Wednesday, January 10, 2007

How to Avoid pitfalls in Cross-Cultural Negotiation

My work in International sales, marketing, and project coordination has given me rich experience in working with people from other cultures. Cross-cultural communications has always been a tricky subject - particularly when there is business negotiations going on between two parties who are from different cultures.

Business negotiations is always a delicate business - even when the parties are sitting across the table and are from the same culture. The complexity of negotiations increases when the parties are from different cultures. But when both the parties are negotiating via electronic media - the challenges are immense often putting the negotiations at risk.

Cultural Differences are Invisible

Recently I had written an article on Challenges of Multi-cultural Teams, the problems encountered in managing multi-cultural teams are magnified exponentially when it comes to business negotiations. The problems of parochialism and ethnocentric attitude come into play without people noticing it during negotiations. To illustrate this consider the following example:

A group of Texans in Bangalore who were here to setup their R&D center in Bangalore, India. We started discussions of working across cultures. One of the senior managers in the group was quite unimpressed and he went on saying that cross-cultural issues does not bother him - "I am not worried about working with Indians." He said, "I have lots of Indians working in my group back in Austin, and there has been no cultural issues in the past." Since I lived in Austin, Texas and went to University of Texas, I knew it was better not to rebut his statement - but at a later time, I gently asked him how many of his Indian colleagues in Austin does he count to be his friends? How many of his Indian colleagues participate in the company’s annual Christmas parties? These questions slowly woke him up to concede that there were some cultural issues but they were not affecting the organizational work. I then slowly asked him to think about the challenges he has had as a project manager when dealing with an Indian who is fresh out of college, and then asked him to imagine the set of problems he will have to face when that person is sitting several thousand miles away in Bangalore? These questions made him aware of the challenges he will have to face when he has to manage a team of engineers who are working in Bangalore. Then I asked him to imagine the problems he will have to face when he has to negotiate from Austin with an Indian vendor in Bangalore.

Cross-cultural negotiations are always very challenging. Unfortunately, people do not realize these challenges before starting the negotiations - mainly because cultural differences are subtle and are often invisible.

A Case study

Harry in Austin and Harsh in Bangalore - both speak excellent English. Harsh studied in California, watches NBA and listens to rock music. All this makes Harry think that Harsh is just like any other fellow American - and starts the business negotiation right away. After few rounds - the negotiations come to a screeching halt due when Harsh decided to take a break during the negotiations.

The problem? Both parties had different perceptions of the negotiation process itself and misinterpretations of the other’s behavior. For Harry, negotiation is about pushing through a quick deal. When Harsh took time - Harry became increasingly impatient and become more forceful in the meetings. Harsh interpreted this with suspicion that Harry was pulling a fast one on him - therefore he needed some more time to study Harry’s proposals.
Though the negotiations concluded successfully, it took a longer time than Harry initially anticipated. This negotiation example shows how cultural differences are often invisible for both the parties and it affects the negotiations itself - when both the parties ignore the cultural differences.

Negotiating Across Cultures

There is no right way or no perfect way to overcome the cultural differences in negotiations. International negotiations are always a delicate business - requiring skill, tact, and diplomacy. Here are some tips that can help one negotiate with a foreign counterpart.

Tip-1: Take time to setup the negotiation process

This step is very important when you are negotiating with a new partner. People in other cultures have a standardized ritual process for all negotiations - particularly in the initial phase. Indians for example, tend to focus more on confidence building during the initial phase. Chinese on the other had have to establish a relationship before they start the serious negotiations. Americans would go over the main objectives in few minutes and then start off with the main negotiations. This approach is however not appreciated by other cultures. The best way to start negotiations is to start with explaining each one’s negotiation process. Take time to explain your process - and ask the other party if they understand it & encourage them to share their process. This helps to build a common ground for all negotiations.

Tip-2: Understand Expectations

In any negotiations parties involved will have different expectations - both sides would like to win but they will have different perceptions of victory. In cross-cultural negotiations it is difficult to guess other side’s expectations. It may make sense to talk about the expectations of both sides at the beginning of the negotiations - but fall short of disclosing their BATNA. Take time & effort to understand the other side’s expectations. Indian, Arab, Chinese and Japanese negotiators do not really like contentious style of negotiations - which is often perceived as "I win - you lose" style negotiations. Instead they prefer a more harmonious "problem solving" approach. It would be therefore useful to frame the negotiations in a problem solving mode when dealing with Asian negotiators and explain that is the approach to them. On the other side, Asian negotiator may assume that the American negotiator will adapt a contentious style and will prepare accordingly. So it will be better to explain the approach in the beginning itself.

Tip-3: Explain the decision making process

Decision making is a complex process in most cultures. Unlike in American culture where the decision maker will be at the negotiation table - Asian negotiators may not be the final decision makers. In Indian and most Asian companies, the final decision maker would be different and may not even enter the negotiation process directly but will be watching and monitoring the negotiation process closely. It is important to know who the decision makers are, and how decision will be made - and on what criteria. So take the initiative to explain the decision making process openly to the other party and encourage them to do the same.

Tip-4: Manage the negotiation

Multi-country, cross-cultural negotiations often take a long time. In the process the negotiation stalls due to various reasons. When issues are being exchanged or for seeking more information etc., the negotiations may come to a halt because one of the parties may be taking time to verify or find information. And at times negotiations come to a halt when one of the parities get distracted by other business needs. In all such cases, the best solution is to manage the progress of the negotiation in a methodical manner. Ideally it will be best when one person from both sides take up the role of project manager for the negotiation process and manage it like a project. This will prevent the negotiation from getting off course or getting stalled for a prolonged period.

Closing Thoughts

Cross-cultural negotiations are always tricky. In most cases parties involved in the negotiation process will not have a good understanding of the other’s culture and hence the negotiation process starts off with a set of false set of assumptions and if those assumptions are not tested, the negotiation process will fail. It is therefore a good practice to verify those assumptions and make things transparent and clear at the very onset of the negotiation process and then work towards successful conclusion.

Also see:

Improved Cross-cultural Communication Increases Productivity
Nature of International Negotiations
Hidden Aspects of International Negotiations
International Negotiations - Impact of Location on Business Negotiations
Preparing for Negotiations
Negotiations as Core Business Competency
Negotiating with Tough Customers - "Take it or Leave it" Situation
Challenges of Working Across Cultures

3 comments:

Master piece in India said...

It's very nice to read and also knowledgeable.

how to greet other in India? read this article

http://indiankulture.blogspot.com

Thanks

Cindy said...

I really enjoyed your post. I have linked to it in my blog carnival today (posted at http://getinternationalclients.com/get-international-clients-sunday-blog-carnival-24/) and I stumbled it.
I write a bit about Cross-Cultural Negotiations and you have a wonderful example. All too often people assume that knowing someone at the office makes them your friend. Your Christmas party example was spot on.

Term Papers said...

Reading this post reminds me of my old room mate! He always kept talking about this. I will forward this article to him. Pretty sure he will have a good read. Thanks for sharing!