How to be a better global manager
Success in foreign markets demands that you understand differences between cultures. A new book tells how.
NEW YORK (Fortune) -- In 1997, with $100 billion in annual sales and 750,000 employees in 8 countries including the U.S., Wal-Mart decided to open 85 stores in Germany, a move Wall Street analysts applauded because it would pave the way for expansion into all of Europe. The retailer bought up a couple of smaller German store chains, and sent over an executive who had successfully run 200 U.S. Wal-Mart stores from headquarters in Bentonville, Ark., to manage the German operations. Nine years later, in July of 2006, Wal-Mart announced it would close down its German stores. The resulting loss: About $1 billion.
What went wrong?
Wal-Mart's main mistake was blithely assuming that what worked in the U.S. would be just as effective in another country. First of all, that Bentonville executive in charge of Germany spoke no German, requiring all his direct reports to speak English at all times. (He turned out to be the German operations' first of 4 CEOs in 4 years.) Worse, Wal-Mart (WMT, Fortune 500) exported its U.S. corporate culture wholesale -- complete with a daily morning cheering session for store employees -- and trained greeters and other staffers to ask customers "How are you today?" the way they do in U.S. stores.
So what, you may ask. Well, Germany may look deceptively similar to the U.S. on the surface, but German culture is much more hierarchical. Managers are expected to maintain their dignity and their distance from employees, not lead them in cheers. Moreover, Germans tend to reserve smiles and greetings for people they know, so shoppers found the greeters' rhetorical "How are you?"s baffling and intrusive. Even details like who bags the goods at check-out were a mismatch: Germans prefer to do it themselves rather than having a store clerk pack their purchases. And Wal-Mart's famous ban on coworkers dating each other sparked an employee lawsuit that was a resounding defeat, and a major embarrassment, to the company. These and other culture clashes made for unhappy employees, few repeat customers, and a dismal bottom line.
But let's not be too hard on Wal-Mart. Charlene M. Solomon and Michael S. Schell, co-authors of Managing Across Cultures: The Seven Keys to Doing Business with a Global Mindset (McGraw-Hill, $34.95) say that plenty of other companies -- and not only American ones -- commit similar blunders when they try to expand into unfamiliar markets; Wal-Mart's German debacle is only one case study among many in their book. The pair run a consulting firm called RW3 (www.rw-3.com) that coaches managers at global giants like Intel (INTC, Fortune 500), HSBC (HBC), and Colgate-Palmolive (CL, Fortune 500) on how to adapt and thrive abroad. A few excerpts from our recent conversation:
Q. Why did you write this book?
Michael Schell: Global companies need people who are trained to recognize and adjust to cultural differences. If you want to advance in a global enterprise, that cross-cultural understanding has to be part of your toolkit. But beyond that, what many employers are realizing is that the workforce right here in the U.S. is now almost 25% foreign-born. Globalization has come to our doorstep. That, combined with the rise of virtual teams in recent years, where team members may be located anywhere in the world, means that you need some awareness of cross-cultural issues even if you never leave the United States.
Charlene Solomon: More and more of our clients are asking for help in training U.S.-based managers to lead global teams.
MS: It's partly due to the changeover from a manufacturing economy to a "knowledge economy". In most companies, productivity is no longer measured by how many widgets you turn out. When the "product" is innovation and intellectual contribution, the only way to maximize that is to understand how to communicate in a given cultural context.
CS: In order to understand the biases and assumptions of people from other cultures, you have to understand your own -- beginning with recognizing that you have them.
Q. Beyond the Wal-Mart example, what are the most common cultural mistakes U.S. companies make when they try to enter foreign markets?
CS: One issue that comes up again and again is that different cultures regard time and deadlines very differently. In Spain or Saudi Arabia, for instance, meeting times and project deadlines are seen as approximate and flexible. Being late isn't a big deal. An American manager, or a Swiss or Japanese one for that matter, will often cut short a phone call or a meeting in order to be on time for the next one, but in many parts of the world that is regarded as unforgivably rude. So when dealing with colleagues or employees in another culture, you need to understand how they see time.
Another big area of difference among cultures is that U.S. employees are empowered to make many more decisions on their own than employees in, say, India or Mexico, which are more hierarchical and give almost all decision-making authority to the boss. With American team members, you might give them a project and a deadline and let them run with it, but that doesn't work in very hierarchical cultures. In India, for example, a much better approach is to set a series of smaller, intermediary deadlines and then check in regularly to guide that employee and give her feedback on how she's doing.
MS: Along similar lines, Americans are much more comfortable with consensus-based decision-making, where the boss will sit down with his or her team and ask for suggestions on how to reach a goal. But asking for underlings' opinions tends to flummox people in more hierarchical cultures. As the boss, you are supposed to have the answers, and an employee who wants to make a suggestion probably fears being seen as disrespectful or presumptuous.
The whole area of risk is interesting, too. American executives often pride themselves on making quick decisions and "trusting their gut". But managers in other countries -- even in places that seem superficially very like us, like Germany and Britain -- regard that as insanely risky. They tend to weigh decisions much more carefully and regard fast decision-making as reckless.
Q. When you train people for cross-cultural assignments, how do you get them to recognize these kinds of cultural pitfalls?
MS: That's the challenge. Even when you spell it out, people often will deny that there are any real differences, or they will just go ahead and act as if they don't see any.
CS: Or, when they run up against a real, deep-seated cultural difference, many people will interpret it as a personality conflict. In China, for example, you won't get very far asking a question that requires a yes-or-no answer. It just isn't the way the Chinese communicate. So when you ask a Chinese employee, "Did you finish that report?" he is likely to reply by telling you a long, roundabout story, with the answer to your question embedded in the middle of it, or perhaps at the very end. If you don't recognize the way Chinese people are raised to speak to each other, you'll probably think this person is being deliberately uncooperative or evasive or, at the very least, just way too chatty. But once you recognize that it isn't personal, it's a cultural thing, then it becomes much easier to adapt to -- or to discuss and resolve.
Readers, what do you say? Have you ever had to get over a cultural hurdle with a boss or coworker? How did you do it? In your experience, are cultural issues becoming more prevalent in the workplace even for managers and employees who never leave the U.S.? Tell us your thoughts on the Ask Annie blog!