At the end of 1995 a business alliance was forged between the innovative high-tech New-Zealand company Spectrum Industries and the Hong Kong company Panda Computing, a company in the Ching Group. Panda wanted to move into the high-tech area that Spectrum was pioneering and was in a position to provide the alliance with the sort of market potential that Spectrum could never hope to match.
The alliance partners had decided on a sector with a short innovation cycle in the high-tech market of the Asia-Pacific region. As a result, the product and service that the alliance was developing needed to be launched quickly. As time was of the essence, executive appointments were made internally.
It was decided to locate the corporate headquarters in Hong Kong – close to the market for the product. The technical-support division of the company would remain in New Zealand, and senior management, marketing, finance and corporate and human resources would be gradually relocated to Hong Kong. A New Zealander, Peter Carpenter, was appointed chief executive. Joe Chan of Panda was appointed to the project as general manager; and, although he was notionally of equal status to Peter, he reported to the chief executive and was in effect less senior. Two of Joe’s central roles were to manage local staff and project teams and to look after Panda and the Ching Group’s financial interests and reputation.
Peter was in his early 30s and had an exceptional record as a technical innovator and sales strategist. He had a reputation for developing products and technical solutions quickly to capitalise on short-term market opportunities. His projects were highly profitable and he had advanced rapidly into senior management. However, Peter was unused to bureaucracy and impatient with formalities. Hence he was often perceived as abrupt in a working context, yet outside of work he was quite sociable. Peter recognised that he was impatient with delay; but he believed that the secret of his success lay in his ability to break down barriers and get results.
Joe Chan had risen through the ranks of Panda through his financial capabilities and his ability to keep a project on budget. Also, his loyalty and ability to manage the complex relationship issues associated with the Ching business empire made him an invaluable team member. Joe was married to the niece of the managing director of the Ching Group and he was on the Ching board. Joe had worked in several companies in the group and he saw Panda as part of a business and family network.
Joe was highly diplomatic and aware of the delicacies of doing business respectfully and with regard to the cultural dictates of the Chinese business environment. He had earned his MBA at one of the best graduate schools in Australia and had the skills to operate at the top of an organisation. Joe was highly detail-oriented and preferred all the correct documentation to be in place prior to action being taken. He insisted that his team members, Western and Chinese, acted respectfully and deferred to the proper people before taking any action. Joe’s counsel was considered essential on assigning tasks, as he could ensure the integrity of important relationships.
In the first few weeks of the alliance, the staff seldom came together in person; instead there were several on-line conferences and conference calls between the executive in Hong Kong and the technical supervisors in New Zealand. The only strategic planning that took place was among senior management in the respective companies. The project team got their sense of the strategic plan through a written document outlining areas of responsibility, job descriptions and deadlines.
Initially Peter’s style was less abrasive than usual. He had some Asian experience as Asia-Pacific general manager in Jakarta earlier in his career and had learnt the importance of giving the appearance of working with local culture.
In the first stages of the project Peter undertook a cost analysis of the management structure and decided to streamline some of its elements.
Joe was impressed with Peter’s credentials – in particular his history of producing extraordinary turnover growth – and he was delighted to have such a dynamic young executive on the team. Yet he was unhappy that he should be reporting to a younger man and to an expatriate unfamiliar with the Hong Kong business culture. Despite these reservations, Joe was eager to be supportive, and he listened to Peter’s proposals to adjust aspects of the business structure. So Joe helped Peter with some changes: Joe saw change as an integral part of a dynamic business.
Peter recognised that he and Joe had different styles and made what he thought were valid attempts to adjust to working with Joe. He quickly recognised that Joe’s unstated role in the alliance was to protect the interests of Panda Computing and the Ching Group. Peter felt that he needed to monitor Joe and ensure he was keeping the interests of the alliance as his top priority. Peter realised that he needed to be guided by Joe in some areas: however, basic business decisions were not things Peter saw as topics for consultation. And he wanted to be sure that Joe knew he was in charge.
Some of the changes Peter decided on included retrenching several staff recruited from Panda’s areas of the business and downgrading and integrating some positions there. Peter felt that the team was focusing too much on Hong Kong and lacked a broader view of North-East Asia. He announced that several key human-resource positions would be outsourced to Spectrum.
When Joe questioned the wisdom of some of the changes, Peter responded angrily. He was not asking for an opinion he said, he was giving a direction. This exchange began a serious breakdown in the relationship.
Joe was furious with Peter for his insensitivity. Also, as a result of some of the proposed changes, he stood to lose face with a number of important contacts and team members. Whether consciously or not, Joe undertook a strategy of avoidance and delay. Peter similarly began questioning Joe’s role: was he really advancing the business alliance’s interests or those of other sections of the Ching Group?
At the end of the second month Peter reviewed overall progress and found that several of the positions that he had told Joe to terminate were still filled on the original remuneration levels. In his view, Joe was not implementing his decisions as he had hoped. Joe could not be removed from his position due to his family connection, position on the board and local knowledge; but he did need to be pulled into line. Similarly Joe was finding Peter so abrupt at times that he was considering taking his concerns to the board. Attempts to deal with the issues had led to cross words in private and had left things in a worse state. The issue was deteriorating with every meeting and now threatened the alliance itself.
In what ways were the business relationships mismanaged? What could have been done differently to create a more harmonious alliance? At what stage of the scenario were there opportunities for improvement in the relationship?
Allan Parker is managing director of Peak Performance Development, a Sydney-based consultancy offering organisational change facilitation, training and dispute mediation. His work includes strategic planning, corporate restructuring and mergers. Besides his work in Australia, he frequently works in Britain and Asia. He is the author of the best-selling book Switch on Your Brain: The Negotiator’s Toolkit and is a co-author of Beyond Yes: Negotiating and Networking.
Andrew Heys has been a conflict-management specialist for a decade. He was a member of the teaching staff at the Centre for Conflict Resolution at the Macquarie Graduate School of Management. He has written for Australian and international journals. He holds an honors degree in politics and a master of international studies (hons). Andrew consults to state and local government, industry associations and the private sector.
Severe mismanagement has taken place in the formation and handling of important relationships. Poor judgment was exercised in selection, a cursory strategic planning process was implemented and cultural training and regular review was absent.
At the outset the partners needed to clarify their reasons for forming the alliance and ensure that those reasons were clearly communicated to all concerned. Little attention was paid to the process of cultural adaptation. There is a spirit of competition between the two companies that is affecting the behavior of many people.
The relationship between Joe and Peter has been badly mismanaged. Peter has no cultural awareness or subtlety. Both Peter and Joe have assigned themselves unstated roles: Peter monitoring Joe’s loyalty to the alliance; and Joe preserving valued relationships. These unstated roles are derailing their relationship.
A more harmonious alliance was scarcely possible given that all concerned were under pressure to get the project up without spending time to plan the process. Although the partners were working under great pressure they needed to make some effort at establishing the way they would work together. These things possibly were neglected due to a perceived lack of importance, the appearance of dealing with a homogeneous technological culture and a need to get the job done. The partners should have developed a relationship and cultural plan with guiding principles and behavior codes in the strategic plan. A complex business alliance would be much better served by a three-step planning process involving:
- A strategic and business plan.
- A relationship and cultural plan.
- An alliance integration strategy.
Adequate strategic and business planning would have revealed the need for relationship and cultural plans that would have furnished opportunities to raise awareness of the relationship and cultural complexities. This would in turn have made for greater sensitivity in developing and managing the collective culture. Finally, the alliance-integration strategy would have made explicit and specific the appropriate behavioral codes.
Similarly, in such a complex cultural context it is essential that there be cultural training for senior executives and team members. This needs to take the form of opening up a dialogue about cultural nuances, not simply giving training on superficial manifestations of culture.
The selection of key players in this case was done on the basis of expediency and technical experience. Had attention been given to selecting people more appropriately skilled against criteria that matched the complexity of the project, tensions could have been avoided. The alliance partners made the error of selecting people before defining their roles – hence the role fits the person rather than the person fitting the role.
The planning process would also have revealed the need for a conflict-resolution system. Joint-session decision making between the alliance partners would also have helped: conference calls for strategic planning is unsatisfactory in the initial stages of forming a group.
There were several missed opportunities for building up the relationship. The following stages could have been adopted:
- Selection. Each partner needed to know why they were going into business with the other and needed to develop a distinctive identity for the alliance. The conflict between Peter and Joe may indicate unclear purpose and identity.
- Pre-alliance planning. Each partner needed to develop a clear idea of their role in the alliance. This would lay the ground for the strategic planning process, provide parameters for the process and also demonstrate to the partners the need for a process of inter-cultural training.
- Collective planning. The process of strategic and business planning would include collectively developing a strategic plan. This would give the partners a clear sense of the alliance’s identity, vision and business strategy.
- Implementation phase. The utilisation of an implementation plan highlighting key result areas, along with measurement indicators to support them.
- Review. A regular review of key result areas and indicators would ensure the effectiveness of the feedback systems and ensure that adequate debriefing was taking place.
The problems between Joe and Peter are threatening the alliance itself. If some of these strategic planning and structural steps had been used then the crisis threatening the alliance could have been avoided. Although the issue seems to revolve around the differing management styles and cultures of the two executives, the application of a plan as outlined above would have seen a more unified and productive alliance.
Caesar N. Atienza is executive director of the BIMP-EABC (Brunei, Indonesia, Malaysia, Philippines-East ASEAN Business Council), the private-sector component of the BIMP-EAGA (East ASEAN Growth Area). The EABC is the organisation responsible for facilitating business alliances within the EAGA and Southeast Asia. Much of his work is related to forming alliances between Australian and Asian businesses through the Step InTo Asia (SITA) Program.
He studied economics at the University of the Philippines (Dean’s List) and pursued post-graduate studies in economic research and corporate planning at the Center for Research and Communications in the Philippines. He has extensive experience in ASEAN and the rest of Asia. He worked with the ASEAN Secretariat in Jakarta for more than 12 years handling trade, investment, industry, minerals and energy matters.
The business alliance formed between Spectrum and Panda looked like a good one. Each seemed to need the other and each brought to the alliance strengths that compensated for the other’s weaknesses.
The relationship was mismanaged from the start. The staff was not given much opportunity to meet in person. The project team got its sense of the strategic plan only through a written strategic policy document. Furthermore, it seems that each of the parties had different perceptions of what the alliance meant and, because of the limited interaction, had little opportunity to detect these differences, much less reconcile them. Hence, it would have been better had the companies jointly undertaken strategic planning rather than separately. Reconciling differences in perceptions about the alliance and even dealing with cross-cultural management issues at the outset would have avoided the deteriorating situation that threatened the alliance.
The situation was exacerbated by the chief executive’s apparent insensitivity to working in an Asian framework, despite having worked as Asia-Pacific general manager in Jakarta.
Western-educated managers often underestimate the importance of “losing face” in the Asian context. While bawling out each other at formal meetings may be acceptable among Westerners, such actions are considered totally inappropriate in Asian boardrooms, especially if there are others around.
Peter Carpenter’s belief that “giving the appearance of working with local culture” would be sufficient to get him through in Asia indicates a lack of sensitivity. Giving the appearance of working with the local culture is scarcely adequate.
An illustration may help. An expatriate manager in an international hotel in Bali was experiencing chronic absenteeism in his hotel. At certain times of the year, he would see a flood of leave applications from the hotel’s Balinese staff, resulting in severe disruption in the hotel’s services. If the leave was not allowed, the Balinese did not show up the next day and would come to work again the day after, as if nothing had happened. This nonchalant attitude to work irritated the manager, who felt that it was unprofessional and irresponsible. The manager decided to apply Western techniques and proposed a unilateral scheme of scheduled leaves and threatened to sack those who refused to co-operate. The result was that all local staff simply left and never showed up again, leaving behind a full hotel with no staff. What the manager failed to appreciate in this case was that the Balinese take their religious festivals seriously. During these events – of which there are many in Bali – the Balinese would go on leave and the hotel would experience a severe staff shortage. Applying conventional management solutions obviously did not work in this situation. What should have been done – and is now actually being done by international hotels in Bali – was to prepare for this local tradition by having a good mix of staff from the neighboring island of Java, together with the local staff, from the outset.
Often the best-conceived projects fail in Asia or run into serious problems simply because the foreign company does not pay enough attention to cross-cultural management issues. Companies wanting to expand operations in Asia (or any part of the world for that matter) would be well served to remember that although they must “think globally” they must also “act locally”.
Joe could have been a very useful ally to Peter. He had the appropriate background and connections to mediate between Spectrum’s Western style of management and the Asian way of doing business. Had Peter sincerely listened to Joe’s opinions, the alliance might have fared better.
Although Joe did resent to some extent his having to report to Peter, he was none the less impressed with Peter’s credentials. He was even eager to be supportive. However, when Peter responded to Joe (who was expressing his views on the changes that Peter wanted done) by saying that he was not asking for an opinion but giving a direction, the relationship was lost.
Someone once said that doing business in Asia requires “one percent inspiration and 99 percent connection”. Developing and nurturing contacts takes years and requires a lot of trust and good will. Understanding (not merely knowing) the local culture goes a long way towards developing good and solid contacts.
Furthermore, you can use this understanding to your advantage. For example, such local values as “debt of gratitude” can be useful management tools in operating successful businesses in Asia.