How Cultural Intelligence Affects Your Bottom Line – by Kyle Hegarty

An American company quietly shuts down their APAC office in Singapore. They conclude that the business model “doesn’t work in Asia.” The local team wouldn’t innovate and respond to local market needs. The American Managing Director thought having a ‘flat hierarchy’ was the answer. He was wrong. His company writes off a few million dollars.

Another senior executive moves to APAC from the UK. He follows Peter Drucker’s Management by Objectives model religiously. This system served him well for many years in London. Yet all of his regional managers will resign within the first 6 months costing the business hundreds of thousands of pounds in lost sales. Does Peter Drucker’s approach not work in Asia, he wonders? Or is something else going on?

“There are truths on this side of the Pyrenees, which are falsehoods on the other.” -Blaise Pascal, 1623-1662

Cultural differences are not new, but over the last few decades, the world got a lot smaller. Advances in technology, emerging markets and a flood of ‘cheap’ capital has created a perfect storm allowing companies to expand overseas faster than any time before. As opportunities grow, cultures collide. Where mountains once acted as barriers cutting people off from one another, globalizing trends are making distance meaningless. But mountains still exist between cultures. As a leading social psychologist wrote, “software of machines may be globalized but software of the mind is not.”

Yet few company leaders are aware of the tools available to manage cross-cultural gaps. In business, this matters because cultural mistakes cost money. A lot of money.

Over the past few months I asked nearly 100 regional executives from all corners of the globe if they had any cross-cultural leadership training. Only 1 had any formal training (she worked for an NGO) and 3 others had read a book or two on the topic. That’s only 4% of surveyed business leaders across Asia, Australia, Europe and the US.

Here was the follow up question: Have cultural differences ever negatively impacted a business situation?
100% responded yes.

If you work with people from different cultures and find communication challenging, or if your company is expanding into new parts of the world, read on because many issues start when different cultures intersect with ‘globalizing’ businesses.

The study of modern cross cultural communication is still in its infancy. But there have been giants in the field who developed excellent models to help individuals and companies improve performance and become more globally-oriented. The first two researchers that come to mind are Edward T. Hall, from the US, and Geert Hofstede, from the Netherlands.

We should be standing on the shoulders of these giants, but we’re not. Why?
Here’s my theory (a ‘low context’ theory, as Edward Hall would say):

Psychologists and anthropologists use too many big words.
Yes, these cross-cultural trailblazers are giants but their work can be hard to digest, at least for a globetrotting simpleton like me. Consider this chapter title: “Homeostatic socio-cognitive systems.” What does that even mean? Here’s a question you can bring up at your next dinner party: does your culture lean towards “Flexhumility” or “Monumentalism”?

And when researchers aren’t making up new and confusing terms, they’re abusing simple words that don’t really need changing. Consider “happiness.” Some psychologists call it “subjective well-being.” But that was a mouthful, so it was shortened to a 3 letter acronym, “SWB.” After a long day of work, the thought of diving into an essay on “cultural metacognition” isn’t very enticing, so I can see why busy executives haven’t scooped up these books.

But here’s the thing: a lot of ideas from this field of study can help leaders cut through cultural misunderstandings within their teams. These models can also help create new offerings, assess growth plans, and find key employees and customers who will stick with your company.

Companies are beginning to learn that having a high cultural IQ affects your bottom line.

The first step is to understand the different cultural dimensions. Basically what this means is that your truth may be your colleague’s falsehood. You’ve got to look at the other side of the Pyrenees and start understanding how different people see the world. Standing on the shoulders of these researchers is a great way to start peering over those mountains and provides quite a view. But it may require help.

The good news is the industry is growing up quickly and there are researchers publishing books for us mere mortals who don’t have the time and energy to wrestle with challenging academic literature. Take a look at the work being done by Andy Molinsky, Professor at Brandeis, Erin Meyer, Professor at INSEAD and David Livermore, President at Cultural Intelligence Center. They’re applying the findings of Hofstede, Hall and many others to modern global business needs.

Also consider team training sessions. Because once you understand the cultural dimensions, you need to apply them within your business. Like any new skills, this requires practice and more practice and workshops are a safe place to start getting diverse people understanding each other. What should you look for in a cross-cultural trainer? Real world experience. The content isn’t that complex. Applying it to the real world is.

We’ve all been thrust into a crowded, rushed and noisy global village so it’s imperative we learn more about our new neighbours….Not only can this positively impact your P&L, you might learn a few things about yourself in the process.

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