a U.S. business model should—or even could—be replicated by its Indian supplier is flawed. The supplier must interface with Indian partners, manage Indian workers, and navigate Indian government processes.
Who’s Your Daddy?
Rather than argue over which parent’s approach to use, partners should collaborate to design a culture around the collaboration’s unique environment and goals. Here’s how to create a goal-based culture that promotes clarity, minimizes conflict, and maximizes employee buy-in:
1. Identify each partner’s goals. Keep in mind that while the same business concepts are used everywhere in the world, the way companies understand and practice these concepts is shaped by local resources and constraints. When your partner talks about “success,” they may mean increased market share. Or maybe success means workforce growth to them. Or quick profitability. You need to understand how they define success and how this definition is shaping their strategies. And they need to understand these things about you. Take time up front to understand your partner’s goals and explain your own.
2. Align your goals. Identify common ground and determine where each partner can adjust to accommodate the other’s needs. It’s best to drop goals your partner doesn’t value. Goals that are unique to one partner will not be served by the partnership.
3. Develop goal-based policies and systems. People on both sides are likely to resist when presented with new rules and processes. Relating these to mutually-defined goals establishes a rational basis everyone can understand, and it’s easier to enforce policies and implement systems that relate to established objectives both sides have agreed on. When disputes arise, choose the approach that best serves the partnership’s goals, without referring to “our way” or “your way.”
4. Reward appropriately. Design a reward system that aligns performance criteria with your goals. Base assessments on whether employee performance incorporates the partnership’s policies and advances its goals. Align reward policies with your stated culture to enhance clarity, compliance, and productivity.
Fortunately, collaborations don’t have to develop all new policies, systems, or processes. One partner will have something close to what you need to meet most of your objectives. Choosing wisely whose approach to use is easy if you base your decision on the nature of the goal. The fact that one company is bigger, wealthier, or more technologically sophisticated does not guarantee that its corporate culture will be relevant to all—or even most—aspects of the partnership. Instead, choose each policy, process, and system for its alignment with a goal.
An example of this procedure might be a jointly-owned collaboration of German and Brazilian electronics producers located in Brazil. German Process-oriented quality controls may be the basis of a high-performance manufacturing system. But the Brazilian partner’s Network–oriented approach to management may result in lower turnover among Brazilian employees. When selling to European customers, the German partner’s Achievement-based focus on the bottom line will deliver the results they desire, but if the collaboration also serves the Brazilian market, the Brazilian partner’s Endowment-based understanding of corporate hierarchies will be critical to satisfying those customers. A mix of policies and processes from each partner will meet the collaboration’s diverse goals most effectively.
If you’re playing cultural tug-of-war with your international partner, think back to how the collaboration’s culture was developed. Did each partner understand the other’s definition of success? Are goals for the partnership the same for both sides? Did you adopt or create policies and systems that aligned with your shared goals? Did each partner accept elements from its partner’s culture that addressed those goals?
If not, it’s no surprise that you’re in a battle for control of your collaboration. Identifying the goals you and your partner share and aligning policies and processes with those goals will help you end the conflict and partner for success.
It’s conventional wisdom that suppliers must establish value propositions based on objective criteria like quality, price, and service to win customer accounts. These factors, combined with strategic positioning and marketing, are the basis for corporate buying decisions. But companies of all sizes make culture-based decisions that have little to do with any of the above. Here are some examples:
Understanding the cultural tendencies of international customers can help market entrants predict how potential customers will view purchasing decisions and develop culture-based value propositions. My book The Culture Solution explains how to recognize cultural tendencies and offers detailed, specific strategies for selling to companies based on their profiles for eight cultural dimensions. Here are some for the examples above:
When it comes to Network-oriented customers like the Brazilian automotive company, it’s vital to take time to create a personal connection, possibly by working through mutual contacts. By developing a strong relationship over time, a new entrant can level the playing field with local competitors so that their objective value proposition will be more persuasive.
Thoroughness-oriented companies like the Italian fabric mill revere tradition and prefer incremental change over radical moves, so it’s important to promote new processes gradually and to show respect for company history and reputation. A supplier that acknowledges the importance of continuity and focuses on the long term will avoid the appearance of a hard sell and give its customers time to adjust to proposed changes.
Before approaching a Group-oriented customer like the Japanese electronics manufacturer, it’s helpful to establish credibility with other members of the system. Taking time to gather information on customer needs and meeting the requirements of the lengthy vetting process enthusiastically will help convince customers it’s worth the time and effort to confirm a new supplier.
Leveraging cultural knowledge is the quickest way for expanding companies to change their status from new kid on the block to trusted insider.
Integrating cultural tendencies to achieve synergies on international projects requires a goal-oriented focus. The practices below help shift the emphasis from partner preferences to the unique needs and goals of the international venture:
#1: Sacrifice Your Leverage
To ensure a goal-based culture, the partner with greater leverage (a customer, for example) must put aside this advantage in the name of outcomes. Forcing one partner to do most of the accommodating results in production inefficiencies and reduced employee motivation and fails to address the unique needs and conditions of the joint project.
#2: Prioritize Goals
Project goals, rather than either side’s preferences, should shape a collaboration’s policies and processes. Partners should consider the resources and constraints that shape their approach to business and how they differ from those of the collaboration. Identifying factors that are unique to the project—and different from either parent—will help collaborators draw on practices from each one that will serve it well.
#3: Respect—But Don’t Worship—Local Practices
Firms that gain overseas employees in an international expansion may inherit policies and practices that differ from, and even conflict with, headquarters’ values. At the same time, headquarters policies don’t always translate well into new cultural contexts.
To decide what to keep and what to change, firms should conduct a cultural assessment of the local environment. They should ask about local practices, pinpoint the systems and processes associated with them, and identify the values that drive them. Understanding the ecosystem of business behind local practices can help management determine which ones should be encouraged and which must be replaced.
#4 View Culture as an Asset
A company acquiring a successful firm to gain access to new markets or customers should think of the acquired firm’s corporate culture as a significant, although intangible, asset. To avoid dismantling the systems and processes that made it successful in the first place, the acquiring company should consider how the company’s values and policies have contributed to its ability to serve the market. Discussing the possible results of changed policies on the acquisition’s productivity, quality, and customer relations can help separate structures and processes that should be preserved from those that must be changed to better integrate with parent culture.
Ethics violations in Japanese companies are making the headlines lately. Toshiba’s “toxic culture” has been blamed for the company’s large-scale misrepresentation of returns on long-term projects in its accounting statements. Its rigid hierarchy has been cited by analysts as a contributing factor. They describe top managers who set impossible targets and pressured employees to produce profit statements to match. People who knew about the abuses felt unable to question them or speak out, and it took an external audit to expose the violations.
A Financial Times article describes some of the dangers of rigid hierarchy, a characteristic of Endowment tendency in my ARC System framework. The inflexibility and formality of strong Endowment orientation, while encouraging loyalty and structure, can create a divide between top management and lower level employees that encourages corruption. People at the top feel they are above the law and people at the bottom lack the power to insist on ethical practices.
There are other problems, too. Employees whose opinions aren’t valued will keep useful insights to themselves. Fear of giving managers bad news causes problems to go unreported. And power distance between customers and suppliers can spread these problems throughout a supply chain. Recent revelations of defects at Kobe Steel and other companies have been attributed to suppliers’ unwillingness to admit they couldn’t meet customers’ quality specifications, another symptom of Endowment tendencies.
Getting input from employees at every level is especially important in international contexts, where companies face new challenges and pitfalls. To counteract excessive hierarchy, managers should work to encourage a flow of information up and down the chain of command. Initiating frank discussions across levels and job functions can help disrupt siloed communication patterns and enhance exchange throughout the organization.
Encouraging open communication takes time; people won’t be quick to express opinions that were ignored or punished in the past. Rewarding those who contribute ideas, take personal initiative, and express concerns will encourage others to follow suit. Securing input from employees throughout the organization can help firms identify and solve problems before they escalate and gain maximum value from their international workforce.
Terry Kahler’s post on his three years as general manager of Dell’s Brazilian operation provides an excellent example of establishing a successful culture in an overseas operation.
To conform to Dell’s corporate policy and adhere to U.S. law, Terry needed to manage his Brazilian employees’ Situation orientation—their tendency to question authority and ignore rules. The existence of the “Jeitinho Brasileiro”, the “Brazilian way” of skirting the law to get things done, isn’t surprising, given Brazil’s history. Situation tendencies are strong in environments where legal and political systems are considered weak or unfair, particularly those with high levels of political turmoil and corruption. Rather than obey rules as a matter of course, people decide what to do based on their own needs.
Although Terry was committed to managing his Brazilian employees in a culturally sensitive way, when it came to ethical conduct, his goal of alignment with Dell’s corporate policy would require a cultural shift at the Brazilian operation.
To create a goal-based culture, it is vital to:
At Dell Brazil, Terry Kahler established clear policies for ethical conduct, offered training in appropriate practices, and followed through with clear and public action when policies were violated. Employees had a road map for success and saw the consequences of not following it. Focusing on outcomes helped Terry justify asking employees to change their behavior and helped him avoid a cultural power struggle. Terry’s use of goal-based management principles made Dell Brazil a global success story.
Things to know and practice for success in international encounters
What to Keep in Mind
1.You have a culture, too
We tend to think of our own preferences as being “normal” or “natural” and to see others as being the ones with a culture. But our own behaviors, attitudes and expectations are culturally determined and no more “normal” than any others. If we grew up where they did, we’d have those cultural tendencies, too.
2.You’re playing the wrong game
No one would use a baseball bat in a basketball game, but we unknowingly use culture-based behaviors, attitudes and expectations in new cultural environments where they aren’t helpful. Cultural awareness means recognizing that the rules of the cultural “games” others are playing are different.
3.Assumptions are like onions; they have many layers
It’s not easy to shed culture-based assumptions because they go so deep. Concepts we refer to every day—honesty, reliability, and respect, to name a few—are defined differently throughout the world. Recognizing the assumptions behind our own expectations is vital to cross-cultural competence.
4.You’re not as open-minded as you think
We’d all like to think we’re understanding when it comes to cultural difference. A good way to test for open-mindedness is to imagine talking to someone from a different socio-economic, ethnic, or political background—in our home country. How easy is it to listen, empathize, and see through their “cultural lens”?
What to Do
5.Become a cultural investigator
New contacts and environments constantly give us clues about their cultural orientation. We can look for these clues in the way people communicate, the way they set up their physical surroundings, and the systems and processes they use. Anything that’s unfamiliar points to a different way of thinking.
6.Identify cultural “sub-texts”—explain yourself and ask questions
Discovering the cultural basis for things that are unfamiliar helps us understand others’ motivations and priorities. Actively comparing viewpoints with international contacts to expose different ways of thinking makes it possible to communicate in a culturally appropriate way and develop proposals that meet common goals.
7.Don’t make it worse
Cultural conflict begins with subtle misalignments. When something seems confusing or a little “off”, it’s best to stop, explain ourselves, and ask questions to avoid compounding the problem. Understanding differences in the way two parties view an encounter is vital to getting things back on track.
8.Have the reaction, then step back
Everyone’s cultural “buttons” get pushed at times, and it’s best to be honest about frustration when it happens. Afterwards, we can step back and think more objectively about why we responded in a certain way. Check out this practice exercise.
9.Put down the bat
Even the best baseball player cannot win a basketball game using a bat. We must understand the rules of a new cultural “game” and the reasons behind them before we make a decision to embrace them or teach others the game we know best.
10.Leverage “their” strengths
Each cultural tendency comes with unique skills and knowledge, so intercultural partners bring new resources and strategies to the table. Combining the advantages of diverse approaches is the way to achieve synergistic performance on international projects and collaborations.