MANAGING ACROSS CULTURES NEGOTIATING ACROSS CULTURES Robert J. Greenleaf Training Management Corporation Princeton Training Press • Princeton, New Jersey NEGOTIATING ACROSS CULTURES Published by: PRINCETON TRAINING PRESS Princeton, New Jersey a division of TRAINING MANAGEMENT CORPORATION 600 Alexander Road Princeton, New Jersey 08540-6011 USA Tel: Fax: Web: Email: (609) 951-0525 (609) 951-0395 www. tmcorp. com [email protected] com Editor-in-Chief: Series Manager: Writer: Cover Design: Interior Design:
Monique Rinere-Guven, Ph. D. Talia Bloch Robert J. Greenleaf Donna Lukis Bonnie Jacobs © 2000 TRAINING MANAGEMENT CORPORATION. Managing Across Cultures Series: Negotiating Across Cultures All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher. Printed in the United States of America ISBN: 1-882390-911
The Cultural Orientations Indicator®, COI® and TMC’s graphical depiction of our Cultural Orientations Model are registered trademarks of Training Management Corporation; Registration: 2,329,085 and 2,361,803. 4 Training Management Corporation TABLE OF CONTENTS TABLE Preface iii OF CONTENTS Introduction 1 Negotiation Defined Negotiating Across Cultures Chapter One: The Impact of Culture on Negotiating Behavior Case Scenario The Ten Dimensions of Culture Cultural Analysis of the Case Scenario Generalizations and Stereotypes in Negotiations 5
Chapter Two: The Seven Phases of International Negotiation 29 An Overview of the Seven Phases Showing a Commitment to Negotiating Internationally Chapter Three: Negotiating Effectively Across Cultures 35 Phase 1: Strategic Planning and Analysis Phase 2: Network Approach and Entry Phase 3: Building Personal and Business Relationships Phase 4: Orientation and Presentation Phase 5: Bargaining and Persuading Others Phase 6: Reaching Agreement Phase 7: Follow-Up and Maintaining Relationships Conclusion Appendix A: Cultural Orientations Model™ Quick Reference Resources Index 77 75 73
Training Management Corporation: Information & Publications Training Management Corporation NEGOTIATING ACROSS CULTURES Training Management Corporation PREFACE PREFACE It is no secret that we are in an era of global business, one in which the world is moving toward a completely transnational market. The rapid growth of increasingly interconnected markets, processes and operations is affecting virtually every industry, company and worker today.
Between the increase in strategic business alliances and the proliferation of global organizations, the share of the market run by companies that span two or more business cultures is growing constantly. These trends have changed the criteria for competitive advantage. Past successes in the old marketplace do not guarantee future success in the new. Speed, responsiveness, flexibility, effectiveness and an ever-increasing rate of innovation have become the cornerstones of success in today’s market. Organizations everywhere have been transforming themselves to adapt to these new requirements.
Most organizations now understand that competitive advantage no longer rests on formal structures but on a dynamic organizational culture that effectively encompasses the mindsets, competencies and practices of the individuals who create, support and sustain the organization––individuals who often do not share the same cultural background. This new type of organization also calls for a different type of manager––one who can create a dynamic, flexible environment and draw upon his employees’ varied mindsets and skills.
Given the varied cultural backgrounds of the employees in global organizations and strategic business alliances, culture has become one of the key areas of managerial competence and one of the most challenging aspects of working in the global marketplace. It was once assumed that business and commerce were culturally neutral zones in which business professionals from various nations came together to participate in transactions according to universally recognized norms. But, this is simply not true. The ways in which we manage and conduct business are extensions of our social and cultural environments.
Thus, how we conduct business is deeply influenced by the cultural values and associated behavior patterns that operate in that environment. Working in the multicultural environment of the global marketplace, today’s managers are confronted with this every day. The individuals with whom they conduct business and whom they manage often represent a collection of different cultures with different, sometimes conflicting, practices. The main challenge for today’s global manager is to combine a repertoire of managerial and leadership skills with a thorough understanding of and sensitivity to culture.
The “hard skills” Training Management Corporation iii NEGOTIATING ACROSS CULTURES iv of business tasks and the “soft skills” of the ways we interact and communicate have thus become intertwined and can no longer be easily distinguished. Today’s manager must be able to successfully integrate cultural knowledge into her understanding of how to manage business and daily work. The guides presented in the Managing Across Cultures series are designed to help you develop the cross-cultural competencies that have become essential to every manager’s basic skill set.
The series explores the interplay between culture and particular aspects of managerial competence. The areas discussed are: Influencing and Persuading Across Cultures Management Across Cultures Managing Global Projects Marketing and Sales Across Cultures Negotiating Across Cultures Presenting Across Cultures Transcendent Teams™ Each title assumes that the reader is familiar with the fundamentals of the management function under consideration and has a working knowledge of Training Management Corporation’s Cultural Orientations Model™.
Building on this knowledge, the authors discuss how each cultural orientation shapes business practices and business interactions within these management functions differently. They then describe which types of practices, within the particular area, are most appropriate for each cultural orientation. Examples are drawn from specific cultural settings to demonstrate the direct applicability of this analysis to actual crosscultural interactions. In some cases, the author also outlines the best strategies for each managerial function in today’s leading business centers. Culture and Cross-Cultural Competence
Unless we have experienced an environment that has changed or is somehow different from those in which we have been socialized, we can easily overlook the profound influence of culture on our thoughts, emotions and behaviors. Usually we do not spend much time considering the deep roots of our behavior or that of others. These roots remain below the level of our daily awareness. When they do surface or when we take the time to consider them, however, we quickly become aware that culture is a diffuse, complex phenomenon that we tend to minimize or even deny the existence of altogether.
Yet, ignoring culture and the role it plays in shaping our business behaviors and preferences is dangerous. Many business arrangements have failed due to an unrecognized and/or unacknowledged clash of cultures. Training Management Corporation PREFACE What Is Culture? Culture is a complex pattern of ideas, emotions and observable manifestations (behaviors and symbols) that tend to be expected, reinforced and rewarded by and within a particular group. Culture manifests itself in tangible ways, such as in language, food, dress, rituals, customs, art and music.
But culture also consists of intangible components, such as values, beliefs, assumptions and the emotions with which these are invested. Culture can be thought of as an iceberg. The visible portion of the iceberg consists of the tangible elements, and the invisible, larger part consists of the intangible components. Thus, the tip of the iceberg can be said to consist of observable manifestations of culture, whereas the thick, much more powerful block of ice below the surface of the water consists of the thoughts and feelings that are associated with and connected to these behaviors.
If these thoughts and feelings remain invisible to us, and we have no insights into them, if we see only behaviors different from our own, then, like any unsuspecting ship, we may run into the iceberg and founder. This series will help keep you afloat. The Five Aspects of Cross-Cultural Competence Cultural competence rests on a process of global learning, which each manager must engage in to become effective in the global business arena. This process has five different aspects to it, which can be cultivated simultaneously and continuously.
The following offers a quick overview of the five aspects as we define them. 1. Open attitude 2. Self-awareness 3. Awareness of others 4. Cultural knowledge 5. Cross-cultural skills The first aspect of understanding people and organizations from other cultures is developing and maintaining an open attitude or mindset. Such a mindset is non-judgmental toward difference––toward different values, attitudes, beliefs and behaviors. It ensures that you interact with others from a broad perspective on the world around you and enables you to recognize the interrelated nature and
Training Management Corporation v NEGOTIATING ACROSS CULTURES interdependence of all cultures. Each individual has a responsibility to continually maintain this open attitude. The second aspect is the development of self-awareness. To increase your effectiveness, it is crucial to recognize your own cultural preferences. This involves identifying the values, attitudes and beliefs you hold and becoming aware of the behaviors you engage in as a member of your own culture.
Articulating these on an ever-deeper level enables you to understand how you must appear to others whose values, attitudes, beliefs and behaviors differ from your own. The third aspect of cross-cultural competence is forming an awareness of others. This entails recognizing the cultural values, attitudes, beliefs and behaviors of those around you. You might ask yourself these questions: • What are the cultural preferences of my counterparts? • What cultural differences may be affecting our interactions? • What cultural common ground do we have?
The fourth aspect is obtaining cultural knowledge. Once you begin to take account of your counterpart’s behavioral preferences and approaches to business, you can base your awareness on a comprehensive understanding of your counterpart’s social and business culture. This means learning about your counterpart’s cultural values, beliefs and attitudes, as well as about the socioeconomic, political, historical and philosophical roots of the cultures that underpin them. The fifth and final aspect of cross-cultural competence is developing cross-cultural skills.
Once you begin to understand the culture in which you will be operating and/or of those with whom you shall be conducting business, you can translate this understanding into effective business interactions. None of these aspects of cross-cultural competence is ever complete. The process of global learning requires an ongoing commitment of time and energy, and, perhaps more importantly, the ability to admit that you never know everything and that you are always open to learning something new.
While the development of these competencies may be a strategic imperative for today’s industries and organizations, it can also be an enormous source of personal and professional enrichment and pride for those who engage in this process as a lifelong undertaking. The Cultural Orientations Model™ (COM™) The Cultural Orientations Model™ is a comprehensive tool that provides both a framework for understanding culture and the ways in which it affects people’s attitudes and behaviors and a vocabulary for discussing these attitudes and behaviors.
It was developed by Training Management Corporation and was first introduced in TMC’s publication Doing Business Internationally: The Guide to Cross Cultural Sucess in 1995. Since then, it has become the cornerstone of TMC’s cross-cultural consulting solutions and has achieved a worldwide reputation. vi Training Management Corporation PREFACE The COM™ describes culture as consisting of ten basic dimensions: Environment, Time, Action, Communication, Space, Power, Individualism, Competitiveness, Structure and Thinking.
Each dimension breaks down into one to four continua along which a person and culture might find themselves. This placement defines their orientation within the dimension. In all, there are 17 continua. The dimension of time, for example, refers to the ways in which an individual or culture perceives the nature of time and its use. Within this dimension is a continuum that goes from fluid to fixed. A culture may emphasize the importance of managing time precisely, or it may reinforce the concept of time as loosely defined. A person or culture may be described as tending toward one or two of those continua.
While one individual may have a very strong tendency toward the fixed orientation of the time dimension, another may have a strong orientation toward the fluid orientation, and yet a third may have a relatively mild inclination on the fixed-fluid time continuum. The Cultural Orientations Model™ For your convenience, a brief reference guide to all the dimensions and orientations is included in the appendix to this publication. For a full overview and review of the COM™, please consult the Cultural Orientations Guide, the foundational publication for understanding the Cultural Orientations Model™.
The guides in Managing Across Cultures are intended for use in conjunction with TMC’s series Doing Business in Regions and Countries Around the World. Doing Business in Regions and Countries Around the World explores a particular national or regional business culture through the lens of the COM™. Each guide contains an in-depth cultural profile of a particular country or region followed by a discussion of its business communication style, management practices, negotiating tactics and decision-making processes, as well as brief historical, political and economic overviews.
Doing Business in Regions and Countries Around the World also explains the difference between stereotyping and generalizing and outlines the role of trust in cross-cultural business interactions. You are invited to use the Managing Across Cultures guides and the Doing Business in Regions and Countries Around the World guides together in whichever way best suits your needs and interests. It is recommended that you start by reading the Cultural Orientations Guide and grounding yourself in a thorough knowledge of the COM™ and your own cultural orientations.
You may then select a title from either the Managing Across Cultures series or the Doing Business in Regions and Countries Around the World series. One will offer you a comprehensive overview of the dominant business culture in the target country or region while the other will provide you with the necessary management skills across cultures in your area of business expertise. Training Management Corporation vii NEGOTIATING ACROSS CULTURES Doing Business Globally Doing Business in Regions and Countries Around the World
Doing Business in Asia Doing Business in the Middle East and North Africa Doing Business in Latin America Doing Business in North America Doing Business in Eastern Europe Doing Business in Western Europe Doing Business in Argentina Doing Business in Australia Doing Business in Belgium Doing Business in Brazil Doing Business in Canada Doing Business in Chile Doing Business in China Doing Business in Colombia Doing Business in France Doing Business in Germany Doing Business in Hong Kong Doing Business in India
Doing Business in Ireland Doing Business in Italy Doing Business in Japan Doing Business in Malaysia Doing Business in Mexico Doing Business in the Netherlands Doing Business in Norway Doing Business in the Philippines Doing Business in Saudi Arabia Doing Business in Singapore Doing Business in South Africa Doing Business in South Korea Doing Business in Spain Doing Business in Sweden Doing Business in Switzerland Doing Business in Thailand Doing Business in the United Kingdom Doing Business in the United States Doing Business in Venezuela Managing Across Cultures
Influencing and Persuading Across Cultures Management Across Cultures Managing Global Projects Marketing and Sales Across Cultures Negotiating Across Cultures Presenting Across Cultures Transcendent Teams™ viii Training Management Corporation INTRODUCTION INTRODUCTION Globalization is exposing more people to cross-border negotiations and bargaining—which, in turn, requires individuals and organizations to effectively work across cultures and languages. This book focuses on how to transcend cultural differences in global negotiations. Negotiating across cultures requires that you have an open attitude and flexibility in your approach.
You must be receptive to cross-cultural learning and maintain an open and productive attitude toward difference. Successful negotiators must continuously challenge their assumptions about other cultures and avoid quick judgments. In cross-cultural situations, you will need to tolerate ambiguity and prepare for the complexity of cross-border negotiations. Patience is a virtue; this remains true for cross-cultural negotiations as well. Negotiating across cultures will require that you continuously pursue learning about other cultures and their approach to negotiations.
To understand another person’s culture, we must first understand our own culture. Selfawareness and knowledge about one’s own cultural preferences is crucial to negotiating across cultures. A successful negotiator is able to understand and articulate his own cultural values, beliefs and attitudes, as well as how they are reflected in negotiating behavior. Being able to identify differences between one’s own culture and another’s—and to realize that these differences can lead to misunderstandings—is important when preparing to negotiate across cultures.
Identifying ways to adapt your approach to support cross-cultural negotiations is critical for success. A successful negotiator is not someone who has memorized a list of do’s and don’ts, but, rather, one who has developed a global feel for negotiating across cultures. This means that there is a need to recognize the cultural values, attitudes, beliefs and behaviors of others in order to develop new cross-cultural negotiation skills. Those negotiators who are more experienced can correctly identify the cultural orientations of their counterparts and how they are expressed in the counterparts’ negotiating behavior.
But, first and foremost, an international negotiator needs to be a good observer, to be able to articulate areas of shared cultural perspectives in finding common ground. Gauging the approach of one’s counterparts to negotiating, and their cultural orientations, will lead to less misunderstanding and stronger cross-cultural relationships. The more you understand about the history, economy, politics and business practices of a specific culture, the more likely you will be able to succeed in negotiating across cultures. A Training Management Corporation 1
NEGOTIATING ACROSS CULTURES 2 successful negotiator has acquired, or can acquire as necessary, a comprehensive knowledge of other, specific social and business cultures. Beyond correctly identifying the general knowledge needed about a culture, a good negotiator may require specific business or industry knowledge. Being able to identify how conflict is resolved, decisions are made, problems are solved, people are motivated, performance is rewarded, relationships are established and maintained, negotiations are conducted, people are led—all these are crucial to success.
Finally, knowing how to enter a network, get the necessary information to negotiate, and build the personal and business relationships required to do business across cultures is also crucial. The larger question is, how can we develop the cross-cultural skills needed to negotiate successfully across cultures? A successful negotiator has the necessary skills to work effectively across cultures in many different business contexts. Experienced negotiators can translate cultural awareness and knowledge into negotiation skills. There is no easy, quick way to improve one’s own ability to negotiate in cross-cultural or cross-border situations.
Only through experience and trial and error can you continue to refine and improve your negotiation skills in order to adapt them appropriately to particular cultures and situations. Understanding the cultural orientations of those with whom you negotiate across cultures is crucial. Knowing, for example, that the Japanese tend to be formal and indirect in their communication is important, but knowing how this affects your ability to negotiate with the Japanese is even more important. In short, there is a need to go beyond an intellectual understanding of how another culture negotiates.
Knowing that the Japanese place great emphasis on protocol and seniority in negotiations should influence your behavior the next time you are in Tokyo. Changing your behavior to adapt to the particular negotiation context and situation is the hallmark of a good international negotiator. Acknowledging the other culture’s approach to negotiation and responding accordingly is the ultimate goal. By better understanding our own cultural preferences and those of our negotiating partners, we can respond more constructively, thereby transcending cultural differences.
Negotiation Defined What is negotiation? Is it the simple process of influencing others to achieve our own ends, or is it a complex process in which teams meet to hammer out agreements that spell out the roles and responsibilities of both parties as they engage in a business transaction? One dictionary definition of negotiate reads, “to confer with another or others in order to come to terms or reach an agreement; to arrange or settle by discussion and mutual agreement” (The American Heritage Dictionary 1209).
The historical root of the word negotiation comes from the Latin word negotium, meaning “business,” neg meaning “not,” and otium meaning “easy time or leisure”— implying that people who negotiate with each other are not going to have an easy time. Negotiating Across Cultures Does the negotiation process really differ from one culture to another? The simple answer is “yes. ” The Japanese approach to negotiation, for example, is first to look at the web of Training Management Corporation INTRODUCTION elationships and obligations owed and then to come to an agreement with the other party, based on consultation and discussion. Emotional connectedness and social obligations play a role in the process, as the Japanese negotiatior strives to understand his counterpart’s position and come to an agreement without an excessive amount of bargaining. The Russian approach to negotiation is to have an informal discussion with one or more people and, over a period of time, come to an agreement. This often means that agreements are reached in informal situations away from the negotiating table––on a break, or when socializing.
The Russian negotiator employs persuasion, reasoning and rhetoric to convince the other party that his position is the correct one. The exchange of favors between parties away from the table is, in many ways, the same as the Western concept of exchanging concessions at the table. The U. S. approach to negotiation is to have two or more people meet and discuss common and conflicting interests in order to reach a mutually satisfying agreement. This requires a more collaborative style of negotiating (called win-win) as opposed to the zero-sum (“winlose”) style of negotiating often found in Europe and Asia.
As Pierre Casse and Surinder Deal state, “Negotiation is the process by which at least two parties with different cultural values, beliefs, needs and viewpoints try to reach agreement on a matter of mutual interest” (Casse and Deal 2). The key word here is “cultural. ” Understanding cultural differences is essential to understanding how other cultures define, and go about, the process of negotiation. There is a need to learn and understand the business practices and communication styles of the other party in a negotiation. It s important to understand how to establish relationships, how to assess expectations, how to reduce conflict and how to develop effective bargaining strategies. When we encounter behavior that is unfamiliar, we tend to view the other’s behavior through the prism of our own culture. This often leads us to negatively evaluate unfamiliar or different behavior, which undermines trust and prevents us from moving the negotiation forward to a successful conclusion. Another response to the other party’s unfamiliar behavior is to ignore it. Because we do not understand it, we may miss opportunities at the negotiation table.
People perceive the process of negotiation from their own cultural perspective or context. How we relate to each other, how we interact in the process, the ways in which we present information, use influence strategies and attempt to reach an agreement are all “culturally bound. ” To be successful in international negotiations, we need to: • Understand the fundamental cultural preferences of the other party. • Understand how our own cultural biases limit our ability to negotiate across cultures. • Determine whether our approach to entering a new network or company is appropriate or not. Devote adequate time to planning and analysis of the other party. • Create a plan with a strategy appropriate to the other party’s situation. Training Management Corporation 3 NEGOTIATING ACROSS CULTURES • Develop both a personal and a business relationship with the other party. • Learn what type of information to present, how and when to present it, and what kind of strategies of influence persuade others. • Be flexible in negotiating in new environments or cultures. • Pay attention to protocol, ceremonies, follow-up visits, and socialization with the other party. Spend time maintaining the relationship and follow-up on commitments. This book explores the ramifications of culture for international negotiations by discussing how cultural orientations manifest themselves during the negotiating process and exploring in detail the seven phases of international negotiations. Chapter 1 analyzes a cultural case scenario and describes negotiating behavior across the ten dimensions of culture. Chapter 2 reviews the basic elements of the seven phases of international negotiation and Chapter 3 provides a thorough going examination of how different cultures approach each of the seven phases.
An appendix concludes the book with a quick review of the Cultural Orientations Model™. 4 Training Management Corporation THE IMPACT 1 OF Chapter THE IMPACT OF CULTURE ON NEGOTIATING BEHAVIOR CULTURE Case Scenario John Banner smiled at the headline in the Wall Street Journal announcing “CreditCorp Negotiates New Joint Venture in Japan. ” The article went on to say that the “hard-charging” John Banner had successfully negotiated a U. S. $1. 2 billion investment for a 10 percent stake in Nagano Securities with an option for an additional 5 percent in the next two years.
The new joint venture in Tokyo was named “Nagano CreditCorp Shoken-Gaisha,” or NCS. The new company would begin wholesale investment banking operations and sell financial products and services to both individual and institutional customers throughout Asia. There would be five new divisions—commercial market services, retail market services, electronic products, management services and personal financial management services—which would sell CreditCorp’s products and services in Japan. The article went on to report that Nagano Securities had 127 domestic branches and 29 overseas offices with a total market capitalization of U.
S. $5 billion. The president of Nagano Securities was Kenichi “Ken” Mogi, age 58, a 35-year veteran of Matsubashi Bank and Nagano Securities. CreditCorp, Inc. , with its 500 domestic branches and operations in 27 countries, was capitalized at U. S. $100 billion and had U. S. $200 billion in assets as of 1998. The CEO, John Banner, age 47, was a 15-year executive of CreditCorp and had been promoted to CEO upon his successful stint as executive vice president of sales in Europe, where he doubled CreditCorp’s base of business in less than three years.
Banner thought back to the meeting he had had with Ken Mogi in New York one year ago, when Banner had proposed that the two companies enter into a joint venture in Japan. Banner had thought that there was a huge opportunity in Japan with its U. S. $10 trillion in personal savings. CreditCorp, Inc. , in its pursuit of establishing a global network of customers, products and services, saw the joint venture as the entry point for increasing its share of Japanese corporate and individual accounts for banking, securities and credit card services.
Two years ago, Nagano Securities had been embroiled in a scandal in which they had tried to cover the losses of their preferred customers (from bad real estate loans and stock deals) at the expense of Nagano’s minor individual accounts. Matsubashi Bank, a major shareholder of Nagano Securities, had appointed Mogi as the new president just before his meeting with Banner in New York. Most Japanese banks and securities companies had had problems after the financial bubble burst in Tokyo in 1997 and 1998. As a result, Mogi was looking for an ON
NEGOTIATING BEHAVIOR 5 Training Management Corporation NEGOTIATING ACROSS CULTURES 6 infusion of capital to keep the company afloat. The joint venture seemed to be the answer to his capitalization problems and CreditCorp’s need to increase their penetration of Japan. Mogi invited Banner and his senior staff to Tokyo in January 1999 to discuss the joint venture idea. During the negotiation, there were three main sticking points in reaching the final agreement between CreditCorp, Inc. and Nagano Securities. First, there was the problem of ownership.
CreditCorp senior executives wanted a 51/49 split to retain control of the joint venture. They reasoned that a U. S. $1. 2 billion investment in the joint venture gave them the right to control the company and its assets. Because the joint venture would be in Japan, however, Nagano Securities wanted a 51/49 split in its favor. They reasoned that their large Japanese client base would be reluctant to deal with a foreign company in Japan’s very conservative banking environment. Second, CreditCorp insisted that it should run the new joint venture and appoint the top officers for NCS from its own management.
CreditCorp reasoned that wholesale banking was not Nagano’s strong suit, and that they had proven their inability to be financially sound by U. S. standards when they became embroiled in the securities scandal in Japan. Nagano Securities wanted its own people to head the new joint venture. They were willing to allow CreditCorp to fill the operations and technology management positions, since they were the dominant leader in the banking industry, but insisted that the board majority of the staff and new president be Japanese.
Third, Nagano Securities was adamant that NCS absorb some 500 of the 2,000 “relationship managers” or sales employees who were responsible for handling their major individual and corporate accounts. They reasoned that for NCS to have credibility in the marketplace, it would need the continuity of the sales force which would, in turn, create new business opportunities in Japan. CreditCorp was extremely reluctant to allow these 500 managers to be transferred to the new joint venture.
With the low return on assets that Nagano Securities had experienced in the past three years, CreditCorp managers felt that Nagano Securities was dumping their poor performers into the joint venture and saddling NCS with the high cost of Japanese salaries and benefits. Besides, with the technology CreditCorp was bringing to the joint venture, such overstaffing would be unnecessary. Banner assigned Roger Greene, 38, a Harvard MBA graduate and former Citibank vice president of acquisitions, to negotiate the joint venture with Nagano Securities.
On his team were two other CreditCorp senior executives: Mary Ross, 42, who was in charge of business development in the wholesale banking division, and Steve Martinez, 35, a rising lawyer in CreditCorp’s trust department, from Miami. In addition, there was Wayne Tanaka—a second generation Japanese-American who had graduated from the University of California, Berkeley—who was the general manager of CreditCorp’s Tokyo office, and his interpreter, Mitsuko Ueda, a recent graduate of Waseda University.
Nagano Securities assigned Junichiro Ando, 65, a graduate from Tokyo University and a former bureaucrat from the Ministry of Finance, as lead negotiator. Ando had recently retired from public service and had been accepted on the board of directors for Matsubashi Bank five years Training Management Corporation THE IMPACT OF ago. He also had been appointed as an advisor to Nagano Securities’ former president, Tomihiro Izumi, and was the lead person in discussions with the government body investigating the securities scandal. In the late 1980s, Ando had spent five years in Washington, D.
C. , working on behalf of his government. The Japanese team consisted of eight members, including Toshio Saito, 54, a 20-year veteran of Matusbashi Bank and president of Nagano Research Center, Ltd; Hiro Hirayama, 53, Director of Corporate Securities; Koji Kobayashi, 42, assistant director of personnel and a graduate of Keio University; Masaki “Mike” Akahane, 38, manager of business development and an MBA graduate from Stanford; Ari Matsuda, 32, a female manager in charge of administrative affairs; and Tomoaki Itah, 28, a section manager in human resources.
Also assisting the Japanese side was Shuichi Ikegami, a senior director for corporate securities and funds from Matsubashi Bank. Banner walked down to Roger Greene’s office and gave him a copy of the newspaper with the article. Once again, he congratulated Greene on his successful negotiation with Nagano Securities. Greene smiled as he thought back to his trip to Tokyo nine months earlier. He and his team had arrived at Narita Airport after a 12-hour flight from New York, to be met not only by Wayne Tanaka of CreditCorp Japan, but also by Junichiro Ando, Toshio Saito and four other Nagano Securities staffers.
A number of limousines provided by Nagano Securities carried members of the two teams to the Imperial Hotel in downtown Tokyo, where the CreditCorp executives would be staying during the negotiations. Ando informed Greene that they had arranged for a dinner party at a famous Ginza restaurant at 7:00 p. m. , to welcome them to Japan. Although they were tired and suffering from jet lag, Greene accepted the invitation on behalf of his team. They were soon picked up at their hotel and taken by taxi to a restaurant, where a sumptuous feast and drinks were served.
After much toasting and nonbusiness conversation, Greene found himself asking Ando about the next day’s negotiation, and whether Ando had received the latest proposal and related information sent by CreditCorp the week before. Greene was surprised when Ando deferred talking about the negotiation and began a long conversation about his own experiences living and working in Washington, D. C. At around 11:00 p. m. , the party finished and the U. S. Americans were informed that they would be picked up at 9:00 a. m. the next day and transported to Nagano Securities’ head office in the Marunouchi district, where the negotiation would take place.
The following morning, Greene and the CreditCorp were greeted at the front door of the Nagano Securities’ headquarters building and ushered into a large boardroom. Having awoken in the early morning hours, the CreditCorp team had already spoken with headquarters over the phone and learned that Banner had given an interview in New York to CNN’s “Financial News,” which would be aired in Tokyo that evening. Banner’s style of business was based on the “profit or perish” model. In the CNN interview he was quoted as saying, “In the banking industry, we have to keep developing new services and products.
We can never relax because the fellow next door can enter the business anytime. We have to run fast to succeed. ” When he was asked about the negotiation with Nagano Securities in Tokyo, he said, “Competition in the wholesale banking business on a global basis is very keen. So, in a sense, we need to diversify our business to sustain growth worldwide. That is why we are investing in Japan. With our banking strengths in on-line products and services we should have no trouble leaping to the top of the wholesale banking business in Japan. ” He went CULTURE ON NEGOTIATING BEHAVIOR 7
Training Management Corporation NEGOTIATING ACROSS CULTURES on to conclude the interview with the following statement. “We have consistently followed a path of international diversification through joint ventures, wholly owned subsidiaries and minority investments leading to participation in 27 countries. We network into different countries step by step, and where the markets seem promising we establish a new business. We trade our technology and knowledge of banking to a new partner who has the local contacts and the financial clout to help us receive a good return on our investment.
If it proves profitable, then we move on to another country. We continue as long as opportunities for profit continue. If not, then we pull out just as quickly as we went in. At any one time we have a priority list of six or seven countries we are studying for opportunities in the banking sector. Japan is at the head of that priority list, and that is why we are talking to Nagano Securities. ” After an exchange of business cards, Greene formally introduced his team to the eight members of the Japanese team sitting across from them at the long, mahogany negotiation table.
Ando thanked Greene for the introductions, then asked the person sitting to his right, Akahane, to introduce the Japanese team in English. After the introductions, Ando welcomed the U. S. team in Japanese, with Akahane translating his remarks into English. He went on for some time discussing Nagano Securities’ past successes in joint ventures in Japan. Then he said: In the past five years, we have established five joint ventures in cooperation with two life insurance companies, three regional banks and a mutual loan and savings company to provide our Japanese customers with quality products and services.
We also negotiated with JCB, a bank-affiliated credit card company in Japan, to furnish credit card services to our consumers in Japan and abroad. We are proud of our 50 years of history and we have been successful with our joint venture partners because we enter into these agreements as if they were a corporate marriage. We believe in an arranged marriage in which there is give-and-take on both sides, just as occurs in a marriage between a Japanese man and woman. For this to happen, we need to have good channels of communication and mutual respect between our two companies.
We will run the joint venture with trust and respect for each other. Courtesy and a continued dialogue between the two partners will allow us to resolve all issues, big and small, that will be encountered in the marriage. We hope that your Mr. John Banner will understand our situation in Japan. Upon completion of his remarks, Ando asked Greene to talk about CreditCorp. Greene thanked Ando for his welcoming remarks and proceeded to lay out the major differences between the proposals of the two sides. He went on to list the three biggest issues: ownership, management control and staffing.
Then he asked Ando which of these three issues he would like to address first. Akahane translated Greene’s remarks to Ando, but to his surprise, there was no visible reaction. Ando sat quietly and after a long silence said, “Yes, we understand your proposal well. ” He then went on to ask Greene how they found their accommodations at the Imperial Hotel, and whether this was their first trip to Japan. This small talk continued for about 30 minutes. After the light discussions, Ando nodded to Akahane, who went on to lay out the Japanese proposal, which he continued doing for some time.
For Greene and his team, this was the same 8 Training Management Corporation THE IMPACT OF information that had previously been presented to them in New York in writing. It seemed that their latest proposal was not being addressed at all. At the end of Akahane’s remarks, Ando stood up and announced that he had arranged for a tour of their offices before adjourning for lunch. The negotiation resumed at mid-afternoon, when the Japanese began asking questions previously asked by the Japanese in writing and which CreditCorp thought it had addressed in its most recent proposal.
Greene fielded some of the questions, but his team answered most of the questions, as they fell in a team member’s functional area. The U. S. Americans answered the questions in a direct, straightforward and concise manner. Throughout the afternoon, additional data and details were provided, either verbally or in writing. During the negotiation, the Nagano Securities team often broke into side discussions in Japanese that sometimes lasted 15 minutes or more. When Greene asked Akahane what the Japanese were discussing, he was told that they were merely reconfirming their understanding of what had been said and that he should not worry.
The U. S. Americans, growing restless, pressed the Japanese to address the three main issues as presented, but were unsuccessful in getting the Japanese to do so by the end of the first day of negotiations. The U. S. Americans even wondered about the role of the others on the Nagano side, since instead of participating in the discussion, they had just sat quietly and nodded in unison whenever Ando spoke. Twice, Greene had tried to redirect the negotiation back to the three main issues of disagreement.
He had even offered to meet Ando’s request that the Nagano name come first in the new joint venture if they could resolve the issue of ownership. He proposed that the new joint venture be named “Nagano CreditCorp Shoken-Gaisha. ” Although the Japanese were agreeable to his offer, they were reluctant to address the ownership issue at that time. In fact, Akahane went on to reintroduce issues that the U. S. side thought had already been successfully addressed in earlier correspondence. This repeated questioning was annoying to the U. S. team.
At one point, Kate Myers interrupted Akahane to say, “Why are you asking the same questions all over again? Haven’t we answered them sufficiently? Can’t we move on to the real issues at hand? ” The Japanese then became very quiet until Greene suggested that everyone take a break. During the break, Ari Matsuda approached the interpreter, Mitsuko Ueda, to ask her if Greene and his team would be interested in having dinner with Ando and Toshio Saito that evening. Ando was looking forward to treating them all as his guests at his favorite member’s club near the office.
Ueda passed on the invitation to Greene and, much to her surprise, Greene thanked Ando but politely declined. After consulting with his team he stated that the U. S. team members were still jet-lagged and in need of rest. He stated that he and his team would like to return to the hotel where they could review the day’s proceedings and prepare for the next day. At dinner, Greene and his team reviewed the day’s events and concluded that they were no closer to an agreement than they had been prior to their departure from New York.
In fact, since the Japanese had not responded to their proposal sent the week before, they felt that they were back at square one. Greene knew, ultimately, that CreditCorp’s joint-venture strategy was to concentrate on the direct distribution of products and services to various market segments in Japan. Their hope was to develop a product mix that would provide their CULTURE ON NEGOTIATING BEHAVIOR 9 Training Management Corporation NEGOTIATING ACROSS CULTURES 10 global clients with the best services in Japan. Banner was less concerned with the name of the company or management issues than he was with profits from the joint venture.
Before the negotiation session began the next day, Ando introduced Shuichi Ikegami, from Matsubashi Bank, to Greene. During an informal discussion, Ikegami explained that a few members of the bank’s board of directors were concerned about the joint venture. He said that member companies of the Matsubashi Group, a horizontally integrated conglomerate of companies affiliated with Matsubashi Bank, had expressed their reservations about the joint venture and had threatened to discontinue using Nagano Securities as their preferred underwriter in the future.
This news alarmed Greene and his team. After a brief side discussion, they asked Ando to explain Nagano Securities’ business relationship with the Matsubashi Group in greater detail. Ando then outlined the structure of the Matsubashi kieretsu, the interconnected structure of the member companies. He stated that Mogi, formerly with Matsubashi Bank, would handle this small problem, since his network at Matsubashi was extensive. Greene and his team expressed their concerns about Matsubashi Group’s relationship with Nagano Securities.
Ando responded that if Greene had the time, perhaps he could visit some of Mogi’s contacts at Matsubashi and explain CreditCorp’s proposal to establish the joint venture. Greene agreed to do so, but didn’t understand what this ultimately had to do with their discussions today. The Nagano Securities team continued the negotiation with another round of questions and expression of concerns. Ando proposed that the two sides address the issue of relationship managers and the need for Japanese clients to feel comfortable with the services and products of the new joint venture.
What better way to do this than to make use of the sales force already in place? He went on to explain the concept of shukko, or assigning staff to a subsidiary or joint venture as a way of gaining experienced staff and a fast start-up in the marketplace. Ando emphasized that relationships came first in Japan and that profits would be realized later. Greene doubted that Banner and CreditCorp’s stockholders would wait patiently for profits. He knew from his research on Japanese business practices that shukko was a traditional way for Japanese companies to reduce head count and costs in times of recession or declining business.
He wondered whether the expense of higher salaries and benefits was justified, based on the performance of these managers over the past three years, and told Ando this. Greene and his team were concerned that Nagano Securities was using the joint venture to dump poorly performing managers at a substantial cost to CreditCorp. Ando assured Green that, if he agreed to accept the 500 relationship managers, the company union would support the move of the 500 managers and agree to a 15 percent reduction in salaries and benefits for those transferred managers.
Greene knew that Nagano Securities had a company union, but he had assumed that the union would not be problematic. The discussion went on for some time and was finally resolved when Wayne Tanaka took Koji Kobayashi aside during a break and proposed that Nagano Securities cover 25 percent of the cost of salaries and expenses over the first two years of the joint venture. Although Greene felt that this was a good idea, Mary Ross disagreed, saying that it would be awkward to manage, measure and reward performance under Nagano’s present relationship management system.
In addition, once these workers were transferred, it would be difficult to fire poor performers. Ando assured Greene that if he accepted the relationship managers, he (Ando) Training Management Corporation THE IMPACT OF personally would work with Kobayashi to select only the best managers for the joint venture. Greene took his team aside and conferred with them. Tanaka told Greene that he was sure that they should trust Ando’s judgment on this point. Greene, wanting to move the negotiation ahead, readily agreed despite protests from Ross.
After lunch on the second day, and having just agreed to meet Nagano Securities’ request on the relationship managers, Greene decided to address the ownership issue. He stated that CreditCorp was willing to invest another 5 percent in the joint venture over the next two years, should Nagano Securities agree to a 51/49 split, which would leave control in U. S. hands. He reminded Nagano Securities of their current financial situation––that their stockholders would want CreditCorp to have control to ensure a healthy stream of profits back to the United States.
Ando reasoned that Japanese stockholders such as Matsubashi Bank would want just the opposite to reassure Japanese customers that they could trust the new joint venture. The discussion went on all afternoon with only one decision being made. The joint venture and new company would be named Nagano CreditCorp Shoken-Gaisha, and listed on the Tokyo stock exchange as NCS. However, both sides agreed to revisit the issue of ownership later in the negotiation. At the conclusion of the second day’s negotiation, Ando once again offered his dinner invitation to Greene and his team.
This time, Greene was happy to accept, but suggested that he meet with Ando separately from his team and allow his team to prepare for the following day. Ando agreed and picked Greene up at his hotel for dinner at his private club. Toward the end of dinner, Ando told Greene that the issue of ownership was important to the Japanese and could be a deal-breaker. He explained how difficult it had been to reach consensus on their position, both internally and with the Matsubashi Group. Reaching agreement had been extremely difficult and time consuming. Any changes on this point would be challenging for Ando and his team.
Beyond the issue of consensus decision-making, he revealed that Mogi had used favors and obligations to align the senior managers of Nagano Securities and Matsubashi Bank and get them to agree on the joint venture with CreditCorp. He asked that Greene talk directly with Banner to see if a compromise could be reached wherein the Japanese side could retain a 51 percent share of ownership. Greene told Ando that he would talk with Banner and give him an answer the next day. In his discussion with Banner, Greene learned that Banner was willing to sacrifice some control as long as profits were high.
CreditCorp was confident that their technology leadership and expertise in wholesale banking would give them an edge in the key decisions of the joint venture. Banner told Greene that, if Greene could staff key positions in the joint venture with CreditCorp executives, he would be willing to give in to the Japanese request for a 51/49 split. CreditCorp, however, would invest additional money into the joint venture based only on future performance measurements to be agreed upon by both parties. On the third day of the negotiation, Greene opened with a counterproposal.
If Nagano Securities would agree to CreditCorp’s request to staff the top management positions of the joint venture, CreditCorp would be willing to agree to Nagano Securities’ need for ownership control. After translating the counterproposal, Ando thanked Greene for his new proposal and told him that he would get back to him after conveying the information to Mogi and his senior CULTURE ON NEGOTIATING BEHAVIOR 11 Training Management Corporation NEGOTIATING ACROSS CULTURES 12 staff. But before doing so, he was interested in learning more about CreditCorp’s plans for staffing top management positions.
Greene explained the organizational structure of CreditCorp and how NCS would be integrated into their global operations. In addition, he stated that CreditCorp’s leadership development program and succession planning would be integral to staffing at NCS. At the end of the morning session, Ando asked Greene and his team if they had planned any sightseeing in Tokyo. He suggested that Greene’s team stay as guests at the Nagano’s company resort house, a local onsen––or hot springs bath––in Kamakura that afternoon, and that they could resume the negotiation the next afternoon.
Greene was surprised at the unannounced break in their discussions and suggested that they continue their talks to ensure that they could come to an agreement before their scheduled departure on Friday evening. Ando told Greene that Nagano Securities needed the additional time to present CreditCorps’s counterproposal to their management. Reluctantly, Greene and his team agreed to the trip to Kamakura. Masaki Akahane and Ari Matsuda accompanied the team on the train ride to Kamakura from Tokyo. Knowledgeable about the Kamakura area, Akahane provided amusing anecdotes to entertain his guests.
After visiting the Great Buddha of Kamakura and bathing at the onsen, the group retired to a large tatami room, where dinner and drinks were served. After dinner, the U. S. team was invited to go singing at a nearby karaoke bar. On the train ride home, Akahane asked Greene about a recent article he had read in the Asian Wall Street Journal about a new joint venture between a U. S. and Chinese company, in which the top management positions were held jointly by both sides for a one-year period. This allowed both sides to learn from each other and to manage the new company jointly.
Akahane wondered if CreditCorp had any experience with this type of management structure. Greene said that he had not read the article, but that it sounded like a good idea worth considering. Ando led off the Thursday afternoon session with a review of the negotiation to date and Nagano Securities’ response to CreditCorp’s counterproposal on Wednesday. Nagano Securities would be willing to give CreditCorp broad discretion on staffing the top management positions if they agreed to the 51/49 ownership issue in favor of Nagano. Ando explained some of the difficulties of hiring, developing and firing Japanese employees in Japan.
With the acceptance of the relationship managers and other employees transferred from Nagano Securities, Ando was concerned that CreditCorp would have difficulty motivating and retaining staff. Ando then asked Akahane to present his own proposal for staffing key top-management positions at NCS. Akahane drew up an organizational structure that had parallel positions at all senior management levels (for example, two vice presidents of finance, one Japanese and one U. S. -American), explaining that such a structure would integrate the two cultures and provide a consensus-based decision-making process for resolving conflict.
The presentation went on for some time, with Greene and his team asking questions to clarify their understanding of the proposed structure. Greene understood that, ultimately, staffing the new joint venture was an issue of creation and control. He understood that conflicting cultural assumptions can have disastrous consequences for new organizations. He was also aware that numerous Japanese and U. S. Training Management Corporation THE IMPACT OF joint ventures had tried parallel organizational structures, with little success. Greene thanked Akahane for his presentation and told him that he would consider his proposal.
He then suggested that they keep this issue on the table until the following morning, and asked Ando for a short break so that he could discuss the proposal with his own team members. Greene felt that CreditCorp should stand firm on their need to staff the joint venture. Tanaka pointed out that CreditCorp managers would have little credibility with Japanese customers, government officials or employees. He suggested that all selected managers have a thorough understanding of Japanese language, culture and management practices.
To ensure success, a training and orientation program would be designed and implemented on both sides of the joint venture. Tanaka also suggested that CreditCorp seriously review key positions and determine which ones required the most interaction with the Japanese business environment and should be staffed by Nagano Securities and which should be staffed by CreditCorp. Everyone agreed that the president of the new joint venture, the vice president of information technology and the vice president of banking operations should be selected by CreditCorp.
Greene suggested that the position of chairman and that of vice president of human resources and sales should be selected and staffed by Nagano Securities. The meeting resumed after a two-hour break, and Greene responded to Akahane’s proposal for staffing by countering with his own proposal, including the suggestion that the chairman of the organization be Japanese. After some discussion, Ando told Greene that he and his team would respond to this proposal on Friday morning. Greene approached Ando and asked if it would be possible to meet privately after the session.
In a private meeting room, Greene told Ando that he would have a problem going back to Banner with the present deal if Nagano Securities did not agree with their need to staff these key positions. He reminded him that CreditCorp had conceded on two of the three issues brought up at the beginning of the negotiation, and that he needed to show a positive result to Banner before he and his team returned to New York. Ando nodded, exhaled slowly, and said: “I will do my best to support your proposal. ” The following morning, Greene’s team was anxious to wrap up the negotiation and fly back to New York. Ando again addressed the U.
S. side and expressed his gratitude for their time and effort. He went on to inquire whether Greene and his team would be available for a meeting in two weeks in New York at CreditCorps’ headquarters. Ando told Greene that he would call Banner personally to set up the meeting and hoped that Banner would be able to attend the meeting. Ando then rose from the negotiation table and bowed to the U. S. side. Greene and his team looked at one another in some confusion, not knowing what to do next. It appeared that the negotiation had ended without an agreement. CULTURE ON NEGOTIATING BEHAVIOR The Ten Dimensions of Culture
Culture affects the negotiation process through the cultural orientations and behaviors that individuals and groups bring to the negotiating table. Although these cultural orientations are unlikely to be addressed during the negotiation, they play a significant role in the proceedings and the final outcome. Training Management Corporation 13 NEGOTIATING ACROSS CULTURES 14 The process of negotiation requires individuals and groups to adopt a position based on their interests and needs. Underlying cultural orientations and core values, which may be nonnegotiable or, at best, marginally negotiable, influence these positions.
To arrive at a mutually beneficial agreement, both sides must conduct “cultural due diligence. ” Cultural due diligence is the process of clarifying the other side’s cultural orientations and the resultant behavior before entering into the negotiation. The following section considers each of the ten dimensions of TMC’s Cultural Orientations Model™ and the ways in which each can manifest itself in the negotiating process. Environment All negotiators strive to control their immediate environment in a negotiation.
The context of the negotiation, the physical location, time, language and psychological space are manipulated to each side’s advantage. There are basically three approaches to controlling the immediate environment or the context of the negotiation: control, harmony and constraint. A negotiator who prefers a control orientation drives all aspects of the negotiation, from choosing the physical location to setting the agenda. As an individual negotiator, you expect to influence and change the negotiation environment to fit your needs. Schedules, responsibilities and performance standards are clearly communicated to both sides.
You are not shy in taking charge of any situation and are highly optimistic and self-confident in your approach. Alternatives or options are selected to enhance problem-solving as issues are outlined and discussed. Opportunities are seized and risks taken to deliver dynamic and novel business propositions. A proactive approach to solving problems through persistence and creativity is employed. You often assume that others should conform to your own approach to negotiating. A highly control-oriented person displays impatience with intangible and vague statements, assessments and evaluations of ongoing discussions by the other side.
Communications technology is used to bridge distance, time and cultural differences. Conflict over positions, the process of give-and-take, and the need to bargain are assumed and expected. A person who has a harmony orientation to the environment seeks out members of his group or the other side to arrive at a mutually beneficial solution. As an individual negotiator, you expect to balance your own approach to negotiation with the needs of the other party or to meet external constraints. Consultation before making any decision is assumed and expected.
Issues are reframed and alternatives selected to present a flexible position to all involved. Attempts are made to adjust initial positions to those of the counterpart, and there is the expectation that they will adjust to the other side’s needs or wants as well. Establishing and maintaining positive relationships is of key importance to you and the members of your team. Compromise and conciliation are used to avoid conflict and reduce the risk to all parties. You exhibit stress when other negotiators display a win-lose or confrontational style of negotiation.
Opportunities and business propositions tend to be well thought out and take into consideration the needs of the other side. The approach to risk is to look for precedent and maintain the status quo rather than to seek novel approaches to problem-solving. When proposing a new idea or making plans, you readily assume that a compromise will be required to reach agreement. Training Management Corporation THE IMPACT OF A constraint orientation defines positions, needs and interests according to the outside forces that limit or prevent action.
As an individual negotiator, you expect that external forces and conditions beyond your control will determine the outcome of the negotiation. Issues and alternatives are restricted by strong religious beliefs, changing economic conditions or governmental regulations. Forecasting future needs and planning for the future are limited. Generally, you accept the status quo and adjust your position to the limits set by the other side or the external constraints you cannot control. You prefer to negotiate with clear guidelines and parameters given by superiors or those in charge.
You assume that you must act within the given limits of a set of negotiation parameters. You have a tendency to frame issues and alternatives according to the demands, actions and approaches of your counterpart. Opportunities and business propositions are guided by considerations of security and of minimizing risk at all stages of the negotiation. Consistency and predictability in business partners is sought from the other side. A reactive approach to problem-solving is employed. The creation of elaborate and fixed contingency plans helps to mitigate risk or change. Renegotiation after the signing of the agreem