The 10 Most Costly Sins When Working Across Borders

Culture clashes can lead to serious strategic fiascos, as when Microsoft wanted to launch Windows95 in China. Here are the ten most costly sins committed by ethnocentric managers. 



In The 19th-century Austrian Army, officers expressed their familiarity by addressing each other with the familiar Du form of “you” used elsewhere only for friends or servants, rather than the more formal Sie normally used in German speaking society. In World War I, when Austria allied itself with Germany, German officers, addressed by their Austrian peers with the intimate Du, felt themselves being insulted or, worse, propositioned.

Such cultural misunderstandings continue to this day. The Swedish manufacturer Electrolux was surprised to find that its vacuum cleaner was not selling in the United States. Why? Well, the company had marketed the vacuum with the slogan “Nothing sucks like Electrolux.” Coors translated its slogan “Turn it loose” into Spanish, where it was read as something like “suffer from diarrhea;” Clairol introduced the “Mist Stick,” a curling iron, into the German market, only to discover that “mist” is slang for manure in German: When Colgate introduced its toothpaste “Cue” in France, it insulted consumers because “Cue” is a French porn magazine.

Other cross-cultural mistakes are less funny and more expensive, sometimes running into billions of dollars – from lawsuits to government sanctions, from post-merger pains to losses in shareholder value. In an interconnected but also fragmented world, firms and managers that lack multicultural competencies are falling behind.

Motorola’s flameout was one of the more spectacular failures. The company deployed its Iridium global satellite system to offer truly global telephone service. When Iridium was shut down, its sunk cost to Motorola was $3.5 billion. But that is just the tip of the iceberg. Here are the ten most costly sins companies commit when doing business in other cultures.

Sin #1: You think the world plays by your rules. Too often, people dealing with other cultures are blind to their own assumptions. GE has one of the best records of thriving in other cultures, but its effort to merge with Honeywell failed because Jack Welch and his colleagues did not fully comprehend the EU's anti-collusion laws, which have a lower threshold for monopolies than their equivalent in the US. This allowed the EU Competition Commission to veto a merger that threatened European state-owned industries.

Sin #2: You do what you always did in the past. Strategies that work in one context don't always work in another. When 250 people in Belgium reported nausea, diarrhea and other symptoms from drinking Coca-Cola in the summer of 1999, the company responded with characteristic American-style marketing optimism of the "Don't worry, be happy" variety. But European consumers were not happy. They felt left in the dark, and European governments simply ordered Coke off the shelves. Coke lost $2 billion in sales that summer, and its share value plunged along with its good image. The company has learned from that calamity. It recently collaborated with the French government and voluntarily recalled bottles in danger of contamination. More importantly, Coke now aspires to respect diversity and local leaders. "You can't apply a global standard of measurement to consumers," Coke's chairman and CEO Douglas Daft says, "because it reduces everything to the lowest common denominator."

Sin #3: You take English for granted. When the US-firm AT&T and the Italian firm Olivetti formed one of the first international corporate partnerships in the 1980s, AT&T did not have any high level managers who spoke Italian. Olivetti's managers were expected to communicate in English. The two companies simply could not communicate efficiently enough to overcome their other cultural differences and soon broke off the partnership. Had AT&T striven to understand the Italian company, it might have overcome these problems - or avoided the alliance altogether. "Of course managers can communicate in English," says Porsche's chairman Wendelin Wiedeking. "But that is not the case on all work levels. It gets quite difficult when it's about details, for example engine parts. But precisely in these matters, workers must understand each other perfectly." Remember that many international colleagues are doing you a favor when they speak English (if that is your native language). They may not express themselves as clearly in English as they would in their language, so you should make an effort to speak a bit of theirs. By knowing even a few words, you show respect for their culture and take a step towards understanding how they tick.



Sin #4: You don't respect the cultural pathways for making things happen. When Disney first opened its EuroDisney theme park near Paris, the American management team enraged the public with its hiring practices and decision to serve McDonald's-style food and—worst of all—no wine, an unacceptable fauxpas in the eyes of French customers. After a disastrous start, EuroDisney became profitable only after a new (French) company president took over. The lesson: respect local practices in the target culture, even if they seem inefficient or impersonal.

Sin #5: You don't stand in their shoes. If you fail to understand other people's goals, concerns, and fears, you will be continuously and unpleasantly surprised by how they act. The consequences are not just lost profits. Al Qaeda's planning for the September 11th terrorist attacks went unnoticed by US intelligence analysts who could not imagine the way Islamic terrorists saw the world. To be fair, it's not easy. "This is the toughest of all intelligence targets," said Lee Hamilton, the longtime chairman of House committees on intelligence and international relations and a member of the United States Commission on National Security. "You have to penetrate their language, their culture." So understanding the other side is not about being nice or polite; it is a strategic necessity.



Sin #6: You don't invest in relationships. In much of the world, you need to establish a strong relationship before getting down to business. In Japan, it can take months to gain the trust necessary for a successful joint venture, and business relationships are often cemented over drinks. But it's not just Asia. Most traditional societies require a personal relationship for business, and even in much of Europe, relationship is at least as important as expertise. But in the United States, a very large country with strong individualism, high mobility and short-term relationships, the court system, including the right to sue, often substitutes for deep relationships.

Sin #7: You jump from vision to action. In the United States, Nike's credo "Just Do It" reigns supreme. But "just doing it" can be disastrous. Even if you have a great idea, people in many cultures want to hear how you will go about achieving it before they will do anything. You can't skip the strategy, the How-to. One American banker wanted to buy a private bank in Europe. When he arrived for the first meeting with the bank's owners, he said that his train was leaving in an hour and asked that they get down to business. The owners just smiled politely and wished him a safe journey. Naturally, it never came to a transaction.

Sin #8: You take the village by storm. Enter a new culture or situation slowly. First impressions matter greatly. If you come onto the scene without knowing the culture and make a big show of yourself and your ideas, before you know it, it's too late, and people will not be open to you. Few companies have the prestige and self-confidence that the German firm Daimler-Benz had when it merged with the US firm Chrysler Motors. Although touting DaimlerChrysler as a "merger of equals," chairman Jürgen Schrempp pushed all but two Americans from the management board of the combined company and installed his trusted German aide Dieter Zesche at the helm of Chrysler. DaimlerChrysler paid dearly for this new brand of German imperialism: the company's revenue fell by 13 percent and its operating profit by some 75 percent the year after the merger, forcing it to eliminate 26,000 jobs and suffer major brain drain from the loss of some of Chrysler's most creative talent. Even today, German headquarters enjoys little trust in the US part of its company. A request by Chrysler executives to use a Mercedes engine in a new sports car was rebuffed for months before finally being accepted with major restrictions. Though Chrysler remains a powerful brand and has regained some of its market share, it still lacks the dynamic character it had before the merger.

Sin #9: You forget that your advice is noise in their ears. . Most people in most places have a good reason, at least subjectively, for doing what they do. Barging in and making changes will meet with resistance unless you can create a demand for your intervention. Our CEO Thomas D. Zweifel recalls, "When I was based in India, it took me months to realize that I was dispensing unsolicited advice. It dawned upon me that telling people what to do made no difference; I had not come to give answers but to ask questions and to listen."



Sin #10: You select the wrong people. "We don't do a very good job of selecting people for foreign postings," concedes Sir Brian Pitman, chairman of Lloyds Group PLC. The British bank sent a brilliant young executive to Argentina. "He only lasted one week," Pitman said. "He just didn't fit in." All too often, senior managers move executives to a target country based on their technical skills alone, rather than also on their cross-cultural expertise; or they get the mix of expats and local leaders wrong.

There are success stories worth emulating. Motorola learned from its Iridium fiasco: the company now uses a workplace simulation program, where trainees are thrown into simulated cross-cultural challenges, to identify and evaluate its international managers. So does Danone. General Electric has learned that it pays to train its managers in global competencies. The iconic former chairman of GE Jack Welch said a few years back: "We have to send our best and brightest overseas and make sure they have the training that will allow them to be the global leaders" GE needs in the future. GE backs these words with action. New hires at GE's Crotonville training center are given crash courses in global issues. Senior executives are routinely sent on 4-week trips to foreign markets, then returned to Crotonville to brief top executives. The intention is to build what Welch calls "a multipolar and multicultural company." GE Capital, which has integrated over 100 mergers successfully, sees integration management as a separate business function, just like operations, marketing or finance. The company seeks to address cultural issues head-on. GE Capital uses "Cultural Workouts" managed by outside facilitators to speed up integration and foster understanding of the partner. When you realize that 25% of managers leave their company within a year of returning from abroad at a cost to their companies of about $1 million per employee, GE's policies make sense. These companies recognize the power of global competency, but many others do not - yet. Few areas in today's business environment offer a greater return on investment. Today's leading managers know that for a minimal input, companies can make or save enormous amounts of money.

All the best,

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Action

Take a moment to think about a chronic issue "large or small" in your organization.

• What chronic problems are you experiencing in your dealings with colleagues from a different background? 
• What are the consequences? What are the costs?
• Which of the 10 sins above might play a role? Where did things begin to go wrong?
• What is missing?
• What is the next step in resolving the issue?