What is cross-cultural management?

Financial concept about Cross Culture with phrase on the piece of paper.
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Oct 20, 2023

Multinational corporations and international businesses often have to navigate a complex mix of cross-cultural differences within their organisations. For example, depending on where their teams operate, managers will have to consider cultural differences in terms of:

  • Communication styles.
  • Work ethics. 
  • Decision-making processes.
  • Business practices.

This is where cross-cultural management comes in. By learning how to successfully bridge cultural divides and create harmonious work environments, managers can maximise the potential of their diverse teams.

The benefits of cross-cultural management

The global business environment is more connected than ever before, and multinational corporations – or MNCs – are helping to shape the world economy through their growth into new markets.

As these multinational enterprises expand their operations across borders, however, they are also encountering a landscape of cultural differences – and if managed appropriately, these differences can have a hugely positive impact on organisational success and outcomes more broadly. 

For example, multinational companies that embrace cultural diversity and cross-cultural management are likely to see:

  • Enhanced creativity and innovation. Multicultural teams bring a variety of perspectives and can help their organisations to develop business strategies that are more adaptable to different markets and consumer preferences, and offer a competitive advantage.
  • Better decision-making. By incorporating insights from employees with diverse cultural backgrounds, businesses can make informed choices that take into account a broader range of viewpoints. 
  • Effective collaboration within teams. Cross-cultural training can create work cultures that emphasise collectivism, and nurture all people within diverse settings. This creates a supportive and productive environment for collaboration, knowledge transfer – or knowledge management – and teamwork. 

“Businesses that employ people from various nationalities, working together under one roof and all facing the same challenges and critical decision-making moments, reap untold benefits from the diversity of their approach,” explains Forbes in its article The Importance Of Cross-Cultural Management. “It’s important to understand that under the same circumstances, how someone approaches decisions and problem-solving could vary based on their background, experience, traditions and culture. This brings myriad positive benefits, and it can also bring some drawbacks regardless of background.”

Common challenges in cross-cultural management

While the benefits are significant, international management is not without its challenges. Cultural differences can sometimes lead to misunderstandings, miscommunication, or even conflict within organisations. 

Language barriers are an obvious example of a potential stumbling block for cross-cultural managers, but according to an article about managing multicultural teams in the Harvard Business Review, cultural differences can also create more subtle – but substantial – obstacles to effective teamwork.

“The challenge in managing multicultural teams effectively is to recognize underlying cultural causes of conflict, and to intervene in ways that both get the team back on track and empower its members to deal with future challenges themselves,” the article states.

The article goes on to say that while people tend to assume that cultural challenges on cross-cultural teams stem from differing styles of communication, this is actually only one of four cultural barriers to success:

  1. Direct versus indirect communication. While effective communication in western cultures is typically direct and explicit, this is not true in many other cultures – such as Asian cultures – where “meaning is embedded in the way the message is presented.” So how a colleague from New York might communicate could be very different to how a colleague from Tokyo might communicate.
  2. Trouble with accents and fluency. International business is typically conducted in English, but misunderstandings or deep frustration can still occur because of “non-native speakers’ accents, lack of fluency, or problems with translation or usage.” For example, Commisceo Global, a cultural training consultancy, offers a case study that highlights how differing attitudes to humour and sarcasm can create conflict between Japanese and British colleagues: “Reputation and standing are emphasised in Japanese culture and people make great efforts to protect both their own face and that of others,” the case study states, so misplaced humour can go badly wrong when it clashes with cultural values or sensitivities. 
  3. Differing attitudes toward hierarchy and authority. Multicultural teams often have a flat structure, but this can be a challenge for team members from national cultures “in which people are treated differently according to their status in an organization” and who are more comfortable deferring to higher-status team members.
  4. Conflicting norms for decision making. How quickly decisions are made and how much analysis is required first varies greatly by culture. For example, American managers tend to make decisions quickly and with relatively little analysis when compared with managers from other countries.

The importance of cross-cultural training for effective management

Cross-cultural training plays an important role in building cultural awareness into management practices, and in addressing common challenges in cross-cultural management.

This training might include:

  • Providing employees and other stakeholders with the knowledge they need to appreciate diverse cultural backgrounds, understand cultural values and potential cultural issues, and develop intercultural communication skills. This often includes studying Geert Hofstede’s cultural dimensions theory, which provides a framework or methodology for understanding cultural differences as well as their impact on business and other industries. 
  • Developing training programmes and initiatives focused on management skills such as conflict resolution, which can help managers to effectively handle problems if they emerge.
  • Offering bespoke training to employees who are moving abroad for work, perhaps at one of the organisation’s subsidiaries, joint ventures, or other offices. Known as expatriates training, these programmes prepare people for the local customs, business etiquette, and cross-cultural communication styles specific to their new host countries and their demographics.

The difference between cultural diversity and cross-cultural management

Cultural diversity occurs when there are people from different cultural backgrounds within a group, such as a community or a business.

Cross-cultural management, meanwhile, involves actively managing and leveraging this diversity to promote better communication and collaboration within organisations.

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