corruption – Success Across Cultures

Wherever there’s a cultural difference spawned from deeply embedded cultural values, ethical dilemmas often emerge.

Negotiators must navigate the balancing act between respecting cultural relativism and adhering to universal ethical standards.

Here, we explore some real-world examples of these challenges and strategies for overcoming them.

Cultural Relativism vs. Universal Ethical Standards

Cultural Relativism – Cultural relativism posits that moral principles are not universal and should be understood within the context of a particular culture.

For example, in some Middle Eastern countries, business negotiations often involve building personal relationships before discussing terms.

This approach, rooted in cultural norms, might seem inefficient to Western counterparts focused on transactional negotiations.

However, dismissing these customs can lead to misunderstandings and ethical missteps.

Universal Ethical Standards – On the other hand, universal ethical standards advocate for consistent moral principles regardless of cultural context.

Issues arise when practices accepted in one culture clash with these standards.

For instance, gift-giving in many Asian cultures is a common practice to foster goodwill.

Yet, this can be perceived as bribery in cultures with strict anti-corruption laws, posing an ethical dilemma for negotiators striving to maintain integrity.

Real-World Examples

Bribery and Corruption – Consider the case of a Western company negotiating a deal in a developing country where bribes are a normalized part of business transactions.

The company faces an ethical dilemma: adhere to universal anti-bribery laws or risk offending local customs and losing the deal.

A notable example is the Siemens bribery scandal, where the company paid millions in bribes to secure contracts globally.

The fallout highlighted the need for companies to navigate these ethical waters carefully, balancing respect for local practices with compliance to international laws.

Labor Practices – Another ethical dilemma can be observed in labor practices.

Western companies often outsource production to countries with lower labor costs.

However, these countries might have different standards for workers’ rights.

For example, Nike faced significant backlash in the 1990s for poor working conditions in its overseas factories.

The challenge lies in respecting the host country’s norms while ensuring that the company upholds universal ethical standards for labor practices.

Strategies for Navigating Ethical Dilemmas

Cultural Sensitivity Training – One effective strategy is to invest in cultural sensitivity training for employees involved in cross-cultural negotiations.

Understanding the nuances of different cultures can help negotiators walk this line of respecting local customs while maintaining ethical integrity.

Clear Ethical Guidelines – Companies should establish clear ethical guidelines that outline acceptable practices in cross-cultural settings.

These guidelines should be flexible enough to accommodate cultural differences but firm in upholding core ethical standards.

Engaging Local Advisors – Hiring local advisors who understand both the cultural context and the company’s ethical standards can bridge gaps.

These advisors can provide insights into how to navigate complex situations without compromising ethical principles.

Open Communication – Finally, fostering open communication between parties can help address ethical concerns upfront.

Discussing potential ethical dilemmas and agreeing on a mutually acceptable approach can prevent misunderstandings and build trust.

By employing strategies such as cultural sensitivity training, clear ethical guidelines, engaging local advisors, and fostering open communication, negotiators can bridge the gap between cultural relativism and universal ethical standards.

Every single person has a mental model.

When assessing the likelihood of an event, the individual bases the event’s probability upon its similarity to that model.

This is called representativeness bias.

Last week, we talked about availability bias, one of the three mechanisms that bias our decision-making.

Availability bias involves one’s perception of an event’s frequency based upon its vividness and frequency in the forefront of one’s mind.

Now, let’s take a look at how this second mechanism – representativeness bias – distorts judgment and decision-making.

Marriage & Divorce

One example of representativeness bias involves marriage.

Many people’s mental model of marriage is that of a lifelong partnership. Not often does a couple enter into a marriage with a view of divorce.

Due to their mental model of eternal love, only around 5 percent of couples in the U.S. sign a prenup, despite around 50 percent of marriages ending in divorce, according to research by Harvard Law.

Somehow, most don’t consider they’ll be part of the statistic and, so, don’t plan for it.

In this way, the power of representativeness bias is stronger than the logic of probability.

Representativeness Bias in Business Decisions

Culture, of course, influences our mental models, and so representativeness biases are grounded in culture.

Let’s look at another example of how a business decision revealed representativeness bias, likely to the detriment of the business.

The global insurance company, Allianz, had built business in eleven African countries. Although profitable, the business was small and, in March 2014, Allianz reviewed their strategy on the continent.

They narrowed their way forward down to two roads: 1) apply aggressive growth through acquisition, or 2) wholly sell off the business.

The board of Allianz was presented with a growth strategy. They rejected it.

Their view was that Africa’s corruption was too extensive and might put the insurance company at reputational risk.

However, Allianz continued to do business throughout Eastern Europe.

According to the Transparency International list – an index of worldwide national corruption – several countries in Eastern Europe, in which the insurance group remained, rated equally corrupt as their African counterparts.

The West’s mental model of Africa considers the entire continent as one monolith of extreme corruption, thereby biasing judgment in lieu of logical probability.

In dismissing growth based on representativeness bias, the company may have lost out on a successful business venture and the profitability that accompanied it.

Tune in next week for anchoring bias.

Tag: corruption

Ethical Crossroads & Negotiation Challenges: The Line Between Cultural Relativism and Universal Ethical Standards

3 Mechanisms That Bias Our Decision-Making: Representativeness Bias