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As globalisation continues apace, a cross-cultural management expert explains how to manage diversity.
Jason Karaian, CFO Europe Magazine
March 3, 2008
When Air France announced the takeover of KLM of the Netherlands in 2003, the Dutch media turned to Fons Trompenaars. Not only was he a well-known consultant and prolific author of books about cross-cultural issues, but as the progeny of a French mother and a Dutch father, he was also "a metaphor for what was happening," he explains. But he didn't make for a snappy television interview, Trompenaars admits, because he's "not in the business of stereotypes." Instead of resorting to the usual observations about the dining habits and business etiquette of the Dutch or the French, Trompenaars takes a much wider view of culture, approaching the subject in a scientifically rigorous, data-driven way that can be difficult to explain in a 30-second soundbite.
With cross-border M&A deals reaching record levels, Trompenaars reckons sensitivity to cultural differences — not just between nationalities, but also between sexes, ages, job functions and industries — is pivotal to innovation, creativity and, ultimately, financial performance. For this reason, he is optimistic about Air France-KLM's proposal to buy Alitalia — a move announced in December that was rubbished by many market watchers, who viewed the cultural differences as insurmountable. But Trompenaars disagrees. "The more nationalities involved, the easier it is to enrich company culture," he says. "It will be easier when the Italians join."
Here, he discusses the role that culture plays in post-merger integration and what CFOs need to know about managing finance's unique culture.
The basis of your observations is a database of more than 80,000 questionnaires spanning more than 20 years. What can CFOs learn from this data?
For CFOs, who mainly deal with numbers, my pitch is that culture is one of the most important elements in making those numbers. Alongside our cultural database we developed a questionnaire called the inter-cultural competence profile, or ICP. It measures how good you are with cultural differences. We have found that high scores on the ICP have an almost perfect correlation with bottom-line performance. This is not fluffy stuff: it's real numbers.
Are there any cultural issues that finance executives find particularly difficult to manage?
Finance managers tend to be linear thinkers — if something isn't down to finance, it must be due to human factors. I try to get them off of this linear path, so that it's not an either-or issue, but arguably a combination of both.
This can be applied elsewhere. For example, if a finance executive asks whether a company should centralise or decentralise, I ask them, "What can you centralise so that you can decentralise more?"
That sounds like the balanced scorecard.
"Balance" is the wrong word. It suggests that if one side goes up, the other goes down. It's still linear thought. You should try to integrate opposites instead of balancing them.
The balanced scorecard has four entry points. There is a financial entry point and a personal development point. Rather than cutting the training budget to boost short-term financial results, a client of ours found that the best way to maximise both was to increase the development budget on the condition that at least 20% of the training was about cost-cutting. The other entry points deal with focusing on clients and improving business processes. Integrating the two could mean implementing a new IT system only if it could help serve clients better.
After the recent frenzy of M&A, many companies are launching programmes to promote a single company culture. Your work seems to suggest that this is a bad idea.
I am not against the "one" this or the "one" that. It's that a company shouldn't define exactly what it means unless that definition has some richness to it.
PepsiCo, for example, defines its core values in a circular manner, avoiding different interpretations by different cultures. If a value was to promote "teamwork," in Japan that would mean ignoring the individual even more, while in the US it would run counter to Americans' more individual nature. So it would be great for the US and terrible for Japan. Instead, Pepsi says one of its values is to strive for "teams that consist of creative individuals." This allows both the US and Japan to be served. Similarly, promoting "straight talk" means that the Dutch will insult people even more. Instead, asking for "honest feedback with diplomacy" is less culturally biased.
Though known for your work on culture, your latest book, Riding the Whirlwind (Infinite Ideas, 2007), is about innovation. How did the former lead to the latter?
A company cannot be innovative without being diverse on an individual, team and corporate level. If a firm wants to assemble a creative team, the worst advice is to put creative people together. The book discusses the nine roles needed for a creative team. One of the roles is the "plant," the idea generator. There is also the "monitor-evaluator," the critic who explains why the plant's ideas won't work, possibly because there is no budget. Different roles make a team more creative, but the key is reconciling the dilemmas between the roles.
Most innovation today does not come from within a company, but through relationships with business partners and a combination of business models. For CFOs, this means that the traditional, internally focused financial control mechanisms tell only part of the story. Finance needs to focus more on what's happening outside the company.
Web Exclusive: For statistics about finance culture from Trompenaars Hampden-Turner's database, visit www.cfo.com/trompenaars.