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Mr. Geddy Teok, an American – Chinese (second generation) employee of a large New Jersey pharmaceutical firm, was based in Tokyo, Japan. His main aim was to get a major joint venture going with one of the largest Japanese pharmaceutical manufacturers. After four years of negotiating, the supreme moment had come for signing contracts. Obviously the lawyers from HQ in New Jersey were well prepared and sent the contract to Geddy one week before the ‘ceremony’.
After four years of Japanese experience, Geddy was shocked when he received the document from the USA. He thought: “I could not even count the number of pages. There were just too many. But I remember the number of inches it measured when laying it on the table. I would guess that with every inch one of the Japanese would leave the room in despair. I hope they come will come with a group of ten. Then at least I will keep one person to talk to. The Japanese will sign the contracts, but this can’t be taken this far.”
Geddy Teok decided to call HQ and ask for some help. The legal department said that the relationship was so complex that the contract needed to cover many possible instances. Moreover, a consultancy firm that advised them regularly said that Asians in general and Japanese in particular had a reputation of being quite loose in defining what was developed by them and what came from the USA: “we better have some pain now and be clear in terms of our relationship, than to run into problems later because of miscommunication. If they sign it at least they show that they are serious.”
Geddy was in despair, but he only had a day to decide what to do. The meeting was tomorrow. Should he perhaps call the Japanese CEO, with who he had built up quite a relationship? Or should he just go for it? Geddy framed his dilemma quite clearly. “Whatever I would do, it would hurt my career. If I insist on the Japanese partners signing the contract they will see it as proof of how little trust has been developed over the years of negotiations. This might mean a postponement of the discussions and in the worst case the end of the deal. If I reduce the contract to a couple of pages and present it as a ‘letter of intent’, HQ in general and even worse the whole legal department will jump on me, jeopardizing my career.”
If you were Geddy, what would you do?
(Adapted from: Riding the Waves of Culture: Understanding Cultural Diversity in Business by Fons Trompenaars and Charles Hampden Turner)
Thursday, October 30, 2008
The culture conundrum
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Posted by Dr. Paurav Shukla at 10/30/2008 04:43:00 pm
Labels: Culture, marketing, negotations
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14 comments:
My first thought is that Geddy has already spent four years building a relationship with the Japanese and would therefore have a wider understanding of their culture than perhaps HQ. If I were Geddy, I would telephone the Japanese CEO to explain the type of contract that had been prepared and that the length/details of the contract did not imply a lack of trust. This would enable Geddy to get some feedback from the Japanese CEO which he could then, if necessary, take back to his own HQ. They obviously don't want to lose the contract and there may be some middle ground that could be reached.
Teresa Boyle
I agree that Geddy must be quite an expert on Japanese business relationships. However, it seems like he lost his grasp on how Americans work (and think) during negotiations. After four years it shouldn't come as a surprise that HQ presented a lot of paper to be signed! Geddy has had plenty of time to coordinate between US Individualism and Japanese Communitarianism - he should have seen this coming and proactively stressed the importance of minimizing the paper-work. I agree with Teresa that there may be some middle ground in reach, but I think he needs a time extension to work this out.
Will the time extension work? Secondly, as we discussed in many Eastern (communitarianism) cultures the person-to-person trust is extremely important. So what way will Geddy be able to handle the Jap side?
Whether Geddy gets the extension or not, he will need to let the Japanese CEO know what is happening - he needs to be honest to keep the trust - but are we assuming that the Japanese CEO would not meet him half way?
In case he doesn't get the extension he has two choices left:
1) giving the contract the way it is to the Japanese even if it may have some bad consequences on their reationships. To avoid that Geddy needs to convince them that it is not because of a lack of trust that the contract is long.
2) Changing the contracts and send a shorter one to HQ's lawyer, even if it will jeopardize its career. Explain to the american lawyers why a so long contract is a treat to the agreement.
Geddy made a mistake by not thinking about this contract problem before. He has to deal with a situation he could have avoid by anticipating it. Now he has only those two solutions I think.
Interesting observation François. Could Geddy have anticipated this situation? If so, what could have been done to avoid it?
I think it would be much better if Geddy calls up the CEO and explain him the situation. As it is an international deal it may require a lot of documentation. Moreover, i think even the Japenese CEO may be familiar with these types of documentation. I think its not much of a problem for Geddy as i think even the Japenese company may be looking forward for some kind of documentation from their side.
Geddy should know about guanxi if he stayed in japan for few years.
I think he should use his guanxi, to get more close to the Japanese CEO.
Guanxi works in business at almost of eastern countries.
If I were Geddy, I would invite the CEO to the VIP club, use some guanxi, invite some other as well(For example,business partner of the CEO) and wines. Let the CEO happy. This will let Geddy get the contract.
You are quite right JB. However, I guess Geddy would have used Guanxi already to come up to this stage. Do you think he can now use Guanxi to actually overcome the legal contract signing hurdle?
Geddy can try getting all the Jap legal experts together and distribute the documents to the teams and ask them to come up with any concern that they might have in their section.
Estimate the time it will take based on time taken to analyze a unit of document and resolving a set of queries.
Negotiate and extend the time-line if required with the HQ by presenting them the plan for closing the contract.
Work on a plan to quickly resolve these queries through a team at HQ. Close the agreement within the extended time-line.
This way both parties show their seriousness in closing the contract.
Geddy should get a kick in the butt for sleeping on the document for a week....:P
But the problem is that Geddy is not dealing with the Jap legal experts. He is dealing with Jap executives and American legal experts. These are two different types of people with different motives and cultures. It's putting the contract forward which is not going to help. Tough one this is.
Assuming that the Jap Execs would have employed a few legal experts too; would the plan work?
You are quite right on that front @vi. The problem however is of 'trust' and this is something very cultural isn't it? Though, I certainly agree that the using Jap legal team there might be a solution in hand. Good idea.
If i was Geddy, I would have told the legal department about some special culture knowledge about Japanese before the contracts were made。So the legal department would make suitable contracts for the both side but not just considering American company’s interest. As an expert working about 4 years in Japanese, Geddy must have built strong relationship with Japanese company, so he should communicate with Japanese CEO about details about the contract before it was signed. I think the trust which has been built between Geddy and Japanese CEO will offer them the chance to negotiate the contract. Lastly, Geddy should give HQ a call to explain the situation and then make a better contract.
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