Issue 15 winter 08

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PDF Downloads This article All articles in issue 015 Create 'My eIQ' Email send via email Contact EIRMA send us a message Diagrams Creating value in diverse teams – the MBI approach

Max von Zedtwitz, vice president of consultancy PRTM

Chris Shilling, innovation and knowledge-management consultancy NewHow KnowHow

Links Andrea Cuomo Why multinationals struggle to manage talent, Matthew Guthridge and Asmus B Komm, The McKinsey Quarterly, May 2008 Creating Value with Diverse Teams in Global Management, Joseph J DiStefano, Martha maznevski, Organisational Dynamics, Vol 29, No.1, pp 45-62, 2000Joseph DiStefano Martha Maznevski BekaertNewHow KnowHow The Chinese concept of face: a perspective for business communicators Wikipedia on ‘loss of face’The American Forum for Global Education on the five relationships in Confucianism EIRMA meeting about on-shoring and off-shoring R&D Max von Zedtwitz Goodbaby Cultural Orientations Framework questionnaire Akzo Nobel Car RefinishesKnowledge on the Move

There’s something about having a workforce drawn from multiple cultures that just seems to make business sense. Surely, the argument goes, companies will gain competitive advantage from being able to draw on the diverse ideas, experiences, thinking styles and knowledge of a multicultural workforce? And won’t this be doubly so if the cultures upon which it draws spring not just from geography but from a variety of job functions (think marketing vs R&D), partner organisations, academic, regulatory and government relations, and markets?

Management consultancy McKinsey seems to think so. Its recent survey of multinationals shows a correlation (but not necessarily a causal link) between a company’s financial performance, as measured by profit per employee, and its ability to manage talent globally. The correlation with factors such as being able to manage cultural diversity, increasing the mobility of global leaders, and having globally consistent talent-evaluation processes was particularly strong. Companies achieving scores in the top third on any of these three factors had a 70 percent chance of also being among the top third in terms of financial performance.

Cultural differentiation is fundamental because without it you’re losing a lot of value. What is scary is when everyone sees everything the same way

Diversity is also important for its ability to reveal hidden opportunities. According to Andrea Cuomo, executive vice president and general manager for sales and marketing in Europe at Franco-Italian semiconductor company STMicroelectronics: “Cultural differentiation is fundamental because without it you’re losing a lot of value. What is scary is when everyone sees everything the same way. It gives comfort, but doesn’t mean people understand the complexity of the world today. To understand that, you need to be open to weak signals and different points of view.”

So does diversity pay and is it good? Not necessarily. It turns out that it is much more difficult to gain advantage from running a multicultural organisation than you might think. In a journal article on creating value with diverse teams published in 2000, Joseph DiStefano, professor emeritus at Swiss business school IMD and Martha Maznevski, also a professor at IMD, suggested that the thing most likely to hinder effective teamwork is cultural differences. Nor were they persuaded that diverse teams would automatically outperform homogenous ones.

Why is this? Culture, among other things, defines the assumptions and expected behaviours of a group of people as they interact. These assumptions run very deep, so people from different cultures will join a team with widely varying ideas about how teams work, what sorts of behaviour are appropriate, how discussions should be run and conclusions drawn. Unless these issues are well understood and actively managed, cultural diversity can destroy, rather than enhance, a team’s efficiency.

Culture wars?

Willem Dekeyser, a senior project manager in the central R&D centre at Belgian tyre cord maker Bekaert, has also worked in Spain and the US, and is in now charge of a project focusing on the Chinese market.

The major challenge today is dealing with multicultural teams. It’s the end of copy-and-paste management

“The major challenge in the job today is dealing with multicultural teams,” he said. “It’s the end of copy-and-paste management and means a great deal of increasing complexity.”

DiStefano and Maznevski define three types of multicultural team: destroyers, equalisers and creators. Teams in the first category lack trust, cling to stereotypes, keep rather than share information and try to undermine each other. All the value that could emerge from a team with multiple outlooks is dissipated, and the team is likely to perform badly.

Equalising teams work so hard to form a common culture that they too suppress the value of employing people from multiple backgrounds. As far as these teams are concerned their ideal output is a compromise, rather than the best of all the inputs from all the team members. Again, the opportunity to gain from multiple outlooks is wasted. Creator teams, on the other hand, explicitly recognise each other’s differences and find ways to make the most of all the insights team members can offer.

Diversity

So how do you build creator teams? One of the challenges is recognising just how many forms of cultural diversity there are. Take the well-worn issue of collaboration between industry and academia, in which the two sides have different motivations, measures of success and attitudes.

“With academics, it is not only a matter of culture but also of function,” said Cuomo. “Some organisations are measured on outputs and some on inputs. For those organisations, it can be more important to get the right inputs in terms of people and funding” than to deliver an output.

Chris Shilling of innovation and knowledge-management consultancy NewHow KnowHow, and formerly manager of the business innovation unit at pharmaceuticals company Pfizer, points out that cultures vary even within academia: “There are huge differences between the famous universities and the others. One project we did with [a famous UK university] was a pain because the technology transfer service negotiated very hard for fees and intellectual property rights. But working with the University of Surrey was great because we negotiated a sensible fee and then what they wanted was for us to take an interest in what they were doing.”

Shilling says companies also need to understand that the organisations that regulate their industries have varying cultures. In the emotionally charged health sector, for example, those who regulate the industry often take an adversarial role, acting as auditors and inquisitors. In the nuclear industry, which cannot afford such tensions, such regulators act more as a partner than an inquisitor.

It is also important to understand how people’s jobs shape their outlooks. Shilling says that in pharmaceutical R&D, there’s a difference in people’s outlooks, approaches to problem solving and thinking styles between, for example, biologists, chemists and medics. “Depending on who leads the team, especially in development, you can have people talking for hours and not really understanding each other.”

Geography

Any discussion of national cultures runs the risk of descending into stereotypes. That said, being aware of the stereotypes and testing them against your own experience is worthwhile: it reminds you that people often work through a fog of assumptions.

Shilling’s experience at Pfizer taught him that it is important to spend time building cross-cultural links so that everyone understands that, for example, when an Englishman says something he usually means exactly the opposite.

He has also faced cultural issues in something as apparently straightforward as English people working with Americans “because the American approach is to try something to see if it works and if it doesn’t, to try something else, while the English [and perhaps European] approach is to do months of analysis before deciding what to do.”

Dekeyser has also had issues in working with Americans, because of diverging interpretations of a common language: “You need to be careful. You really need to be checking whether everyone has understood what you’ve said.”

Guilt and shame

To make a brutal simplification, some cultures control people through guilt and others through shame. Many Western cultures use guilt – ‘I have broken society’s rules and I feel bad about it’ – whereas many Asian cultures use shame – ‘I have broken society’s rules and people think less of me’. Saving ‘face’, which in China can mean both the recognition that a person gets from being successful and society’s view of their moral character, is vital. Confucian ideas that there are five forms of relationship between people (ruler and subject, father and son, elder brother and younger brother, husband and wife, friend and friend), each of which has a dominant and a subordinate partner, are also important. Combine the two and you get societies that are strongly hierarchical and dedicated to the preservation of face.

What does this mean in practice?

Cuomo says that working in such cultures takes care: “Some are very hierarchical and if you treat people in a certain way they can lose face. Somehow Italians can ‘wash their faces’, take the loss of status and move on, but if the Chinese lose face they become unable to function within their team.”

Max von Zedtwitz, vice president of consultancy PRTM and a professor at Tsinghua University, says that Confucian ideas of power in relationships “insist that a junior reports to a senior and that the senior is always right. This adds to the complexity of relationships, and not always in a positive way.”

Shilling has found that in Japan, deference is always shown to the most senior person in the room, which can make it difficult to get everyone to express an opinion. “To make those teams work we needed to get a Japanese person who had worked in a Western culture to lead them.”

This deference and desire to preserve face can also make it difficult to have very direct conversations about issues, as many Western cultures allow and expect.

“The Chinese won’t necessarily feed back that something is going wrong,” said von Zedtwitz.

Relationships

The other aspect of working with these cultures is the importance of building relationships. Dekeyser says: “Networking relationships are very important to getting things done. In India and China I always take a high-ranking Indian or Chinese person with me to the first meeting with an organisation with which I want to work.

“In India we have tried to set up a network with the academic world so that we can spend a lot of time getting to know each other and then we can start working together. We’ve tried to formalise this [approach to] networking, so that when I go to a Chinese plant I organise meetings with people that are not directly involved with our current project, because sooner or later they may have an impact.”

Dekeyser has found issues of hierarchy and face in his work in India as well.

“In India they have a very democratic way of tackling a problem,” he said. “A manager won’t take the next step until all his team members agree. In Belgium if the team majority agrees, the team leader can take a decision and move on.”

While this can be frustrating, there is an argument for saying that complex multidisciplinary problems might be best approached through this kind of rigorous, multifaceted analysis.

“In India they claim the final result will be better using their method,” said Dekeyser. “But it’s not by making sure everyone agrees that you finally get the best answer.”

China in Europe

“We can look at the Japanese 20 years ago as a model,” said von Zedtwitz. “I think the Chinese are in a better position to capitalise on overseas R&D than Japan because there are more Chinese populations overseas. Chinese companies will be able to choose a local Western R&D director or a local Chinese R&D director. Think of the scientific Chinatowns that exist at MIT, Imperial College and the Technical University of Eindhoven. Graduates from these places may not be equipped to be R&D directors now, but they will grow up.”

What’s interesting is whether these companies will repeat the mistakes of Western companies, taking a colonial approach to overseas ventures by sending people from headquarters to show the locals how it’s done.

“It is particularly important for Chinese companies to be international, rather than sending their own people from their headquarters to the West,” he added. “It’s all question of how much they trust other cultures and are prepared to work with them.

“It may be natural for a country to move through these stages as it opens up. Chinese industry’s moves overseas are at an extremely early stage. But so far they seem to be following our path, similar to what we’ve done in terms of colonialism.”

One company that is avoiding this approach is Chinese baby carriages maker Goodbaby, which has annual revenues of €540m, has grown 30% a year for the past four years and has a 43.5% share of the market for pushchairs in China, Europe and the US. It has opened up R&D facilities in Europe, to localise its products, develop market knowledge, attract talent and avoid the ‘equalisation’ that has happened within its Chinese R&D facilities.

“Although we have people from the US, Italy and Japan working in China, when they have been there for a while the kind of products they design are just like Chinese products,” said Andy Zhu, group vice president, quality and manufacturing support at Goodbaby, during an EIRMA meeting. “From day one we never thought of moving someone from China to lead [the European operation].”

Instead the company has hired a European R&D head with long experience in the industry, and told him to run the R&D centre as if it were his own business.

Things to avoid

So what should industrialists do to make the most of multicultural teams? One of the most important things you can do is to trust them.

Don’t insist on headquarters controlling things

“Don’t insist on headquarters controlling things. It’s a natural urge that can lead to failure,” said von Zedtwitz. “It’s only during the second to fifth years of the establishment of a new R&D centre that an R&D organisation will work out what it can do well. Requests from headquarters tend to distract people from what they are doing and will lead to the dismissal of good people, the loss of others and perhaps the loss of the head of R&D.”

Process issues can also cause unnecessary friction.

“There’s an argument that the things that the headquarters would like its R&D centres to do, for example getting connected to the IT systems used in the rest of the organisation, may be inappropriate for a Chinese organisation at that stage of its development,” said von Zedtwitz. “You have to be prepared for people to say they don’t want to do something because it doesn’t feel right for China.

“Research and development evaluation methods may not be appropriate for Chinese work [at first],” he added. “There are frameworks for an R&D capability to grow into, which are as valid in the West as in China.”

McKinsey’s research certainly suggests that mature organisations flourish globally if they can evaluate talent consistently world-wide, in part because this aids mobility.

You can go too far in trying to homogenise a global culture. According to von Zedtwitz, a Californian computer maker designed its Beijing operation to look like a Silicon Valley R&D centre, using corporate colours and flying furniture in from the US. But there’s a fine line here. Staff working in China don’t want to feel they’re being used as cheap labour compared to colleagues sitting in the same chairs working on the same problems elsewhere in the world. R&D managers need to present Chinese labs as offering a unique opportunity, such as being a stepping stone to working in the West, or focusing on adapting Western science to Chinese culture.

Things to do

Cuomo says that the key to managing multicultural teams is to know people, understand what they’re doing and their environment.

“You need to understand the characteristics of people. Once you have those characteristics then you can start building, but you need a balance of everything within a team including analysis, synthesis, energy, determination and the ability to delegate. We also need to understand that in some places culture is key.”

von Zedtwitz says this takes rare skills.

The skills required to manoeuvre through these cultural sensitivities go beyond those demanded of most R&D directors

“The skills required to manoeuvre through these cultural sensitivities go beyond those demanded of most R&D directors. I’m not sure whether you can prepare for this challenge. It requires an education that is difficult to find, especially if you need both the R&D skills and the entrepreneurial skills to create something new.

“Headquarters organisations also need to recognise that as the local R&D effort evolves, the skill set of the R&D director will have to change as well, so the headquarters needs to know when to replace the R&D director.

“In the start-up phase the director needs the independence to create something out of nothing. In the second phase the director needs to facilitate the local staff to create an identity for their work. In the third phase the R&D director needs to reinforce connections between the operation and the product divisions.

“Ideally an R&D director has all three of those skills.”

Dekeyser agrees that creating an overseas R&D facility is a staged process.

“You need enough expatriates to start with and then you can transfer management to the local people,” he said. “In our Chinese operations, for the first five years we had Belgian managers in the plants and after five to ten years we transferred the plant management and sometimes even the business unit management to the local people.”

This is when you start getting the true value of working with another culture.

“If you want to be successful in China you need to give the Chinese people enough authority to go their own way. We had many plans but if we had done them with a pure Belgian management style we would not have got as far as we have. As a Belgian manager you need to trust the Chinese people to do it better their own way, and they definitely can. Giving certain authority to the local people really pays back.”

Tools

The key to working successfully with other cultures is to understand the cultural differences and make the most of them, rather than trying to smooth them away. DiStefano and Maznevski at IMD have defined a process for doing this, which they describe in three steps: mapping, bridging and integrating.

In the mapping phase, a multicultural team defines which characteristics (eg attitudes to authority, preferred communications style, etc) will have the greatest impact on its effectiveness. Each member then describes their own perspectives on each of these characteristics, so that everyone knows a little, at least, of how their colleagues think.

Fortunately there is an online tool, known as the Cultural Orientations Framework questionnaire, which provides a starting point for mapping exercises. Many users find the most revealing thing about its use in a team is their own responses. Putting the responses together exposes how outlooks vary, so that teams can be aware of the potential for misunderstandings and the opportunities to develop multiple approaches.

In the bridging phase, team members are encouraged to find ways of communicating effectively with people from different cultures. The first step is to develop the confidence to do so, which is often strengthened by the information provided by mapping process. The second step is for individuals to use that information to adapt their communications styles to match the cultural background of those to whom they are speaking (a crude example – don’t tell a Chinese person they are wrong in front of others). The third step in bridging is to use this new-found ability to communicate to develop a way for the team to work together effectively. For example, they could make an explicit decision about what kind of team they want to be, or the purpose of their meetings – will they be to solve problems, or simply to share information?

In the integration phase, the mutual understanding developed during mapping is combined with the communication skills developed during bridging and put to work. This process has three steps: managing participation, resolving disagreements and building on ideas. Each step is enabled by the mapping and bridging that has gone before: if you know an apparent conflict between team members is more to do with communications styles than substance, it is easier to turn it into a positive. The integration phase is also where a good manager can find ways to gather input from everyone, no matter their cultural background and communications style, so the team can build on each other’s ideas.

This is a brief summary of DiStefano and Maznevski’s strategy, and is by no means the only recipe for successful multicultural management. But it does show that techniques for tackling this issue are available to those who need to do more than just try their best and hope it works.

Conclusions

Globalisation, open innovation and the increasingly multidisciplinary nature of R&D mean it is increasingly important to work well with different cultures. The key is to try to understand other cultures and how they affect the way people think and act, respect those differences and find ways to use them to advantage.

There are other things you can do.

STMicroelectronics, for example, was formed from the merger of a French and an Italian semiconductor company. According to Cuomo, Pasquale Pistorio, the merged company’s first CEO, avoided a national split in the company by organising the various sites it inherited by business unit, “so their allegiance became to the business unit rather than to France or Italy.”

Peter JT van der Donk, knowledge manager at Akzo Nobel Car Refinishes, used a number of techniques to develop bonds between the company and the local workforce when it opened a site in India. This improved relations, reduced staff turnover and so helped the company protect its intellectual property in the region. He described his approach at a recent EIRMA meeting about knowledge on the move.

The underlying key to successfully managing multicultural teams is to trust and respect that other cultures have important things to offer.

“It’s important to instil local teams with the idea that they can make a difference, to create something that adds value to the parent company, to the Chinese organisation and to themselves,” said von Zedtwitz. “And don’t ignore the fact that one of the benefits of working with another culture is finding that they have different ways of running things,” which can be more appropriate for their circumstances and as successful as your own approaches in their natural context.

[There’ll be more on the management of multicultural teams at an EIRMA meeting planned for November 2009]

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