The real costs of mindset mismatch

Last November in Beijing I gave a talk at the American Chamber of Commerce in China. In the talk I discussed a recent report by the Economist Intelligent Unit (EIU): “Competing across borders: How cultural and communication barriers affect business.” The report is packed with statistics and analysis of the challenges global businesses face working in multiple geographies.

The EIU surveyed 572 executives in February and March, 2012. Every company either has an international presence or plans to expand internationally. Almost half of the respondents (47%) were at the board level or C-level. More than half (53%) were from companies with over $500 million in annual revenue.

In addition to the survey, the EIU conducted interviews with eight top-level executives with deep and broad global experience.

These are not mom-and-pop shops; the respondents know the challenges of working globally in large, complex organizations.

The stats paint an odd picture: overwhelmingly these executives agree that working across borders presents unique and significant challenges. Yet an alarming number aren't doing what they need to do.

Let's start with the responses to this question: "Overall, how important would you say cross-border collaboration is in the following environments? Within your organisation generally; Within your business unit or division; With external partners, suppliers or outsourcers in other countries"

The percentage of respondents who answered "very important" or "somewhat important" is (in order): 97%, 94%, 95%. Nearly unanimous.

Next, this question: "To what extent can better cross-border communications improve the following at your company? Profit; Revenue; Market share"88%, 89%, 86%

What's more important to a business than profit, revenue and market share?

Clearly cross-border collaboration matters for these companies.

What makes cross-border communication especially challenging? A number of things, according to the survey, which asked: "Of the following, which are most likely to cause the greatest misunderstanding in cross-border communication for your organisation?"

Topping the list: "Differences in cultural traditions in different countries," which was listed by 51% of respondents (when allowed to choose two from a list of six).

Surely, then, addressing these challenges must be a top priority for these companies?

Not so much.

The survey asked: "In improving cross-border communications, how would you describe your company’s investment in the following?"

"Management time spent on assessing impact of cross-border communication issues" 34% either "not enough" or "negligible"

"Training to improve employees' language and communication skills": 47% either "not enough" or "negligible"

"Conflict resolution of disputes arising from cross- cultural misunderstandings": 42% either "not enough" or "negligible"

"Recruitment and selection of individuals who are suited to cross-cultural environments": 40% either "not enough" or "negligible"

The EIU team concludes:

In light of the fact that in the same survey most executives admit to a strong correlation between cross-border communication and the financial performance of their organisation, it is remarkable that such a large percentage of companies appear to be taking an avoidable risk with such a key determinant of their competitiveness.

This reminds me of what I wrote on my home page:

All organizations in China work in an unpredictable environment. What few realize is that much of what determines your success or failure is completely predictable. Decades of on-the-ground experience and validated research have shown that when Westerners go to China, certain things will come up as a result of the unfamiliar mindset of the people around them.

A hitter in baseball knows the difference between a fastball and a curveball, and knows which one they’re better at hitting. Nobody should go to China without knowing the basics, or without knowing their own strengths and weaknesses as leaders and as venturers into the unknown. Why lose out for failure to prepare for what you can prepare for?

The success of any business — or, really, of any organization — boils down to how that organization stewards it precious resources: time, money and goodwill. I've addressed this before. What's new about the EIU report is what it reveals about the scope and scale of the problem in global business.

Why is this crucial business issue given short shrift? It has everything to do with how humans are built.