Cover story: Cultural management – Your passport to influence abroad.

Cover story: Cultural management - Your passport to influence abroad.

Cultural differences between the various foreign arms of a multinational, or even between business divisions, are a barrier to consistent corporate strategy. The answer, writes Clive Couldwell, is effective cultural management.

Although managing cultural issues is a fiendishly complex task, today’s consultants have to master it if they’re going to help managers and organisations understand and successfully respond to their new global environments. And the best way to start cultural management, says Robert Goodsell, director of Smythe Dorward Lambert (SDL), which educates clients in how to manage culture-clashes, is by gaining an appreciation of the culture already in place in any organisation. “An organisation is by definition an organised body of people,” says Goodsell. “The culture in that organisation then defines what is expected of those people, and ultimately what is valued and rewarded. So, in order to determine the culture that you want, it is essential to know where you are coming from. Unless you understand what you have culturally, it is pretty difficult to develop a business strategy or to plan for change.” When SDL wants to develop a complete picture of a company’s culture in this way, it uses a technique called “corporate mapping”. This measures how a company is currently behaving so that the aspects of its culture that need to be reinforced or changed can be highlighted, ready for development of a strategy that best serves the company’s business objectives. For example, when the pharmaceutical companies AstraMerck and Astra USA planned to merge to form Astra Pharmaceuticals, they initially both thought that they shared most of the same values and that they would naturally blend into one. However, when SDL began culture mapping within the company, it became clear that there were major differences between the two cultures. If the companies were simply allowed to evolve or be integrated without a defined way forward, what would emerge would be a blend of mediocrity, and not a hybrid that incorporated the best of both companies. After the culture mapping, it emerged that one organisation saw the merger as a way of enabling it to “play in the big league”, although many employees expressed concerns about how they would fit in with the culture of the other organisation. In contrast, the other organisation felt that it would become a middle-of-the-road company, that it would no longer be unique, and that it would lose everything of which it was proud. “Whilst speed was an option, the human pain and anxiety associated with an organisational change of this scale is inevitable, whatever the timescale,” says Tom Peacock, Astra Pharmaceuticals’ executive director of change management and communication. “Our role was to ensure that the creation of Astra Pharmaceuticals went beyond financial, operational and structural considerations, and that the people aspects of change stayed on the leadership team’s agenda. Creating a new team in the face of a merger should not be underestimated. There was limited time to ‘norm and storm’ given the enormity and immediacy of the challenge facing the group.” At the end of last year, Frankfurt-based Deutsche Bank acquired New York’s Bankers Trust. Now, Deutsche Bank is taking a kind of “culture audit” of the two banks, looking for areas where there is potential conflict or areas that might need streamlining, and seeking ways in which the two financial giants can be seamlessly integrated. The new organisation is eager to get the best of the people and processes from both sides of the merger – and by paying close attention to cultural differences, and by being careful to attend to communications – Deutsche Bank is hoping that it will get just that. One of the first things its human resources integration team has done is set up a web site containing all the information it has about the partnership. The site is on a secure intranet which is not part of the system of either bank, and it is being used to distribute news and other information to everyone involved in the acquisition. The web site includes presentations by senior executives about priorities, changes that are expected to be made, and values. There is a space for feedback where top executives can answer questions, and there are presentations of town meetings which have been held around the world, so that those who could not attend are appraised of the results. Through the site and its culture audit, Deutsche Bank is attempting to address the big questions: “Why is this merger taking so long to complete?” and “What will happen to individual departments as the back office from the two banks are combined?” The latter is an important question because the back office, which Deutsche Bank calls Global Technology and Services and which is the operations and infrastructure arm for the new bank, has about 25,000 employees. One experienced cultural manager is Andersen Consulting, which is now organised as a series of market units, the partner and professional teams in each of which are entirely global. The company’s approach to cross-border culture measurement and management is based on a blend of its own practical experience and the work of the celebrated Dutch professor, Geert Hofstede, who came up with a system that measures national cultures across four dimensions. “The work that Hofstede did is still extraordinarily robust,” says Terry Neil, managing partner, knowledge management, for Andersen Consulting worldwide. “I carry a little aide-memoire around with me which I often check just before I get off the plane to understand how the different value systems between my particular background, and the background I’m about to work with, are likely either to bump into each other, or be relatively easy to work with. Hofstede’s work has provided a tremendous starter kit to help me understand why, say, my French partners and clients’ values are going to be rather different from my own.” The significance of differences between management cultures can seen in the behaviour of one of Neil’s US clients, a financial services company. “One American executive had moved to France to take up his new role, and immediately did what any good American would do. He went through a bunch of team building activities with his new direct reports,” says Neil. “But we were concerned that to the French this looked like very weak behaviour because they expect leaders to lead and set direction. On the other hand, it would have been exactly the right kind of behaviour in a UK, or US environment, where there is less hierarchy, and people really appreciate being part of the team and being pulled along.” According to KPMG Management Consulting’s Ian McLeod, a consultant in the company’s JD Edwards practice, some of the biggest culture challenges are to be found in the Far East, where westerners are generally viewed in the same way as we in the UK tend to view Americans – loud and insensitive. “It’s very easy to come away from a meeting believing that you’ve obtained approval for something just because everyone around the table has nodded,” he says. “However the issue won’t have been resolved at all. It’s just that either they haven’t been bold enough, or their culture hasn’t allowed them, to say no.” Another example of how local culture can be misunderstood came into play during one of McLeod’s assignments in Indonesia, where he was primarily involved with smoothing out cultural differences between his clients and The World Bank, which at the time was funding a number of construction projects. “The World Banks’ US representative was continually wanting to kick the Indonesians for failing to deliver on project milestones, but they could not interface with this chap at all. He assumed that because they said they’d deliver by a certain date, it would have been done. But this conversation would just never have taken place between two Indonesians,” says McLeod. “I got round it with the American in the same way I would do in the US or UK. I acknowledged we’d slipped the deadline and that there were things we needed to do, identified what we were going to do to pull that date back, so the next time he came in to discuss the next deadline we would be on target.” McLeod says that although this approach was relatively easy for him, it simply wasn’t the kind of action that the Indonesians could take. “The hard part for me was translating what I said into a language that the Indonesians could respond to and go along with,” he adds. McLeod’s difficulty highlights just how complex cross-culture assignments can be. In the old days, consultants were thrown together to serve a bunch of clients and the whole entity was called a client consulting group. “They may not even have worked together before and from the first day we’d call them a team, despite the fact that we’d not done anything that would help them become one,” says Andersen’s Neil. “Since then, we have discovered that the investment in getting teams as individuals to understand what their different roles bring to the pot can have a tremendous impact on how quickly they become productive and effective in working together.” Ernst & Young prepares for such assignments by placing all its new consultants into a global orientation programme. “This covers our approach to consulting but also our approaches to working in multi-cultural teams and international environments, and it forces the consultants to think what ‘multi-cultural’ and ‘working together effectively’ really mean,” says Pam Evans, Ernst & Young’s HR director for management consultancy services. “The concept of bringing the best team together to serve the clients’ needs and making sure that team can work together effectively and is adequately supported is something that is a key focus in the provision of good client service,” she adds. “Once you get this right internally, it is intimately connected with the quality of services our clients get, because they meet motivated, confident, positive staff. Clients then sense that we practice what we preach.” KPMG’s McLeod also takes the preparation of consultants for global assignments with JD Edwards very seriously. “It is by far and away the most difficult of the things we do,” he says. Seventy five per cent of JD Edwards’ work lies outside the UK, primarily in implementing ERP systems globally. The practice currently has assignments in the US, Sweden, and the Middle East (Bahrain, Kuwait). In the past few years, ERP systems have become major targets for corporate investment because, in the right hands, they can improve a company’s business-driven operational processes, which is good news for any global organisation that is striving to manage its operations across multiple countries. “Global software projects bring a number of classic cross-border and inter-company challenges with them,” says McLeod. “Quite often, people want to retain what they’ve got and there’s nearly always resistance to implementing new software. However, resistance in the UK is one thing, resistance in Guatemala is quite another. We might interpret it as resistance when it may be anything but.” McLeod ensures his practice teams contain a good cross-section of staff who understand the local culture and speak the language. “It’s a good way of breaking down barriers,” he says. “Although a deal may have been struck with the client’s head office, implementation will also take place in the local business units, which may not want the technology, and may not even speak English.” Technology may also reveal major cultural hurdles. Companies are driven to implement an ERP system so they can create a common view of their operations right across the globe. “You can track this back and ask why would an organisation not already have a common approach? The answer would be that it’s grown by acquisition. This means it probably has several different cultural pockets within it,” McLeod argues. He cites a Swedish client in the packaging industry that was made up from what were several completely different companies, each with its own systems, which he was tasked with replacing with one JD Edwards implementation. “Resistance was greater because they were having this new system dumped on them – and by outside consultants,” says McLeod. “The cultural issues associated with working in the local country are magnified because you’re in effect working for a different organisation to the actual client.” This type of resistance is one of the reasons why a good many high-profile, cross-border ERP systems have failed. “Problems don’t arise because of the technology but usually because the culture behind its implementation is wrong and a lack of high-level sponsorship at head office allows local countries or business units to get away with dissent, and at worst downright refusal to implement,” says McLeod. “You’ve got to get the business to buy into the technology rather than use a dictatorial approach. In this kind of situation we make sure that the client is willing to back us and put into place appropriate change management structures and processes to get all these local different firms to become one.” At the outset of such an assignment, defining a global template is important so that you know broadly what you’re going to implement throughout the client company. “We have to get everyone together and work out what it is we want to implement from the start. There’s often resistance to that from senior management. Intellectually, they know it’s the right thing to do but they see it as a delay. They assume after they’ve submitted their requirements we can start to implement a month later with the first country, March the next, and so on,” says McLeod. “We tell the client they have to do this if they want a common system, otherwise they’d just have 20 different versions of JD Edwards instead of the 20 different systems that they currently have.” As a general rule of thumb, consultants have to recognise that the power structures in different organisations differ greatly. “That is one of the strongest factors in cross-cultural working,” says SDL’s Goodsell. “Misinterpreting them is one of the most common mistakes made. When we’re talking to clients about this, we use some fairly superficial and trivial examples. We talk to them about the ‘hierarchical’ French autocratic style, a ‘group-oriented’ Asian style which is more about seeking agreement, and what we call ‘structured individualism’, which is more US. And there are some interesting overlaps when you get up into Scandinavia, where there is a mixture of both group-oriented and structured individualism.” Goodsell also maintains that there are three culture “dimensions” at work in companies. “There is the national cultural dimension, the organisational culture, and the individual behavioural style according to the personality type of any individual. You certainly cannot work without separating, or thinking about separating, the cultural style driven by a country, and the way of working that is engendered by a particular organisation,” he says. The body of research knowledge that forms the basis of cross-cultural management is well advanced, but its application in the general world of business is very patchy. It currently sits in the heads of cognitive and social scientists rather than where it ought to be – in the heads of business leaders. “The next major wave of management practice will be looking at this as a serious dimension of competence development for leaders in business. We have too many business leaders where this isn’t even on their radar screen,” says Andersen’s Neil. “The role of management must change from structuring tasks to shaping behaviour. This captures a real change in competence, a new focus that business leaders will have to take on board.” Neil’s thought comes down to an ultimatum. If business leaders don’t respond to cultural issues, then managing the cultural complexity increasingly found in today’s global organisations is going to become almost impossible. Clive Couldwell is a freelance journalist. CULTURAL ISSUES IN CROSS-BORDER MERGERS Many people instinctively resist change and will need help to understand and find meaning in an emerging culture, but the following checklist can serve as a recipe for better ways of working: – Recognise that both organisational and national values, norms and practices vary. – Don’t make assumptions about shared values. – Establish cultural baselines and identify commonalities and key differences that may throw work off track or even require a strategic rethink. – Tailor your communication to suit different cultures. – Consider its desired impact and the required response. – Work with people familiar with different cultures to translate and deliver the message for maximum impact. – Involve people from both cultures and organisations in creating any new organisation. – Don’t impose new ways of working on people, rather, involve mixed groups from both cultures at all levels of both organisations when planning the way forward. – Create a new culture rather than a compromised blend of the two organisations. – Make sure that this new culture emerges in local business activities and practices so that the brand comes alive in its diverse markets. – Recognise that individuals and groups require support through the cultural transition. Source: Smythe Dorward Lambert.

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