Date posted: 1/12/2016 4 min read

Cultural intelligence and business decision-making

The way people make business decisions varies from culture to culture. Understanding how different people arrive at their decisions can make or break a business deal

In brief

  • International business success requires cultural intelligenc — CQ — the knowledge, skills and abilities needed to communicate appropriately and effectively with people of other cultures
  • Communicating appropriately involves interacting with others in a manner that conveys genuine interest and does not violate their cultural values, beliefs or norms
  • This article is an extract from the book, exploring the differences in decision-making criteria across cultures

By Felicity Menzies CA

International business success requires cultural intelligence — CQ — the knowledge, skills and abilities needed to communicate appropriately and effectively with people of other cultures.

Communicating appropriately involves interacting with others in a manner that conveys genuine interest and does not violate their cultural values, beliefs or norms. Communicating effectively involves successfully achieving the goals of the interaction. In my new book, A World of Difference: Leading in Global Markets with Cultural Intelligence, readers get a mix of anecdotes drawn from my personal experiences and research-driven insights for developing cultural intelligence. This article is an extract from the book, exploring the differences in decision-making criteria across cultures.

Americans Jeff and Kyle were in Kuala Lumpur to finalise negotiations for setting up a regional distribution centre for medical equipment manufactured in the United States. Their Malaysian-based colleagues had completed due dilligence and had selected a preferred partner and Jeff and Kyle had travelled from head office in New York to settle the terms of the arrangement. After a 30-hour transit, they were keen to get down to business and finalise the terms of the deal so that they could return to the States and attend to other outstanding matters before the weekend.

The Americans were relieved to be welcomed at the airport by company representatives. They interpreted their host’s assistance to get them quickly to the office as indicative of their shared desire to swiftly conclude the terms of the distribution proposal and sign the contract.

They were met upon arrival by the CEO of their potential Malaysian business partner and were ushered into a formal dining room where a lavish breakfast was laid out for the negotiating parties. “Perfect! Super-efficient!”, thought Jeff and Kyle. “We can get down to business immediately over breakfast.”

But it soon became apparent to the Americans that their Malaysian hosts didn’t share their urgency to conduct business. Breakfast topics were varied but not business-related — and when Jeff and Kyle attempted to raise the distribution deal, their Malaysian hosts paused for a while before changing the subject. Jeff and Kyle assumed that once the breakfast plates had been cleared, the business negotiations would start. Instead, their Malaysian hosts suggested that their guests freshen up in their hotel room after such a long trip and they should all meet in the lobby just before lunchtime.

Slightly confused, but glad they had an opportunity to revise their notes before the next meeting, the Americans checked into their hotel and spent an hour together reviewing the terms of their proposal. At noon they were met in the lobby by a representative of their Malaysian hosts and driven to a local restaurant where they were again joined by key senior employees of their potential Malaysian partner.

Building relationships can seem tedious for members of task-based cultures.

Once agian the Malaysians appeared reluctant to discuss business. Annoyed by the apparent stalling, Jeff suggested that they should go through the proposal and reach agreement on the terms. “I’d like to reach agreement on the deal this afternoon. We are on a tight deadline and are keen to wrap this up so that we can make the evening flight back to New York tomorrow. We’ve travelled a long way and, to be honest, we are frustrated that we haven’t had an opportunity to present our proposal to you.”

The Malaysian CEO laughed but nodded for the Americans to continue and the discussion finally turned to business. To Kyle and Jeff, all seemed to go well. Although a couple of questions were raised regarding their suggested terms, no opposition was expressed and the Americans believed that an agreement had been reached.

The next morning, the Americans took their luggage with them to the office. They had intended on quickly signing the deal that they believed they had agreed with the Malaysians the previous afternoon, before heading directly to the airport. To their surprise, the CEO’s assistant delivered them a message that the CEO was not able to sign the agreement. Instead, he thanked the Americans for coming and wished them good luck in finding a suitable partner.

Kyle and Jeff had failed to understand the difference between task-based and relationship-based cultures. America is a task-based culture. In task-based cultures transactions come before relationships. In those cultures, business is conducted on the basis of cognitive trust. Cognitive trust involves confidence in one’s competence, abilities and experience. You enter into business relationships when you trust that person has the skills and knowledge to do a good job. In task-based cultures, business decisions occur quickly on the basis of assessments of competence and reliability. Task-based cultures are more concerned with what you do than who you are.

In relationship-based cultures such as  the Malaysian culture, relationships come before transactions. In relationship-based cultures, affective trust plays a significant role in business decisions. Affective trust involves how emotionally secure you feel that the other party has your interests at heart. Affective trust develops from warm relationships and friendships. In relationship-based cultures many meetings may be needed before business is transacted. In initial meetings, business issues may not be addressed at all. Discussion is focused on assessing the character and intentions of the potential business partner. In relationship-based cultures, business decisions are formulated slowly as the parties get to know each other personally. Relationship-based cultures are more concerned with who you are rather than what you do.

Building relationships can seem tedious for members of task-based cultures. In those cultures, deadlines and punctuality are valued. It can be particularly difficult for members of task-based cultures who are travelling for business and are struggling with jet-lag and time-zone differences to cope with the social demands of relationship-based cultures. Members of relationship-based cultures, on the other hand, can feel rushed and pressured by members of task-based cultures. The eagerness of task-based cultures to conduct business before relationships have had a chance to develop can breed distrust and suspicion.

Like America, Australia and New Zealand are task-based cultures, albeit not to the same extent. There are a number of tips I would suggest for Australian and New Zealand business leaders seeking to improve their effectiveness when working with people who are more relationship-orientated or task-orientated than themselves.

Felicity Menzies CA is principal consultant at Culture Plus Consulting, a Singapore-based diversity and inclusion consultancy. cultureplusconsulting.com

This article was first published in the December 2016 issue of Acuity magazine.

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