Developing Cultural Intelligence
A company's Investment in selection, development, and preparation of individuals for cross-cultural assignment is critical for success.
By Bruce Wilkinson and Mary Shippy
In the summer of 2005, the number of tower cranes piercing the bright blue sky in Dubai, UAE was astounding. At 110°F and 90% humidity, which is quite uncomfortable, construction cranked along at a breakneck pace. In only one of several condominium developments, there were more than 80 condominiums under construction around the newly dredged harbor.
This in a country where less than 10% of the population is native. Juxtaposed between Europe, Asia, and Africa, the opportunities for an international construction company seem unlimited. One can hardly watch a Discovery channel show on mega structures and not see something being built in Dubai. While many opportunities exist to build a multinational business and the barriers to doing so are shrinking, the challenges of blending multinational operations remain. Construction-specific and general economic data from sources such as the Bureau of Economic Activity, as well as numerous other sources, attest to the globalization of the economy along with the historical and projected growth of firms with ownership in another country. Fueled by the explosion of infrastructure and technology, this change is making significant impacts on the construction industry in all sectors including design, manufacturing, and contracting. This article seeks to identify some of the trends associated with the international growth and expansion trend; identify some of the people-related challenges; define the concept of cultural intelligence; and relay what some companies with significant multinational presence are doing to develop cultural intelligence in their companies.
Historical and Projected Growth Rates
The following are some quick facts about the international growth and expansion trend:
- The August 22/29, 2009, issue of Engineering News-Record noted that there was a 20% increase in the amount of work performed by international firms outside of their home country.
- U.S. companies’ employment in foreign affiliates increased 40.5% from 1990 to 2000.
- Foreign companies’ employment in U.S. affiliates increased 35.8% from 1990 to 2000
While these numbers reveal an increase in the numbers associated with international work, the operations of U.S. multinational corporations remain concentrated in the U.S. Their domestic operations consistently account for approximately three-quarters of their output, investment, and employment. Europe remains the largest international market with 60.3 billion in construction revenue produced by international firms, a 29.2% increase from 2003. Asia and the Middle East are at about half of that volume with 30.5 billion and 25.4 billion respectively; however, Asia only experienced 16.7% growth while the Middle East experienced a huge 54.8% change..
More regional than global factors drive this growth. The increase in the price of oil has resulted in higher profits for many of the countries in the area. The UAE and other countries are pouring these profits back into the local economy in the form of industrial, tourism, and infrastructure expansion. Asia is seeing tremendous growth from outsourcing and offshoring opportunities as multinational companies explore ways to innovate, streamline, and reduce costs by moving elements of their business overseas or complete manufacturing operations offshore. India’s growth as a call center has been well documented. In fact, Indian call centers are struggling to handle this growth as turnover in some of the call centers is incredibly high. Even so, their ability to train native Indians to communicate with Americans demonstrates Thomas Friedman’s premise in his 2005 book The World is Flat. Friedman notes:
“… that no matter what your profession — doctor, lawyer, architect, accountant — if you are an American you better be good at the touchy-feely service stuff because anything that can be digitized can be outsourced to either the smartest or the cheapest producer or both …. Everyone has to focus on their value-add.”
As a member of the World Trade Organization and host for the 2008 summer Olympics, China’s explosive growth has influenced the price of construction materials worldwide, but it has also provided an opportunity for firms from all over the world to go to China to participate in both mega projects as well as smaller, traditional projects. In the United States, where only a small percent of the largest international contractors and design firms are headquartered,22.8 billion of 1.03trillion total U.S. construction work was performed by internationally owned firms.
Modes Of Growth
This growth and international movement is happening in every way that growth has traditionally occurred and in some new ways. Some growth is occurring as companies pursue larger projects such as Build Operate and Transfer or BOT projects. These mega projects require firms with significant financial resources to fund them over a long period of time. These projects attract companies from all over the world to participate in the bidding process. One of the most traditional ways companies expand is to acquire companies in other countries such as the way Stantec Inc. (recent acquirer of multidiscipline design firm DufresneHenry), a Canadian-headquartered engineering firm with North American and Caribbean operations, or Skanska AB, headquartered in Solna, Sweden, did. Other companies leverage their core competency and travel the world opening new offices as opportunities arise. Finally, engineering firms and contractors are increasingly exploring options in the outsourcing arena as they discover that routine design tasks or CAD operations can be performed efficiently overseas at a significant savings. Often, those involved are not even aware that their local structural engineering firm is having its structural designs performed in Asia or on some other continent.
Reasons To Go
Companies go overseas or multinational for a variety of reasons. The globalization of the worldwide economy makes it easier for companies to take advantage of a number of potential benefits. Some companies go overseas to take advantage of hot markets where higher margins are possible. On the other hand, some companies may pursue a more stable market as a means to minimize risk for a portion of their portfolio. Publicly traded companies that cannot find sufficient work domestically often expand internationally to achieve the growth required to satisfy shareholders. These companies see the potential efficiencies and savings offered by outsourcing and offshoring. The difference between outsourcing and offshoring is a matter of scale and location. Outsourcing involves moving elements of an operation to another company that can perform the function more efficiently. Outsourcing may be accomplished domestically or by finding offshore providers. Offshoring is associated more often with moving entire operations, like a manufacturing facility, overseas. Outsourcing can be a boon to domestic A/E/C firms looking for an edge while offshoring can be the source of tremendous construction requirements to support the new overseas manufacturing base. If a group of McDonald’s in Cape Girardeau, Mo., can outsource their drive-up window services to a call center in Colorado Springs, Colo., and save money while making dramatic strides in performance, then who knows what advantages are available for those willing to innovate. Consider this quick list of items that can be performed remotely:
- Production of mechanical coordination drawings
- Production of as-builts
- Routine design of temporary construction shoring, electrical, mechanical, and other systems
- Operation of customer call centers for large projects
- Operation of service call centers for facility managers.
Before telling your local customers that you have decided to move to India to help build wastewater treatment plants, consider this: There are still significant challenges and risks posed by working at the international level. From the unpredictability of terrorist activity to the potential for valuation fluctuations, the ability to reasonably predict and therefore manage the risks is difficult. Effectively leading and managing a tremendously diverse group of people also presents a significant challenge.
Certain skills and behaviors are needed to be successful in this new business environment. Technology, economics, and politics have shifted, but so have our day-to-day interactions and relationships with people who are culturally different. The range of different cultural backgrounds in the modern business environment, even for construction, is significant and growing. Depending on your market, your colleagues, business associates, and contacts may represent countries or ethnic groups from all over the world. This amalgamation of people creates a new and major challenge for everyone who works in globalized business. Whether you are owned by a multinational company, your company is breaking into the world market, or you transact business at home — globalization will impact you. Many of us find cultural differences hard to deal with. We have a tendency to want everyone to “be like me.”
Crossing The Cultural Barrier
One of the ways we fail to cross the cultural barrier presented in international business is by not being aware of the key features and biases in our own cultures. For example, Americans do not realize that their outgoing manners can be perceived by other cultures as overly aggressive, noisy, and disrespectful. Another way we fail is by being defensive or ill-mannered when interacting with people who are culturally or physically different. Yet another failure, preventing us from crossing the cultural barrier, is tending to see the behaviors of others through our own cultural lens, leading to misunderstanding and confusion. Finally, we often are unwilling as individuals or organizations to adapt to doing things differently. All these areas produce stress and anxiety and ultimately result in impaired performance and lost business opportunities. Businesses and individuals can choose how to cross cultural boundaries. Here are three common paths taken. Some businesses and individuals expect everyone else to adapt to the “American way” and the English language. Although there is some evidence that our world is converging, many lost opportunities and failed business adventures litter this path. An alternate path leads some businesses and individuals to try to understand cultural differences by learning about the new culture. This cultural awareness and its relation to business behavior is an important step in crossing any cultural boundaries. Many businesses use this path to make serious investments in cross-cultural projects. Yet, without further exploration, these projects can encounter huge setbacks due to delays in deliveries, complex government custom issues and work-visa delays, skilled worker shortages, complicated communication and hiring issues, and unforeseen national festivals and celebrations that can shut down a site for weeks. The best path leads businesses to become culturally intelligent. This means being skilled and flexible when it comes to understanding a culture, interacting with the culture, and reshaping thinking to be more sympathetic and adaptable to the new culture.
Characteristics Of The Culturally Intelligent
Cultural intelligence is the capability to interact effectively with people from different cultural backgrounds. A person with high cultural intelligence grasps what makes us human and at the same time what makes each of us different from one another. A person with high cultural intelligence is able to figure out the behaviors and features of individuals and groups that are true of all people and all groups and at the same time, observe and appropriately react to individual situations. To develop cultural intelligence, start with an understanding of yourself and your own cultural habits. Just like every family has certain traditions and rituals that they practice daily, your culture is rich with those types of customs. For example, as you go to work each day observe how people greet or acknowledge one another.
Do you see any common themes or patterns? If you spend time at the airport, sit and watch the way people are greeted when they come off the plane. Are they greeted differently or the same as your family greets you? Do the greetings vary according to the individual?
Another way to develop cultural intelligence is to rent a foreign film with subtitles and observe what is different and what is the same in the way people greet or acknowledge one another. Or, eat at an ethnic restaurant and observe how the wait staff and chefs interact with each other. Do they change language, tone, or their pace of speaking from one group of people to another? All of these examples are ways to become more aware of your own culture. Cultural intelligence depends on having keen observation skills. Using these skills to pay attention to the subtleties of human interaction is an important part of becoming culturally intelligent. Even within our own culture we can miss subtle clues of business clients, employees, and family members. Working in a sales environment, missing these clues can mean the difference between closing a deal and missing an opportunity. Try observing not just what people are saying with their words but what they are saying with their body language and tone. Ask questions about what you are observing. If someone looks at their watch, ask them if they are on a tight schedule. If you notice someone suddenly not maintaining eye contact with you or switching topics — could it be a subtle clue to something else that you missed? To take this process further, visit a local ethnic food market and pay attention to what is going on around you. Do you notice non-verbal and verbal clues that you don’t understand? Do you feel uncomfortable and out of place? How might others have that same feeling around you? These exercises suggest ways to fine-tune your keen observation skills. Another step in the process of developing cultural intelligence is to enhance your ability to demonstrate appropriate behavioral skills. Behavioral-skill development takes the willingness to be different, modify patterns of behavior, and acknowledge that it is about difference, not right vs. wrong. Behavior changes are the biggest stretch for many people working across cultures. Adjusting to how business is done in different cultures often doesn’t result in the same urgent time schedule as other work. Yet, non-adjustment to other cultures has caused many cross-cultural business transactions to sour. Tapping into resource books can provide access to information for your success. Inviting those from other cultures to your home can also open a window of opportunity and insight. In a similar way, being invited to someone’s home from another culture can be an insightful experience if you put your first two cultural intelligence skills to work — knowing yourself and using your keen observation skills.
Organizational Support For Cultural Intelligence
Organizations wishing to support the development of cultural intelligence must do so intentionally and purposefully on an organizational and individual level. Combining traditional methods with non-traditional approaches is a great way to start. Traditional methods emphasize learning about customs and cultures of individual people and groups through reading and language classes. This method also includes providing family support systems for adjusting to living in a new culture. For example, this may include helping a spouse find work and helping children find a comparable school. Non-traditional approaches include company field trips into cultural environments and providing cultural mentors or coaches in country. Both of these examples would provide a guided experience into the manners and customs of a culture and help with adaptation to the host culture. The final result would be to express to the host culture that you understand what it is like to be them.
The Construction Industry's Efforts
Companies move people across cultures for different reasons. These include: 1) To develop specific skills that are not readily available within a specific cultural workforce; 2) To provide succession training where formal development and exposure to international opportunities are necessary for advancement; 3) To increase growth capacity and opportunities for individuals to achieve expertise within a company; and 4) To use global exchanges of people and ideas to spread organizational knowledge around the company. A brief survey of international and multinational companies in the construction industry indicates that companies address the issue of cultural intelligence in many different ways. Our surveyed participants indicated that not every employee is suited for international work. In companies where the movement of individuals around the world has become commonplace, careful screening processes are in place to assess the skills, personality, and suitability of an individual to live and work in another country and culture. Some of these companies have identified certain traits that, based on their experience, increase the likelihood that an individual will succeed in a particular situation. Assessments that address these characteristics can help evaluate the success of the investment being made to train and develop an individual. Those who seek international assignments must have a desire to work abroad and look upon it as a challenge and a learning opportunity. Attitude, coping skills, flexibility, and adaptability are a few of the characteristics that organizations look for in their assessment process. The presence of family that shares these characteristics can become an important element in the success of those crossing cultures. Family can also act as a support system for mitigating the stress of adapting to a new culture. For the most part, companies are accessing both formal and informal processes to help their employees and companies be successful in these endeavors. Specifically, they rely on cultural consultants, cultural mentoring programs, executive coaching, internal formal training processes, and external fact-finding trips and informal exchanges. Consultants who specialize in preparing persons for foreign assignment can assist with training on the host culture norms, history of the host country, all the way down to the day-to-day details of living arrangements, schools, and religious accommodations. Mentor programs include sponsor contacts in the new host country and may well include mentors in the current country with knowledge of the new country. Fact-finding trips are a relatively inexpensive way to determine if the new location is right for an individual. Clearly, a company’s investment in selection, development, and preparation of individuals for cross-cultural assignments is critical for success. The win for companies is a strong mix of cultural identities, resulting in a more fully international identity throughout the organization. This positions organizations with greater flexibility and bench strength as they consider new business markets. Conversely, the failure of construction companies to be culturally intelligent costs not only in their own market potential but in the development of multicultural leaders for the future of the industry. Research indicates that the global marketplace will increasingly need more aware, educated, and culturally intelligent organizations and leaders.