Perhaps you’ve heard that the Chevy Nova once lacked sales in Latin America companies because the automobile’s name translates to “doesn’t go” in Spanish?  Although that story isn’t really true – it’s an iconic example of the perils of remaining ignorant of cultural sensitivities when doing business across borders. 

When companies face more serious cross-border crises, there’s usually a lot more than lost sales on the line.  Thus, I remain amazed at how many multinational businesses do not incorporate “cultural risk management” into their ongoing issues and crisis management programs. 

Understanding and addressing cultural risk is the realm of Hilka Klinkenberg, who is one of the senior members of the Global Coaching & Consulting Group.   

 Hilka and I connected back in 1994 when we explored whether she can lead a workshop at one of the Ketchum global director meetings.  Over the years, we’ve shared thoughts on client crisis situations that involve many a cultural faux pas.  We recently re-connected and Hilka has graciously agreed to address these Three Tough Q’s:

 

Q1:  Do multinational organizations need to “press their hands against the hot stove” before taking cultural risk management seriously?

No.  However, that seems to be the preferred modus operandi.  Cultural risk avoidance should be incorporated into the enterprise risk management of any large or small organization doing business outside its national boundaries.

Cultural risk arises when individuals or organizations are unaware of the basic values intrinsic in other cultures.  Consequences range from mild insults that can affect the tenor of a relationship – to possible imprisonment and huge financial losses.  Cultural crises can affect a global company’s product development and production, legal and political issues, human resources and relocation, marketing and advertising.  And, in today’s virtual world, any flashpoint can go viral in an instant.

Often, I hear executives say there’s no need for cultural risk management when they hire locally.  But, do their local executives understand broader global implications of decisions?  Does headquarters understand the local implications of their overall corporate policy?  A company may enjoy a global brand and a global image, but customers, the media and governments are local.

We offer cultural risk analysis, training programs, establishing protocols and even setting up a risk assessment committee.  This preventative approach is better than trying to manage a cultural crisis after the fact.  Benjamin Franklin famously said, “an ounce of prevention is worth a pound of cure.”  In a global environment, we prefer to say, “a gram of prevention is worth a kilo of cure.”

Q2:  Are there common elements among the many examples of multinational organizations “misplaying” a cross-border crisis response because of a lack of attention to cultural sensitivities?    

Lack of resources is primarily the excuse of smaller companies first entering the global market.  For others, there is a mix of factors at play.    

National pride can cause a corporation to behave inappropriately when it considers the behaviors and values of its home country to be superior to the country in which an event has occurred.  When emotions already run high after a corporate misstep, it takes very little – just a thoughtless remark by a corporate representative – for a crisis to escalate.  

Local pride kicks in when individuals or groups of people feel belittled or mistreated by an outsider like an arrogant, powerful multinational.  This creates an “us against them” situation that too often escalates hostilities.  Pride is not restricted to corporations and business.  Governments and countries, too, take umbrage when they feel slighted or misrepresented.  

Arrogance is a flaw within many global corporations that think the management and leadership styles of their home country are superior.  When a company’s earnings eclipses the GDPs of many countries where they operate, it could lead to arrogance where they begin thinking they are too big to fail.

Ignorance of a country’s customs and values often leads to stereotyping and prejudice.  It is not uncommon to find executives and board members of multinationals who are parochial in their attitudes.  But, ignorance is no excuse when the fortunes of your organization rest on your decisions and actions.  

A companion to ignorance is thoughtlessness…that little off-the-cuff comment or impulsive action that can turn a manageable issue into a misplayed crisis response. 

   

Q3:  Can politics sometimes trump a cultural risk management program’s chance for success if a company gets entangled into a geo-political mess?

Sure. 

In autocratic countries like China, governments can control both the courts and the media, and it is hard to win when a crisis occurs.  The Rio Tinto bribery scandal in China is only one example.  (And not the only example – see last week’s Forbes blog piece on “The Dark Arts of Chinese PR.” – J.D.)

Even in democracies, politics can trump crisis management.  Democracies are run by politicians whose primary job, if one were cynical, is to get elected.  They jump at the opportunity to capitalize on a crisis by making as much noise and getting as much media attention as possible.  The media’s job is to get ears and eyes to improve their ratings.  Both feed on crises to succeed.  And, if a country or a political party has an agenda that can be promoted by exploiting a crisis…well, that’s politics.

The political, economic, legal and media environments of a country should always be considered when formulating a cultural risk management plan.  Wise multinational organizations take the time to incorporate cultural management programs into their gold-standard crisis management programs.

Thoughts about this interview?  Please share your thoughts in the comments below.