Lessons in Cross-Cultural Negotiations
In today's global environment, suppy management professionals need to understand the four key cultural dimensions
By Michael A. McGinnis -- Supply Chain Management Review, 4/1/2005
Increasingly, supply management professionals are becoming involved in international negotiations. For many, this is a new and potentially intimidating challenge. But by understanding a few key cultural dimensions, they can meet the challenge and become better negotiators on behalf of their companies.
In the 1980s, Geert Hofstede of IBM developed a widely accepted framework for assessing cultures. That framework incorporated four dimensions: individualism/collectivism, power distance, masculinity/femininity, and uncertainty avoidance. This column summarizes the framework and describes its implications for developing cross-cultural negotiating strategies and tactics. Please keep in mind that these dimensions are generalizations and that individuals may vary from their society’s descriptors.1. Individualism/ Collectivism describes the extent to which a society emphasizes the individual or the group. Individualistic societies encourage their members to be independent and look out for themselves. Collectivistic societies emphasize the group’s responsibility for each individual. The United States is considered to be an individualistic society, while Japan, for example, is collectivistic. Negotiators from a collectivistic society are likely to spend more time on long-term goals, to make realistic offers, and to be cooperative. On the other hand, negotiators from individualistic societies are more likely to focus on the short term, make extreme offers, and view negotiations from a fixed-pie perspective. Furthermore, they are likely to be more competitive overall. So if one party is focusing on short-term results (seeking guarantees that seasonal merchandise will arrive as promised) while the other party is more concerned with long-terms goals (ensuring a level of business that will provide stability for their company), then both parties will become frustrated. A critical factor in such negotiations is for each party to understand the other’s main interests rather than just focusing solely on their own.
2. Power distance describes the extent to which a society accepts that power is distributed unequally. When power distance is high, individuals prefer little consultation between superiors and subordinates. When power distance is low, individuals prefer consultative styles of leadership. Malaysia and Great Britain would be considered as high and low in power distance respectively. Negotiators from low power-distance cultures may be frustrated by the need of negotiators from high power-distance cultures to seek approvals from their supervisors. On the other hand, negotiators from high power-distance cultures may feel pressured by the pace imposed by those from low power-distance cultures. The key here is to understand the power-distance mindset of the people you’re negotiating with. That understanding is the first step toward closing the deal and setting realistic expectations for the relationship that follows.
3. Masculinity/Femininity refers to the values more likely to be held in a society. Masculine societies are characterized by an emphasis on money and things. Feminine cultures are characterized by concerns for relationships, nurturing, and quality of life. Japan is an example of a masculine culture, Finland of a feminine one. When negotiating, individuals from masculine cultures are more likely to focus on the specifics of the agreement and not show much concern for its overall impact on the other party. Negotiators from feminine cultures are more likely to be concerned with the agreement’s aesthetics and longer range effects; they feel that the details can be worked out later. For example, an American manager is more likely to stress adherence to shipment delivery dates; while the Mexican supplier he’s negotiating with may keep emphasizing its reputation and overall reliability. This exemplifies the difference between a masculine and feminine outlook, respectively.
4. Uncertainty avoidance refers to the extent that individuals in a culture are comfortable (or uncomfortable) with unstructured situations. Those in societies with high uncertainty avoidance prefer stability, structure, and precise managerial direction. Those in low uncertainty avoidance societies are comfortable with ambiguity, unstructured situations, and broad managerial guidance. Greece is an example of a society that is relatively high in uncertainty avoidance, while Hong Kong is considered low in uncertainty avoidance. Negotiators from high-risk avoidance cultures are likely to seek specific commitments in terms of volume, timing, and requirements. Their counterparts from low uncertainty-avoidance cultures are likely to be comfortable with rough estimates of volume and timing and with constantly changing requirements. During the negotiating process, discussions around delays in new-product availability, for example, might cause great concern to those high on uncertainty avoidance. On the other hand, it would be viewed as an opportunity to creatively improvise by those who are low on uncertainty avoidance.
An Essential Skill Set
An understanding of these four dimensions provides a useful framework for approaching negotiations, especially when the other party (or parties) is likely to have different cultural values. Above all, it’s essential to recognize that others may have a different cultural orientation from your own—even when you’re negotiating with others from your own country. With this awareness, you can more readily modify your negotiation approach when necessary. For example, a person may be individualistic, low on power distance, masculine, and low on uncertainty avoidance. That person may have to develop an ability to think and act collectively, recognize that there are others that place greater importance on authority, recognize that a negotiated agreement may be a component of an overall relationship, and understand that others may see a lack of structure as a lack of commitment.
Readers who would like to develop a closer understanding of cross-cultural negotiations should read Essentials of Negotiation, 3rd Ed. by Roy J. Lewicki, David M. Saunders, Bruce Barry, and John W. Minton (see Chapter 8 in particular). This highly readable paperback published by McGraw-Hill/Irwin (ISBN Number 0-07-254582-8) contains a wealth of information on negotiation principles and practices. The Institute for Supply Management Web site (www.ism.ws) is another valuable resource on negotiating. Some of the information on the site is limited to members, while other information is available to nonmembers.
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