Solar Turbines Inc., an American industrial giant, once sold $34 million worth industrial gas turbines and compressors for a Russian natural gas pipeline project1. Both parties agreed to meet at a neutral location, France, for the final negotiation. Initially, Russians were tough yet reasonable, but on arriving in France, they became demanding and unreasonable. After several difficult days, the American negotiators identified the roadblock. Americans realized that Russians prefer shorter meetings. Hence, they modified their negotiation strategy by limiting their sessions to a 45-minute meeting in the mornings, followed by afternoons at the beach or golf course. Subsequently, Russians began to concede and asked for longer meetings because they knew they could not go back to Moscow without a signed contract. The American executives’ willingness to be flexible about their cultural style yielded a wonderful contract for Solar Inc.
The above example illustrates that global business contracts not only cross national borders, they also cross cultural boundaries. When people from two different cultural groups negotiate, each one brings to the table a unique style and process of negotiation. Cultural differences between negotiators can create barriers that hinder progress or push the negotiating process to an impasse. The diversity of cultures makes it difficult for any negotiator, no matter how skilled and experienced, to understand all cultures in entirety. How should an executive prepare to cope with culture while making deals? While searching for an answer to this question, I found six elements that tend to complicate intercultural negotiations.
These six elements affect negotiating behaviours. Assessing oneself and others with respect to the six parameters will lead to better understanding of counterparts and anticipate and avoid misunderstandings. It also aids in thorough preparation for negotiations. Below are the six elements:
1. Negotiating goal- Contract or relationship:
Negotiators from different cultures may tend to view the purpose of a negotiation differently. For dealmakers from some cultures, the first and foremost goal of a business negotiation is a signed contract between parties while others may focus on creating a relationship. For example, often, Asian negotiators begin with building a relationship. They tend to give more time and effort to negotiation preliminaries, while North Americans often want to rush through this first phase of deal-making. When dealing with relationship negotiators, it may be important to show that the two parties have potential to build a rewarding relationship before striking a deal. On the other hand, while negotiating with a contract dealmaker, trying to build a relationship may be a waste of time and energy.
2. Personal style: Informal or formal?
Culture strongly influences the personal style of negotiators. A negotiator with a formal style insists on addressing counterparts by their titles, avoids personal anecdotes, and refrains from questions touching on family life of members of the other negotiating team. A negotiator with an informal style tries to start discussions on a first-name basis and quickly seeks to develop a personal, friendly relationship with the other team. For instance, it is heard that Germans have a more formal style than Americans do. Generally, it is safer to adopt a formal posture and move to an informal stance if the situation warrants it, rather than assume an informal style too quickly.
3. Emotionalism: High or low?
Various cultures have different rules as to appropriateness and form of displaying emotions, and these rules are brought to the negotiating table as well. Common stereotypes indicate that Latin Americans show their emotions at the negotiating table, while Japanese or many other Asians hide their feelings hence maintain a poker face. However, individual personality plays a role here. There are passive Latins and hotheaded Japanese too. Cultural Intelligence amongst negotiating parties will serve them a great deal. Dealmakers should seek to understand the other party’s tendency whether to exhibit emotions or not, for better results.
4. Building an agreement: Bottom up or top down? General or specific?
Negotiating a business deal could be either a deductive or an inductive process. Deductive negotiations start from an agreement on general principles and proceed to specific items. Inductive negotiations, on the contrary, begin with an agreement on specifics, such as price, delivery date, and product quality, a sum total of which becomes the contract. Few cultures prefer very detailed contracts that attempt to anticipate all possible circumstances and eventualities. Other cultures prefer a contract in the form of general principles rather than detailed rules. Some researchers believe that the French prefer to begin with agreement on general principles, while Americans tend to seek agreement first on specifics. For Americans, negotiating a deal is basically making a series of demands and trade-offs on a long list of particulars. Knowledge of stakeholders’ preferences and being flexible with one’s own preferences, would avoid deadlocks.
5. Decision Making: One leader or group consensus?
With regard to decision-making, some cultures emphasize on a supreme leader who has complete authority to decide all matters while other cultures stress on team negotiation and consensus decision making. Research indicates many American teams tend to follow one leader approach. Other cultures, notably Japanese and Chinese, prefer group decision making. In any negotiation, it is important to know how the other side is organized, who has the authority to make commitments, and how decisions are made.
6. Risk taking: High or low?
Certain cultures are more risk averse than others. In deal-making, negotiators’ culture can affect the willingness of one side to take risks– to divulge information, try new approaches, and tolerate uncertainties. Some cultures prefer caution and restraint and usually tread the known path and follow past approaches. For instance, Japanese, with their emphasis on requiring a large amount of information tend to be risk-averse. Americans, by comparison, are risk takers. Research shows that French and British are risk takers too.
These six elements tend to generalize national or cultural approach to negotiation. However, these generalizations are helpful to the extent that they are only guides, not stereotypes. Even researchers like Hofstede, Schwartz, Hall, amongst others, advice not to typecast individuals based on their nationality and culture. Peoples’ negotiating style depends on many factors including situation, stakes, the history between parties, individual preferences, and interpersonal dynamics. Two negotiators may have very similar values and norms, despite differences in their cultures. Therefore, it is important to study any negotiator’s personal style as well as his/her culture.
In addition, here are a few simple guidelines for coping with cultural differences, if any, in international negotiations and transactions:
#1. Be Aware
Knowledge and Information is the currency of negotiators. Being aware of customers or suppliers’ culture, through reading and/or conversations with those from the country concerned, will certainly help a lot.
#2. Show respect
Experienced negotiators tend to respect and appreciate unfamiliar cultural practices. It is far better to seek to understand the value system at work and to construct a problem-solving conversation about any difficulties that unfamiliar customs pose.
#3. Understand others’ perception
Almost everyone is influenced by his or her culture. Therefore, knowing how one appears to their foreign counterparts from a cultural standpoint, would be useful in creating a space for a healthy negotiation. If any of these perspectives are negative, one could be culturally flexible, to get better outcomes.
#4. Bridge culture gaps
It is possible that cultural differences can create a divide between two sides of a deal. Therefore, constantly, search for ways to bridge that culture gap. Finding something in common, such as a shared experience, interest, or goal, could be the first step in building that bridge the cultural gap.
The purpose of these guidelines is to identify and understand specific negotiating traits affected by culture. Equally important is to determine how one’s negotiating style appears to others. With this knowledge, a better understanding of negotiating styles and approaches can emerge.
In conclusion, it is surmised that a lot can go on during the course of a negotiation to overcome individual, contextual, and cultural differences. Even if one of the parties in a negotiation remains motivated to search for their own cultural bias and that of the other party, respects differences if any, is flexible and uses information and knowledge to bridge cultural differences, an acceptable agreement can be reached.