Cases of failures in applying the principles of cross-cultural management. In May 1998, the German company Daimler merged with Chrysler (the third largest U.S. car manufacturer). In 1999, the Economist, evaluating the results of the merger, noted the decrease of the flow of talented designers and managers, previously bursting to work in Chrysler. Now, they preferred to work at Ford or General Motors. Also an unresolved question for a year was that of the location of the company’s headquarters in Germany or the United States. Problems were also caused y differences in styles of holding meetings: before important meetings German managers read 50-page documents, while their American counterparts preferred live conversations to papers. Problems arose due to differences in management styles at lower levels: German managers preferred to work with written reports of subordinates, while the Americans tended to “look them through later” (Brock & Siscovick, 2007).
Interestingly, Daimler Company carried out a strategic analysis to make sure that the merger project would be well-planned and feasible.
A hundred cases of mergers were studied. During the analysis it was found that in 70% of cases the objectives put before the merger were not achieved as a key to the success of such an enterprise is not the price of a new product (released by the new merged company), but the correct strategy and the process of integration of the different companies. However, Daimler managers faced with problems in the field of cross-cultural relationships (Brock & Siscovick, 2007; Yoshimura Thomas, 2008).
“Cross-pollination” of American and German business cultures was difficult. As a result, the American style won and Daimler managers learned from the Americans to use corporate resources more effectively, while Crysler managers learned from the German colleagues to keep the discipline. According to experts, one of the mistakes of Daimler managers was that they did not take into account that in mergers and acquisitions abroad, cross-cultural issues manifest themselves only after the deal is done and are much harder to analyze than economic, financial and legal problems (Brock & Siscovick, 2007). Over the time, the consequences of the merger from simply unwanted become dreadful, leading to a reduction in profits and the threat of layoffs (Peterson & Sondergaard, 2008).
Another example of unsuccessful experience of cross-cultural management was in General Motors. In 1997, General Motors, in order to halt the decline of its market share of motor vehicles, began to use the Japanese production system Just in time and kanban. This experience was a failure – in June 1998 two plants of the company were closed, after discussion by the company’s management of issues like the threat of closure of the entire enterprise, its inability to technical advances and the inability to transfer part of the work to outsourcing because of strikes involving 9000 people (Yoshimura & Anderson, 1997).
The problem of GM managers was that they only reproduced the systems responsible for the technical process. They didn’t take into account that these techniques worked only in Japan, because Japanese workers are strongly committed to the interests of the company and because in Japan (as in Germany) employee’s participation in the company’s activity is encouraged and welcomed. One can say that the fact of an employee’s involvement in the common work is an implicit component of the technologies Just in time and kanban (Yoshimura & Anderson, 1997).
The described problem situations should not surely be explained only in terms of cultural differences. Part of the difficulties faced by managers of companies was caused by their incompetent behavior and wrong decisions in conditions of cultural differences. The example of General Motors obviously demonstrates intercultural conflict between Japan and the USA. But Japan’s technological experience was opened; the American managers simply did not think over and implement thoroughly enough its transfer to the native soil. Daimler managers were more careful in preparing for the merger of the companies, but they didn’t consider the cultural aspects of the future cooperation.
Despite the uniqueness of each of these examples, there are risk factors that create cross-cultural problems common to all:
• Limitations of the “normal” Western business logic which make it difficult to rationally explain what is normal for business in other countries;
• Manifestations of xenophobia;
• Traditional view of the well-known phenomenon may be outdated.
Positive experiences of managing cultural differences. The Danish company Novo Nordisk was founded in 1989 by the merger of two pharmaceutical companies – Nordisk Gentofte and Novo Industri A/S. (Today, Novo Nordisk is one of the world’s largest companies specializing in biotechnology, the world’s second producer of insulin, the largest producer of enzymes for food production and household chemicals).
Any merger is associated with an increase in tension within companies, tensions between the constrained colleagues. In addition, the number of top-managers increased, administrative practices prevailed and company’s management lost effective contact with employees both in Denmark and in the branches. According to the company’s corporate governance, the need occurred to implement a number of initiatives reducing the feeling of isolation and improving the vertical and horizontal communication (Welch, 1994).
To achieve the planned goals, Novov Nordisk applied facilitation (Welch, 1994). The essence of the latter consists in the promotion, help, assistance, dissemination of relevant information in the field and creation of the necessary interaction between the business units. It is important that facilitation is by no means a compulsion, it is fostering of the natural course of events in a given direction (Schein, 1996).
Facilitation was implemented by the working group of 14 people (of different nationalities, with different functions in the company from research to commercial, with different education, with extensive international contacts within the company and being committed to Novo Nordisk) (Welch, 1994).
The task of the team was to help corporate managers in the transmission of values embodied in the principles of management of Novo Nordisk (NN) to all departments of the company. Facilitators should have become extraordinary change agents, because NN management believed that if all branches of the company accepted the corporate philosophy, rules and values and honestly strived to realize the goals of the company, the relationship between its divisions would be more efficient and successful. This, in turn, would weaken the barriers on the way to sharing knowledge and promote innovation and collaboration between the branches. The company’s management was confident that the synergy would enhance the ethical standards of businesses and consumers anywhere in the world would always be sure to get the service of the well-known quality (Welch, 1994).
Facilitation itself consists of three components: though audit it is necessary to assess whether the branches observe the standards of the company and NN management principles; provide advice and assistance in field, assist the subdivision in the correction of identified inconsistencies with existing requirements; by identifying successful local ways of working to help spread the experience in the organization.
Facilitators were a multicultural force designed to ensure that each of the NN branches recognized the company’s philosophy and management requirements, as well as to identify best practices and make them available to the entire organization. In terms of cross-cultural management there were two areas of work: autonomy of facilitators as the basis of the team work, and their interaction with the branches in which facilitation is carried out (Welch, 1994).
In terms of autonomy the team of facilitators, the NN gained a unique experience of creating a group of people who voluntarily exchanged the knowledge and experience, respected each other’s professionalism (despite the difference in age and work experience), who worked on the principles of equality. The group had no opinion leaders or “responsible persons”. Most importantly, the facilitators are a constantly acting group in NN and what is revealed by this multicultural team of professionals cannot become known in the company in any other way. In terms of interaction with the branches, facilitators used their communication, language, listening skills and ability to adapt to circumstances (the correct choice of clothing, style of communication, the use of the names, titles, etc.) (Welch, 1994).
According to the NN management, the work of the facilitators helped the company realize that the observance of principles of work developed by the “top” does not happen by itself. Facilitators also succeeded in implementing regulations in effect. The company discovered where exactly a lack for competent staff was. Facilitators acted as a catalyst in establishing communication between different entities of the company. The branches themselves found that sincere and direct dialogue with the facilitators was always constructive. It was found that when a facilitator said that he knew an example of good work it was more useful than any other method of the company. And personal interaction literally broke the internal systems in disseminating information and transferring of useful experiences (Welch, 1994).
Thus, obviously, the traditional criteria of culture are not enough for the analysis and, even more so, for the use of the experience of companies in the above examples. A key component of the described situations is organizational knowledge, learning, methods of
communication between managers and employees.
In this regard, considering culture as a resource for organization development, cross-cultural management should be seen as a systematic and organized attempt to use the knowledge in the organization to improve its operations. When thinking further, culture is not a factor of difference of one company from another, but the development factor, the source of knowledge transmission technologies, training of employees and partners. In this case, culture is no longer an obstacle for development, but is really a company’s resource. And evaluating the culture as a resource and not as a stumbling block, we change our frame of reference and therefore we change our course of action. Further, we’ll consider the main issues of introducing cross-cultural training in the originations aimed at teaching managers to control cultural differences.