CHAPTER 4

Making Decisions across Cultures

WHO DESERVES THE BONUS?

Santoso, an Indonesian, and Alice, an Australian, are friends and business partners, working tough road-building projects in Indonesia, where Alice’s civil engineering background and Santoso’s local knowledge and financial skills have complemented each other. Now they find they have a major disagreement.

Two years ago, Adi Perkasa, a senior manager in the company who is independently wealthy, used his high status and connections in the area to secure for the company a major road-building project. Santoso and Alice saw the project as a godsend because they had been facing an uncertain period with few contracts. Moreover, due to the hard work and skill of certain staff, the project has been successful and has made a large profit. Believing in sharing good fortune with those who made it possible, Santoso and Alice have decided to set aside US$100,000 for distribution to the senior personnel involved. The questions they have to decide are who gets paid a bonus and how much?

Three staff members immediately stand out. Adi secured the contract but had little to do with its completion. Bambang, an engineer, wrote a brilliant plan for the project but thereafter was distracted by a looming family tragedy. He is from a poor background, has a large family, and struggles to pay his bills: recently his son suffered a brain tumor, and the family faces a bill for overseas treatment that is simply beyond their means. Finally, as the project manager, Rafi managed the project enthusiastically, leading and motivating his project team extremely well to far exceed the project objectives.

How should they distribute $100,000 to reward three such distinctive contributions? Alice suggests to Santoso that each of them should write down a suggested fair allocation and that they then use these starting points to negotiate what is fair. Santoso doesn’t like that idea—he would prefer a general discussion of the three candidates first. But eventually he agrees. Alice thinks hard about the allocation and then writes down

Adi: $10,000

Bambang: $50,000

Rafi: $40,000

When she looks at Santoso’s sheet of paper, she is shocked. He has written

Adi: $60,000

Bambang: $10,000

Rafi: $30,000

She looks at Santoso in disbelief. “You can’t be serious,” she says. “Adi is a lazy, aristocratic con man. And he is already rich—he doesn’t need this money. Rafi made this profit for us. And what about Bambang—his plan was great, and what’s more, he needs the bonus more than anyone else. How can you possibly justify giving all that money to Adi?”

Santoso shrugs his shoulders. “Adi is a very important person,” he says. “He is well-connected. Our company is lucky to have him. Without him there would be no project, no profit, and no bonus for anyone. If he finds out we paid the others more than him, he will be insulted. He may leave. And then where will we find such contracts? As for Bambang, the family worries of others are no concern of ours.”

Decision making is everyone’s business. Each of us constantly makes decisions—which item on the menu to choose, which house to buy, whether or not to pursue a relationship. We choose from among alternatives all the time. Mostly, we think we are doing so by being logical. But it is often cultural patterns that determine both the way we make decisions and the decisions we make. In the case above, Alice structured the decision-making procedure rationally: she did her best to allocate fairly by applying normal Western principles of rewarding effort and performance but was probably influenced in deciding Bambang’s reward by an ethic of humanitarianism. In contrast, Santoso wanted to discuss the problem before beginning to devise a solution, paid more attention to role and status than to performance, and dismissed the humanitarian aspect for someone not part of his in-group. Alice and Santoso are adhering to decision models that are characteristic of their cultural backgrounds.

Culture influences what is perceived as desirable and also how to achieve these goals. It determines how decision makers simplify the complex reality of decision making. In order to break out of their culturally based decision-making scripts, both Alice and Santoso need to learn from each other and develop their cultural intelligence.

The Rational Model

Decision making in many Western countries has been heavily influenced by the application of a linear type of formal logic called the rational model of decision making. We see this often in business. However, culture influences all decision making, be it at work, in the home, or elsewhere.

The rational model states that decision making operates—or should operate—in a sequence of steps. These involve

• defining a problem: for example, a leadership vacuum created by the resignation of the organization’s chief executive officer (CEO)

• generating a range of potential solutions: for example, attracting a range of candidates for the vacant CEO job

• applying systematic analysis to the potential solutions to predict which one will best satisfy predetermined criteria: for example, subjecting CEO candidates to formal assessments to determine which would provide the best leadership

• choosing and implementing the best alternative: for example, selecting, appointing, and supporting the candidate for CEO who performs best on the assessments.¹

This approach is the basis of management science and is implicit in the thinking behind such management decision-making techniques as linear programming, break-even analysis, feasibility studies, and strategic choice. Many individuals pride themselves on their powers of analysis and logic, and promote and defend their decisions accordingly. However, other decision-making models are possible. What would you think of a board chair who said that the new CEO had been selected for one of the following reasons?

“His father had the job before him—it’s a company tradition.”

“We liked her more than any of the other candidates.”

“He comes from a good family and attended an excellent university.”

“We asked all the employees, and she got the most votes.”

“We prayed, and God showed us the correct choice.”

“We hired him because he is the brother of a board member.”

“We all know him well, and we know we can trust him.”

“Through his wife, he has excellent political connections.”

“We chose her because she offered the biggest payment.”

“I don’t really know why we appointed him. It just seemed like the right thing to do. It was intuitive.”

A Western board acting thus might have its shareholders howling for blood. Yet all of the criteria above are common in one place or another, part of the fabric of business decision making. Even in the West they may be used more than we imagine but not acknowledged. Instead, those who make an appointment based on tradition, personal attractiveness, family background, popularity, nepotism, friendship, politics, graft, or intuition typically deny that these factors were considered, and cite “rational” grounds for the decision.

This adherence to a linear analytical model of decision making is part of a script or cultural cruise control (see Chapter 3) typically practiced by Westerners. In the bonus decision case study, this type of linear rationality is part of Alice’s underlying philosophy. However, her Indonesian counterpart, Santoso operates from different assumptions, with a script that is more holistic and emphasizes the specific context of the situation.² Cultures often have different criteria against which to assess decision outcomes.

Can Westerners be sure that the analytical thinking in which they are indoctrinated by their society, their education, and their employing organizations is always the best basis for decision making? We think not. The West may have something to teach others about decision making, but it can also learn something from others in this diverse world.

In this chapter we focus first on the rational model, indicate some limitations in its use, and then show some alternatives that are used effectively in other cultures. We advocate a more flexible, culturally intelligent approach to decision making based on appreciating and using a diversity of methods.

Problems with the Rational Model

Quite apart from the alternatives used in non-Western cultures, the rational model of decision making is known to be imperfect.³ It might work well if

• decision makers had clear unambiguous criteria to work toward (for example, short-term versus long-term profit, market share, employee safety, family harmony, self-fulfillment). In fact, criteria are seldom clear and are often in conflict.

• decision makers were agreed on rational models to understand the human elements involved in decisions. It is often easy to understand a mechanical or financial system in rational terms, but in systems involving people, agreement is difficult to reach.

• decision makers were capable of accurately defining the problem, generating a range of alternative solutions, accurately predicting the outcomes of all possible solutions, and manipulating huge amounts of relevant data. In fact, decision makers typically have limited capacity in all these areas. Much intended rational decision making gets replaced in practice by a “messier” process of “muddling through.”⁴

• decision makers were unbiased enough to stick with the solution suggested by a rational analysis, even if they personally didn’t like it.

• there was time to consider fully every possible alternative. Imagine, for example, trying to select a new home by evaluating every single house for sale in the city.

Even decision makers who pride themselves on their rationality can seldom overcome these difficulties. In practice, they adopt various decision-making strategies that are less than rational:

• They work incrementally, moving gradually toward a decision in small steps rather than performing a single powerful analysis.

• They create heuristics, simple rules of thumb that may or may not have a rational basis but that simplify the decision-making task.⁵

• They satisfice; that is, they choose a plausible alternative that they become aware of early, rather than continuing to look for the best alternative.⁶

• They procrastinate, they panic, and sometimes they avoid the decision altogether.

These forms of simplification are generally consistent across cultures. But there are also differences. For example, a common mental simplification or heuristic, called availability, is to rely on the ease of recalling something from memory and to give more weight to easily imagined events in making a judgment. But because this heuristic is based on experience, it can vary across cultures. For example, Thais would probably give a higher estimate than would Americans of the worldwide rate of death by being trampled by a water buffalo.

In some cultural settings decisions may be appropriate that are based on tradition or consensus or family advantage or custom. And even if we could get around all the impediments to rationality mentioned above, the meaning of rationality differs across cultures, and a decision made without reference to cultural factors is at least as likely to fail as a decision made purely on cultural grounds.

Rational decisions often fail to be made and implemented because they are unacceptable. It has been wisely stated that the measure of a decision’s adequacy is a function of its quality and its acceptability.⁷ Trying to approximate rationality may result in a high-quality decision, but that decision also has to be implemented, usually by people other than the decision maker. Any couple who has tried to buy a house knows that a logical case is useless against a partner’s statement such as “I just don’t like the feel of it,” and that the house must be acceptable to both partners. If those involved do not accept the decision, they will not be committed to making it work, and, however “rational” it is, it will probably fail. In the bonus decision case, Alice and Santoso need to work together toward a solution that, despite their different cultures, they both find acceptable.

Culture thus imposes limits on what decisions can realistically be implemented. In some countries the appointment of a woman to a high-status position—however suitable she may otherwise be—is unacceptable, so any woman appointed will most likely fail because of the unwillingness of others to work with her. In other countries the implementation of work practices that involve breaking religious taboos cannot be tolerated, no matter how rational they may be.

An important limitation on rational decision making comes from the cultural dimension, identified in Chapter 2, called collectivism. Collectivism calls into question who makes the decision, how it is made, and who benefits from it. In both individualist and collectivist cultures, it is acceptable for decisions to be made by individuals. However, in a collectivist culture the society must also have a norm of hierarchy, and the decision maker should be of high status (as in China). But in collectivist cultures with more egalitarian norms (such as Israel) it is expected that the collective will be properly informed, consulted, and involved.

It is important for Western decision makers to suspend, in part, their own notion of rationality as the basis for decision making, to be mindful of the specifics affecting decision making in other cultures, and to learn to reinterpret rationality to accommodate local habits and constraints.

Motivation and Goals

Decisions are also affected by the motives and goals of those who make them.⁸ For example, a manager deciding who to appoint as her assistant might mainly seek to improve the organization’s performance, or to remain popular with staff, or to maintain power by appointing a weak subordinate, or to follow tradition. Such motives vary with culture.

In Western cultures, many would-be rational decision makers often pride themselves on their ability to set aside their personal motivations and to rely instead on applying logic to achieve a good result. For example, they might choose the candidate they think has the best qualifications for a job rather than the one they like the most or who is a family member. But the non-Western rational model might instead consider factors such as a personal relationship of the candidate to the decision maker and the social context of the decision. After all, who can I trust more to do a good job than a member of my own family?

A fundamental difference such as individualism/collectivism can dramatically affect decisions. People from individualist cultures generally assert their own rights and ideas and resist group pressure, whereas those from collectivist cultures are more influenced by the context and the ideas of others. For example, in one research study,⁹ people from collectivist Brazil were more likely than those from the individualist United States to forego a personal financial benefit in order to visit a sick friend. Another important product of individualism is high individual self-esteem and optimism. For example, Americans are much more likely to overestimate their abilities, chances of success, and so on than are the collectivist Japanese. But Japanese are more likely to believe that their judgments are shared by others.¹⁰

Culture also determines which decisions will be acceptable. Individual incentives for productivity may get good results in an individualist culture but not in a collectivist one. But to those in an individualist culture, participative group discussions that slow down decision making may be irksome. In a high power-distance culture, people expect and may even welcome autocratic behavior from bosses, but in a low power-distance culture, they will reject such behavior. Decision makers need to read the motivation, particularly the culture-based motivation, of staff.

In addition, by considering culturally based motivational differences, we may be better able to understand the decision-making methods and criteria used by our counterparts from different cultural backgrounds. In the bonus decision case, Santoso and Alice are influenced by the collectivism and individualism of their respective cultures. Each acts according to the motivation of his or her cultural group. Both fail to exhibit cultural intelligence.

Selection and Allocation Decisions

IT’S WHO YOU KNOW THAT COUNTS

Jan Moore, European area manager for Clarkson Equipment Corporation (CEC), telephones Craig Finley, CEC’s manager for Russia: “Hi Craig. Sorry, but I’ve been looking at your latest report, and there’s a problem with the Slovaski project.”

“Oh? Sorry to hear that. What problem?”

“This funding request, made by Sasha, the project manager, to send his new management trainee to London to get an MBA, all paid for by us.”

“What of it? We’ve done that for promising juniors before.”

“Turns out he’s Sasha’s son!”

“Oh, that.”

“And that’s not all. I’ve been going through all the last few years’ appointments to the Slovaski project. They’re nearly all friends and relations of Sasha’s. And the promotions—his relations are going up the organization chart like shooting stars! It’s sheer nepotism, Craig.”

“That’s the way they do things round here, I’m afraid. Sasha’s very good at what he does. And he makes sure his protégés do a good job.”

“Look, Craig, this can’t go on. The company has a standard hiring procedure, and Sasha’s breaking every rule in the book. Weren’t you supposed to introduce our standard hiring practices—you know, job requisitions, advertisement of vacancies, candidate résumés, line managers conducting interviews, and so on?”

“I did, but the Russians don’t like them. They ignore them.”

“Oh, for heaven’s sake! Craig, you were instructed three years ago to appoint an experienced HR manager over there to implement and control the hiring policies. Why haven’t you done it?”

“Because I know it would be a disaster. There would be huge resentment, and not just from Sasha. Look, Jan, we’re operating in an Asian culture here. Western standards don’t always work. If hiring people you have known for a long time and therefore trust is a local custom, you can’t change it overnight. And you probably don’t need to change it.”¹¹

Staff selection decisions are among the most common in organizations. In the example, the Westerner, as usual, proposes an analytical model focused on candidates’ behavior. The Russians prefer to rely on more holistic and subtler contextual cues of suitability.

Here, we can contrast the Western view that what counts is what you can do with the Eastern belief that what counts is who you are. In our initial case, Santoso’s awarding of the highest bonus to the person with the highest status rather than to the biggest contributor is similar. In China, the network of a candidate’s relationships, his or her guanxi,¹² can be critical to selection for a job and ability to perform in it. Guanxi, though, is more complex and subtle than a simple relationship. It is likely to exist as part of a network of family and personal connections and to involve delicate patterns of mutual obligation.

In the West, such things are thought of as favoritism or nepotism and are frowned upon; rather than relying on their connections, candidates are expected to demonstrate their personal suitability. The East/West difference may be increased by the current Western fashion—often built into local legislation—for equal employment opportunity, meaning opportunity based solely on the Western criterion of individually assessed qualifications for the job. However, even this Western ideal can be affected by subconscious biases favoring one group over another.

Other cultural differences in selection practice are subtler. In one recent European research study,¹³ the ability to do the job was the main criterion across a number of countries, but “ability” was differently defined, with egalitarian Scandinavian countries putting a lot of emphasis on interpersonal skills, whereas countries emphasizing status differences paid more attention to age.

Reward allocation decisions, such as that in the initial case, require making decisions that balance equality against equity. Suppose several people collaborate on a project, but some use more skill, work longer hours, and make more effort than others. An equitable allocation will distribute rewards in relation to responsibility, time, effort, and so on. An equal allocation will reward all participants equally just for contributing. Individualist cultures generally favor equitable solutions, whereas collectivist cultures tend to favor equal ones. Collectivists are also more likely to take into account need as a criterion.

Ethics and Decision Making

THE TRADE PERMIT

Mohammed is an official in a Middle Eastern country. His job is to review applications for trading permits issued to overseas visitors. He has to ensure that all the appropriate criteria are met. If they are, he will normally grant the permit.

Mohammed’s salary is extremely low. Relying on his salary alone, Mohammed would be unable to provide for his family. Fortunately there is relief for him in the system: he is good at his job, and it is customary for applicants to show their appreciation for his service by giving him small sums of money. Many applicants are Americans and Europeans from wealthy multinational companies, which can easily afford these additional costs. The arrangement is understood by all those involved, including Mohammed’s superiors, and works to the advantage of all.

Recently, however, Mohammed has had some difficulty working with John O’Connell, who has recently arrived as the representative for an Irish company seeking to build an export-import business. When O’Connell presented his application, it was impeccable. However, he showed no signs of offering a financial accommodation. Perhaps, Mohammed thought, this was just an oversight. He told O’Connell that some further paperwork was needed and that he should come back in a few days.

O’Connell has been back twice. Each time he has become more irritated at the delays, but despite hints from Mohammed, he still has not offered any cash. So Mohammed continues to prevaricate: if Mr. O’Connell will not play the game according to the established rules, he will have to accept the consequences.

Back at his office, John O’Connell calls an old friend, a man with experience in the country in question. The friend immediately realizes what the problem is and advises John how much he should offer and how he should make the offer. John becomes angry.

“But that’s bribery!” he exclaims. “Pure corruption.”

“No, it’s just the way these people do things,” says the friend. “Think of it as a tip.”

In the global business environment, as in life generally, almost every decision has an ethical component. The press regularly tell us of ongoing ethical crises in many countries: politicians and business executives pillaging their countries and companies or maximizing “perks,” lies and deception practiced against shareholders, “pork-barrel”¹⁴ politics; bribery and corruption in governmental institutions, embezzlement; credit card and computer fraud; tax avoidance on a gigantic scale by both companies and individuals. But different societies often have very different views of what behavior is morally unacceptable. Monetary payoffs to officials in return for favors granted—the essence of the above case—represent just such an issue. The following are examples of common decisions that present global organizations with ethical dilemmas:

• Moving production to a foreign country to take advantage of cheap labor, resulting in exploitation and dangerous working conditions.

• Discouraging union organizing in countries where unions are not well established.

• Abiding only by the minimum environmental protection laws imposed by the country in which the company is operating, standards that may be much lower than those in the company’s own culture.

• Promoting dangerous products (such as cigarettes) in foreign markets when demand declines at home.

• Doing business in a country with a repressive government.

• Imposing a global ethical norm developed by the headquarters of the firm.

• Advertising luxury goods in less developed countries.

However, you don’t have to be at the top of the organization, or even in an organization, to face ethical dilemmas. Whether to pay unofficial inducements, what level of expenses to claim, whether to accept gifts from prospective suppliers, how much to claim on your theft insurance when your house is burgled—all these issues raise ethical questions. Those doing business internationally or dealing with staff or colleagues from different cultures quickly realize that what they think is morally correct erodes in the face of differing cultural values and norms for behavior. They often have difficulty in reconciling their own ethical standards with local practices, or, when invited to do something they truly believe to be wrong, in saying no.

Many decisions that cross countries or cultures are ethically ambiguous. Consider the common decision of organizations in economically advanced countries to relocate manufacturing in developing countries in order to achieve lower labor costs. Here is how such a decision might be perceived by (a) a manager from a developed country making such a decision in order to keep his company in business and (b) an activist concerned about the welfare of the people in the developing world.

Businessman: “If we do not make this decision, we will go out of business, totally failing the shareholders who have put their trust in us. Everyone will lose their jobs, not just those in our European factory. We would be bringing to the people of the region of Vietnam where we seek to set up our factory an opportunity to participate in the Western dream of secure employment. We will pay a competitive wage. No one will be forced to work for us—they will do it because they know they are better off that way. We are helping them! But we cannot pay more. That would enable our competitors to take our market away, and everyone would suffer, including our Vietnamese employees. Our extension to Vietnam, you see, is totally ethical.”

Activist: “Your company is a fundamentally immoral organization, interested only in generating huge profits for its managers and shareholders. It seeks to move into Vietnam only because it knows it can exploit the people there. It will pay them wages that they can scarcely live on, force them to work long hours, and neglect their health and safety needs. If the company really wants to help the Vietnamese people, why doesn’t it double the proposed wages and ensure reasonable working conditions? It could do that and still make a huge profit. But multinationals don’t think this way because they are fundamentally unethical.”

Who is right? Both! The two protagonists are proceeding from very different frames of reference. Interestingly, though, each party is seeking to do right by the Vietnamese workers involved.

To the activist, the concept of profit is immoral. Her radical analysis of “big business” focuses particularly on multinational companies because they use inter-country differences in areas such as labor costs, pollution control, and ability to get their way with government authorities as a basis for making big decisions—such as relocation—in the logical pursuit of profitability. This is part of a wider belief by businesspeople that in the end striving for profit is good for everyone—including the Vietnamese workers—because it causes economic systems to become more efficient and makes goods cheaper. While different cultures tend to have different views of business freedom and control, the moral questions separating this businessman from the activist cut across cultural boundaries, and the attitudes and institutions that support them are international.

The situation described above represents perhaps the most difficult ethical dilemma that global managers face. The question is “Should I follow a practice that is allowed in a foreign country but not in my own?” Managers commonly try to answer this question in three ways.¹⁵

• The first tries to evaluate the consequences of the decision and calculate the maximum benefit for the most people. This is what the businessman was arguing in defense of moving his factory to Vietnam. Many Vietnamese people would benefit, as well as the businessman’s own shareholders. However, as indicated by the response of the activist, benefit is often in the eye of the beholder.

• The second approach is to rely on some moral rule. We all learn such rules as part of our cultural socialization, and these rules are often apparent in religious teachings. An example is the idea of treating others as you would like to be treated. However, the obvious problem with moral rules is finding a set of rules upon which all cultures can agree. For example, even in cultures as similar as the United States and Canada, strong differences in opinion exist with regard to the right of the state to put someone to death.

• The final method of answering ethical questions is the culturally relative approach. This approach suggests that ethical behavior varies from one culture to the next. While seemingly consistent with our general recommendations for being culturally intelligent, this approach is insufficient to deal with the ethical dilemmas of global managers making decisions across cultural boundaries. While many differences in business practice are in fact related to the cultural norms of a society, cultural relativity can make it possible for people to justify reprehensible behavior based on culture.

CULTURALLY INTELLIGENT DECISIONS

What then is the individual who wants to make an ethical decision to do? Not surprisingly, we suggest that the steps to cultural intelligence will also lead to more ethical decision making across cultures.

The first step is knowledge. We need to understand our own mental programming concerning what is ethical. What do we believe is proper behavior and why do we believe it? We also need to be aware that people in other cultures hold the values that are prevalent in their society.

The second step is being mindful of the ethical component of decisions. Who is likely to benefit, and who will be harmed by the decision? Mindfulness also means paying attention to all the factors that might influence the decision. These include the relative level of economic development in a society. The mindful decision maker will ask, “Would this practice be acceptable in my country at a similar level of economic development? Is this practice a violation of some fundamental human right?”¹⁶

The cross-cultural skills of the culturally intelligent decision maker will include a repertoire of behaviors that recognize value differences across cultures but are consistent with self-chosen ethical principles. These principles will develop over time as the individual gains knowledge and practices mindfulness. He or she will uphold these non-relative values and rights regardless of majority opinion and will act in accord with these principles. Doing so will often require creative solutions to ethical dilemmas. For example, one organization, while yielding to the cultural norm of employing children under the age of fifteen in its factories in a developing country, also provided time off and monetary support to allow these children to acquire a basic education.

Summary

This chapter describes decision making in cross-cultural context. Perhaps the world is gradually accepting a Western-style linear analytical approach to decision making, but this approach is not universal. Globalization is driven by a relentless logic of business profitability, and the process of globalization has been dominated by organizations based in the United States and Western Europe attempting to impose that logic in Latin America, Asia, Eastern Europe, and the Middle East. However, because people in different cultures have different mental programming, the ways in which they simplify the complex process of decision making are likely to be different. Decisions are also affected by the motives and goals of the decision maker, which are based on culturally different values. The culturally intelligent person is better able to understand the decision-making methods and criteria used in other cultures. Almost all decisions have an ethical component because some stakeholders benefit and others do not. The culturally intelligent decision maker is able to balance the culturally relative nature of ethics while upholding fundamental human rights.