Last month, we focused on Dr Byrne's insights into how Australian businesses can improve their cultural awareness in order to better navigate cultural risks and take advantage of opportunities in Asia.

This month, we continue our series by focusing on Dr Byrne's insights on how Australian boards and businesses can bridge the cultural gap with Asia.

Dr Margaret Byrne is a management consultant, executive coach and researcher on leadership and change management. She was interviewed at the AICD’s 2015 Company Directors Conference in Kuala Lumpur about the need for Australian business leaders to develop greater ‘cultural competency’. Dr Byrne also gave a speech at the Conference titled “Learning about Asia to succeed in Asia: Culture as a risk factor”.

Individualism and hierarchy: How Australian and Asian cultures differ on key cultural metrics

In her speech at the 2015 Company Directors Conference, Dr Byrne referred to two metrics used to measure cultural differences, which draw upon Geert Hofstede’s seminal Cultural Value Dimensions Theory and the more recent Global Leadership and Organization Behaviour Effectiveness (GLOBE) study on leadership characteristics across cultures.

The first metric she examined was individualism; that is, the extent to which a particular society, culture or country prioritises the individual or the group. The second she examined is hierarchy; that is, how power relationships and social structures are organised within a particular culture.

Dr Byrne argued that in terms of both individualism and hierarchy, the key quality that separates Australian culture from Asian cultures is Australians’ sense of egalitarianism.

“Australia is profoundly and radically different”, suggested Dr Byrne. “Anthropologists globally call Australia a ‘super egalitarian’ country’”, said Dr Byrne. She argued that the difficulty for Australians when dealing with other cultures is that sometimes “our egalitarianism can be misinterpreted as brashness, as rudeness, lack of respect [or] lack of finesse”.

Dr Byrne said that the Australian preference for “communicating or behaving in more or less the same way with everyone” comes across as “radically different” when interacting with Asian cultures. Asian cultures, argued Dr Byrne, have more hierarchical and subtle forms of self-presenting which involve “many different styles of communication and behaviour flexed and nuanced to different contexts, to different relationships [and] to suit different, particular circumstances.”

Dr Byrne suggested that Asian cultures value indirect communication. She stated that indirectness is the “common denominator” across Asian cultures, and “serves multiple, really important purposes, across this entire region”.

Indirectness “helps to manage hierarchy, it protects face, it promotes harmony, and it deliberately allows multiple meanings”, said Dr Byrne.

How can cultural awareness and analysis assist organisations?

In her speech, Dr Byrne referred to her work on cultural awareness and management with Warren Fish of Aurizon, an ASX 50 company and Australia’s largest freight rail transporter of coal, iron ore and commodities for export to markets in China, India, Japan, South Korea and Taiwan.

Mr Fish provided two examples of where cross-cultural awareness and analysis has been used to bridge the cultural gap in highly sophisticated joint venture negotiations in Asia, as well as on large scale Australian projects with Asian counterparties.

Mr Fish referred to his work as the Executive Director of the Safety Portfolio on a large resources project involving a Chinese state owned enterprise. His role was to improve the safety record by reducing the number of on-site injuries. One of the complexities was the large contingent of foreign workers across all levels of the organisation, from junior engineers through to top executives.

Cross cultural analysis revealed that there was a gap in cultural and commercial perspectives on safety, governance and regulation. “We saw Chinese colleagues seeing Australia as over regulated and very difficult to do business in, and our Australian workforce viewed their Chinese counterparts as not paying enough attention to things like safety or quality control” said Mr Fish.

A cross-cultural program was implemented, placing emphasis on providing “a common guide for culture and behaviour”. Utilising elements of Confucian philosophy, it focused on building skills in four key areas: trust, personal relationships, practical compromise and collective goals. As a result, over the first 9 months of the project there was a decrease in the ‘recordable injury frequency rate’ from 14 injuries per million work hours to 5.

In a second example, Mr Fish explained how cross-cultural awareness and knowledge was used to enhance strategic thinking in highly sophisticated joint venture negotiations with a large Chinese state owned enterprise and a Korean steel producer.

“Trust is absolutely fundamental to senior relationships”, suggested Mr Fish. He emphasised the strategic importance of cultural awareness and knowledge in building trust and personal relationships with senior leaders of Asian counterparties. He also emphasised the strategic importance of being seen to make an effort in cross-cultural interaction, as a means of both building relationships and minimising any cultural misunderstandings that may arise. It “makes a deep impression on counterparties to see you making the effort”, said Mr Fish.

Can cultural awareness be used to help boards manage risk and enhance company performance?

Culture is involved in “every conceivable kind of situation or business task type where you might want to influence, persuade, convince, advise, collaborate, solve problems or make decisions”, suggests Dr Byrne.

As a first step, suggested Dr Byrne, companies need to engage in a cultural “gap analysis”. This may reveal cultural differences or misinterpretations that require board oversight. Risks may include the potential for relationship breakdown in important commercial dealings with foreign counterparties or potentially adverse effects in foreign consumer markets.

On the other hand, cultural awareness and analysis can be used as a tool to enhance commercial relationships at the senior level or improve company performance. Making a genuine commitment to the culture of Asian clients or understanding the cultural perception of Australian brands in foreign markets has the potential to greatly improve the performance of Australian companies.

Australian and Asian cultures have “two quite different mindsets”, suggests Dr Byrne. The Australian approach, she argues, has a preference for being “analytical, linear, [and] evidence based”; and the Asian approach has a preference for being “contextual, suggestive and holistic”.

Understanding these different mindsets and cultural biases plays an essential component at both the day-to-day and strategic levels within organisations.