A Lack of Cross-Cultural Intelligence is a Serious Risk to Business Survival.
The work of smoothing intercultural transitions has never been so critical. More people than ever are moving to and from different countries for work. As workplaces become more multi-cultural by nature, it is important that organisations avoid cultural misunderstandings as they can lead to serious business risks. Unrecognized and misunderstood cultural differences may lead to suboptimal performance, miscommunication and confusion within work teams, particularly those companies conducting international business.
There are four types of risk associated with conducting International Business.
Cross-Cultural Risk: a situation or event where cultural miscommunication puts some human value at stake.
Country Risk: potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country.
Currency Risk: Risk of adverse unexpected fluctuations in exchange rates.
Commercial Risk: firm’s potential loss or failure from poorly developed or executed business strategies, tactics, or procedures.
As we look closer at Cross-Cultural Risk, some examples of risk factors are as follows:
Differences in language, lifestyles, attitudes, customs, and religion, where a cultural miscommunication jeopardizes a culturally - valued mindset or behavior.
- Cultural blunders- hinder the effectiveness of foreign managers.
- Differences impede effective communication.
- Cultural differences may lead to suboptimal productivity and profit margins.
- Lack of cultural understanding can lead to disharmony amongst people.
More and more research has become available to validate the importance of cross-cultural training, for example:
- Leading executives from around the world now identify cross- cultural leadership as the top management challenge for the next century.
- Of all managers given overseas assignments as expatriates, up to 40% end them early, and cultural issues are the cause of 99% of early terminations, not job skills.
- Many expatriate assignments fail because the accompanying spouse and family have not adjusted culturally.
- The cost of each failed expatriate assignment has been estimated anywhere from USD 250,000 to more than $1.25 million when expenses associated with moving, downtime, and other costs are included.
Cultural Intelligence and training is a more reliable way to predict how you will lead across cultures than your personality, age, gender, where you’re from, or emotional intelligence.
A lack of cultural intelligence results in increased time to get the job done, heightened travel time and costs, growing frustration and confusion, poor job performance, decreased revenues, poor working relationships at home and abroad, and lost opportunities. Conversely an expat who is culturally intelligent will get up to speed on the new assignment more quickly, which in turn makes better use of the costly expense of sending talent overseas or bringing talent in.
Cross- cultural training can therefore be the difference between individuals and organisations that succeed in today’s multicultural, globalized world and those who fail.
At Cross- Cultural Transitions our aim is to increase retention rates and cultural understanding in the workplace by providing exemplary cross- cultural services that are supported by leading research in the field. Our hope is that all organisations will strive to lead with cultural intelligence.