Going native

In the past few years, Chinese companies have been on the prowl to pick up troubled Western brands. But their track record has been generally poor, with lots of flops, especially multimedia consumer electronics maker TCL's deals with Alcatel and Thomason.

These fiascos put TCL Chairman Li Dongsheng, once high-flying amid a buying spree, at No 6 on a list of the poorest performing Chinese bosses, released by Forbes' Chinese edition in July 2007.

Reasons vary, but the cultural differences apparently played a role. Shortly after TCL merged with Alcatel's mobile phone unit, the Shenzhen-headquartered company sent a team of executives to oversee the French operations, but soon found managing French workers a formidable challenge due to ignorance of the local culture, insiders say.

The culture shock was big: the Chinese team wanted everyone to be workaholic and without an increase in salaries. The French employees and managers had a more relaxed, laissez faire attitude towards employment and after several culture clashes, there was an exodus of French managers.

And before signing the deal, TCL underestimated (or was even unaware of) the pressure in France it could face when it planned to cut its highly unionized workforce there. Such a flop underscores a lack of ability of corporate leaders to operate in a multicultural environment in a world that is becoming flatter and increasingly connected, according to Frank Brown, dean of the international business school INSEAD.

Brown, the former head of the $3.5 billion Advisory Services unit at PricewaterhouseCoopers who has been watching the rise and fall of businesses during his 26-year career at the consulting giant, sees an urgent need nowadays for global organizations to build the so-called "transcultural leadership", especially for Chinese executives who are in a rush to go overseas but lack experience and proven track records.

According to Brown, the transcultural leader is "sensitive to national and cultural differences and knows that there is much to know and knows how and where to get advice on moving around and doing business in unfamiliar locale".

For example, "if you land in China, you don't constantly compare China to your home. You have to spend time learning China, understanding why China is the way it is", Brown says in an interview with China Business Weekly.

"That helps you to do businesses, relate people, build relationships, build business relationships and learn how to negotiate."

Ignoring cultural difference can sometimes be disastrous. For instance, Sony, which featured England's historic Manchester Cathedral in a violent PlayStation video game, drew unexpected fire. Also Nike in 2004 stumbled in China after broadcasting a TV commercial featuring a US basketball star defeating a martial arts master and two Chinese dragons, iconic symbols of China.

However, transcultural leadership is not only about avoiding cultural taboos. It's about openness so that a leader can "learn enough to make informed decisions, adopt innovative ideas, get warnings of obstacles ahead and otherwise stay attuned to the world outside the organization", Brown writes in his new book, The Global Business Leader: Practical Advice For Success in a Transcultural Marketplace.

Chinese PC maker Lenovo seems to has done better after acquiring IBM's PC-making business although the firm had little experience in operating outside Asia. After the deal with IBM, the firm immediately relocated its headquarters to New York and established a board with diverse backgrounds and even appointed American Steve Ward as CEO, someone who was highly experienced in operating multicultural environments.

Such practices help avoid culture clashes and at least ensure a smooth transitional period where an expected exodus of former IBM managers was avoided due to Ward's appointment, Lenovo founder Liu Chuanzhi has said.

Liu, one of the top and few management gurus in China, is apt in understanding cultural differences. "We found it's not easy for Americans to compromise and they always resort to lawyers (to solve problems)," Liu told a forum.

"So we told our Chinese employees to compromise first if it is not a big deal. In most cases, actually after you compromise the Americans have to also compromise, otherwise a trivial thing can flare up."

Liu, 64, speaks no English but he's the only business executive who in a boardroom relying on translators during conferences and negotiations. Brown, who speaks no Chinese, says he applauds the ability to speak a foreign language, but says it's not "critical".

"You don't have to speak 50 languages (to be a transcultural leader)", he says, adding the crux is the willingness to experience and be open to different cultures.

Brown recalls being frustrated during negotiations once when his counterpart, who spoke fluent English, insisted on the presence of a translator.

But Brown soon found that in local cultures the presence of the translator gave the negotiators "more time to process what they were hearing, more time to think over the responses, and think over their positions". And "you can create a level playing field in different ways", Brown says.

It's better to have a diverse team at the very beginning of starting up a business, says Brown. But that's a merit most Asian companies, especially Chinese ones, have been lacking.

"Diversity is a good thing in all aspects. But in a lot of parts of Asia, especially China, the corporate world is overwhelmingly male-dominated and the leadership tends to be older. These are the two areas of diversity China clearly needs to learn," says Brown.

"You have to work harder at communications and if your board tends to be older males who resist change, you may have a problem. Besides, you need other cultural perspectives from outside China."

(China Daily 11/03/2008 page7)