Cross-cultural training often focuses on those undertaking international assignments, rather than on senior decision-makers.
Dr Barbara Gibson, a consultant and lecturer in intercultural communication and global business, shares research findings she presented at this year’s EuRA Congress, arguing that failure to address intercultural competence at CEO level can hinder organisations from achieving strategic objectives in non-domestic markets.
In the increasingly global world of business, more and more companies of every size are doing business beyond their domestic borders. Unlike in the 20th century, when international business was the realm of the mega-corporation, and companies tended to progress slowly through identifiable stages of domestic to international to multinational to transnational, today many companies are global from start-up, and many global players are small and medium enterprises.
For smaller companies, the percentage of company resources focused on international markets means the stakes are higher. Even for the large, well-established multinationals, increased globalisation and worldwide competition have added pressure to be as successful outside their domestic markets as they are at home. But companies both large and small still often encounter cultural barriers that result in lost contracts, failed joint ventures, disappointing performance, regulatory and legal difficulties, and other challenges.
With a background that includes more than 25 years in corporate communication and business strategy, I had observed at first hand how many companies – including large global players – were often not achieving objectives outside their domestic markets. I often saw what I felt was a lack of intercultural competence at the top of the organisation. I had begun to suspect that ‘ethnocentricity rolls downhill’, and I wanted to find a way to help companies achieve success globally. So I decided to undertake a PhD in intercultural communication, focusing my research on the intercultural competencies needed by global CEOs.
What I found was that few studies actually examined the top level of management, leaving a gap in understanding which intercultural competencies are needed at the strategic level, where decision-making that determines the company’s success or failure in non-domestic markets takes place. Little is known about CEOs’ own perceptions regarding cultural challenges in their day-to-day jobs, or about their own capabilities in dealing with them.
The purpose of my study was to gain insights into the strategic-level intercultural challenges faced by companies doing business internationally, and identify the competencies needed by CEOs, in order to help companies to overcome cultural barriers to achieving their strategic objectives.
In total, I interviewed 28 CEOs of businesses operating in a global context. Companies represented ranged in size from fewer than ten employees to more than 200,000. Those interviews generated approximately 24 total hours of digital audio recordings, which were transcribed verbatim, resulting in more than 250,000 words of textual data available for analysis.
Areas of business impact
My first research question focused on whether the intercultural competence of the CEO has an impact on their success in achieving business objectives. The interview data was analysed to examine where, if at all, culture comes into play at CEO level. The findings clearly indicated that cultural challenges impact the CEOs in the study and that the CEOs’ intercultural competencies do have an impact on their ability to achieve their objectives in a number of areas, the top five being managing their top teams, conflict/negotiation, decision-making, hiring, and ethical issues.
Five key intercultural competencies
Based on those identified areas of business impact, I analysed which intercultural competencies are most likely to contribute to success or failure. In total, the data revealed 351 instances of competencies evident or lacking across all 28 interviews.
The findings identified five key intercultural competencies needed at the CEO level.
- Cultural self-awareness, defined as an awareness of one’s own cultural influences, tendencies and biases, and awareness of how one’s own culture may be perceived by members of a different culture.
- Cultural sensory perception, defined as the ability to recognise when cultural differences are in play, utilising a range of senses to spot verbal and non-verbal cues. (Although this competency is frequently referred to as ‘intercultural sensitivity’ in the literature, that term is also frequently misinterpreted as something akin to political correctness, so I coined this new term to better describe the sensing nature of this competency).
- Open-mindedness, defined as the ability to suspend judgement based on one’s own cultural biases and accept that other ways of thinking and behaving may be just as valid.
- Global perspective, defined as viewing the business from a transnational perspective, rather than as domestic first, rest of world second.
- Adaptability, defined as the ability to change one’s behaviour, communication style or business strategy as needed to fit the circumstances.
Analysis also found associations between specific competencies and the identified areas of business impact, providing possible insights into which competencies may be most critical, depending on the current strategies, challenges, and stage of business of the company.
By far the most-referenced source of culture-related challenge for the CEOs in the study was that of managing and motivating their culturally diverse top management teams. They experience problems building trust and loyalty cross-culturally, and motivating team members from other cultures with different value systems from their own. They encounter difficulties gaining the feedback needed to make sound decisions due to cultural differences in communication style, and at times they are tripped up by cultural differences in specific practices or attitudes.
The competencies most associated with the impact area of managing in the data were cultural sensory perception and adaptability. Those who are successful seem to rely more on their ability to sense that something is not working as intended, paying close attention to both verbal and non-verbal signals. Once they sense a problem, they can gather more culture-specific information and adapt their behaviour or strategy.
The findings revealed that culture impacts CEO success in dealing with conflicts, and in negotiating. Although not an everyday challenge, the narratives regarding this area of business impact often revealed incidents where the consequence of not understanding the cultural issues at play was complete failure (that is, the negotiation ended, the deal was lost). Therefore, where the CEO is involved in intercultural negotiation, either on a frequent basis or in areas of high strategic importance, this impact area becomes more important. Cultural sensory perception appears to be the most critical competency in this area, to avoid abrupt failures that are the result of being blindsided by cultural differences.
The competencies associated in the data with decision-making include cultural sensory perception (the most frequently associated), adaptability, global perspective and open-mindedness. Issues raised were not solely around whether or not decisions made were the ‘right’ ones, but also around the CEO’s ability to adapt to culturally-different decision-making styles, particularly when the CEO is the cultural outsider compared with the majority of the top management team and employees.
Hiring the right people for key roles in foreign markets, while not an everyday occurrence, is critical to a company’s success. As one CEO in the pilot study explained, the inability to hire the right people in foreign countries is one of her company’s greatest barriers to growth. While several competencies were associated with this impact area in the data, the highest association was with cultural self-awareness, particularly the ability to recognise one’s own cultural biases.
The competencies most associated with dealing with ethical issues were cultural sensory perception, open-mindedness and adaptability, and it seems that all three are required in this area, in this order. Without the ability to recognise that cultural differences are in play and the ability to suspend judgement, one is not able to adapt. While this interplay is probably present in other areas to some extent, it seems particularly strong in this impact area, due to deeply held beliefs and values.
The study has provided a clear indication that CEOs working in a global business environment do perceive that cultural challenges impact their success in a number of strategic areas, and that specific intercultural competencies are needed. This has implications not only for current CEOs, but also for boards of directors and others involved in CEO selection and succession planning, and for HR and communication professionals responsible for executive development.
For those working in the relocation field, perhaps the most notable findings from the study are those related to how intercultural competencies are developed. The most frequently cited source of learning by the CEOs was living and working abroad, with several noting that it was essential to avoid living in an ‘expat bubble’.
Development appears to come frequently from informal relationships, and from the opportunity for mentoring moments as failures occur. This would indicate the need to move away from one-shot training and pre-move orientation toward programmes that provide ongoing support throughout an overseas assignment, and possibly to move away from expat enclaves toward full cultural immersion.
For an extended version of this article, see the Summer 2015 issue of our Europe digital magazine, out July
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This article was originally posted on the Relocate Global website and can be viewed here.