Hard vs. Soft Factors

We all know the difference between hard factors and soft factors. Hard factors can be observed, defined, and most importantly quantified. Soft factors, in contrast, are difficult to observe, difficult to define and difficult to quantify. Everyone likes hard factors better than soft factors. And that is quite understandable.

But, what about national culture? Let’s think about it. Have you ever tried to change how Germans define quality? How Americans fundamentally persuade? How Germans set up complex work processes? How Americans establish and deepen business relationships?

Wait, let’s step back a bit. Have you ever tried to explain how Germans define quality? How Americans fundamentally persuade? How Germans set up complex work processes? How Americans establish and deepen business relationships?

And it gets even more complex have you ever tried to manage the differences in how the two cultures do those things? Ever tried to integrate them? To get them to work together? That’s really hard stuff. We’re talking about national culture. Who we are. Where we come from. How we think. How we work.

Culture is our self-understanding, our self-definition, it is deeply-rooted, not easy to change. Folks, national culture is the hard. Hard in the deeper, truer sense of the word: complex, not quantifiable, difficult to describe difficult to manage, and very difficult to integrate. Folks, culture is not soft, culture is hard. In fact, culture is the hardest of the hard factors in the global economy.

Four Questions

Take a piece of printer paper. Unlined. Fold it in half. Twice. You have quadrants. Turn the paper sideways to the landscape position. Now use a pencil and an eraser.

Baseline Number

First, what is your baseline number? It could be a hard number: revenue, profit, cost. Or a soft number: speed, quality, response time. Perhaps it is an investment: a merger, an acquisition, private equity or a joint-venture, a corporate reorganization, an important project. In the top-left quadrant write that number.

Key Success Factors

Second, what are the key success factors? In the bottom-left quadrant list max. five factors. These are the things which your organization must do well in order to meet the baseline number in order to succeed.

Cross-Border Collaboration

Third, which factors are dependent on cross-border collaboration? In the top-right quadrant list those success factors which are driven by collaboration. Then sketch out per factor and on a separate piece of paper: who is working with whom, on what, why, and most importantly how. Fourth, how is your company supporting that collaboration?

Steps Taken

In the bot­tom-right qua­drant write down the actions your or­ga­ni­za­tion is taking in order to ensure successful cross-bor­der col­lab­o­ra­tion in the areas you identified in the third qua­drant.

Folks, this exercise asks three important questions: What are your key success factors? Who are the people collaborating? How are you helping them to understand the influence of culture on their collaboration?

Four Questions + Numbers

Ok, you are probably wondering why you were asked to put a number in the top-left quadrant. Good, let’s get a sense for the numbers when Americans and Germans do or do not understand each other.

Let’s take the topic Communication. Again four questions: 1. What is your organization’s target number? 2. Which factors contribute to that target number? 3. To what degree are those factors based on collaboration? 4. How does the topic Communication influence that collaboration?

Target Number

First, define your organization’s target number as 100. Then enter that target number in $ or €. You define what target number means for your organization. It could be revenue, profit, cost, investment, budget, a scorecard goal, or other.

Key Success Factors

Second, list the five most important factors which determine your success. These are the things which the organization must do well in order for it to achieve its target number. Assign a % to each success factor. The total may not exceed 100%.

Then multiply each % by your target number. This gives you a $ or € number for each individual success factor. In other words, you have quantified each success factor’s contribution to reaching the target.

Based on Collaboration

Third, estimate to what degree each of those success factors is based on Americans and Germans collaborating. Assign a % to each success factor. The total may exceed 100% since you are estimating for each respective factor independent of each other. Some success factors may be more dependent on cross-Atlantic collaboration than others.

Then multiply each % by that success factor’s contribution to the target number, as quantified in Step 2. This gives you a $ or € number for collaboration of each individual success factor. In other words, you have quantified collaboration’s contribution to the organization’s success factors.

Influence of Communication

Fourth, estimate the influence of communication on collaboration. That influence may vary depending on the nature of collaboration of a given success factor. Communication in one area of collaboration may be more important than in another area. Assign a % to each success factor.

Then multiply that % by the degree to which each success factor is based on collaboration, as quantified in Step 3. This gives you a $ or € number for the influence of communication on collaboration for that success factor. In other words, you have quantified communication’s influence on collaboration.

Everyone loses

Your company has acquired another company. Or another company has acquired yours. Or within your company a reorganization is taking place. It doesn’t really matter. The dynamics are the same. Colleagues will be collaborating across borders. Many of them for the first time.

Now, if cross-border collaboration works, everyone wins. If it does not work, everyone loses. And we know that most cross-border combinations either fail or underperform. Not only mergers of entire companies. But also mergers of organizations within companies.

And the reason why they underperform is not only because they are mergers of company cultures, but also mergers of country cultures. They are mergers across borders. Company culture and country culture.

M&A and PMI

Your company has acquired another company. In another country. From another business culture. One of largest investments in the history of the company.

There are reasons for the acquisition. Those reasons make up the business case. Business cases are translated into goals. Goals require a path to them.

That path – let’s call it post-merger integration – is a very complex undertaking. Complex action. Taken by people.

People integrate. People are integrated. Integration is not mechanical. Instead it is human and personal. We are not robots. We have minds and hearts.

Mergers, acquisitions, combinations – pick your term – are a coming together of peoples, of their minds and their hearts. How they think. Therefore, how they work.

Minds and hearts have a home. They come from somewhere. That somewhere is national culture. Home is national culture. The German engineer is a German first, then an engineer. The American project manager is an American first, then a project manager.

But Germans and Americans are not the same. Similar, yes, but different. In some areas very different. And at times, so different, that they are in opposition to each other.

The coming together of Americans and Germans cannot fully succeed unless the two cultures understand each other. Understand at as deep a level as possible: How they think and how they work. “Where they are coming from.” Literally, where they are from.

And this process of understanding must begin during integration. Not afterwards. Not when problems occur. Problems which will be painful and expensive.

If integration is the coming together of minds and hearts, then a structured, determined and constant pursuit of understanding each other must be the foundation of integration, common to all aspects of integration. Not an afterthought, but the focus of thought, in the forefront of our minds.

Zero Point Zero One

Imagine this.

Your company has just acquired another company. That other company happens to be in a different country. That means your company and the other company are at home in different cultures.

Your company is German. The acquired company is American. Or switch it around. It doesn’t make any difference. Either way, the merger will not succeed if those two lead cultures do not understand each other.

Imagine that the acquisition price is one billion. American dollars or Euros. It doesn’t make any difference. It’s a lot of money.

Now, let’s assume three things: First, there are differences between Americans and Germans. Second, the differences are in foundational areas. Third, if the differences are not understood, collaboration will suffer.

If you don’t agree with those three assumptions, there’s no reason for you to continue reading.

But, if you do agree, I have a question for you: What is your company willing to invest in order to reduce the risk that collaboration suffers because of cultural misunderstanding?

How about 100,000 dollars or Euros? Does that sound like a lot of money?

Well, what percentage would that be of the acquisition price of one billion? How about one-hundreth of one-percent? Did I get that right? Math was never one of my strengths. Zero point zero one. Not one percent. Not one-tenth of one percent. But one one-hundreth of one percent. Zero point zero one.

Is your company investing that much? Perhaps less? Perhaps more? Perhaps the company is investing a total of zero point zero zero. Nil. Zero. Zilch. Nothing.

Has your company even factored in the influence of cultural differences on the success of the acquisition? If not, what does your company know that the cross-Atlantic mergers of the past did not?

Now let me frighten you into at least considering investing that zero point zero one: 
What if the merger does not go well, if it underperforms terribly or even fails? You folks know the business case. You know where the critical points are.

What if the press writes about it? And what if they name culture as one of the major reasons for the failure? “not integrated well” … “were not aligned” … “did not get along” … “cultural infighting”?

Keep in mind that neither the press nor the financial analysts can quite articulate what they mean by “the cultures did not get along.” And how could they. They don’t understand the complexities. They are journalists and financial analysts.

And frankly, the companies who are merging – and by that I mean you folks – are most likely not much better. Or are you?

So the story appears in the media. The analysts begin downgrading. And your shareholders are not amused.

What will be your line of argumentation for why the company did not invest one-hundreth of one percent – zero point zero one – to ensure that the two lead cultures understand each other?

The keyword here is “ensure.” And you can spell it either way. With an “e” or with an “i”. It doesn’t make any difference. Zero point zero one. Success or failure.

Wrong Thinking

Blind Spot

Folks you won’t believe this, but it took me five years to discover my blind spot about the Germans. In fact, I didn’t even find the blind spot myself. It was pointed out to me. By a German.

Until then I thought Germans were basically Americans who just happened to speak a different language, live in a different country, have a different history. I expected the Germans to be like me think like me act like me like John Magee, an American.

I learned that the Germans don’t always think like me and they don’t always act like me. And from their perspective, I – an American do not always think or act like they do I suspect that the Germans thought that I too was a German, who just happened to speak a different language who came from a different country which has a different history.

Germans aren’t Americans. And Americans aren’t Germans. And thank goodness. Wouldn’t the world be horrible if we were all the same?

Hard vs. Soft

We all know the difference between hard factors and soft factors. Hard factors can be observed, defined and quantified. Soft factors are difficult to observe, define and quantify. Everyone likes hard factors better than soft factors.

But wait, what about national culture? Let’s think about it. Have you ever tried to change how Germans define quality? Americans fundamentally persuade? Germans set up complex work processes? Americans establish and deepen business relationships?

That’s really hard stuff. We’re talking about national culture. who we are where we come from how we think. how we act. Culture is our self-understanding – our self-definition deeply-rooted – not easy to change.

I think the case can be made that national culture is among the hardest of hard factors. Hard in the deeper, truer sense of the word: complex, not quantifiable. Difficult to change. Influencing everything we think and do That’s hard. Culture is hard.

Not Addressed

We’re all very busy. We fight day in and day out to get the job done. It’s easy to overlook the influence of culture on our work. And it’s perfectly legitimate to say “people are people.” But, people aren’t people. There are German people. There are American people. And there are many other peoples.

Often we sense cultural differences, but we can’t quite put our finger on it. Even when we can articulate the differences, we don’t feel comfortable addressing them. We’re afraid collaboration would get even more difficult.

And when we do decide to address cultural differences, it’s not easy to find someone who can help us out. Business consultants don’t address cultural differences. They focus on the hard factors, on things they can quantify.

Organizational development experts don’t address cultural differences. They prefer to talk about corporate culture. The top business schools can’t help. Very few professors have any experience working in and across cultures. They’re academics.

So what happens? Cultural differences don’t get addressed. We’re left alone with the problem.

Seven Thoughts

Many words for culture

I’ll be honest, I am not a big fan of the term culture wishy-washy touchy-feely. I like the term national culture. It’s more robust. It’s more accurate. It’s more true. But there are many words we can use: logic, tradition, hard-wiring, dna, method, process, approach, self-understanding, beliefs, belief system, mentality, character, character traits, national character.

These are all synonyms different words with the same meaning. But what is national culture? The answer is very clear, very straightforward. National culture is how we think and how we act.

People in boxes

I know, I understand, you can’t put people in boxes everybody is an individual you can’t generalize. But, that’s wrong. We can put people in boxes. We can generalize. Let’s think about it. Two very sophisticated societies. United States. Germany. They couldn’t function if their people didn’t have a shared understanding in those areas which are essential to their society working.

Now what do we mean with a shared understanding? We mean a common, or near-common, belief system. But, not a least-common denominator not a watered-down belief instead shared at the deepest level not in all of the details but in the main points. These are the beliefs which define a culture which hold it together. That’s what we do at CI. We try to identify those beliefs. We can put people in boxes. The boxes are called cultures.

About them. About us.

Whenever we think about another culture we’re thinking about our own culture. Every conversation about another culture is a conversation about our own culture. It can’t be any other way. Every person is from a national culture. “From” meaning at home in, embedded in, coming from. And so, we all see other cultures through the eyes of our own culture.

We don’t have any other eyes. I see Germans and Germany with American eyes. The Germans see Americans and America with German eyes. None of us is floating way up in the stratosphere detached from the world, from their culture, from their home looking down at other cultures as if from some neutral perspective.

Why is this important? We can’t work well together, unless we understand each other. We can’t understand each other without understanding ourselves. Understand yourself. Understand the other. They go hand-in-hand. They complement each other. Depend on each other. Cannot work without each other. That’s the beauty of it. We need each other.

Bell Curves

People always say to me: “Wait, John, aren’t there differences not only between, but also within cultures?” My answer is always the same: “Well of course there are. Lots of differences.” America is diverse. Germany is diverse. Humankind is diverse. East Coast. West Coast. Northern Germany. Southern Germany.

Christians. Jews. Muslims. Non-believers. Female. Male. Young. Old. Extroverted. Introverted. From a big family. From a small family. Grew up in the city. Grew up in the country. Trained in the natural sciences, engineering, medicine, law, business, economics, humanities. Working in marketing, manufacturing, supply chain, sales human resources, service, general management. Diverse.

But, consider this: capable Americans, capable Germans can switch at any time from one company to another company within their national culture, within their national business culture without a problem. How is this possible? They have common – or near common – beliefs. Beliefs which are critical to the stability of their societies and critical to the stability of the companies companies which are rooted in their societies.

But, here’s the difference when Germans and Americans collaborate two sets of belief systems come together. So, we’re interested not so much in the diversity within the U.S. or within Germany we’re interested not so much in the distribution along the respective bell curves. We’re interested in the gaps between the two bell curves.

North. South. East. West.

We all know what a compass does? It provides orientation. We begin with: North. South. East. West. Then we get more accurate, more precise. North by northwest. South by southeast. Another image: first we see a field, then a stream, a bit further a wooded area. We enter into the wooded area we see different kinds of trees. Field. Stream. Wooded area. Trees.

When we discuss cultural differences we begin with the general then, over time, we become familiar with the specifics. We become more accurate, more precise. We get to know each other in order to work together. Think of Google Earth. Zoom in. Zoom out. First in 30,000 feet. 3,000 feet. 300 feet. 3 feet. Then out 3 feet. 300 feet. 3,000 feet. 30,000 feet. In. Out. General. Specific.

Capable. Proud. Strong-willed.

Germany. The United States. Germans. Americans. Two successful societies. Two successful national economies. Nation. Economy. Companies with successful approaches. Both peoples are capable, proud, and strong-willed.

Both peoples are determined to have the say, to “run the show”, to “be in the driver’s seat.” Whenever we discuss the German or the American approach, we’re talking about approaches which are proven, which work. Whenever we discuss how we do things, we’re talking about what leads to success. Both approaches lead to success.

Differences. Not Commonalities.

I get asked all the time:”John, why do you focus only on the differences? What about the commonalities?” I always have the same answer. Commonalities work for you. There’s no need to discuss them. Differences, on the other hand, are far more important and far more valuable. I know that sounds like a paradox. But it’s not.

For two reasons. First Differences can lead to serious problems. People working against, instead of with and for each other. And these problems can be very painful. Second Differences offer tremendous potential. Imagine what could be accomplished if national cultures understood each other then combined their inherent strengths?

Corporate vs. Country

Folks, country culture runs deeper than company culture. Let me to make the case for this:

Which came first? Literally. Which existed first, the company or the country where it was founded, where it has grown, where it currently exists? Formulated differently: which existed first the company or the culture of the people who founded and run the company?

Let’s get concrete: Which existed first Siemens or Germany and the German people? General Electric or the United States and the American people? Who existed first Werner von Siemens, the German or Werner von Siemens the engineer? Thomas Edison, the American or Thomas Edison, the inventor? How about Apple Computer: first Apple then the United States? And Steve Jobs: entrepreneur first, then an American? Was Jobs an entrepreneur, who happened to be an American or was he an American who became an entrepreneur? Let’s take BASF, the biggest chemical company in the world. Is that company more chemistry or is it more German? If you’re not sure, ask non-Germans who work for BASF.

Another way to ask the question is: Of the great, iconic American and German companies how many years – or decades – were they primarily a domestic company meaning operating in the U.S. or in Germany before then became a truly global company?

Ok, let’s take another approach to answering the question which runs deeper company or country culture: When it comes to the fundamentals to the foundation, to the deepest levels: in how we think, therefore in how we work who has more in common: a German mechanical engineer at Daimler in Stuttgart and an American mechanical engineer at Ford in Detroit in other words: two mechanical engineers, both in the auto industry or a German mechanical engineer at Daimler and a German marketing specialist at BASF, both Germans or an American mechanical engineer at Ford and an American working in finance at DOW Chemical, both Americans?

Asked in a different way: if you had five Germans and five Americans in a room and in each group was one person working in the disciplines of: engineering, manufacturing, service, marketing, sales so, a German engineer, a German in manufacturing, a German in service, a German in marketing, and a German in sales and the same on the American side and you asked each of them individually, separate from each other to respond to a handful of questions about foundational topics such as: communication, decision making, leadership, processes, etc. would their responses run along the lines of discipline or country culture in other words, would the Germans and the Americans in their respective disciplines, for example, engineering have the same or similar responses or would the Germans and the Americans respectively and independent of the disciplines in which they work have the same responses?

We are trying to get to an answer, to a truth what is the deeper driver, country culture or company culture, discipline, size of organisation, business sector, etc.

Let’s look at this from another angle: If it is true that after an agreement has been entered into Germans seldom do follow-up with each other whereas Americans do frequent follow-up with each other does that change based on: the company they are working for in which discipline they work, for example, in engineering in which business sector the company is operating whether the company is large, mid-sized or small? In other words do the American and German approaches to follow-up change based on the culture of the company they are working in?

What exactly is company culture? What does it mean? What would be examples of company culture? Is it plausible that such examples run deeper than national culture?

Even inanimate objects, like buildings, are cultural in their character can there be German office buildings which are not German in their character? Is there such a thing as architecture in Germany which is not fundamentally German? If it is the case, that even inanimate objects are based and driven by culture is it not the case that how people think, work, and interact is also based on and driven by culture?

Start-ups are start-ups, right? Wrong. An American start-up in Silicon Valley and a German start-up in Berlin are not the same. Because a start-up in Berlin or Munich is German first, then a start-up. They are German start-ups and not American start-ups.

A German engineer is a German first, then much later a German engineer. An American in marketing is an American first, then much later an American marketing specialist. Does anyone really believe that German engineers and Americans engineers think and work in the same ways? Well, if you’re not sure ask both American and German engineers who have significant experience in collaborating with each other.

Thought Streams

To integrate is to form, to coordinate, to blend into a functioning and unified whole. Collaborating across borders means to integrate not only on the working level, but also on the thinking level.

The working level is about how the work is done. Literally. Specifically. Concretely. How-the-work-is-done defines company culture. “This is how we do things. It’s who we are.” Post-merger integration uses the term work-streams. Streams. Water. Flowing. How the work flows. Work-streams. Work-flows.

Company culture, however, is imbedded in country culture. Rivers and streams have beds. Work-streams – How-the-work-is-done – are imbedded in culture. Cross-border collaboration can only succeed if integration takes place on both levels: work and thought, company culture and country culture.

Work-streams and thought-streams are inseparable they are two sides of the same coin they inform, and form, each other.