Managing cross-cultural diversity in financeAdaptability across a broad range of stakeholders is an important success factor for leaders.
When I started my first regional role as CFO with telecom Nokia in Shanghai in 2001, headquarters' expectations and mandate were clear: Beyond the finance deliverables, my assignment was to build relationships between a Western-cultured organisation and the teams from Asian countries, especially China; to build teams that share the corporate culture; transfer expertise; and grow selected local talents.
I was expected to be the person educating and federating people, to be an expert on the region, and to be the point of contact for headquarters. I was the central link of a one-to-many relationship between headquarters and countries.
International practices have become more homogeneous, with the development of norms, modes of interaction, and trainings often of Western influence (IAS, IFRS, FCPA, MBAs), even if not fully embraced by regional, Chinese, Indian, or Islamic sensitivities.
But in the same period, the business environment has considerably changed. The multicultural reality has become more complex, not limited just to country cultural relations. Behind the illusions of globalisation, as a multicultural CFO, I have witnessed a multiplication and a fragmentation of cultural and identity problems, shaped by complexity.
Developing effective cross-cultural relationships is essential for today's finance professionals. At a time when transformation is becoming a critical part of the CFO responsibilities, cross-cultural challenges can affect team performance and derail transformation programmes if not properly managed.
A changing world
In the last ten years, finance has witnessed major changes in the labour market, fostered by the rise of global education, travel opportunities, and technological development. Pools of qualified local talent in finance and management have emerged across the globe.
In that time, teams' performances have improved, people have become more autonomous, and the level of knowledge and technical expertise has significantly increased across all countries. This evolution enabled task offshoring in emerging countries or in the rising superpowers of India and China.
Cultural differences seemed to lessen as common languages were used and unified attitudes were formed, especially on culturally sensitive topics. This unity helped in creating team spirit, fostering collective expertise, and facilitating interactions with headquarters. With time, it becomes second nature to integrate cultural differences, build teams, and adapt to changes.
However, the business environment and the finance function also changed considerably. Change has become permanent. We often focus on the technological dimension of transformation, but the nature of organisational transformation is firstly cultural. The changes we are witnessing involve several distinct shifts taking place:
In the identity of finance
Robotic process automation, blockchain, artificial intelligence, the evolution of enterprise resource planning (ERP), and digitisation have all helped improve team efficiency and effectiveness and provided new horizons in all finance functions. But team reorganisations and the redefinitions of roles, set-ups, and careers have created individual and collective identity questions.
Task offshoring, the subcontracting of ERP/IT, and remote working have increased agility and standardisation and lowered cost baselines. But they have also opened up greater cross-cultural interaction. Role handover to these new structures may become more complex if cultural factors are neglected, and operational efficiency between teams can be affected. Interactions outside of the company — with customers, suppliers, etc. — are increased in all directions, creating more potential cross-cultural volatility.
In working culture
Lack of coordination and communication introduces another risk factor that can seriously impact finance deliverables, because there is now very limited slack in processes and deadlines to react — for instance, in reporting.
In generational culture
Digital native generations seek purpose and show different career and life aspirations, cognitive approaches, and attitudes toward relationships and work. A cross-generational gap driven by technology and education is growing, challenging but not yet replacing traditional social and management codes.
Factoring in cultural values and beliefs is crucial to properly addressing these multiple cultural shifts. Cultural values help connect transformation to local environments and are the compass helping people to navigate the new environment. This is especially precious when everything else is perceived as unstable.
Roadblocks to cooperation
Ignored or mismanaged, cultural specificities can become obstacles through resistance, misinterpretation, hesitations, and delays; they can weaken a group dynamic by blurring the common vision or creating discord. Negative effects will be more frequent when people are under pressure, when tensions appear in relations, when critical management decisions are being made that affect a particular geography or a social group, when important posts are to be filled, when management is at a distance, or when teams are large and heterogeneous.
In Asia a "yes" can mean a "no", while "no" or "impossible" may not even exist in the local business language. People may not publicly express an opinion or raise questions. In some countries people will not admit to having problems, so as to not lose face; or they can overcommit today and withdraw tomorrow. Very importantly, the influence of senior people — even those outside of line management and of the group as a social entity — prevails.
The time dimension differs from one place to another — for example, a longer-term view tends to be taken in China, whereas things are more dynamic and cyclical in India — as well as the logic used to address problems. Historical and cultural incompatibilities are in some cases still very much present. And emotional intelligence does not have the same resonance everywhere.
The new generation of communication tools, social media, and long-standing business interactions may create an illusion of an almost perfect cultural alignment. But the reality can be different. Not all cross-cultural challenges are negative, but some can affect team performance and derail transformation programmes if not properly managed.
If you ignore this tension, you might well fail. For those seeking to harness the positive potential of cross-cultural diversity and avoid the pitfalls, the following suggestions based on proven experience are offered. These can be valid in most cross-cultural contexts, especially in periods of transformation.
Build an identity
Create a common identity and way to operate as a team. This does not mean bypassing local cultures and practices. Create a specific togetherness accepted by all, which will complement but not supersede cultural specificities and will not be under one dominant culture.
To build this common identity, safe spaces of expression are required — in meetings, through mentoring programmes, and in workshops, where anyone can meet the other and be exposed to differences and, ultimately, co-create. It is critical to define objectives and common principles of interaction, set the pace for collective action, and frame interactions. Be clear about what cannot be compromised or tolerated. Leadership team workshops — twice a year if possible — are a great forum to work on these topics. Address specific issues in a one-to-one mode only and what may concern the group publicly.
Encourage collaboration and empowerment
For the massive transformation programme at Nokia, people from different countries and teams were mixed together in working groups to define the common way to proceed and to cascade it down to their perimeter. Given the complexity and diversity of the region, a top-down approach would have failed.
Build a solid and diverse leadership team with people convinced by the common cross-cultural project. This will help collective learning, and the organisation will build a collective emotional intelligence.
In complex environments, other organisations yours may encounter — for example, offshored shared-service centres or corporate teams — will bring their own cultural challenge. Whenever possible take the initiative, break the silo, include them in your team meetings, take their viewpoints into consideration, associate their people to your activities, and encourage your team members to proactively interact in as many ways as possible.
Tools, processes, and task organisation are critical parts of transformation. But the social and human dimension is what will make it a success or a failure. You need to progress on both sides in parallel, making sure that all the teams are properly equipped for change. The impacts of transformation may be perceived in different ways depending on countries and cultures.
Collecting regular feedback from employees and line managers through surveys will help; supporting and coaching line managers will be decisive. Creating a transformation team, even a virtual one, can help in that respect, providing local support for the multiple activities being undertaken by various people. Lead a monthly session with line managers under pressure from the transformation process to better understand the local perspective and find ways to support them.
Promote rotation and experience sharing
Expose your people to diversity. At Nokia several professionals regularly rotate in short-term assignments across countries. We created "hit squads" composed of volunteers from different countries and finance teams that support other teams remotely or on-site on case-by-case topics.
Engage your team members in global activities when possible. At Alcatel-Lucent local finance professionals were given opportunities to join the group corporate controlling team. It benefited their career development and networking, but it also helped bring attention to the region's specificities. Offer multiple opportunities for engagement to people across your team.
Cross-cultural issues are not specific to finance. Other functions face similar issues. They can bring useful ideas; your HR team can support you as well. Regularly exchange cross-cultural ideas with other senior leaders, and seek ideas both from within your company and from outside, such as from professional bodies.
Even with experience, you cannot pretend to understand all the cultural aspects; your own biases will alter your judgement. To counter that, spend time with your people in one-to-one open conversations with no pre-set agenda and in collective sessions. Encourage them to contribute to the group.
Identify local talent whom you trust, who can coach you, and who can guide you on local cultural specificities. Develop relationships with them and ask for feedback and recommendations. This can help you appreciate the different approaches to problems or relations. Do not bring your own solution.
Reading reports is not enough. You need to meet people, experience the cultural fact, challenge your own biases in the field, interact with people in their context, and get a sense of it. The best way is to be passionate and curious, observe, listen, experiment, learn, and — last but not least — be humble.
- "Watch for These Signs to Spot Your Rising Stars", June 2019
- "3 Priorities for Building Future Finance Leaders", 25 March 2019
- "Defining and Developing Employee Value Proposition", FM magazine, 14 November 2018
- "Leadership Skills in an AI World", 16 October 2019
- "Driving Ethical Behaviour in a Global Organisation", FM magazine, 21 August 2019
Jean-Philippe Gauvrit has held several senior leadership positions in finance and management and spent most of the past 20 years in the Asia-Pacific region (APAC), based in Shanghai and Singapore. As the regional CFO for Nokia and previously for Alcatel-Lucent in APAC, he led multicultural teams based in more than 15 countries. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.