Imagine that you have been leading businesses successfully for many years within the country. As you climb up the ladder, at some point you are contacted by a headhunter with a potential job assignment in a multinational company that besides being a rather small business serving the domestic market, has tried to start selling overseas for a year without much success. As an entrepreneur yourself, you know that about 20 % of the businesses fail within their first year of operations; 30 % within the second; 50 % on the first five and after 10 years about 70 % have ceased operations. In this case, the problem is related to the lack of adaptation into the new scenario where the company has to deal with offices located abroad, different cultures, beliefs, and therefore, multicultural mindsets with the difficulty such situation entails. This situation is becoming more and more common nowadays and therefore requires a global mindset approach to bridge the existing cultural gaps.
Globalization drives the multicultural environments
Multicultural environments have shifted in the last few years from a potential scenario into a reality. It has become the new normality to have peers from different countries into what nowadays is becoming an inclusive, diverse and multicultural corporate environment. Such a situation entails benefits but also a number of challenges, often related to cultural clashes: from rather simpler-to-solve communication breakdowns or belief differences to more complex and rooted ethnocentrism and parochialism.
Reasons for internationalization are rather diverse, with some corporates considering such expansion policies due to increased competitive advantages related to productions overseas (lower production costs, better availability of resources, more accurate product specificity requirements…), others due to their expansion into other markets different than their home market ones, or in some cases, simply to pursue a the capability of competing with other brands that have a similar portfolio and are present in overseas markets.
Challenges arising from the multicultural environments
In the need for such internationalization, there are key elements that need to be considered in order to succeed in such endeavor, being some of the main ones the following concepts:
- Cultural Distance
- Global Mindsets
First of all, what is cultural distance? According to Azar (2014), research has shown that cultural distance is an important source of uncertainty for organizations during their internationalization process. Differences in norms, ideas, values and beliefs in culturally distant markets increase the liability of foreignness and uncertainty that makes the firm perceive a lack of sufficient relevant information regarding the targeted market, generating challenges to predict the future behavior of such market.
Using cultural difference indicatives as a measure to determine whether two markets can share a common strategy or are too different to each other can be a good way to set the fundamental strategy for the internationalization of a firm. The power distance indicator (PDI) refers to the degree which power is distributed equally or unequally among the society. The individualism (IDV) refers to the degree in which individuals are able to care for themselves and their relatives. The masculinity (MAS) refers to in which degree achievement, heroism, assertiveness and material reward for success are important in the society. The uncertainty avoidance dimension (UAI) measures the degree in which people within a society feel uncomfortable with facing uncertainty and ambiguity (Azar, 2014).
Secondly, let’s see what’s the role of perceptions for this matter. The perceptions are a key element in the definition of the environment of organizations as it defines the worlds of the individuals as well as guides their behavior (Cook & Hunsaker, 2001). The process of creation of a perception has different stages, such as perceiving the first information from the environment, selecting and screening it (filtering), organizing and interpreting the information and finally creating the action (Cook & Hunsaker, 2001).
One of the challenges that we face in the generation of perceptions is that they are heavily affected by its impact in the actions we are conducting. For instance, in situations in which we depend on third parties to be able to conduct a big project (i.e.: contractors), lack of accuracy in their service delivery can generate us a negative perception that goes beyond the person that conducted that task or the brand itself: it can be associated to such specific type of contractors (constructors, etc).
Global Mindsets: The bridge that minds the existing cultural gap
So, how can we ensure to bridge the corporate culture of the head office with the overseas cultural distances and perceptions? The internationalization processes often imply that the organization that is expanding may wish to send an expatriate manager to the countries in which the firm is expanding to. There is endless cases of failure related to the particular person that has been expatriated and in most of the cases, the perceptions and the mindset of the expatriate are the main reason for such failure: they lack global mindsets.
According to Bowen & Inkpen (2009), global mindset is an important factor for success for organizations that engage in businesses in countries other than their original home country. The managers that are sent to the newly expanded countries need not only to be talented and competent but also need to understand about strategic processes and structures and how they are organized in the country of destination. It is important that such managers are engaged into understanding diversity of thought to improve employee satisfaction due to the fact that the country of destination may have different mindset and therefore a different approach is required.
According to Felicio, Meidute & Kyvik (2016), the organizations that have aligned global mindsets between the company culture and the individuals prove to be more successful in their internationalization strategies. Political instability is a risk factor that any company has to acknowledge when implementing a globalization policy, and therefore measures need to be taken into account to mitigate it.
According to Javidan (2014), there are a set of skills that are inherent to the managers that have global mindset. They are the following ones:
- Three core competencies: Self-awareness, engagement in personal transformation, and inquisitiveness.
- Seven mental characteristics: Optimism, self-regulation, social judgment skills, empathy, motivation to work in an international environment, cognitive skills, and acceptance of complexity and its contradictions;
- Three behavioral competencies: social skills, networking skills, and multicultural knowledge.
Even so, global mindsets seem to be a profile that becomes more needed and desired in the organizations, not only because of their capacity to bridge gaps overseas, but also in a world where business does not stop and has no understanding of nationalities, languages, culture and religion.
In a nutshell, if you are a business owner, leader or manager, consider the need to add one more requirement to your recruitment needs & wants, employing global mindsets when in need to reach beyond your borders.
- Azar, G. (2014). How congruent are managers’ perception of cultural distance with objective reality? Cross Cultural Management, 21, 400-421.
- Bowen, D. E. & Inkpen, A. C. (2009). Exploring the role of “global mindset” in leading change in international contexts. The Journal of Applied Behavioral Science, 45(2), 239. doi:10.1177/0021886309334149.
- Cook, C.W. & Hunsaker, P.L. (2001). Management and Organizational Behavior, McGraw-Hill, Boston, MA.
- Felicio, J. A., Meidute, I. & Kyvik, O. (2016, November). Global mindset, cultural context, and the internationalization of SMEs. Journal of Business Research, 69(11), 4924-4932.
- Javidan, M. (2014). Mansour Javidan: What is the Global Mindset? – Global Matters