Why Coca-Cola Tests High Potential Leaders for Cultural Intelligence

Last week, the Cultural Intelligence Centre announced that every participant on Coca-Cola’s high potential leader program is tested for cultural intelligence (CQ); the ability to function effectively in culturally diverse settings (1), or put simply – how well you get on with people different from yourself (may that be in age, national culture, profession, religion, gender and so on). We take a look at why organisations on the forefront of glocalisation today are harnessing and developing cultural intelligence in their leaders.

Glocalisation is the incorporation of both local and international strategy. Some simple examples include McDonald’s extensive vegetarian menu in India, Starbucks’ Ramadan cup designs in Malaysia and Singapore and subtle tweaks to advertising such as adaptation of commercials by DELL (2). To successfully lead glocalisation strategy and implementation across cultures, leaders are increasingly in need of cultural intelligence (3).

‘Fortune 500 companies expect their greatest revenue streams over the next decade to come from emerging markets’ (4)

But how does training your leaders in cultural intelligence specifically improve your business? We take a look at the top three benefits associated with CQ...

1. NEGOTIATION SKILLS

Those with higher CQ are able to achieve better results in cross-cultural negotiation; with CQ helping negotiators behave in a cooperative way when faced with a context where they had to adapt their behaviour (5). One of the key causes of failures when it comes to international negotiation is a lack of cross-cultural understanding of the negotiators involved (6). It is easy to see how a failure to recognize the importance of ‘saving face’ for Indonesians or the value of building relationships prior to business in China could de-rail even a simple negotiation.

‘Differences in culture between business executives can create barriers that impede or completely stymie the negotiating process.’ (7)

2. JUDGEMENT AND DECISION MAKING

When it comes to making decisions that will impact the global strategy of a company, it is helpful to have a leader with the ability to empathise with different stakeholders and consider the impact of strategic decisions on a diverse selection of individuals. Cultural awareness and specific cultural knowledge (Metacognitive CQ and cognitive CQ) have been found to predict performance in cultural judgment

and decision-making (8). Some have cautiously estimated that the average Fortune 500 company spends $50 million a year on developing products that never even make it to the market (9) although it is even harder to calculate the long term cost to a brand of an unsuccessful product launch.

‘In Chinese, the Kentucky Fried Chicken slogan ‘finger-licking good’ came out as ‘eat your fingers off’’ (10)

As companies continue to globalise, product launches become increasingly tricky. From the more complex cases where subtle social cues have caused failures (for example eBay’s failure in China due to their lack of appreciation of guanxi (11)) to Pepsi-Cola’s failure in South East Asia after changing advertising colours to those representing death and mourning, it is clear that leaders with the ability to adapt to new cultures have great value to international firms.

3. ADAPTABILITY

Individuals with higher levels of cultural intelligence have been found to be adaptable when it comes to professional performance expatriate assignments (12) and making international business decisions (13). Between 20-45% of expatriate assignments are estimated to end prematurely to the contract termination date (or to put it less politely, they fail), with costs per failed expat assignment totaling up to £2 million (around $3.1 million) (14). Whilst issues such as familial dissatisfaction can cause a great deal of issues for those on expat assignments, the failure to adapt leadership and working styles can result in professional as well as personal issues through conflict and demoralisation; failing to appreciate why teammates in Asia may not speak-up so much compared to American colleagues can be one example of this (15).

‘To match the advantages of local companies, multinationals in effect need to become like amphibians, who often are born in one environment (water) but are also at home in another (on land).’ (16)

CQ TODAY

A recent article by The Boston Consulting Group, boldly named ‘There’s No Such Thing as Corporate DNA’ further highlighted the need for adaptation or ‘radical change’ for companies navigating today’s ‘era of drastic change’ (17). Despite the need for change, we still see leaders clinging to their firm’s heritage and tried-and- tested frameworks, sometimes right into bankruptcy. As a psychology student myself, I have spent time researching the difficulties we face when changing our minds, and it’s an almost-impossible task (18), often especially difficult for those with many following their previous work. Change can be scary, but if you want to bring your products or services to a new culture, you need to be prepared to make a hell of a lot of adjustments.

The population of China is not going to adapt to use a new product... it’s up to the leaders of today’s multinationals to do the adaptation

By recognizing the need for cultural intelligence, firms are providing leaders with the right skills for adaptation across cultures; they will have the ability to negotiate, make the right judgment calls and adjust their leadership styles in line with whatever the future holds. And that’s why Coca-Cola trains their high potential leaders in cultural intelligence.

CULTURAL INTELLIGENCE & THE CHANGE SCHOOL

Cultural intelligence, the ability to adapt behaviors across cultures, is linked to improved performance in multicultural work groups, expatriate assignments and overseas study programs (1). With corporations blazing ahead on paths to globalization, we have seen a need for cultural intelligence like never before. Navigating dynamic cultural behaviors, norms, beliefs and values has become the next great challenge for managers and employees.

Our programs on cultural intelligence bring you the tools to adapt your behaviour across cultures to work with new partners, be smart about the way you approach new markets and also addresses the need for cultural intelligence within diverse teams to improve overall performance. At The Change School, our corporate programs can be tailored to the needs of your team or situation – from a 2 hour Culture 101 to help you introduce the concept of CQ to your colleagues, to a week long team retreat in Bali to address diversity, company culture and adaptation, we have the expertise and flexibility to help on a bespoke level.

Please reach-out to The Change School at hello@thechangeschool.com to introduce yourself and find out more about our cultural intelligence team programs.


REFERENCES

1)  Ang, S., Van Dyne, L., Koh, C., Ng, K. Y., Templer, K. J., Tay, C., & Chandrasekar, N. A. (2007). Cultural intelligence: Its measurement and effects on cultural judgment and decision making, cultural adaptation and task performance. Management and organization review, 3(3), 335-371.

2)  Case Study Inc (2010, February 10). Glocalization Examples - Think Globally and Act Locally. Retrieved from http://www.casestudyinc.com/glocalization- examples-think-globally-and-act-locally

3)  Ang, S., Van Dyne, L., Koh, C., Ng, K. Y., Templer, K. J., Tay, C., & Chandrasekar, N. A. (2007). Cultural intelligence: Its measurement and effects on cultural judgment and decision making, cultural adaptation and task performance. Management and organization review, 3(3).

4)  Livermore, D. (2015, July 20). Top Two Reasons Organisations are Building CQ. Retrieved from http://davidlivermore.com/blog/2015/07/20/top-two- reasons-organizations-are-building-cq/

5)  Groves, K. S., Feyerherm, A., & Gu, M. (2014). Examining Cultural Intelligence and Cross-Cultural Negotiation Effectiveness. Journal of Management Education.

6)  Salacuse, J. W. (2005). Negotiating: The Top Ten Ways that Culture Can Affect Your Negotiation. Ivey Business Journal.

7)  Ang, S., Van Dyne, L., Koh, C., Ng, K. Y., Templer, K. J., Tay, C., & Chandrasekar, N. A. (2007). Cultural intelligence: Its measurement and effects on cultural judgment and decision making, cultural adaptation and task performance. Management and organization review, 3(3), 335-371.

8)  Sewall, A. (2014 April 10). Calculating the True Cost of Failed Products. Retrieved from https://blog.wizeline.com/2014/04/10/calculating-the-true- cost-of-failed-products/

9)  Fromowitz, M. (2013, October 13). Cultural blunders: Brands gone wrong. Retrieved from http://www.campaignasia.com/BlogEntry/359532,Cultural+blunders+Brands +gone+wrong.aspx

10)  Stoker, J. (2015, June 24). Guanxi 101: Appreciating the value of relationships in Chinese cultures. Retrieved from http://thechangeschool.com/blog/guanxi-101-appreciating-the-value-of- relationships-in-chinese-cultures

11)  Rose, R. C., Ramalu, S. S., Uli, J., & Kumar, N. (2010). Expatriate performance in international assignments: The role of cultural intelligence as dynamic intercultural competency. International Journal of Business and Management, 5(8), p76.

12)  The Role of Cultural Intelligence in Marketing Adaptation and Export Performance (2013). Journal of International Marketing Vol. 21, No. 4, pp. 44-61.

13)  Mahoney, S., Aranda, G. (2015, May 21). Can you afford to throw away £2 million of your organisation’s money on a failed Expat Assignment? Retrieved from http://business-reporter.co.uk/2015/05/21/can-you-afford-to- throw-away-2-million-of-your-organisations-money-on-a-failed-expat- assignment/

14)  Stoker, J. (2015, July 10). Why your teammates aren’t speaking up – the Asian perspective. Retrieved from http://thechangeschool.com/blog/why- your-teammates-aren-t-speaking-up-the-asian-perspective

15)  Santos, J. F., & Williamson, P. J. (2015). The new mission for multinationals. MIT Sloan management review, 56(4), 45-54.

16)  Burkner, H., Chin, V., Dayal, R. (2015, April 8). There’s No Such Thing as Corporate DNA. Retrieved from https://www.bcgperspectives.com/content/articles/leadership_talent_globali zation_theres_no_such_thing_corporate_dna/?utm_source=201507TOP&utm _medium=Email&utm_campaign=ealert

17) Popova, M. (Retrieved 2015 August 4) The Backfire Effect: The Psychology of Why We Have a Hard Time Changing Our Minds. Retrieved from http://www.brainpickings.org/2014/05/13/backfire-effect-mcraney/