Tag: decision-making

Chrysler & the PT Cruiser: A Cross-Cultural Case Study

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A French office is like a royal court; a German office is a well-oiled machine.

As we’ve discussed over the past few weeks, analogies are simple mental models that can aid cross-cultural understanding.

While behavioral changes are inevitable when working a new culture, it can be impractical to completely alter your cultural identity. Analogies provide a rough blueprint so you can play by the rules.

They show you how another system works by transposing that system onto a concept that’s relatable to you.

Analogies aren’t perfect, but they do enable you to better comply with behavior in another culture which will make you more effective as a colleague or manager.

Instead of making decisions from the bias of your own cultural anchor, by understanding the structure of the workplace, you better understand its mechanics and are able to intuit decisions that more appropriately align.

If you don’t have a zookeeper to come up with an analogy for you – like an expat or local who’s worked in a similar cross-cultural capacity – observe the nuances of the culture and create your own simple but clear analogy to use as a mental model.

Here’s one example of how author and professor, Clotaire Rapaille, did just that.

The Culture Code

Having been exposed to numerous cultures in childhood, it was natural for Rapaille to dedicate his life to researching the differences of cultures around the world.

In doing so, he became a personal advisor for CEOs of top global companies and is on retainer for many Fortune 100 companies.

By applying basic analogies in his book, The Culture Code, his concise observations of other cultures make cross-cultural understanding more efficient.

Chrysler Case Study

One case study Rapaille presented in The Culture Code involved the development of Chrysler’s PT Cruiser.

Data from focus groups helped Chrysler analyze and understand the “code” of American car consumers.

What did they find?

  • A car means family: For Americans, the family car is made important during primary socialization. Therefore, the nostalgia of childhood and family are aspects entering into this code.
  • A car means freedom: As with most things American, owning a car in one’s youth means owning freedom in more ways than one. It was found that 80 percent of Americans have their first sexual experience in the backseat of a car.
  • A car means identity: There is a strong correlation between a person’s car and their identity in the U.S. In some ways, you are what you drive.

Considering this data, it’s clear that there’s a powerful emotional relationship between Americans and their cars.

As production planning for the PT Cruiser went into effect, German car manufacturer Daimler-Benz (Mercedes) took over Chrysler.

The German culture’s relationship with their vehicles is much different.

The legal driving age in Germany is 18, so the correlation between youthful freedom (and the nostalgia of a first sexual experience in a car) isn’t as common.

Moreover, German cars are ubiquitous with quality engineering. The focus is on advanced technology rather than on the powerful emotional relationship a consumer might have with their car.

Due to these differences in culture, the PT Cruiser project was not as successful as it could have been.

While the retro and individualistic design of the Cruiser pushed the right buttons for the American consumer, the German executives ignored this, instead focusing on the vehicle’s modest quality engineering.

They assumed the PT Cruiser would be a marketing disaster and consigned its production to a small plant in Mexico.

Because of this decision, supply couldn’t keep up with demand, when the car became a big hit with Americans.

The company could have sold much more in the first year had Daimler-Benz better understood and catered to the culture of the American car market.

This is one example where exploiting a cultural analogy (one shaped by family, freedom, and identity) could have guided decision-making and led a company to greater commercial success.

Analogies: Understanding Culture Through Powerful Mental Models

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You are a manager in a foreign culture. You look at everything through your cultural lens.

Workplace behaviors are strange. Your colleagues’ habits seem irrational.

You feel like a visitor at the zoo, a spectator observing everyone.

In actuality, you are in their habitat; not the other way around. You are the odd one out, behaving according to your “strange” cultural norms and values in their culture.

You are the monkey in the zoo.

This is an example of an analogy: a powerful image that enables you to adapt your mental model to the reality of your environment or situation.

Last week, we talked about German manager, Marie, and her struggle working in a French office.

It was an analogy – the French office is like a royal court – that assisted her in adapting her frame of interpretation.

Why do analogies work?

Because they familiarize unfamiliar situations, helping us form new mental models to confront the unknown.

Analogies Reshape Mental Models

Schemes, representations, and images form the mental models used to perceive and understand the world around us.

These are largely based on past experience, education, and training.

The mental models we’ve developed provide shortcuts in decision-making, allowing us to make decisions quickly and efficiently without necessarily having all the details at our fingertips.

Because we don’t have all the details, mental models abstract reality; they are biased. They make the real world more simplistic than it actually is.

Despite significant experience or education to back our mental models, at some point, they are usually wrong in one way or another.

What’s worse is mental models are deeply rooted and slow – if not impossible – to change.

Analogies, however, make that change easier.

By “tricking” our brains into seeing something that previously seemed concrete (office behaviors, for instance) in a new light (viewing French companies like royal courts), we are able to draw different connections and conclusions than our previous mental model allowed, thus arriving at new decisions that more adequately address the reality of the environment.

Making the Unfamiliar Familiar

Unknown social constructs are reshaped by analogies into a picture you can comprehend.

The fresh perspective from this corrected mental model will allow you to make more rational decisions relative to the social constructs of the culture.

There are, however, limits to analogies. Like anything, they aren’t perfect.

But a good analogy that accurately represents a cultural dynamic that doesn’t align with your own is always an improvement on the mental model you’ve brought with you from abroad.

Trying to fit another’s culture into your own is like trying to fit a square peg into a round hole.

So, how do you create good analogies?

Next week, we’ll talk about how Geert Hofstede’s dimensions can help.

3 Mechanisms That Bias Our Decision-Making: REVIEW

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Why do we make the decisions that we do? How do we rationalize these decisions?

Research is constantly evaluating how and why business managers make the choices we make, which we’ve outlined over the last few weeks.

To sum up, the three main biases discussed:

  • Availability bias – involves making a decision not based on an outcome’s true frequency/probability, but rather on how frequent an event enters the forefront of one’s mind.
  • Representativeness bias – involves judging the likelihood of an event based on how closely it relates to another event – i.e., on a mental model that does not exist in reality.
  • Anchoring bias – involves reaching a decision from an initial set point, often grounded in your culturally-influenced values and norms.

However, these are only a few ways in which culture creeps in to bias our decision-making.

Even our confidence in our decision-making ability is often influenced by culture.

Confidence in the Veracity of Decision-Making Ability

Research shows that, compared to their U.S. counterparts, Mexican managers are exceedingly confident in the veracity of their decision-making.

In a study by Christine Uber Grosse, entitled, “Global Managers’ Perceptions of Cultural Competence,” one Mexican manager explained the differences between leaders in Mexico and America, saying:

“We in Mexico are more colloquial or informal and are not so inclined to statistics. The Americans are very ‘manual-oriented’ and organized and we are more relaxed and ingenious.”

So, while before committing to a decision, U.S. managers expect to hear a complete plan laid out, including costs, a schedule, and the target results, Mexican managers rely more heavily on their gut instinct.

Moreover, when Mexican managers commit and something fails, they are more likely to double-down on that commitment, throwing good money after bad (as U.S. managers might put it).

According to research conducted by J. Frank Yates and Stephanie de Oliveira (“Culture and Decision-making“):

“A high degree of overconfidence has been found among Mexicans relative to Americans (Lechuga & Wiebe, 2011)…Overconfidence was widespread but differed in degree according to region.”

This overconfidence was attributed by the authors not so much to a manager’s judgment in confidence, but rather to differences in ability, as the latter varied substantially across countries.

Simplified Mental Models

Tying this all together with cross-cultural business, knowledge of the biases that influence decision-making – and another’s confidence in their decision-making – will help you navigate another culture’s rationale while also redirecting yours accordingly.

With various worldviews and cultural backgrounds, subjective realities exist, resulting in different mental decision models.

But one thing is universal: managers use their simplified and biased mental models to make their decisions.

Although likely different than your own, their simplified mental model is not irrational; it is based upon their subjective cultural perception and reality, just as yours is.

Oftentimes, no matter how illogical a decision may seem to you, the other is acting rationally within their own cultural framework, their baobab.

So, before concluding that a foreign manager’s decision makes no logical sense, familiarize yourself with the culture, its perception, and its reality.

You may then understand how a manager’s availability, representativeness, and anchoring biases – or any other culturally-influenced bias – enter into their decision-making.

3 Mechanisms That Bias Our Decision-Making: Anchoring Bias

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An anchor prevents a boat from straying from a set point.

When making decisions, managers are starting from their anchor – their initial set point, which is grounded in culturally-influenced values and norms.

A manager will drift from this point until the chain pulls taut.

There, he will reach a final decision, but inevitably, because he is anchored to a set point, that decision is influenced by anchoring bias.

We’ve talked about availability bias and representative bias in the last two blog posts and how each influences decision-making.

This week, let’s take a deep look at anchoring.

Anchoring in North African Souk

Let’s say you’re from a Western culture and travel to Northern Africa as a tourist. There, you head into a souk, and a seller zeroes in on you.

Knowing that your cultural norms and values are anchored in paying top prices for quality goods, the seller asks for a much higher price for a carpet than he might ask of locals.

Assuming your ignorance of the local pricing market, he starts astronomically high when haggling. That way, he can negotiate down to the highest amount you’re willing to pay.

He knows your anchoring bias allows for it.

If you never discover how much locals are paying for the same carpet, you’ll be none the wiser. You might even walk away thinking you scored a real bargain, when in reality, you paid ten times the local rate.

But if you later discover the seller gouged you on the price, you’ll likely feel scammed, which can often strain future negotiations.

This is one way in which markets use anchoring bias to their advantage in cross-cultural business.

Anchoring in Vancouver Housing Market

Sometimes, exploiting anchoring biases can backfire for local communities.

Let’s travel from North Africa to Vancouver.

The ‘90s saw a peak in Hong Kongers and mainland Chinese immigrants migrating to Canada. A large number settled in the Vancouver area.

Hong Kong real estate is notoriously pricey, so when Hong Kongers anchored in Vancouver, they were willing to pay top dollar for property.

The local real estate market exploited this anchoring bias and charged higher rents.

The result was that, like Hong Kong, Vancouver real estate now has a reputation of being exceptionally expensive.

According to MoneySense,

“Data collected by David Ley shows how, over the last few decades, metro Vancouver has become similar to other Pacific Rim ‘gateway’ cities, such as Hong Kong, Singapore, London and Sydney. Each of these gateway cities have rising housing costs that are fueled by high immigration-driven population growth and foreign investors.”

So, when exploiting anchoring biases in cross-cultural business goes South for local communities, how do they re-anchor?

In 2018, the British Columbia New Democratic Party was voted in primarily due to their platform on housing costs. Their goal was to increase the housing supply, slow demand, and dissuade overseas buyers by taxing empty homes and raising the foreign-buyer tax from 15 to 20 percent.

In this way, Vancouver is attempting to re-anchor their housing market to align with their own cultural norms and values.

3 Mechanisms That Bias Our Decision-Making: Representativeness Bias

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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.

3 Mechanisms That Bias Our Decision-Making: Availability Bias

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Managers apply simple models to help make decisions. Personal experience and culture help form these models.

Our cultural environment largely influences the rationale of our decision-making processes.

Daily decisions don’t require extensive analysis; rather, progress is made more efficient using prior experience and rule of thumb.

But it’s important to note that when we lean heavily into “rule of thumb” and prior experience, we unconsciously rely on bias.

As identified by research, three mechanisms affect this decision-making bias:

  • Availability
  • Representativeness
  • Anchoring

We’ll outline each across the next few blog posts, starting today with availability.

First, a question…

Which of the following do you think kills more people worldwide each year?

  1. Vehicular accidents
  2. Lung cancer
  3. Cape buffalo

If you answered “a) Vehicular accidents,” you’re a product of availability bias.

Availability bias involves making a judgment based upon the frequency of an event in the forefront of one’s mind rather than the event’s real-life probability.

Emotional or easily imaginable events – like vehicular accidents – are recalled more readily than a vague, obscure, or uninteresting incident.

This makes such events seem more prevalent and probable than they actually are.

And the answer…

An experiment was done in the U.S. with just such a question, where participants were asked whether more worldwide deaths were caused by lung cancer or car accidents annually.

Most answered that car accidents resulted in a higher fatality rate. The reality is that lung cancer kills nearly twice as many each year.

On average, over 2 million die each year from lung cancer, according to the World Health Organization, while the CDC states that around 1.35 million are killed on roadways across the globe annually.

The reason there is such a lopsided perception on each event’s probability is partially related to media culture, in which vehicular deaths are much more widely covered than those caused by lung cancer.

Humans really do have a selective memory: we remember more frequently and distinctly situations with a vivid narrative.

This skews the perception of each event’s frequency.

Other aspects that contribute to an individual’s availability bias include personal experience. If the individual knew of someone or multiple people, for instance, who had died from either lung cancer or a vehicular accident, this information might also bias their judgment.

Now, consider if you asked the same question of a Kenyan participant. In Africa, 200 people die each year from Cape buffalo, and such fatal incidents are likely heavily covered by the media.

Overall, a Kenyan participant might have a higher estimate than their U.S. counterpart regarding the global fatality rate caused by Cape buffalo.

In this way, cultural differences impact our availability bias and, in turn, our perception and judgment when it comes to decision-making.

On deck next week: representativeness.

4 Managerial Styles to Cope with Stressful Decision-Making

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You are facing a global pandemic. You must decide the best approach to keeping your business afloat.

How do you protect your bottom line? Do you lay off workers? Can you do mental gymnastics and reassess your business model, making the current economy’s limitations work for you?

The way you cope with the stress of complex business decisions reflects both your personality and your culture.

Four different managerial styles have been identified through research.

We’ll call these styles:

  • The architect
  • The free spirit
  • The expert-seeker
  • The panic attack

You may recognize one – or all – of these strategies in yourself and your management methodology.

Let’s take a look at each.

The Architect

This form, which is most taught in schools of management, considers alternative solutions to complex business decisions through the attentive collection of facts.

This methodology and its application is one in which Western managers pride themselves.

An architect is a planner, accounting for the whole picture and all potential outcomes.

The Free Spirit

Complacency and spontaneity are the main tools in the free-spirit’s managerial toolbox.

No complicated decision-making process is employed; the free-spirit takes the first available practical course of action that presents itself.

In doing so, she may be blind to alternatives with better outcomes.

The Expert-Seeker

Instead of relying on his own managerial expertise, the expert-seeker passes the buck to those more knowledgeable or qualified on the subject.

The expert-seeker might consult a specialist or supervisor in all aspects of an issue in order to direct his decision-making.

The Panic Attack

The last managerial decision-making style is one you should avoid.

This tactic involves succumbing to panic mode and making reckless, ill-advised decisions largely based on hysteria.

Obviously, this decision-making methodology is not recommended.

Personality and Culture Impacts Decision-Making Methodology

Your decision-making process is largely impacted by both your personality and culture.

Although you’ll find all four strategies in every culture, some styles may be more predominant than others.

For instance, you’ll find The Architect methodology is applied more often in Western cultures (e.g. the U.S. and Australia) than in, say, Japan or other East-Asian countries.

That does not mean the chosen strategy is any less rational or effective (unless we’re talking The Panic Attack).

The difference in methodology is based on a different set of cultural norms and values so, rather, a style that is ineffective in one culture may be more effective in another.

As we discussed in past posts, people act rationally within their own culture.

One example:

Intuition and emotion often direct Japanese managerial decision-making.

Due to the collectivist values of the culture, a primary concern will be how the decision might be received by the group and how it might affect the social fabric.

Collectivist societies take stock in the collective view; the welfare of the entire group, rather than simply the individual, is most important.

We’ll talk more next week about other biases in the managerial decision-making process.