When Your Company Is a Regular United Nations

Yves Doz is not the target consumer of cosmetics maker L’Oreal, but the Solvay Chaired Professor of Technological Innovation at international business school INSEAD is fascinated by the company. The French firm requires that managers from mixed cultural backgrounds comprise more than one-third of its product development teams.
 
As it happens, multiculturals in business is one of Doz’s special fields of study. He notes that L’Oreal’s multicultural approach appears to be working – sales in Asia Pacific grew 18.4% last year and 17.6% in Africa and the Middle East.
 
On the other hand, Best Buy shut all nine of its stores in China in 2011, just five years after entering the market. The US retailer of consumer electronics has been criticized for applying the global formula of siting big box stores in out-of-the-way locations, rather than respond to the Chinese consumer’s preference for neighborhood stores.
 
From his research, Doz told CFO Innovation’s Ida Mattsson, managers rooted in more than one culture are more likely to recognize new product opportunities, are more capable of integrating multi-cultural team, and are more able to bridge differences between subsidiaries and headquarters. Excerpts from the interview:
 
How do you define a multicultural person?
Essentially [a multicultural person] is defined by the ability to reach from one cultural frame to another . . . You need to be comfortable in [all] cultures, at the same time that you do not belong entirely to one community or another.
 
As an individual, you need to be sensitive to the several cultures and try to keep a balance. In other words, to think and act, say, Chinese and French-Canadian and Brazilian, depending on circumstances and context, and to be able to adjust to local culture and local circumstances as a function of these kind of multicultural identities.
 
There doesn’t seem to be ready supply of these individuals, especially in the business context. Does every company really need to hire or develop multiculturals?
If the issue is entirely to enforce or ensure conformity and uniformity, then you can say bringing someone from the corporate office, be it the US or Germany or wherever else, may make this easier.
 
[You hire locals] when there is a need for local sensitiveness, local awareness and adaptation.
 
But if there is a need to adapt to different practices, different financing practices and tools and contexts and so forth, then probably you would need a few multiculturals to act as a bridge between the global pressure of uniformity, on one hand, and the need for local awareness, on the other.
 
You may want to have someone from the head office to basically provide the integration and control. You then may want to have locals for local subsidiaries. And you may want to have a couple of multicultural people to act as interfaces, bridges, operating at sub-regional levels.  
 
Often, [multiculturals are required] in areas where there is a big interaction between local and global, or locally differentiated and globally integrated needs. And also where you need to try to find a good solution which is as uniform and integrated as possible, and yet remain sensitive to local differences.
 
Can you give us examples of companies that are taking the multicultural approach?
One of the things we [at INSEAD] studied in Citibank some years ago is them trying to develop a more unified back office and a more similar set of portals across various countries for their employees in different parts of Asia. This is an example of the kind of complex knowledge [possessed by multiculturals], because you need to understand the specific banking habits, consumer behavior and so on in different places around very different countries.
 
At the same time you need to be sensitive about how to integrate all [of these differences] and create a common back office backbone for all the various operations in various countries. That [revolves] very much around retail banking, credit card operations and the like.
 
When you deal with complex knowledge of this kind, around processes that are not standard routine processes, it may be lead to innovation and new products, like we saw in L’Oreal, for example. It is when you deal with culturally sensitive and complex knowledge that needs to be shared and integrated across borders that I think biculturals and multiculturals are most useful.
 
What about multiculturals in finance?
If you think of finance and control, measurement and accounting and so on, there is the important issue of the trade-off between fostering and maintaining discipline and uniformity, on one hand, and on the other side, being able to be flexible in how you deal again with terms, conditions, distribution channels and so on across countries.
 
My colleague Hae Jung Hong made a study of Deloitte’s accounting and auditing practice. On the one side, they are paid for basically auditing accounts and therefore enforce incoming disciplines, standards and so on. But on the other hand, they also have to understand that global customers also are different.
 
So how can companies successfully recruit for multicultural talent?
There are all kinds of tests, cross-cultural awareness index, indices and so on that you can use to try to test people for some of the [multicultural] dimensions. The other point is by interviewing people at some length, by observing their behavior in a multicultural context, you pretty much get a sense of [their ability to] shift from one culture to another.
 
To some extent, it’s relatively easy to find what some people call “Westernized” Asians, but it’s often more difficult to find “Asianized” Westerners. But companies really only need to have a few multiculturals in places where they can make a very valuable difference.
 
Will they need to be paid above-market rates?  
You have to pay more for a multicultural than for a local. You also often have to recruit them internationally. For example you recruit the famous “Chinese sea turtles” – people in the US of Chinese cultural background who have acquired the US or north European or European culture. You basically hire them to return to China [so you have to pay them more].
 
But one has to be careful. In some regions of the world, and in some countries, the US for instance, you are legally not allowed to recruit on the basis of ethnic background  . . . So it becomes an informal process: We select people who have cross cultural bridging capabilities, and so on and so forth.
 
What other incentives work best in attracting and retaining executives and employees who work effectively in a multicultural environment?
What you need to do, and which most companies find difficult, is to value their multiple cultures.
 
One critical point is appreciation by employers, by managers and colleagues, that they bring something different and are valuable . . . These folks are different, we don’t [necessarily] relate to them.
 
How can a multicultural person help locals and expatriates work together?
In some countries, particularly in Asia, it’s difficult to be negative. It’s difficult to say no explicitly. Therefore, one way to say no is not to say no – and leave areas uncovered.
 
One of the challenges for Western managers is what is not said. Basically, they need to take cues from what they see as missing, rather than what’s being communicated. I think that’s one important thing.
 
Related to this is the level of risk you are willing to take. If I’m a Singaporean I’m not going to be taking many risks. I am essentially going to play it safe and challenge myself to improve incrementally. If you ask me to do something very innovative which is going to leapfrog whatever we do, that’s probably not going to go anywhere.
 
If I’m American, I will be much more willing to take risks. Everything else being equal, I will be more willing to go for some form of breakthrough, some form of leapfrogging. And I won’t feel shame or embarrassment if it does not work. I will just say, Well we tried, we did our best and we learned.
 
So the views around risk and learning, embarrassment, losing face and saying no, if you wish, are intimately related.
 
You need to understand the different profiles in the team, the different profiles in the company vis-à-vis some of these issues. You need to be on the lookout of what is not communicated.
 
The multiculturals have a built in ability to do this more effectively and more rapidly than people with a single cultural background.
 
In today’s fast-paced world, more people are taking the chance to work globally, which means they have to deal with cultural differences, both at work and outside work. What advice can you give to people to more easily adjust to a new cultural environment?
One, learn the language, as much as you can. Two, associate with local people. Three, be curious. And four, build networks that straddle multiple cultures.
 
Now, there are caveats here. Typically, it takes about two years to start to be sensitive enough to a culture, to really start to at least become intensely aware of what some of the differences are. Travel or short stays do not qualify.
 
The second point is that some people will move from one expatriate assignment to another, from one country to another, at a relatively quick pace. In a sense, they develop some kind of expatriate fatigue.
 
One of my colleagues here at INSEAD [Prof. André Laurent] years ago was working on a study of a large population of [international] executives. He then wrote an interesting article called “Once a Frenchman Always a Frenchman.”
 
The point he was making there was that, rather than learn about the new places, [the respondents] on a kind of survival tool kit. After a while their sensitivity and their ability to learn about new cultures were actually dulled by their exposure to more cultures.
 

It is also important not to try to train yourself ahead of time, but to have people you can rely upon to almost coach you. People you can go to and say: “I had this discussion or this exchange, or I received this document or this note, or I cannot really make sense of what went on or I cannot make sense really what this document says.” That can help decrypt and interpret what is happening.  

 

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