One undisputable trend in the business world since COVID-19 is the shift toward remote work. This is especially true in the world of tech startups, where the nature of the business makes it fairly easy for people to do their job from any spot in the world with a decent internet connection. This trend allows startups to build truly multinational teams. Of course, while this brings obvious benefits, it might also be a source of internal friction.
Needless to say, internal problems in the team of an early-stage startup could be fatal for the project. Because of this, it is important to understand the potential areas where misunderstandings and conflicts could arise and to actively work towards building a productive internal culture.
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In their book “Intercultural Communication in the Global Workplace”, Iris Varner and Linda Beamer explore the way culture affects the relationships within international teams, as well as their success. Oftentimes issues, caused by cultural differences are overlooked and not addressed in time, leading to strife within the workplace that could have been easily avoided.
Most international companies have ongoing integration teams and training. However, a frequent issue of such training sessions is that they focus on cultural stereotypes and observable behavior, instead of the underlying reason for that behavior. This creates friction points because members of one culture do not understand why members of another culture do what they do. Additionally, it creates confusion within teams when members of a different culture do not act in the way that they are expected to.
This article will go through some of the more common issues that may be encountered between members of international or intercultural workplaces and will give practical advice on how to overcome them in the context of startups.
1. Attitude Toward Management
One of the first and most commonly encountered issues within international groups is their attitude towards meetings and agendas. In some business cultures, it is more common to set and follow a strict agenda to minimize distractions and uncertainty and to have a very streamlined and focused discussion. In others, it is more common to have a more flexible, free-flowing agenda during meetings.
Both approaches have their pros and cons. What is important in this example is to make sure all team members are on the same page and have the correct expectations. If your team sticks to strict agendas, it’s a good idea to establish a place that encourages free-flowing conversations. For international teams, this could be specific company Slack or Discord channels.
Another issue that is closely related is the use of language. Most international companies have a set common language to use in official meetings and other communication. However, business talk often sneaks into casual office conversations and if this happens in a language that is different from the one established in the company, it would result in a situation where people would be excluded from joining the conversation, but may also miss potentially important nuances of the workplace, or details in a project.
In this case, the best option is the lead by example. When you are in the presence of multinational team members, make sure to always speak the common language even when you are talking to someone with whom you share a mother tongue.
Lastly, the power distance (the degree of separation between the executives and the employees) is quite high in some cultures and relatively non-existent in others. Being unaware of these differences could result in awkward dynamics between members of the executive team and team members when they come from different cultural backgrounds.
Generally speaking, in the context of early-stage startups it pays dividends to try to shorten the power distance if possible. Startups thrive on flexibility and creativity, which means that it is great if in your organization employees feel comfortable presenting ideas to the founders and taking the initiative even when they are not fully certain of the outcome. This wouldn’t happen if they feel this is not their job, but only the job of the founding team (i.e. larger power distance). Because of this, it’s a good idea to try to nurture a culture that rewards initiative rather than purely results (or worse – ticking boxes).
2. Attitudes Toward Compensation
In their book, Varner and Beamer share a cautionary story: in 1998, during the merger of the German Mercedes-Benz and the US Chrysler, the German magazine Stern posted an article that compared the salaries of the employees at both companies. This resulted in a lot of tension between the employees. More specifically, the German employees were worried that their pay would be cut in order to equalize it with their US colleagues.
Of course, this is a problem without an easy solution. On one hand, one of the biggest benefits of having an international team is that you can lower your costs. On the other, it is hard to build a productive culture if some of your team members feel underappreciated. One possible solution is to make sure that the salary discrepancies between team members with the same position (and job title) in the organization are as low as possible.
The risk tolerance of people in different cultures is also something that you should consider as a startup founder. Some people are happy to work for a lower set amount if they are sharing in the upside of the company in the form of e.g. employee options. As a founder, you shouldn’t assume the predisposition of people towards fixed and variable pay, and you should discuss it and solve it on a case-by-case basis. Ignoring this aspect could lead to a situation in which you think you are compensating your employees fairly, while they have entirely different expectations.
Additionally, there are differences in the way that members of different cultures spend their money. Of course, no one can dictate how someone else spends their disposable income. However, it is important to be aware of the fact that members of different cultures tend to display their wealth in different ways, otherwise, it could lead to unnecessary tensions and judgment, which further leads to conflict in the workplace.
3. Regulatory Issues
Coming back to the Chrysler/Mercedes case, the German acquisition of the company created a law issue – the two companies could not legally merge their pension funds, despite becoming a single legal entity. A unique plan had to be developed – the US and European branches had to manage their pension funds separately, leading to employees globally having better or worse pension plans, depending on their location.
Sharing financial information internationally comes with its own issues too. For example, in the United States, at the time, companies were required to submit their financial reports 4 times a year, while in Germany, the requirement was only 2. This led to the need for Mercedes to start applying US law in Germany, in order to stay consistent. Moreover, the timing of these reports and announcements also plays a role. Due to time differences, announcements made in the morning in one location may be received in the middle of the night in others. In the case of the Mercedes-Chrysler merger, this posed a large issue, as the US side felt intentionally excluded, causing major strife within the two branches.
Despite the high-profile examples, these issues often apply to startups. Generalized advice is not very useful in this context because the possible issues are highly specific. Nonetheless, a good principle to adopt is one of full transparency – this way people would be informed of the underlying reasons for potential problems.
Cultural friction issues in an international startup team can severely hamper the productivity and morale of team members. Because of this, it’s important to be conscious of the areas that can generate such problems in order to take preemptive measures:
- Attitudes Towards Management – understand how agendas are perceived in different cultures, make sure to use one language, not only in official meetings but outside of them as well. Be aware of the perceived power distance and try to shorten it.
- Attitudes Towards Compensation – it is important to address payment differences between employees from different locations, if applicable, as it may result in unnecessary tension among them.
- Regulatory Issues – If a company operates in more than one country, it may have to abide by the law in all of them at the same time. This may alter the workday for some employees.
A study about multicultural tech startups in Finnland reached the conclusion that seeking help from startup hubs, mentors, and even government agencies (depending on the country) can be helpful in dealing with these issues.
Regardless of the approach, it’s important to keep in mind that dealing with cultural friction is a long process: understanding foreign cultures, developing opinions, and resolving disagreements takes time. Successful intercultural teams rarely achieve success from the get-go. In the long run, however, cultural alignment guarantees enormous value for the productivity of the startup team.