Did you know that in Indonesia people point with their thumb as it’s considered very rude to point with a forefinger, while in Thailand it’s equally offensive to touch the top of another person’s head? Cultures worldwide have many differences like these that raise significant challenges for today’s companies operating in markets alongside one another.
The picture to the left represents Janus, a Roman God of doorways and hallways. Some may also associate him with new beginnings. Like Janus, to be successful global leaders must develop:
- Global business knowledge: A deep understanding of the nature of the world economy and global operations.
- Cross-cultural competence: Being attuned to relevant cultural cues, and able to interpret and respond appropriately.
Expanding Globally
As Larry Goldberg mentioned in his article, Overcoming Growing Pains at PSOs, “global expansion sooner or later happens with growth”. The stage can be approached in a few different ways.
Exporting and licensing focus primarily on sales. Software Vendors, and especially SaaS (Software-as-a-Service) providers commonly use them to penetrate new markets, often without having a local physical presence. Both are low risk, and success depends on the quality of the offering for the new market.
Franchising goes beyond licensing and provides the whole end-to-end experience to the customer. One example is the Microsoft Partner Network, with over 6000 organizations selling Microsoft software together with implementation services based on the best practices and requirements from the software juggernaut. Due to less control of the quality of service, franchising tends to have mixed results especially when the services include highly skilled employee force.
Joint venture in many cases is the most suitable approach. In most countries, having local ownership greatly increases the chance of success, especially with small and medium size organizations where the brand is not recognizable in the new region. One of the critical aspects of the approach is the maturity of the internal processes. Even fully defined procedures will be tested by the differences in culture, laws and approach to work. As an example, Europe and Japan are known to have more process-oriented cultures, while US employees tend to organize their work backlogs by task. On the surface this may look like a subtle difference, but when people from different regions work on the same project, it can be a nightmare. Best practices include written guidance available to all team members and communication via video calls.
Wholly owned subsidiaries tend to have more cultural challenges. Many times, managers from abroad are brought in to run operations. Without enough time, such leaders have a hard time picking up the cultural cues quickly enough. On the other hand, such an approach tends to have a clear chain of command, more mature processes, and if successful at first, can scale rapidly.
One approach not shown on the diagram is outsourcing, and for the purpose of this article it is omitted on purpose since the outsourcing vendor still must utilize one of the previously mentioned approaches. Best practices for the services organizations include ISO standardization or Capability Maturity Model benchmarking for the IT organizations. Most of the developed and developing countries have certifying and auditing services locally available.
Cross-Cultural Competency - Operating out of the comfort zone
Competency is a set of congruent behaviors enabling effective work in cross-cultural situations. The following table shows different aspects of culture impacting the workplace.
Cultural Values
| Individualism Individual goals and rights are more important than personal relationships. | Collectivism Personal relationships and benefiting the group are more important than individual goals. |
| Low Power Distance Status differences are of little importance; empowered decision-making is expected across all levels. | High Power Distance Status differences should shape social interactions; those with authority should make decisions. |
| Low Uncertainty Avoidance Focus on flexibility and adaptability; tolerant of unstructured and unpredictable situations. | High Uncertainty Avoidance Focus on planning and reliability; uncomfortable with unstructured or unpredictable situations. |
| Cooperative Emphasis on cooperation and nurturing behavior; high value placed on relationships and family. | Competitive Emphasis on assertive behavior and competition; high value placed on work, task accomplishment, and achievement. |
| Short Term Values the immediate outcomes more than long term benefits (success now). | Long Term Values long-term planning; willing to sacrifice short-term outcomes for long-term benefits (success later). |
| Low Context Values direct communication; emphasis on explicit words. | High Context Values indirect communication; emphasis on harmonic relationships and implicit understanding. |
| Being Orientation Social commitments and task completion are equally important; diffuse boundaries between personal and work activities. | Doing Orientation Task completion takes precedence over social commitments; clear separation or personal and work activities. |
Many models have been created to help companies better understand the impact of each value. One of the most popular is by Professor Geert Hofstede. The example below shows the difference between the United States and India. By understanding the model and adjusting their style, leaders can greatly increase their chance of success across the board.
Barriers to Operating Globally
Cultural relativism suggests that the home culture is the best. Meaning that culture creates a ranking system in the mind. Taken to the extreme, it can become cultural imperialism: a problem with them, not a problem with us.
Self-reference criterion (SRC) or “culture shock” is a natural reaction to an unnatural event (naturally resort to one’s own program for living).
Tips for Building Great International Teams:
- Company culture and values must be the baseline for the behavior. Otherwise, by default local beliefs will prevail. Team collaboration (us vs. them should be eliminated from the vocabulary.
- Visits – while it is an extra expense, having employees visit their colleagues is critical. Breaking bread (or having a beer) is seen as one of the key building blocks towards adopting the same values.
- Language cheat sheets – the first step is using online machine translators. However, having 10-20 commonly used words in the region, even slang, will improve camaraderie.
- Video calls are by far better than audio only – reading non-verbal clues and seeing the work environment in the other office brings people closer. It is especially helpful in high stress situations, while the best practice should be embedded as early as possible.
- Local communities matter – especially in time of need, people tend to step up and help each other. Having matching funds for such occasions available greatly enhances the image of the organization.
- Small gestures of appreciation are in many cultures more valued than salary increases. By listening and showing care leaders can build relationships locally and globally.
Rewards structure
- Competition vs. Collaboration: Often teams feel threatened by colleagues in remote locations. Team building events, virtual or face to face, will help.
- Transparency: The more it is shared with the other offices the more trust is established.
- P&L ownership – most often each country has its own P&L. The best practice includes additional key performance indicators, especially for leaders, focused on enterprise success.
- A similar structure produces similar customer experience – if measured similarly, and if given enough training, colleagues from different parts of the world can provide almost identical customer experience. The days of outsourced, low-quality, support is being replaced by global teams, where regardless of the background individuals identify with the company culture.
Summary and Next Steps
It is helpful to know that most responsibilities are the same regardless of the culture. Also, most countries read similar business literature, for example Sun Tzu’s “Art of War” has been as popular in Europe and the US, as it has been in Asia. Many of the leadership principles apply across borders, and can be tested with a simple Leadership Factor observation:
When looking for the new leaders, or trying to develop as a global leader, the following critical few should be considered:
- Mindset (“It’s not good, it’s not bad, it’s just different”)
- Tolerance, open-mindedness, acceptance
- Passion or thirst for culture
If you’re ready for the next level Cultural Intelligence (CQ) is a great tool for the journey. Buena Suerte! Good luck!
