Do you remember how Chrysler looked in the year 2000?
That tired, underperforming behemoth, with its aging products that simply weren’t good enough to keep it from bleeding rivers
of money? Quite a change between then and now, don’t you think?
After the painful “merger of equals” with Daimler-Benz,
with huge power conflicts and much cultural friction, and with several years of struggling and suffering behind it, Chrysler today
sure looks prettier. It has started making decent profits again and is showcasing long lines of attractive new models.
While many people played a role in this astounding turnaround, one person deserves much of the credit: Dieter Zetsche.
A German by passport and culture, Turkey-born Zetsche, who has also
lived and worked in Argentina, Brazil, and elsewhere in the U.S. before taking the helm at Chrysler, demonstrated the value of
cultural understanding. After taking over at a time when Daimler-Chrysler chairman Juergen Schrempp’s attitude had almost
everyone at Chrysler turned against “those Germans”, Zetsche managed to revitalize employee relations by showing a
can-do attitude coupled with much-appreciated humility, unleashing developers’ creativity, or bonding with Chrysler’s
loyal dealers. At the same time, he slashed payroll by more than 20 percent, overhauled and accelerated programs,
cost-reduced manu- facturing, outsourced nonessential processes, established companywide benchmarking, juiced up marketing, and
shook up his senior management team. Dieter Zetsche, now destined to become the next chairman of DaimlerChrysler, is living
proof for the importance of cultural understanding.
Why does knowing this “culture stuff” matter?
What’s the incentive for learning about it? Or, in CFO speak: what is the return-on-investment (ROI) of cultural
Let us take a look at some areas where the ROI of cultural
understanding can be substantial:
1. Communicating with Foreign Company Employees
Studies have shown that oral communication between people within the
same culture is usually only 40 to 60 percent effective. About half of the message gets lost. This becomes even more
challenging in international interactions. Communicating with foreigners not only introduces language pitfalls but also
cultural barriers. For instance, people in many countries may not openly reveal personal opinions or flag problems. It
usually takes subtle questioning in culturally compatible ways to find out what they really think. Body language can also
be hard to read. Under- standing such cultural aspects pays huge dividends: error rates drop, redundancies and unnecessary
rework can be prevented, and companies are able to maximize their success by aligning their international workforce.
2. International Negotiations
Experienced negotiators know that when the bargaining begins, the
party which is better prepared will usually end up with the better deal. Nowhere does this apply more than in international
settings. Negotiators who do not understand that arguing may not mean disagreeing, that silence may not signal rejection, or that
signing a contract may not cause the bargaining to stop in a given culture inevitably end up with unfavorable terms. Worst
case, there may be no deal at all. As a matter of fact, experts list cultural hurdles as the primary show-stopper in more
than 25 percent of all failed international business negotiations. Simply put, cultural understanding frequently translates
to negotiation success.
3. Cross-Cultural Project Management
A recent IT survey on offshore outsourcing found average savings
of only 10 percent, while more than a quarter of the participants reported that their project cost had actually increased.
Other surveys have shown cultural factors contributing significantly to such disappointments. This should be no surprise,
since project success depends on several culture-specific factors, such as communication, planning, risk-taking, responsiveness,
or team motivation. Each of these needs to be managed effectively. Ample evidence suggests that culturally savvy
project managers drive substantially higher success rates.
4. Intercultural Partnering
Collaborating effectively with international partners requires
trust. Countless examples exist where mistrust got in the way of cross-cultural partnerships, reducing or destroying their
strategic value to both sides. In many such cases, the reason given for the failure is “incompatibility between the
partners”, which often indicates cultural friction. Indeed, managing international alliances has become one of the
biggest challenges for global companies, and alliance managers who can work productively across cultures are much sought
after. The financial incentives for companies to manage their partnerships in culturally effective ways are obvious and
The Bottom Line
Let's face it: a hard nosed, bean-counting CFO may still not
be convinced. It is indeed difficult if not impossible to assign accurate numbers to the financial rewards of learning how to
work across cultures. As the fine print usually says, “results may vary.”
But there can be no doubt that the benefits of understanding
cultural differences and knowing how to overcome them are significant and often substantial. In contrast, the required
effort is not. Time to take a lesson from Dieter Zetsche?