The ability to negotiate effectively is one of the most important managerial skills. It determines the ability of managers to create value for their companies. Globalization provides new sources of value creation whether via the emergence of new market opportunities and/or opportunities for enhancing efficiency via outsourcing of activities. Negotiation is a process through which the partners seek to reconcile their congruent and incongruent goals. Yet, the process by which this is done varies across cultures. For example, in the relationship-oriented cultures of Asia, Latin America, or the Middle East, developing a relationship and/or trust is critical to successful negotiations. In the task-oriented cultures of North America/Europe, the relational dimension recedes in salience and the emphasis is on getting to business expeditiously.
Differences in negotiation styles can create problems which often get magnified if the partners remain ignorant of how their approach to negotiation differs from their partner. In this blog I highlight some difficulties that arise in negotiating across cultures and in the next blog I will suggest ways by which many of these problems can be mitigated.
PROBLEMS IN INTERCULTURAL NEGOTIATIONS
- Clash of expectations
Managers socialized in different cultures view negotiation from different perspectives. Managers may differ, for example, as to the importance of a contract, how important is the need to develop a relationship, the time horizon in question. This is only illustrative of some potential differences and in actual fact there can be a huge number of differences some being more salient than others. Managers who lack cross cultural exposure are often unaware of these expectations. Conflicting expectations can slow the negotiation process down. It can also generate negative emotions such as frustration or anxiety as managers may be uncertain as to how the negotiation is developing and/or the causes of these problems. The ability to trust your partner is important and this can get compromised when expectations are incongruent and managers are insensitive to the fact that expectations may be dissonant.
- Emergence of conflict
In some cultures, such as in North America or in Germany potential partners communicate directly. If they want to say, yes, they will do so. In Asia or Latin America, the communication style is more indirect and there may be a reluctance to say, no, even if the real intent is no. This can create misunderstandings and generate conflict. There was a German multinational that entered into a distributorship agreement with an India company. The problem was that the Germans and Indians were not on the same page but this recognition was lost on the Germans. They expected the Indian distributor to sell a particular line of products which the Indians were not interested in selling, but they never communicated this to the Germans. The Germans got very frustrated and the Indians too. Eventually the partnership was dissolved. The challenge in these cases is that the conflict which is initially task based can transform itself into an emotion-based conflict and this is not advisable.
- What is trust?
It is widely recognized that trust is important in negotiations. When negotiators trust each other, they are more likely to share information and are open to exploring alternatives that meet the interest of the parties. Yet, a conundrum remains: What is trust? In North American/European societies trust is all about predictability. Do you deliver what you say that you will? In Asian cultures for example, trust is derived from emotional bonding. Although predictability is important it is insufficient. The different meaning of trust in different societies can be potentially problematical in intercultural negotiations.
- Dealing with bureaucracy
As companies seek to form joint ventures, or engage in mergers and acquisitions, or set up a subsidiary in a country they are often tasked with the need to cope with the local bureaucracy. This is not easy for several reasons. First, by the very nature of what a bureaucracy is, it is often slow and not innovative. Bureaucrats like to maintain control and they are reluctant to go out of their comfort zone. Bureaucrats are also risk averse and this leads to tardy decision making as well as incremental as opposed to radical changes. In many instances companies have to deal with multiple bureaucratic agencies and not just one. This makes their task even more difficult. A foreign firm can get tangled up in the web of bureaucracy from which it may not be easy to disentangle.
- Approaches to problem solving
Negotiators may take either a pragmatic or an ideological approach to negotiations. In the pragmatic stance negotiators wish to strive for an agreement and are willing to make compromises. In the ideological stance the emphasis is on the purity of the solution i.e. how close it comes to attaining the best possible solution. Conflicting approaches can create a negotiating impasse. As each party thinks that their approach is the preferred solution the room for a compromise seems distant.
Cross cultural negotiations are indispensable for managers seeking to do business across their national borders. In this blog I have sought to highlight some of the challenges that negotiators may face.