Can leaders be successful leading business ventures in cultures outside of their own without understanding those novel cultures? If recent research and news accounts are correct, the answer is no. A conservative estimate suggests that 70% of global business ventures fail because of mismanagement of cultural differences.1 In this article, we address the question of intercultural leadership competence and how to build it. Based on original research conducted with 30 intercultural experts, we developed and tested a leadership preparation model we call GeoleadershipTM. This model does not suggest a blanket approach to leadership preparation approaches. Rather, it addresses missing aspects of culturally biased approaches. The remainder of the article describes the typical problems inherent in intercultural business contexts, presents the GeoleadershipTM Model components, and then applies the model to a specific case study in a global business.
The Problem of Culture
Whether or not we desire to, most adults act from a cultural bias. Culture influences, if not controls, our lives. Culture informs our religious/spiritual beliefs, our ways of eating, our manner of dress, and how we view the world. Our own cultures become so ingrained and second nature that they feel quite natural. When we put ourselves in another culture, we can quickly encounter customs, beliefs, and laws that feel quite unnatural. Therein lies the dilemma for business leaders who desire to conduct business in a culture outside their own. Leading a business venture in another country across national and international boundaries can be daunting. As recently as 2004, the world consisted of at least 200 nations and over 5000 ethnic groups. In many countries, the population is segmented into a dominant majority with one or more ethnic minorities amounting to more than 10% of the population.2
Theorists define culture variously and, as Pedersen and Connerley suggest, culture is often a misunderstood construct in organizations.3 Hall4 viewed culture as a mental exercise for sending, sorting, and processing of information. Kroeber and Kluckhohn5suggested that culture was an abstraction, rather than something tangible. Triandis6 perceived culture as a set of norms, roles, and values that produce meaning. Samovar and Porter7 suggested that culture is the cumulative deposit of knowledge and experience acquired by groups of people and then passed on to subsequent generations. House, Wright, and Aditya8 defined culture as the patterns of shared psychological properties among collective members resulting in attitudes and behaviors transmitted across generations. Such psychological properties include assumptions, beliefs, and values. When shared collectively, such properties become cultural norms or accepted behaviors. Although culture appears to be related to ethnicity, nationality, demography, or status, the typical definition is similar to Hofstede's "the collective programming of the mind that distinguished the members of one human group from another."9
Adding complexity to the picture is the fact that business organizations, too, have or are cultures. Shafritz and Ott10 described organizational culture as "a polemical concept which does not lend itself to a single definition." Van Maanen11 posited that it was "observed behavioral regularities when people interact, such as the language used and the rituals around deference and demeanor." Deal and Kennedy12 argued that culture is "the dominant values espoused by an organization, such as product quality, or price leadership and affects practically everything from who gets promoted and what decisions are made, to how employees dress."
Leadership Is a Cultural Concept
The problem with even the best-intentioned recommendations for leadership competence in intercultural contexts is that there still remains a cultural bias. In other words, the very concept of leadership is culturally bound. For example, in French, leadership (conduit) means "to guide one's own behavior, to guide others, or command action." Although the French are famous for protesting, authority commands deference and respect. In German, leadership (führung) means "guidance," and in organizations, it is construed to consist of uncertainty reduction. The leader guides action by the rules in such a way as to motivate. In Arabic, there is a word sheikh that has different meanings according to the regional culture. Literally, sheikh means a man over 40. However, in the Gulf and Saudi Arabia, sheikh means a person from the Royal Family. In Egypt, sheikh means a scholar of religion. In Lebanon, sheikh means a religious leader, even among Christians. The socioeconomic and political culture of the Middle East plays a role in influencing the definition of leadership, though it is generally agreed that leadership is tied to seniority before any other qualification. In most of the Middle East, the term" leadership" is a political term, with the exception that in Iran, it is more a religious term. In Chinese, the characters for leadership, mean "the leader and the led." The implication is that leadership can only be a relational activity. For this article, we focus on a US leader who faced the intersection of American and Chinese business culture.
The GeoleadershipTM Model
We conducted a study with leading intercultural experts from around the world to determine the critical competencies for intercultural leadership and how leaders can acquire them. While the study's questions focused on US business leaders, panelists concluded that their recommendations held for all leaders engaged in global enterprise.
From the analysis, we identified seven critical factors considered necessary for intercultural leadership competence. These seven critical factors were integrated and form the foundation for Geoleadership,TM a new intercultural leadership model. The seven factors are as follows:
Care: Global business leaders should hold and maintain equal concern for the bottom line and for stakeholder groups. One of the starkest criticisms of US business leaders is that their focus is on profit above all other considerations. While we can agree that one objective of business is profit creation, we also believe that a longer term and broader social system ultimately serves business.
Communication: In order for business leaders to lead effectively in intercultural situations, they must engage the people of the cultures in whose countries they work. Closely related to context is that leaders must reach out to people in other cultures with a desire to understand and appreciate that culture and its people. Leaders must learn communication skills that promote listening and open, respectful dialogue.
Consciousness: A person filling the role of leader (or manager) needs to develop self-awareness. A leader's awareness must be expandable as contexts shift such that the leader becomes aware of his/her own personal cultural background and bias relative to that of other people. Building consciousness means being able to expand self-awareness.
Contrasts: Leaders must be able to work comfortably and effectively with ambiguity. Developing a tolerance for working with contrasting perspectives, methods, and differing value systems is critical. Working in ambiguous contexts requires patience and consciousness. Working at such a high level of consciousness means that leaders must be able to perceive multiple levels of contrasting meaning simultaneously.
Context: Global business leaders must develop the ability to A) perceive, discern, and adapt to the situations within which they work, and B) suspend judgment. As trite as it may seem, the old expression "when in Rome, do as the Romans do" seems to apply. This is not to suggest that leaders patronize the people with whom they interact in intercultural contexts. Rather, global business leaders must attend to the situation in which they find themselves. Leaders need to be able to recognize their own culturally learned behavior and adapt it according to their new context.
Change: Postmodern organizations require leaders who demonstrate flexibility in adapting to dynamic cultural environments. Intercultural leaders must shift from the old mechanistic mindsets of the industrial era to the flexible adaptive perspective of organizational life as a complex sociocultural system.
Capability: In order for a leader to be effective in intercultural situations, sufficient personal and organization capabilities must be developed. Intercultural competence requires that leaders are able to assess their own and others' capability and build it where there is deficit. Most important is the leader's influence in facilitating the creation of an organizational culture capable of intercultural learning agility.
In the following section we present a case study and illustrate how each of the seven model principles potentially contributed to the success of a leader who transferred from the US to China, and who, as president, led his company's expansion into that country.
The Case of Shanghai Motors Parts
Tom Fontaine is the president of Shanghai Motor Parts, the second largest auto interior parts manufacturing company now operating in China. He is from Wisconsin, graduated from Princeton and Harvard universities, and is fluent in Mandarin. He has lived and worked in Shanghai with his wife and children for 15 years and become thoroughly immersed in the culture. The company's strategy for entering China was rather simple. China had a large workforce that was willing to work for much lower wages than laborers in Europe and North America. Moreover, there was a thriving economy and the Chinese people had acquired an appetite for driving automobiles. Before the current economic crisis, China was the third largest producer of automobiles in the world, although a large number were foreign carmakers. China's own auto manufacturers are not well known outside of that country. Shanghai Motor Parts found a niche selling interior parts and components to the largest of the homegrown Chinese auto manufacturers.
When Tom Fontaine took the assignment to explore the possibility of going into China, he had several concerns about navigating the Chinese culture. Tom's first consideration was related to the corporation's goals of expansion. Chief among those was his intention that whatever agreement was forged had to benefit all stakeholders. His worry was how to do that given that he was a novice, even though he was well traveled and had taken three years of Mandarin in college. Tom's first step before traveling to China was to contact someone who had experience with both business and Chinese culture. He knew from his Mandarin studies that there were many pitfalls that could befuddle someone who did not understand the subtleties of Chinese society. Tom cared about not only the impression he made, but also about the company's effect on the Chinese.
Tom's coach had advised that the Chinese, especially in the north, still live by the teachings of Confucius. For this reason, Tom began reading to reacquaint himself with Confucian ideals. What occurred to Tom was he had better do a lot of listening. Communication would be essential in building trust, and trust was a cornerstone of building relationships upon which business agreements could be forged.
Tom had an edge on some people who take on foreign assignments because he was a leader who had developed a high level of self-awareness. Consciousness, or being mindful, is important when shifting between situations and in maintaining integrity. What Tom learned was that the more he focused on the present and less on a goal in the future, the better his relationship building went. He learned he could be charming and humorous and that these qualities served him well. He learned the importance of attending to details and following through on everything he promised. Most importantly, Tom learned to cultivate every interaction by attending to the person and their needs.
The differences between how American and Chinese businesses operate is striking, and the ability to manage ambiguity and appreciate the contrasts between cultures is an essential skill for leaders working across cultural contexts. The key to understanding these differences struck Tom as requiring patience and perseverance. He determined that one important building block in forging relationships with the local people in Shanghai would be solving interpersonal problems rather than problems of process and legality. To the Chinese, building a relationship is about building trust; it is not about money.
In China, every interaction between people is based on a relationship. The concept of guanxi, which literally means "relationship," is held as a primary value. In business relationships, guanxi takes on additional meaning, referring to the network of relationships forged over time, relationships built on reciprocity. The Chinese society is much more complex than most Westerners imagine, differing vastly across many regions. Customs, language, and norms of each region must be recognized and honored. The Westerner who assumes that she/he has mastered China by coming to a base level of understanding of one city could blunder seriously.
Negotiating a business expansion into a new country, especially for those leaders who physically move to that country, entails monumental change. Through Tom's work in learning about Chinese culture, building greater self-awareness, and living in the moment, he increased his ability to adapt and be flexible.
By the time Tom had finished assessing the expansion to China, he knew what capabilities he and the company needed to grow. While he was confident, he was always tuned into the context and open to growth. As the relationship grew, Tom determined that if the company was going to move forward with expansion, it could not be on an American timetable. Tom had once heard an expression in the American business lingo that said to "slow down to move fast," and he began to understand the wisdom of the saying related to his company's endeavors in China. The most important capabilities that Tom acquired were cultivating self-awareness, developing appreciation for and knowledge of another culture, forging deep interpersonal relationships, creating a vision for the long-term, and learning to assume nothing.
We developed the GeoleadershipTM Model based on our research into the competencies required for business leaders to be successful in intercultural business contexts. The seven dimensions of the model foster comprehensive preparation for global business ventures through cultivating similar, but heightened, skills to what has been taught in traditional leadership models. While most leadership models advise attention to communication, intercultural contexts require heightened listening skills. While most models advise leaders to acquire an ability to live with ambiguity, a much greater emphasis is needed when entering different cultures. Cultivating skill in all seven dimensions is how one leader, Tom Fontaine, brought his company to China with success.
1 International Labor Organization. 2004. World Employment Report. Geneva.
2 United Nations Human Development Report Office, 2004
3 Pedersen, P., & M. Connerley. 2005. Leadership in a Diverse and Multicultural Environment: Developing Awareness, Knowledge, and Skills. Thousand Oaks, CA: Sage.
4 Hall, E. T. 1976. Beyond Culture. Garden City, NY: Anchor.
5 Kroeber, A., & C. Kluckholn. 1985. Culture: A Critical Review of Concepts and Definitions. New York: Random House.
6 Triandis, H. C. 1993. The Contingency Model in Cross-Cultural Perspective. San Diego, CA: Academic Press.
7 Samovar, L. A., & R. E. Porter, eds. 2001. Communication between Cultures, 4th ed. (1991). Belmont, CA: Wadsworth.
8 House, R. J., N. S. Wright, & R. N. Aditya, 1997. "Cross-Cultural Research on Organizational Leadership: A Critical Analysis and a Proposed Theory." In New Perspectives on International Industrial/Organizational Psychology, edited by P. C. Earley & M. Erez. San Francisco: New Lexington.
9 Hofstede, G., & G. J. Hofstede, 2004. Cultures and Organizations: Software of the Mind, 2nd ed. (1996). New York: McGraw-Hill.
10 Shafritz, J. M., & J. S. Ott. 2000. Classics of Organization Theory, 5th ed. (1977). San Antonio, TX: Harcourt College.
11 Van Maanen, John. 1979. "Reclaiming Qualitative Methods for Organizational Research: A Preface." Administrative Science Quarterly, 24, December: 520-524.
1 Deal, Terrence E., & Allan A. Kennedy. 1982. Corporate Cultures: The Rites and Rituals of Corporate Life. Reading, MA: Addison-Wesley.