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This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

insight

MULTICULTURAL MANAGERS

Cultural Competence: Why It Matters and How You Can Acquire It By YIH-TEEN LEE and YUAN LIAO

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n international joint venture involving Apollo Tyres of India, Cooper Tire of the United States and Cooper Chengshan Tire (CCT) of China highlights what the Financial Times has called “a growing problem” for today’s managers who are increasingly doing business across borders. In 2013, within the space of a few months, the merger and acquisition degenerated into legal action. Covering the court case, the FT reported that the deal seemed to have gone sour largely due to miscommunication and cross-cultural misunderstandings. “Evidence showed American and Indian IESEinsight

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https://dx.doi.org/10.15581/002.ART-2746

executives had put entirely different constructions on the same events, and none seems to have understood their Chinese partner, Mr. Che.” This became clear during union negotiations: “While the Americans prioritized speed and protection of shareholder value, the Indians focused on building strong relationships … The misunderstandings with Mr. Che appear to have been even graver,” with the Indian executive testifying he could not understand the English of his Chinese counterpart, leading to puzzled exchanges between the parties. This story is not unusual. Another more recent FT report on the Indian mobile phone ISSUE 26 THIRD QUARTER 2015

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Cultural Competence: Why It Matters and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

The means of minimizing the friction and maximizing the performance of culturally diverse and globally dispersed work teams lies right under your nose: It’s about leveraging multicultural individuals. company, Bharti Airtel, reveals it, too, underestimated cultural factors when it launched an advertising campaign aimed at the African market. As one Nairobi marketer said, “Multinational companies … come with their global brand positioning and they want to cut and paste.” But just putting black models and images of the savannah in an ad for Africa is as crass as putting a Thai, a Chinese and an Indian in the same ad and thinking you’re reaching Asia, he said. As executives increasingly find themselves operating in multicultural contexts, it becomes paramount that they develop not only awareness of cultural norms and differences, but capabilities for managing them effectively, in order to limit the potential for misunderstanding and conflict, as befell the companies in our previous examples. In this article, we will explain how companies might identify and make better use of the invaluable attributes offered by multicultural managers and employees. Drawing on research, interviews and case studies, we suggest how cultural intelligence might be developed as a vital managerial competence for the world we live in today.

EXECUTIVE SUMMARY Emerging research suggests that multicultural individuals have innate abilities that make them exceptional candidates for global leadership – yet they often pass under the radar of HR. Although companies are hiring more multicultural employees, it is frequently a token gesture to reflect society’s growing ethnic diversity, or because they need their language abilities. What’s really needed, say the authors, is a greater

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awareness and appreciation of the beneficial role of culture in the workplace. This article explains how companies might identify and make better use of the invaluable attributes offered by multicultural managers and employees. Drawing on research, interviews and case studies, the authors suggest how cultural intelligence might be developed as a vital managerial competence for the world we live in today.

The Rise of the Multicultural Workplace

Technology and globalization have radically reconfigured the way we work. One visible consequence of this is the rise of the multicultural workplace, which can expose big differences in areas such as communication, approaches to time management and managerial styles. Some of these differences can cause problems, including misunderstandings, interpersonal tensions and weak performance; hence, the growing importance of cultural awareness in the workplace. The good news is that the means of minimizing the friction and maximizing the performance of culturally diverse and globally dispersed work teams lies right under your company’s own nose: It’s about leveraging the multicultural individuals themselves. Today’s workplaces are brimming with managers and employees who are multicultural in two senses. On the one hand, managers and employees may be intrinsically multicultural in the sense that they are mixed-race or mixed-ethnic by birth; they’ve lived in more than one country (expatriates, international students, immigrants and refugees); they were brought up with at least one other culture besides the dominant mainstream culture (such as children of immigrants); and/or they are in intercultural relationships. These people have internalized the values, attitudes, beliefs and assumptions of more than one culture. (See the sidebar Don’t Dismiss Marginalized Multiculturals.) On the other hand, monocultural managers and employees may be experiencing multiculturalism as a feature of doing business internationally. They are being exposed to diverse cultural influences and values, and they find themselves having to navigate a wider variety of viewpoints, opinions and experiences. Suddenly, they realize they need to pay much more attention to interpersonal interactions and IESEinsight

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Cultural Competence: Why It Matters and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Don’t Dismiss Marginalized Multiculturals

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hough being multicultural has advantages, some individuals can suffer from acute feelings of isolation, homelessness or even depression as they struggle to develop a real sense of belonging to any one culture. For some, this leads to an active rejection of all cultures. Naturally, this does not serve the cause of global leadership. But it would be unfair to dismiss these so-called “marginalized multiculturals” as poor adapters, suffering from identity crises. Our research has found that living in a state of “in-betweenness” can, in fact, be a genuine asset for global leadership – provided that such people develop a healthy selfawareness of their own special gifts. After all, who better to help bridge cultural divides than those who are able to see all sides simultaneously? As both cultural insiders and outsiders, “marginalized multiculturals” are prone to have an “ambidextrous” mind-set – a trait that management scholars say is vital for dealing with the competing demands, paradoxes and trade-offs of doing business in the 21st century. They’re also naturals at playing devil’s advocate, which is so essential for decision-making and avoiding groupthink. The challenge for companies is to develop effective methods for tapping into this rare human commodity. Unfortunately, most companies are still far from realizing, let alone utilizing, this potential. Organizations should remain on the lookout for these profiles as serious contenders for global leadership positions.

make greater efforts to foster inclusive organizational cultures. In either case, the multicultural workplace has huge implications for management – and not only in terms of the challenges mentioned earlier. By learning to be culturally competent, managers and employees will discover numerous advantages that are indispensable for global leadership today.

Benefits Worth Having

The effect of culture on business management is a relatively nascent field of research. Geert Hofstede, a Dutch manager turned academic, was the first to get the ball rolling in the 1980s when multinational companies really started to globalize. Research has only recently started IESEinsight

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to shift from mapping national cultural differences (aka Hofstede) to getting to grips with the special nature of multicultural individuals. Here we summarize some of the main findings emerging primarily from psychological research on bicultural and multicultural individuals. These competences would be highly beneficial for any manager to have today. COGNITIVE COMPLEXITY. This refers to the ability

of a person to perceive and respond to variables based on prior experience and pre-established insights. Sometimes this is associated with an even more specific type of cognitive capacity: integrative complexity. This is the capacity and willingness to acknowledge the legitimacy of competing perspectives on the same issue. In cross-cultural settings, such as a multinational corporation, high levels of integrative complexity can help managers and employees understand other cultural perspectives and accept their legitimacy in shaping how other people think, feel and behave. CREATIVITY. In its broadest sense, creativity means taking existing resources and coming up with new ideas of value. Having been exposed to a broad variety of cultural contexts, multicultural individuals tend to develop richer conceptual cognitive structures, from which they can generate different ideas. For example, when asked to create a new type of cuisine, Chinese-American individuals fused elements from both cultures. While some dishes may be unconventional in one or another culture, multicultural individuals are more psychologically prepared to at least try them. In addition, they are more likely to generate new insights on the interrelations between ideas from various cultures, and synthesize them. In another example, when the British supermarket chain Tesco began to lose competitiveness in its home market, it invited a team of Asian managers from its subsidiaries to cast their eyes on its home operations and identify improvements. Tesco appreciated that outsiders can often see things that those at home take for granted. INTELLECTUAL FLEXIBILITY. Individuals with multicultural mind-sets often have a higher level of intellectual flexibility. Since they are not constrained to a single cultural frame and are

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Cultural Competence: Why It Matters and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Cultural intelligence is developed as managers become more sensitive to the influence of culture, as well as more adept at adapting their behavior to different cultural contexts and norms. used to adopting multiple perspectives in their thinking, they are much more able to think outside the box. CULTURAL INTELLIGENCE. This encompasses mal-

leable capabilities that enable individuals to function effectively in cross-cultural settings. This includes a meta-cognitive component – being culturally sensitive and mindful – which helps individuals process and accurately interpret cultural knowledge. Cultural intelligence also helps when it comes to exhibiting acceptable norms and behaviors in interactions with people from distinct cultures. Multiculturals may also develop greater cultural intelligence as they become more sensitive to the influence of culture as well as more adept at adapting their behaviors to different cultural contexts. Moreover, their multiple cultural identities give them a wider variety of cultural schemas to guide their behavior, equipping them with better behavioral adaptability. ABOUT THE AUTHORS Yih-teen Lee is an associate professor of Managing People in Organizations at IESE. He holds a PhD in Management from HEC, University of Lausanne, and a Master’s in International Business from National Taiwan University. His paper on culture and personenvironment fit won the Best International Paper Award of the Organizational Behavior Division at the 2006 Academy of Management Annual Meeting. He has co-edited Les compétences culturelles (2007) and Cultural Contexts of Human Resource Development (2009).

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Yuan Liao is an assistant professor of Managing People in Organizations at IESE. She holds a PhD in International Business from Beedie School of Business, Simon Fraser University, and a Master’s in Psychology from the Chinese University of Hong Kong. Her research interests lie in cross-cultural management, cultural intelligence and multiculturalism. Her work has appeared in the Journal of Business Ethics and the Journal of International Business Studies, where she also serves the editorial review board.

Well-Positioned for Global Leadership

If all this is true about bicultural and multicultural individuals, the question is: to what extent are they in positions of leadership in your organization? Carlos Ghosn, the CEO and Chairman of Renault-Nissan, is a high-profile case in point. Born in Brazil, raised in Lebanon, educated in Paris and fluent in French, Portuguese, English, Arabic and Japanese, Ghosn splits his time between Paris, Tokyo and other far-flung RenaultNissan facilities around the world. Widely credited with saving Nissan from the brink of bankruptcy, Ghosn attributes much of his success to his multicultural background: “My background was probably a big asset for me. Being able to navigate in new cultural contexts – not being rigid or uncomfortable in unfamiliar surroundings – was absolutely fundamental.” Multicultural individuals, like Ghosn, can be invaluable assets to multinational companies. For example, when they experience cultural conflicts, they often feel an urge to engage in deep self-analysis, which in turn results in higher levels of cognitive complexity. This process increases their ability to differentiate between and navigate seemingly conflicting realities and systems. And this can be a huge asset for today’s generation of global managers facing increasingly complex realities. Another advantage of multicultural leaders is that they do not lug around heavy baggage from any one particular culture. Their lack of strong identification with any one cultural group makes them particularly adept at handling diversity. They are also often perceived as culturally neutral, giving them an edge in their relations with team members. Here are a number of other advantages multicultural leaders bring to the table: When people interact or operate in cultural settings different

CROSS-CULTURAL ADJUSTMENT.

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Cultural Competence: Why It Matters and How You Can Acquire It

Haier in Japan: Bringing Two Distant Worlds Together

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

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n 2012, China’s home appliances behemoth, Haier, acquired Sanyo, the white goods business of the Japanese household brand, which also covered Indonesia, Malaysia, the Philippines and Vietnam. Given the long history of mutual distrust and animosity between China and Japan, one could be forgiven for questioning the wisdom of the decision. It wasn’t just the two countries’ cultures that were deeply divided; Haier’s corporate culture, which was based on performance-based management, stood in stark contrast to the Japanese focus on seniority, lifetime employment and annual salary increases irrespective of individual performance. How could Haier dispel the general mood of distrust among Sanyo’s employees and convince them to sign up to Haier’s vision, especially against the backdrop of deteriorating relations between China and Japan? The key was in Haier’s choice of managers. The first to take the helm of its Japanese business was

Du Jingguo, a long-serving Haier executive. Du was Chinese rather than Japanese, but had managed a previous joint venture with Sanyo, had lived in Japan for many years and had a Japanese wife. He understood that the success of Haier Japan hinged on his ability to integrate Japanese culture with Haier’s corporate culture – a blend of Western management theories, infused with ancient Chinese philosophy, and executed according to local practice. Thanks to his bicultural mindset, Du was able to play the role of cultural bridge to perfection and avoided the trap of viewing complex situations in simplistic either/or terms. Not only did he understand the importance of putting the Haier system in place, he also skillfully deployed culturally nuanced methods for winning Japanese workers over to the Haier system. For example, to achieve more buy-in from his Japanese team, Du devoted huge efforts to communicating informally. This

from their own, they normally need to adjust. As a result of the intellectual and behavioral flexibility mentioned previously, individuals with multicultural mind-sets are consistently found to enjoy better cross-cultural adjustment in psychological, social and task domains. In other words, they are better at adapting their behavior in ways that produce desired outcomes in less familiar cultural settings. Psychologically, they tend not to suffer as much from stress and frustration related to cultural differences. Socially, they may communicate effectively with people of different cultural backgrounds and develop good interpersonal relationships. Task-wise, by being extremely mindful and taking into account IESEinsight

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involved lots of meetings and going for drinks after work for more than two years. When Du took a different position in Haier, his successor at the helm of Haier Japan was Yoshiaki Ito, a young Japanese national born and raised in Thailand and educated in the United States. Thanks to his multicultural background, Ito was fully aware of the cultural obstacles he faced and was able to switch effortlessly between languages. He could also approach challenges from a much broader perspective. Under his tutelage, Haier’s Japanese division has reformed its salary and promotion system, and restructured its product and staff development processes. As the Financial Times noted, Haier’s experience in Japan shows that developing managers who not only know the company back to front but are also culturally intelligent greatly improves the chances of success in crosscultural expansion.

multiple perspectives, they accomplish taskrelated goals in cross-cultural work settings. BOUNDARY SPANNING. Boundary spanning refers

to the activities that allow individuals to broker or create ties across the boundaries of social or organizational groups. Cross-cultural collaborations often involve dense and frequent interaction between members belonging to various cultural groups. Because of their cultural knowledge and cognitive complexity, individuals with multicultural mind-sets are often able to establish and share connections and ties with and between multiple groups to enable the flow of knowledge, information and resources. ISSUE 26 THIRD QUARTER 2015

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Cultural Competence: Why It Matters and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Organizations should invest time in finding people who have these skills. When organizations start with the right people, their training programs will be more successful at developing truly effective global leaders. Their strategic position can also contribute to smoother relations among members of multiple cultural groups. Similarly, individuals with multicultural mind-sets can contribute to knowledge transfer within organizations. Because they understand the codes of multiple cultural groups, they are able to: codify and decode knowledge and practices; identify and establish links to facilitate crosscultural social networks and the flow of knowledge among multiple parties. Sometimes, they can even serve as cultural interpreters among multiple cultural groups. This means translating not only across languages but also across the cultural codes underlying the messages.

CROSS-CULTURAL KNOWLEDGE TRANSFER.

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Research suggests that individuals who do not identify themselves with any particular culture can excel as global leaders not only because of their ability to handle complexity, diversity and uncertainty, but also because of their ability to keep a safe distance from any one culture. This “in-betweenness” offers them an unusual capacity for cognitive and emotional detachment, which allows them to bridge differences more easily. Some multicultural leaders can even shift between cultural personas, like a cultural chameleon. For example, Yoshiaki Ito, the CEO and President of Haier Asia, the Japanese division of the Chinese home appliances manufacturer, is a Japanese national born and raised in Thailand and educated in the United States. To establish personal trust and respect with his Japanese colleagues and subordinates, Ito uses a formal Japanese style. However, whenever negotiations stall and a more persuasive approach is needed, he effortlessly reverts to a more assertive American style. (See the sidebar on Haier in Japan.)

INTERGROUP & GLOBAL LEADERSHIP.

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Given the array of skills that multicultural managers have to offer companies, it’s surprising that they continue to be so overlooked and undervalued. Granted, more and more organizations are hiring multicultural employees, but often as a token gesture to reflect society’s growing ethnic diversity. They are also taking advantage of multiculturals’ language abilities. Yet their much broader potential – as boundary spanners or cultural brokers, for example – remains largely untapped.

How to Tap the Asset of Culture

Global leaders can be selected or they can be trained. The main emphasis these days is on training global leaders. However, these programs are usually extremely costly and do not guarantee success, in part because the key characteristics – such as cognitive complexity and cultural mindfulness – are difficult to instill. Organizations should invest just as much time into finding people who already have these skills, whether they know it or not. When organizations start with the right people, their training programs will be more successful at developing truly effective global leaders. That said, since multiculturals represent a comparatively smaller segment of the population, it makes little sense for organizations to recruit on this basis alone. However, if you view multiculturalism as a process – that is, people going through identity construction with respect to different cultural groups – then the candidate pool widens considerably. Perhaps your company has promising yet largely undetected multiculturals working under its own roof. The first question is how to identify them, and then how to help them hone those unique talents. One way is to develop specific programs aimed at locating the multiculturals within the organization. Imagine that you are the manager of a large Spanish division of a British software IESEinsight

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Cultural Competence: Why It Matters and How You Can Acquire It

Four Steps to Hone Your Cross-Cultural Skills

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

A multicultural mind-set requires serious effort in the following areas.

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BROADEN YOUR MIND. Expand your cultural knowledge through multiple channels, including newspapers, movies, books, traveling and working abroad, or simply surrounding yourself with people from different cultures. This is the awareness-raising phase.

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DEVELOP CROSS-CULTURAL SKILLS THROUGH PRACTICE.

The best way of improving your cross-cultural skills is through experiential learning. Working and traveling abroad is the obvious choice, but there are other ways to interact and engage with foreign cultures without leaving home. Most workplaces will have expatriate colleagues or foreign visitors, or you may find yourself working as part of a global virtual team. These afford numerous

opportunities to hone your cross-cultural skills through trial and error.

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BOOST YOUR CULTURAL META-COGNITION. This

involves consciously monitoring your own behavior in intercultural interactions. Pay close attention to how you act and react in diverse situations. Reflect on successful as well as unsuccessful intercultural interactions. “Mindfulness” exercises – i.e., making nonjudgmental observations, devoting your full attention, being present in the moment – can be useful in this process. It is often a good habit to keep a journal of your reflections, writing down what knowledge and skills you gleaned from each interaction. Then, you can discuss these reflections with a trusted

producer. Tucked quietly away within one of your company’s departments is a 30-something Peruvian called Fernando who has spent 15 years living in Madrid, the last five of which he has been working for your company. In his early 20s he spent two years studying business administration in Berlin, where he met his current Swedish wife. He speaks three languages fluently (Spanish, German and English), is comfortable in just about any cultural setting, deals with people from all over the world, and is performing his admittedly rather undemanding tasks perfectly well. Fernando is the perfect example of a gifted but underappreciated multicultural. His life and work experience should make him an ideal candidate for fast-track professional development. Yet his career is going nowhere. He’s not even on the company’s radar. By enlisting the help of HR and middle managers, your organization will IESEinsight

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mentor. This helps you decide what action to take next, and gives you some reference points to evaluate whether your behavior is achieving desired goals.

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CULTIVATE COGNITIVE COMPLEXITY. Cognitive com-

plexity requires being able to view issues from more than one framework, and somehow integrating or rationalizing multiple, competing frameworks. So, having monitored your own behavior, you need to apply the same level of conscious, proactive analysis to appreciating the differences and similarities between seemingly conflicting perspectives and systems. To see things from another perspective ultimately involves qualities such as empathy, sympathy, flexibility and honest communication.

have a much better chance of tracking down the likes of Fernando. Once you’ve done that, you can try developing their managerial skills while carving out roles for them that make much better use of their cross-cultural talents – for example, as a leader of a global virtual team.

Training for All

Beyond selection, it is also beneficial to offer training and development to multiculturals and monoculturals alike, so they can be more effective leaders in the global context. For multiculturals, the objective of the training is to help them be more conscious of their exceptional multicultural backgrounds and the associated competences. They can better leverage their singular strengths once they can make better sense of their cultural backgrounds and identities, and be aware of their competences. ISSUE 26 THIRD QUARTER 2015

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Cultural Competence: Why It Matters and How You Can Acquire It

This document is an authorized copy for the course "Organizational Behavior: Managing People " taught by prof. Anneloes Raes.

Multicultural leaders may relate better to team members from different cultures and resolve conflicts more easily. Their multiple talents can also be put to good use in international negotiations. For monocultural individuals, it is also possible to design training programs that contribute to the development of a multicultural mind-set, moving beyond the frontier of one’s cultural origin. That said, multiculturals may be better equipped to lead diverse teams and build trust in multicultural contexts than managers with only one cultural reference point. Leaders of global virtual teams are often expected to be the glue that holds the team together, by initiating relationships among team members and encouraging members to participate more fully in team activities. This kind of role is probably going to be easier for individuals who have experience moving in and out of cultural groups. As such, a leader with a multicultural mind-set may relate better to team members from different cultures and resolve conflicts more easily. What’s more, a global team feeds off multiple perspectives from diverse team members. When a leader recognizes the value of these alternative inputs and integrates the most promising ones into the team’s processes, he or she raises the team’s chances of producing creative output. The multiple talents of multiculturals can also be put to good use in a company’s international negotiations, where their natural cultural instincts and insights might make the difference between the company securing a good deal and a bad one. They can also help smooth its internal relations and operations by serving as special liaisons between multicultural divisions or departments. If your company is short on multicultural employees or managers, you can do one of two things: You can try to instill the rare skills they possess among select members of your current workforce. Though difficult, it is not impossible. (See the sidebar Four Steps to Hone Your Cross-Cultural Skills.) n

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Alternatively, you can start looking beyond your company’s walls. Instead of trying to create global leaders, you can try to track them down. The good news is, today the world is teeming with people like Carlos Ghosn and Yoshiaki Ito – people who have learned to excel in business precisely because of, rather than in spite of, the cultural dimension. To find them, all you need to do is start looking. n

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Read the case study “Haier: Will Venture Abroad Clean Up or Be a Washout?” in IESE Insight Review (Issue 16, First Quarter 2013) at www.ieseinsight.com/review Read or watch IESE professor Pedro Nueno’s interview with Carlos Ghosn, Chairman and CEO of Renault-Nissan, in IESE Insight Review (Issue 15, Fourth Quarter 2012) at www. ieseinsight.com/review Fitzsimmons, S.R., Y.T. Lee and M.Y. Brannen. “Demystifing the Myth About Marginals.” Global Leadership Insights of the Global Leadership Academy, 2011. As this is a burgeoning field of research, the authors would like to invite managers to join their research projects and contribute to the further development of knowledge on this topic. If you can relate to the phenomena described in this article, and you are willing to share your insights and contribute to research, please contact the authors at [email protected] and [email protected]. IESEinsight

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