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Skyline Business School |
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Skyline Business School |
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Issue:1
The hidden challenge of
cross-border negotiations
Cultural differences can influence business negotiations in significant and unexpected
ways, as many a hapless dealmaker has learned. In some cases, it's a matter of ignorance
or blatant disrespect, as with the American salesman who presented a potential Saudi
Arabian client with a multi-dollar proposal in a pigskin binder, considered vile in Muslim
Countries. He was unceremoniously tossed out and his company blacklisted from working with
Saudi businesses. But the differences can be much more subtle, arising from deep-seated
cultural tendencies that influence how people interact-everything from how people view the
role of the individual versus the group to their attitudes, say, about the importance of
time or relationships.
My research shows a treacherous aspect to cross border negotiation that's been overlooked
in many a literature: the ways people from different regions come to agreement, or the
processes involved in negotiations. Decision-making and governance processes, which
determine either a "yes" or a "no", can differ widely from culture to
culture, not just in terms of legal technicalities but also in terms of behaviours and
core beliefs. Numerous promising deals have failed because people ignored or
underestimated the powerful differences in processes across cultures.
Map the players and the process
In any negotiation, you are always interacting with individuals, but your real purpose is
to influence a larger organisation-representing a diverse set of interests-to produce a
meaningful yes. Applying "home" views of corporate governance and decision
making to international deals may seriously hinder the negotiation process. I find it
useful to breakdown the decision-making process into several constituent parts:
Who are the players? Regarding a deal in the US, extra
players beyond those representing the two companies may influence the deal: the SEC, the
Federal Exchange Commission and the Justice Dept., among others. In other countries,
there'll be extra players as well, but different and often less obvious. For e.g. in
Germany, labour has virtually equal representation on many supervisory boards of
directors, and local party officials play an integral part in the Chinese negotiating
teams there. If an acquisition target has foreign subsidiaries, the skein of negotiating
partners may grow even more tangled. All these constituencies bring their own interests to
the table, as well as varying abilities to block or foster negotiations.
Who decides what? Even if you know who's playing a failure to
understand each player's role-and who owns which decision-can be very costly. Cultural
assumptions can sometime make it very difficult to recognise or acknowledge who has formal
decision rights. Understanding both formal decision rights and cultural assumptions in
less familiar settings can be vital.
What are informal influences that can make or break a deal?
Many countries have webs of influence that are more powerful than the actual parties
making the deal, even though those webs don't have the formal standing of, say, government
agencies. In Japan, it may be the Keiretsu-Industrial groups that are linked by a web of
business ties, lending, and cross-shareholdings. In Germany's financial sector, it might
be the insurance giant Allianz. In Italy, it may be a set of powerful families. Outsiders
need to understand these webs and factor them into their negotiating approach.
In short, successful cross-border negotiators begin by discarding home-market presumptions
and developing a clear map of the players who are likely to influence the formal and
informal decision process. Only when you know exactly who these players are can you
develop a strategy that targets their interests.
Adapt your approach
However, knowing who's in the process is only half the battle. While you negotiate with
people, you are typically seeking to influence the outcome of an organisational process.
That process can look different in different cultures, and different processes may call
for radically different negotiation strategies and tactics. While it is difficult to
generalise, such processes tend to take one of several forms: top down, consensus, and
multistage coalition building.
Top Down. In some cases, you will deal with a "real
boss", a top-down authority who ultimately makes decisions unilaterally. The most
effective negotiators avoid making deals with relatively powerless agents who function as
important messengers or emissaries but not as powers in their own right. Instead, these
negotiators find ways to interact directly with the boss-or, if that's not possible, to
connect with people outside the process who have close ties to or influence over the boss.
This strategy must be used cautiously, however. It can easily backfire when subordinate
players have opportunities to sabotage the deal or erode its effectiveness. What's more it
can be risky to impute omnipotence even to apparently powerful bosses.
Consensus. If top down authority is at one end of the
decision-making spectrum, then consensus is at the other. The consensus process can have
many variations and is especially common in Asia. It sometimes requires agreement among
the members of the other side's negotiating team; at other times, it requires agreement
from the broader enterprise and can include external stakeholders and governments. The
need for consensus among players on the other side will affect your negotiating strategy
in many ways:
Since consensus cultures often focus on relationships rather than deals.
Consensus processes often go hand-in-hand with near-inexhaustible demands for information.
To the extent that you can pinpoint the source of delay-usually the doubts of specific
people or units-you should design your approach to help your proponents on the other side
convert the doubters.
You may need to shift your focus away from the bargaining table and instead interact
extensively and informally with the other side as it tries to reach a position internally.
Coalition Building. Decision processes don't always come in
pure forms such as top down or consensus. Sometimes, they are less defined and don't
require the agreement of every player but rather the support of a sufficient subset of
players-a "winning coalition" that can effectively pressure, sidestep, or
override dissenters. At other times, a "blocking coalition" that has interests
no one can ultimately overrule can bring a proposal to a halt.
In closing, it's worth noting that cultural allegiances are often not as simple as they
appear. While national culture can tell you a lot about the person sitting across the
table from you, every individual represents a number of cultures, each of which can affect
negotiation style.
Reviewed from Harvard Business Review-
by Saurabh Marya,BA Mass Comm, MAHE, Level 1
Comments and questions: info@skylinecollege.com
URL: http://www.skylinecollege.com
