Case Study How to Bring Cross-Cultural Teams Together Alicia Clegg March 30, 2017 As the appetite for cross-border deals increases, business schools are mining insights from corporate couplings that prospered against the odds, in the hope that they hold valuable lessons for managers struggling to overcome cultural divisions. Case studies plunder the past for lessons in how to turn adversity into success. For example, few would have bet on a good outcome when Haier, Chinas leading home appliances maker, formed a joint venture with Sanyo Electric to develop refrigerators in Japan a 2007 episode in corporate history studied by researchers at Iese Business School in Spain. Speculation was rife among the Japanese workforce that Haier, the majority partner, merely wanted to rip off Sanyos know-how. There was a lot of uncertainty, says Du Jingguo, Haiers Asia chief executive, of the deal. Would we co-operate long term or did we just want to take the technology? Culturally, the two companies were poles apart. While Haier promoted staff on merit and paid by results, Sanyo was wedded to the Japanese tradition of promoting by age and length of service. Undeterred, Mr Du split the Japanese workforce into small groups and night after night, over rounds of drinks, he listened to their concerns. In the end, his softly-softly approach paid off. Guided by what he learnt, Mr Du began to promote younger employees, but in a way that spared the pride of their seniors, who were given honorific titles and opportunities to work beyond retirement to compensate for their loss of expected income. His bridge-building helped pave the way for Haiers acquisition in 2012 of Sanyos white- goods business in Japan and other south-east Asian markets though he paid a price. After two years of drinking, I developed a gastric ulcer, he says. Acquisitions are an important way for businesses to grow and gain knowledge. With global M&A activity at highs last seen in 2007, deals today often cut across borders, with emerging market companies among the biggest spenders. In 2016, according to Deloitte, Chinese acquirers spent 10 times more on European businesses than vice versa. However, studies typically find that between 40 and 70 per cent of all deals fail to pay back. A third of companies blamed differences in corporate culture for their lack of success in one of only a few quantitative studies of post-deal integration, conducted by Aon Hewitt, the consultancy, in 2011. For deals that mix businesses from advanced and emerging markets, the statistics may be worse. On top of differences in corporate ethos and all the other hazards that cause mergers to unravel, such as incompatible IT systems and personality clashes, there is the risk of cultural misunderstanding. What can organisations do to improve the success rate? And after a merger, what is the best way for companies from cultures that are worlds apart to work together? Encouraging employees with cross-cultural backgrounds, who ha.

1. Case Study How to Bring Cross-Cultural Teams Together Alicia Clegg March 30, 2017 As the
appetite for cross-border deals increases, business schools are mining insights from corporate
couplings that prospered against the odds, in the hope that they hold valuable lessons for
managers struggling to overcome cultural divisions. Case studies plunder the past for lessons in
how to turn adversity into success. For example, few would have bet on a good outcome when
Haier, Chinas leading home appliances maker, formed a joint venture with Sanyo Electric to
develop refrigerators in Japan a 2007 episode in corporate history studied by researchers at Iese
Business School in Spain. Speculation was rife among the Japanese workforce that Haier, the
majority partner, merely wanted to rip off Sanyos know-how. There was a lot of uncertainty,
says Du Jingguo, Haiers Asia chief executive, of the deal. Would we co-operate long term or did
we just want to take the technology? Culturally, the two companies were poles apart. While
Haier promoted staff on merit and paid by results, Sanyo was wedded to the Japanese tradition of
promoting by age and length of service. Undeterred, Mr Du split the Japanese workforce into
small groups and night after night, over rounds of drinks, he listened to their concerns. In the
end, his softly-softly approach paid off. Guided by what he learnt, Mr Du began to promote
younger employees, but in a way that spared the pride of their seniors, who were given honorific
titles and opportunities to work beyond retirement to compensate for their loss of expected
income. His bridge-building helped pave the way for Haiers acquisition in 2012 of Sanyos white-
goods business in Japan and other south-east Asian markets though he paid a price. After two
years of drinking, I developed a gastric ulcer, he says. Acquisitions are an important way for
businesses to grow and gain knowledge. With global M&A activity at highs last seen in 2007,
deals today often cut across borders, with emerging market companies among the biggest
spenders. In 2016, according to Deloitte, Chinese acquirers spent 10 times more on European
businesses than vice versa. However, studies typically find that between 40 and 70 per cent of all
deals fail to pay back. A third of companies blamed differences in corporate culture for their lack
of success in one of only a few quantitative studies of post-deal integration, conducted by Aon
Hewitt, the consultancy, in 2011. For deals that mix businesses from advanced and emerging
markets, the statistics may be worse. On top of differences in corporate ethos and all the other
hazards that cause mergers to unravel, such as incompatible IT systems and personality clashes,
there is the risk of cultural misunderstanding. What can organisations do to improve the success
rate? And after a merger, what is the best way for companies from cultures that are worlds apart
to work together? Encouraging employees with cross-cultural backgrounds, who have lived and
worked in both countries and speak the local language to act as link points between headquarters
and local management is a good first step, says Sebastian Reiche, an associate professor at Iese
Business School, and the co-author of the case study of Haiers acquisition of Sanyo Electric.

2. When a foreign acquirer buys a business, employees often fear for their future. Will our jobs be
moved abroad? Do the new owners understand what our customers like? Rather than parachute
in expatriates and risk a brain drain, a wiser course may be to retain the local leadership and
build on what made the business successful. As Prof Reiche puts it: You dont want to destroy the
asset that you are buying. Infosys, the Indian IT business, is grappling with the dual dilemma of
how to integrate foreign acquisitions without stifling their entrepreneurial spirit or falling foul of
cultural differences. Rajesh Krishnamurthy, who heads Infosys Consulting, cites Noah
Consulting, a Houston-based information management business, still led by its founders under
Infosyss umbrella, as an acquisition that the business got right. To help the founders integrate
their company into their new parents systems, Mr Krishnamurthy recruited two managers of
Indian origin from Infosyss US operations. Having lived in India and the US, the managers were
also able to provide the cultural translation sometimes needed between Houston and Bangalore.
Mr Krishnamurthy observes that while some nationalities, notably Americans, spell things out,
Indians make their points in a more roundabout way. They often hate to say no. His comments
are supported by the analysis of communication styles conducted by Erin Meyer, a professor of
organisational behaviour at Insead. When cultures with different styles of disagreeing meet, she
notes in The Culture Map, misunderstandings are the result. As Mr Krishnamurthy puts it: It can
seem to others that we beat about the bush. Even businesses that appreciate the importance of
culture can be wrongfooted by differences that they fail to anticipate. Nathan McDonald, co-
founder of We Are Social, a London-based marketing services agency acquired by Blue Focus,
Chinas largest marketing services group in 2013, highlights the breakneck speed by which
business is conducted in some emerging markets as a potential pinch-point in cross-cultural
deals. In China, everyone is in a big hurry because the growth is so fast, he says. Mr McDonald
recalls a sticky moment when the HR director at Blue Focus proposed visiting his team but at
such short notice that he and his partner would have had to cancel client meetings to host her. So
they emailed back, emphasising that while they were eager to spend time with her, their
commitments to their clients took priority. Now the companies schedule a monthly catch-up call
at which future visits are planned. Weve learned how to calibrate our expectations, weve
adjusted to their pace and theyve adjusted a bit to us, Mr McDonald says. While acquirers need
to respect cultural differences, an entirely hands-off management style may not be the answer.
Even subsidiaries that relish autonomy want to feel connected to the wider whole, says Mr
Krishnamurthy. There are commercial drawbacks to managing businesses as standalone entities.
If each company exists in a silo, there is no knowledge-sharing, and no learning from each others
successes and mistakes. Organising exchange visits and opportunities to collaborate on shared
projects may be one way to foster a sense of collective identity. At Infosys, workers from across
the group are encouraged to dial into monthly forums and present their top innovations so that

3. good ideas can be shared. Local differences in the protections that workers enjoy on matters such
as disability, health and safety, gender and LGBT rights are another hazard that companies must
negotiate. Though respecting local law may be all that is required to operate legally, applying
different policies internationally can expose companies to accusations of hypocrisy. To avoid
such problems employers forums, such as Business Disability International, recommend
adopting company-wide policies on equality rights and applying them globally. Mr Du, for his
part, remains committed to fostering entrepreneurialism in a culturally sensitive way. Though
progress can be slow persuading Japanese workers to accept just the basic principle of
performance-related incentives took six months of discussion he insists that there is no
alternative. As the manager, I can issue an order, but if people dont agree in their hearts, the
order will be meaningless, he says. Case Question 11-15.What kinds of potential cross-cultural
conflicts are evident in this case?