The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

The Challenges of International Management Teams

How Different Cultures Affect Business Decisions
Eric Lynn, LCT Consultants, Nuremberg, Germany

(for Corporate Resources Group, International Personnel Programme Conference

Budapest, Hungary, October 7th – 9th 1998)

In 1996, I was participating in a debriefing meeting with four human resources managers from
a German engineering company in the process of building a high-tech manufacturing facility in
England. I had just outlined some of the differences in working styles between the British,
German and Austrian engineers and managers in the project that had arisen during a series of
trainings for the German and Austrians involved. To my astonishment one of the managers
present asked me if, in view of these differences, it was possible to ".... get the people to
cooperate in any way whatsoever." The only response I was able to give was: "You have to!"

Mark is a very successful small businessman from London. Due to the increase in his
company's activities in Germany, he has taken up contact with the London representative
office of a German bank to discuss investments and a credit line. Substantial flows of money
are involved and Mark has therefore been invited to the bank's head office in Frankfurt to
discuss his needs.

He has never done business with German banks before.

He is met at the airport by the company chauffeur and taken to the offices. Max, a foreign
investment banker, greets Mark in a friendly but very formal manner. Mark is ready to spend a
little time on small talk and is surprised when Max begins to ask him about his financial needs
almost immediately. As the discussion progresses, neither person feels very happy.

Mark is thinking: "This is a strange way to do business. He doesn't even know me; I don't
know him and he wants me to give him my money?"
He is not comfortable.

Max is thinking: "This is a strange way to do business. He cannot understand why Mark is so
interested in talking about things other than business.
He is not comfortable.

These two examples from an interface involving two or more cultures illustrate some of the
issues, challenges and human problems arising from international business. They indicate the
stress people can experience when working with the unknown and unfamiliar. In addition, they
illustrate the dangerous reactions that it can provoke: denial and flight from reality, failure to
recognise your partner's needs, the ease with which lack of respect can be conveyed. The
potential costs for the corporations are enormous.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 1

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Defining the Real Question

Our core theme here is "The Challenges of International Management Teams – how different
cultures affect business decisions". To address this issue, we can look at models, learn from our
own and others' experience and adapt our behaviour accordingly. This in fact happens all the
time.
However, although these approaches are extremely relevant and useful, it is not enough. We
need to focus in on questions which lead to action, not just study. This is why it would be more
useful to expand the statement of our core theme to read: "The Challenges of International
Management Teams – how culture differences should affect business decisions and what we
can do about it". The first question is neutral in tone, the second, proactive.

Six Key Aspects of International Business Contact

Six Key Aspects of International Business Contact

• Trust
• Commitment
• Success
• Working Together
• Attitudes to Time
• Decision Making

A starting point can be to look at six key aspects of international business contact: trust,
commitment, success, working together, attitudes to time, decision making. The way each one of
us individually and each culture perceives these things defines what we think the "right" way to do
things is, and even more, defines what we perceive as reality. This might mean that a team of six
people from six countries are creating six realities around a situation. And, of course, they are all
wrong. Due to the fact that they have formed a "team", they are in the process of creating a new
reality. If they are not aware of this process, the potential for collapse is great. This is the key
issue that we shall be examining here.

What is reality? Reality is the way things are. Human beings, however, all too frequently define
the "real situation" as the way they think things ought to be – according to their own attitudes and
values. A further complication is that they superimpose their individual wishes onto a situation
and then imagine it the way they want it to be. They have their individual attitudes (greatly

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 2

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

influenced by their cultural background) of how to develop trust among colleagues, the factors
constituting success in life, how people should work together, how groups should be led, the
degree of deference that leaders should be treated with, who makes decisions and how they are
made. The problem is that this model of reality is biased and static. Whenever two or more
people come together for the first time, they are creating a new situation in life. Members of
international teams are forced to work together (regardless of the definition of "working together"
and regardless of the quality of the cooperation). This meeting is the creation of a new reality
because each interaction releases emotions in the individuals which, in turn, influences their
attitudes toward their counterpart(s) and the situation. Awareness of and openness to this
process are key first steps towards success in international interactions.

International teams have to be formed in a number of situations, for example in mergers,

acquisitions, joint ventures, projects, as well as in day-to-day operations in multinational and
global companies. Political, social, individual, business and cultural factors all influence the
interactions.
The problem is, in principle, very simple: to bring people of different backgrounds together in
order to function as an effective team. Accomplishing this is, however, far from simple, not only
because of the complexities of the issues and the people, which is a huge intercultural challenge
that needs to be met, but also because of the way we often try to do things.

Three Cases

What actually happens when, for example, six people of two, four or six different backgrounds
come together in order to cooperate (nominally, form a team)?
In answering this question, we can use as learning tools both cases that have had a negative
outcome and those that have had positive outcomes.

In looking at these cases we should ask ourselves three questions:

1. What happens to the people involved?

This means what happens to them internally, at the emotional level, things we may not be
able to see. Normally, we only see the effect.
2. What is at the core of all of these interactions and personal conflicts among the people
involved?
3. What causes us to make these mistakes?
...over...and...over...again.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 3

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

The first example: "Advanced Technology - Prehistoric Cooperation, No Product" (page 11,
appendix), is really a result of both the German and American decision makers' concentration on
the task to the exclusion of the relationship element of business. They had different perceptions
of all the six key aspects of international business mentioned above. They separated the project
from the people. They separated the outcomes from the people.

The next example is called "Unbelievable, but True". It is a case that finally turned out positively,
but only after major problems and millions of dollars in extra costs. It concerns a railway
engineering project in Asia involving European companies from four different countries and a
local Asian company. Each contractor's responsibilities were clearly defined by the client (the
local transportation company) and each contractor reported directly to the client. There was no
formal contact between the contractors although of course they did have regular contact. The
poor communication channels within the client's organisation created an additional challenge. Six
weeks before the railway was due to open, they had still not solved the problem of how to make
the separately contracted systems compatible with each other. Claims and counterclaims were
being made by all contractors. Only at this stage did all the parties agree to let the engineers
come together, without the presence of the commercial managers to assess liability issues, and
address the problem with the aid of an outside facilitator. They solved the problem in time for the
opening on schedule.

The key mistake in this project was separating the inseparable. The five organisations involved
had to work with each other, but were prevented from doing so effectively by the contract
structure. People protected their own positions, making little attempt to understand the needs of
their counterparts. There was fear and suspicion, a lot of blame and very little trust. Again, the six
key aspects were perceived differently by the cultures involved.

The third case, "An International Cocktail" (page 12, appendix), is an illustration of the results that
can be achieved when the issue of cultural differences is addressed at the start of a project. The
relevant issues were addressed in an open and timely manner and dealt with by the management
team and project members in both separate and joint sessions. These issues included prejudice,
leadership, teamwork, decision making competence, mutual responsibilities and commitment. By
making their differences in perception clear, the project participants were enabled to deal with
problems that arose on a day-to-day basis amongst each other.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 4

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Reasons for these Outcomes

Referring to the three original questions, we can summarise the answers before going on to look
for an alternative.

1. What happens to the people involved?

When conflicts arise, they feel something isn't right.
The others, whoever they are, are not functioning according to their rules (this works both ways).
Negative feelings build up: frustration, anger, "what's happening here?", etc.
They become aggressive, defensive, forceful. They are unable in this condition to function
effectively and, moreover, unable to cooperate.

This is also something more, something deeper. Something inside them says stop – we cannot
do this. This "something" is often extremely difficult to define, to formulate. And in the western
world we are accustomed to formulating our thoughts in words. However this is not always
possible. I experienced this during a workshop that I attended a while ago. A Japanese colleague
who had been living in California for sixteen years and speaks English absolutely fluently
suddenly stopped a session in which we were examining this issue. She said: "I have fully
adapted to American life. To others, I seem to be able to express myself fluently but I now realise
what has been pulling at my soul all of these years: I have retained by Japanese identity but am
being forced to function in an American way and set aside my natural way of doing things." She
had assimilated in order to survive. But the core had been contaminated. There is a Turkish
proverb which says, "My soul is being squeezed."

2. What is at the core of all these interactions?

It is the need for respect: the respect that an individual perceives others showing toward them.

And here lies one of the key differences between cultures. Respect means different things to
different peoples. It is one of the core values that nearly all people in the world grow up with. It
has become an intrinsic need in all of us.
So, when it is violated, not recognised, the wound may remain very deep. It is extremely difficult
to function when wounded. And to wound unintentionally is very easy because we all define
respect differently.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 5

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Outcomes when two or more definitions of respect collide.

Authority Individual

Germanic
Anglo-Saxon

Respect

Asian
Germanic
Italian
French

Seniority Status

The outcomes are:

• feelings of personal injury – unintentional, of course
• spiralling effect of disfunctionality
• disintegration of constructive communication
• losses, breakdown, etc.

Closely related to this is the question of what is important in business dealings. We can
reformulate the question: "What do I intrinsically feel is the right way to do things?"

Some further examples:

When German and American engineers get together to develop a new product or system, they
both are looking for quality. However, they have widely different concepts of what a "quality
product" is. Germans tend only to feel happy with an end product that cannot possibly break
down (the perfect solution). The American will tend to look for a workable solution that can be
improved as the need arises. This difference was illustrated by an American at a recent trade fair
who, while examining an excellent piece of German engineering, commented: "This thing is built
to work on the moon, but I only need it on earth." This may seem to be a relatively simple
example but it is based on deep-seated beliefs of what is right and, if the issue is not addressed
soon enough, can have disastrous and very expensive consequences, as can been by the
previous example of "prehistoric cooperation".

When British and German businesspeople get together, the basis for the business contact is
significantly different despite the fact that there are many ancient historical links between the two
countries. The British tend to be relationship oriented, the Germans task oriented. The British
have an intrinsic need to get to know their counterpart, to get a sense, a feel for the kind of

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 6

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

person they are dealing with. They need to feel comfortable with them. Only then can something
constructive develop in their business cooperation. German businesspeople, on the other hand
have an intrinsic need to get down to business quickly and use their time efficiently: as one
German manager formulated it: "You should spend time talking about the real points, not blah,
blah!" An illustration of how frustrating an extended small talk phase can be for a manager
accustomed to function in a task orientated way occurred during a training session a few years
ago. I was simulating an initial meeting session with a very successful senior manager of a
consumer goods company, who had never been abroad. After three minutes of "small talk", he
banged the table in frustration saying "I can't waste my time with this nonsense!" After I
suggested that he take next flight home, he understood. But he understood with discomfort,
because he was being asked to do something foreign to his nature.

A third example in the financial services sector, involving the acquisition of a Japanese company
JPF by an American company USF, illustrates even more vividly the disastrous consequences of
failing to take cultural differences into account when making decisions. In this case there has
been a direct negative outcome on the corporation's results. USF, having acquired JPF, a
company of 150 employees, is attempting to impose their values and modus operandi on JPF.
USF's perspective is that business results are the only important factor and that JPF staff can
simply be trained to take on USF's values. Some of JPF's senior executives apparently have had
few problems in making this transition but are meeting considerable resistance internally, from
their Japanese colleagues. Furthermore, the Japanese staff no longer trust their own senior
executives and have a complete lack of trust in USF. Why?

Because trust in Japan is based on integrating the interests of the individual within the interests of
the group to produce a harmonious environment consistent with a world evolving for the common
good of all.
Trust in the United States is based on a contractual relationship which will generally be
formulated to accomplish pre-defined business goals. USF take the view that individuals who
follow their line will survive and the rest are responsible for looking after themselves. The result:
Key players at JPF are resigning and the costs of the acquisition are mounting. Motivation is
extremely low.
The Americans have a conviction that they are doing the right thing while the Japanese feel
unable to function according to their natural laws.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 7

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Which leads to the third question:

3. What causes us to make these mistakes?
Why do we operate in this way?

Clearly, the answer is that the actors are convinced that they are doing things the right way. But
the real reason, I believe, that people behave the way they do is due to something far more
fundamental that cannot be put down to cultural differences alone. It is due to the way we look at
the world.
It is the tendency we have in the western world to separate, to look at the world as a collection of
separate parts. We separate the person from the tasks. We separate the people from each other
and their relationships. We separate the tasks from each other and their environment, and
simultaneously, we expect people to work together in teams. We could ask ourselves whether we
do this out of naivety. The answer must also be no. We have simply not been mentally
programmed in western cultures to take a holistic view of events. We tend to think in terms of
linear cause and effect chains. In the orient, people cannot work with fragmented parts. They can
only function within a holistic framework.

Natural physical laws, however, tell us that separation is an illusion: that everything is connected.
But we still separate, because it's natural for us. It is our way of coping with the challenges of the
world.

When a person takes on a task, they become part of the task and the task part of them.
When people come together on a project, the project becomes part of them and they become
part of the project. In addition, they automatically become part of each others' lives.
When we decide to implement a new project, be it an engineering development, administrative
system or a merger, we are creating a new environment. This new environment is the new reality
and the people involved are creating it. They are interconnected with each other and the
environment.
The process is evolutionary.
This is something far more fundamental than simply making business decisions, building a team
or creating a new product or system. It is creating a new reality for the people, the organisation or
organisations involved, for the societies involved. And it can only have a positive outcome if
people feel good about it.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 8

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Steps for implementing a new direction

To avoid these mistakes of the past, to be really successful, we need to make major adjustments
in the way business decisions are made.
This is the new direction mentioned earlier. If we do this, we can encourage real success in
international teams.

A New Direction for International Management Teams

FROM TO
separate parts holistic
separate units team
fire brigade prevention
collision coexistence collaboration

behavioural change attitude change

values attitudes behaviour knowledge

The charts on page 13 (appendix), which derive from Peter Senge's model of systems thinking
illustrate how this might look.

If we continue assume a static model without taking these systems into account, failure is pre-
programmed.
So what should we do concretely?
The natural answer, of course would be nothing. We should simply let things happen: a natural
process.
The realistic answer is that we need to do something because our business lives and systems
are organised around goals, deadlines, competition. We are subjected to external pressures
which we have to take into account to ensure our survival as profitable businesses and
encourage the developments we see as worthwhile.
The cultural differences in how we perceive these developments makes the issue even more
complex.
We, all of us involved in making critical decisions about people's lives, have to facilitate this
process of evolution.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 9

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions

Steps

1. Treat all processes as holistic and systemic, and develop an awareness for the fact of
inseparability amongst ourselves. Interrelationships thus become clear.
2. Before attempting to implement any change whatsoever, define the problem. Incorporate all
people involved during this stage. The cultural differences amongst the participants will come
out into the open and can be dealt with before any damage has been done to the
relationship(s). Relationships can actually be fostered and respect developed. In brief:
face the issues head on!
3. Plan projects and processes to include the task and the relationship interactions. As the
Chief Executive Officer of a large German corporation has said: "There are no technical
problems, there are only technical challenges and people problems."
4. Develop a process and holistic awareness among all participants in a project.
5. Move from static to dynamic planning models.
6. Instead of asking what we can learn about other cultures, ask: "What can we learn from other
cultures?"
7. Place people at the core of all decisions. After all, they have to implement them.

In far too many cases, cultural differences are a hindrance to success, but only because of the
way that they are addressed or ignored. An approach such as the one above would enable
cultural differences to become a resource. It would enable different strengths to be utilised in
getting closer to achieving any teams' full potential. Having said this, I personally do not believe
that it is even possible to define "full potential".

Professor Nancy Adler of McGill University, Montreal, has defined productivity in multicultural
groups like this:

Actual Potential Losses due to

Productivity = Productivity - faulty process

If we change the formula we get:

Potential Actual Avoidable

Productivity = Productivity + losses due to
faulty process

There are still a lot of boundaries to be pushed.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org 10

The Challenges of International Management Teams – How Different Cultures Affect Business Decisions
Appendix
Advanced Technology - Prehistoric Cooperation No Product (1)
A team of American and German development engineers was given the task of developing a multi-purpose
telecommunications unit for the executive market. The client was a large American corporation. The project team was
made up of engineers from the client (50%) and from a German sub-contractor (50%).

The project fell behind schedule very quickly and the cost estimates were revised upwards regularly. The challenges
included unforeseen technical problems which came to light during the testing of the chips as well as designing the
components so that they could be produced efficiently. Production had been planned in one of the German sub-
contractor's plants.

It did not prove possible to solve the quality problems to the satisfaction of both parties.

The Americans continuously accused the Germans of being sticklers for detail and unaware of the need to get the
product on the market more quickly.
The Germans accused the Americans of not being interested in manufacturing a product according to the quality
specifications that had been agreed upon.

The team communicated mostly via phone and weekly video-conferences. The quality of cooperation between the
two groups within the team declined continuously. Demands and counter-demands became the norm.

• What happened? z Why?

Advanced Technology - Prehistoric Cooperation No Product (2)

This case illustrates clearly what can happen when values clash and the participants in the process are unwilling or
unable to approach the issues.

The issues here include:

• the definition of "finished product" or "ready for • differences in communication styles and
market" interpretations
• the approach to solving technical problems • differences in approaches to dealing with negative
issues
An additional complicating issue is: z the power position of the American corporation.
Some of the key German values are quality, thoroughness, precision, efficiency.
These contrast with some American values: doing, fast progress, efficiency.
The main concern of the Americans was to launch the product on the market before their competitors. They therefore
concentrated on speed rather than meeting the quality specifications to 100 %, taking the attitude that problems
would be ironed out as they arose. The German engineers prided themselves on the quality of their work. It would be
acting against their natural instincts to release a product which they knew did not meet the quality specifications.
This is also connected to different approaches to problem solving. The Germans were accustomed to analysing the
individual sections of the unit to ensure that all possible weak links could be found. They would then reconstruct the
unit before running a test which they were sure would be positive. This was of course time consuming from the
perspective of the Americans, for whom the time to market argument was more significant. Their approach was to
locate the obvious problems, fix them and then retest the unit. If additional problems occurred later (which they did),
they would be solved at the time.
We have different concepts here of achievement and efficiency.
For the German engineers, achievement meant producing a unit which functioned precisely according to the
specifications. For the American engineers, it meant launching the product within the pre-set time frame.

For the German engineers, efficiency referred to the operation of the unit. They did not consider manpower costs to
be so significant. For the American engineers, efficiency was related to the costs and time involved in developing the
product. They did not consider the perfect functioning of the unit to be so significant.

As frustrations built up, each party became simultaneously more and more defensive and accusative. Documentation
which was not essential for the current stage of the project was being demanded, at times, in an attempt to provoke
the "others". Negative results were immediately seized upon by the Germans, which sent the Americans back on their
hind legs as accusations concerning their ability began flying (Germans being unaware of the reaction of the
Americans, who simply wanted to progress with the project, towards negativity). Necessary information was not being
exchanged because the Americans felt it was being demanded from them (misinterpreting German communication
style, while the Germans were unaware of how to communicate with the Americans in order to get cooperation) and
the Germans had the feeling that the Americans simply wanted to put pressure on them.
The fact that the main contractor in the project team was also the customer placed additional pressure on the
Germans. They were extremely concerned that the responsibility for quality problems would be transferred to them,
especially as they were to be responsible for production.

The project was never completed! The total loss was over $20 million.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org Tel: (49) 911 397702; E-mail: ericlynn@lct-consultants.org 11
The Challenges of International Management Teams – How Different Cultures Affect Business Decisions
Appendix
An International Cocktail (1)
A European engineering research project has been set up to find solutions to technical
compatibility problems affecting equipment throughout the continent. The project involves about 50
people from 12 organisations in four countries. These organisations include large corporations,
consultancies, research companies, government-owned public companies, universities. Some of the large
corporations are competitors. A significant proportion of the financing is from public funds. The
organisations and nationalities involved are German, Swiss (German), Italian (both North and South) and
British. All people involved have a good reputation in the industry. Some of them have limited or no
experience of working in international projects.
The project is divided up into six work groups each with a leader. Project members and group
leaders may be working in two or three work groups simultaneously. A significant proportion of the
contact is virtual.
The project working language is English. The majority of participants speak English as a foreign
language. Most speak it well. Some speak it very poorly. Even among those who speak it well, their
accents are not always easy to understand.

Nobody's time is completely dedicated to the project.

Each of the organisations involved views the priority of the project differently.
A progress and budget review of the project is due at the half-way stage (after 18 months).

The challenge Questions

To get the necessary commitment to the • What are the issues involved?
project and colleagues from all participants • Which issues need to be addressed?
right from the start • What can be done to get the project up and running?

An International Cocktail (2)

A new project will develop. The challenge can be redefined as ensuring that the new project
culture evolves positively and to ensure that all participants are aware of the process.
The issues involved here are leadership, commitment, working styles, communication styles,
responsibility, history and politics.
Political issues can only be dealt with at the management level and are not necessarily a cultural
issue. Project participants will usually be victims (positively or negatively) of these issues. They should
therefore be left out of the equation here.
Probably the most critical issue here is leadership. This covers the project manager as well as the
leaders of the six work groups. The six work group leaders cover all the nationalities in the project. Two of
them have no experience of leading international groups. Some have never had any leadership training.
Prior to the project kick-off meeting, it was therefore decided to hold a workshop with all work
group leaders. The issues of cultural differences in working styles, communication styles, expectations of
leaders and subordinates of each other, responsibility, the role of the leader, decision making,
independence, security, definitions of cooperation were all experienced by the participants and confronted
explicitly.
The kick-off meeting was designed as a combination of technical presentations and meetings,
social events and workshops to address cultural differences in working styles.
The cultural workshops covered the issues of leadership, commitment, working styles,
communication styles, responsibility, respect and history (which included work on prejudice and
stereotypes) in an experiential manner. The results were at the same time surprising, shocking and
amusing for the participants. The atmosphere enabled them begin overcoming pre-conceived ideas and
form relationships with each other. The culture of understanding, acceptance of differences, cooperation
and joint responsibility was beginning to form.
The technical meetings achieved results. Concrete arrangements for the next stages of the
project were made.
The kick-off concluded with every individuals assessment of the current status of progress to give
an overall picture of how the project stood.
At the time of writing, the project is still in progress and results are more or less in line with
deadlines and expectations.

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org Tel: (49) 911 397702; E-mail: ericlynn@lct-consultants.org 12
 The Challenges of International Management Teams – How Different Cultures Affect Business Decisions
Appendix
New Directions
separate parts holistic
Task A

Task A → Goal A A

Task C
Task B → Goal B B
Task B
Task C → Goal C C

Task D

individual units teams

Person 1

Task A

Person 2
Person 4

Task B Task C

Person 5
Person 3

Integrated Corporation / Project

Person 1 CORPORATION
PROJECT Task A

Person 1
Person 2
Task B
PEOPLE TASK
Task A
PROFIT PROFIT

Person 2

Task B

Person 3

© 1998 Eric Lynn, LCT Consultants, Nürnberg, Germany. www.lct-consultants.org Tel: (49) 911 397702; E-mail: ericlynn@lct-consultants.org 13