Case Study on Intercultural Negotiations

Previously:

MCC is a US-American computer manufacturer that has been operating in more than 20
countries. As its foreign sales have grown, top management has become increasingly
concerned about international co-ordination. Overseas growth, while robust, has been
unpredictable. The company has therefore decided to coordinate the processes of measuring
and rewarding achievement worldwide. Greater consistency in managing country operations
is also on the agenda.

Two years ago, the company decided to use a more differentiated reward system for their
salesforce. One of the reasons was to see whether the motivation of the American salesforce
could be increased. In addition, the company became aware that the best sales people often
left the firm for better paying competitors.

The plan is to introduce a pay-by-performance scheme with which MCC has been
experimenting in all of its markets. The scheme consists of the following elements:

• A bonus which depends on the turnover figures each quarter for each salesperson: 100%
of the salary for the top salesperson is; 60% for the second best; 30% for number three and
four; and no bonus for the remainder.
• The basic salary of all sites people of mid-size computers was decreased by 10%.

During the first year of the trial period there was continuous discussions among the affected
employees. 56 people left the company because they were convinced the system treated
them and just leave. Total sales did not increase as a result of this. Despite this disaster,
management continue to experiment because they believed that this kind of change was
necessary and would take time to be accepted.

The situation:

Ms Johnson is an HR Manager from MCC’s US-American operations who is charged with

negotiating implementing the pay-by-performance scheme with the Country Heads
responsible for MCC’s country operations outside of the US.

Ms Johnson sets up series of meetings with Country Heads. We meet her in Milan, Italy, after
some of the meeting with country headshave taken place already.

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During a meeting in Milan Ms Johnson presented ideas for the payment scheme to motivate
the salesforce. She became annoyed at the way these meetings were always run and
decided to introduce guidelines on how all future meetings should be conducted. She did
not like the Singaporean and African representatives always turning up in groups. They
should, she said, confine themselves to one representative only. And could Mr Sin from

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Singapore make sure that his boss was always represented by the same person and not
different people on each occasion?

These suggestions were not very popular among some of the managers. Mr Sin, Ms Nuere
from Nigeria and Mr Calamier from France wanted to know the reasons for these comments.
Mr Sin asked why, since different issues were on the agenda, they should not have different
representatives knowledgeable on the various items. The discussion was going nowhere and,
after an hour had passed, Ms Johnson suggested it be put to a vote, confident that most of
his European would back him.

But this, too, proved controversial. Mr Calamier threw up his hands and said he was “shocked
that on such a sensitive and important issue you seek to impose this decision upon a
minority“. He said there really should be a consensus on this even if it took another hour. Mr
Sin agreed that “voting should be saved for trivial questions“. Johnson look to the German
and Scandinavian representatives for support, but to her surprise they agreed that consensus
should be given more of a chance. She was too frustrated to respond to the Dutch manager‘s
suggestion that they should vote on whether to vote. Finally, the Nigerians recommended
that at the very least a discussion and/or voting should be postponed until the next meeting.
How else were those present supposed to solicit the views of the colleagues in the home
offices? Wearily, Ms Johnson agreed. Further discussions about the reward system would
have to wait too.

Ms Johnson finally managed to compromise on the representation issue by allowing each

national office to send up to 3 people, if they wish, but no more. This decision had not been
voted on. Everyone had agreed. Now she could start to tackle the introduction of pay by
performance, bonuses and merit pay for the next year.

She started, as usual with an overview of the situation in the USA. It had been three years
since the system was first introduced. In general, she explained they could detect a link
between the use of the system and computer science, although it had to be mentioned that
a similar system had failed miserably in the manufacturing department. A different type of
achievement-based reward system was currently being tested. No problems were
anticipated with this new system. “In summary“, Johnson said, “we are strongly convinced
that we need to introduce the system worldwide.“

The Northwest European representatives voiced their carefully considered but positive
comments. Then the Italian representative, Ms Gialli, began describing their experience with
the system. In her country, the pay for performance experiment did much better than she
had expected during the first three months. But the following three months were disastrous.
Sales would dramatically lower for the salesperson who had performed the best during the
previous period. “After many discussions“, she continued, “I finally discovered what was
happening. The salesperson who received the bonus for the previous period felt guilty in
front of the others and tried extremely hard the next quarter not to earn a bonus.“

The Italian manager concluded that for the next year of this experiment, the Italian market
should be divided into nine regions. All sales representatives within one region should be
allowed to allocate the bonus earned in their region either to individual performers or to
share it equally. The blunt reaction of Ms Bergman, the Dutch manager was: “I have never
heard such a crazy idea.“

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Raising his voice, Mr Pauli, Gialli’s colleague, asked: “What do you mean, a crazy idea? We
have carefully considered the pros and cons, and consider that it would greatly benefit the
buyer.” “Please don’t get overexcited“, pleaded Ms Johnson. “We need to provide solid
argument and should not get sidetracked by emotional irrelevancies.“ Before Bergman had a
chance to explain why she thought it was a crazy idea, the two Italian colleagues left the
room for a time-out. “This is what I call a typical Italian reaction“, Ms Bergman remarked to
her colleagues. “Before I even had a chance to give my arguments as to why I think the idea
is crazy, they walk out.“ Managers were squirming uncomfortably in their chairs. They did not
know what to think. Ms Johnson got up and left the room to talk to the Italians.

As the representative from head office, Ms Johnson felt very responsible for the development
at the meeting. The Italians behavior seemed strange to him. Ms Bergman just wanted to
discuss an important aspect of the consistency of the reward system and they did not even
give him a chance to explain his position. Moreover, the Italians had refused to put any solid
arguments on the table themselves.

When Johnson entered Ms Gialli’s room he said: “Paola, what’s the problem? You shouldn’t
take this too seriously. It’s just a business discussion.“

“Just a business discussion?“ Gialli asked with unconcealed rage. “This has nothing to do with
the business discussion. It is typical for the Dutch to attack us. We have our own ways of
being effective, and then she calls us crazy.“

“I didn’t hear that“, Johnson said. “She simply said that she found your group bonus a crazy
idea. I know Bergman and she didn’t intend that to refer to you.“ — “If that is so“, answer
Gialli, “why is she behaving so rudely?“

Johnson realized how deeply her Italian colleagues had been offended. She went back to
Bergman, took her aside and told her about his conversation with Gialli. “Offended!“ Said
Bergman. “Let them have the self-control to respond to professional arguments. I don’t
understand why they are so hotheaded anyway. They know we have done extensive research
on this. Let them listen first. You have to remember that these latins never want to be
bothered with facts.“

The Italian managers were far from assuaged. One even referred unpleasantly to “the
American cult of youth: mere children who I think they know everything. So when the
Spanish HR manager, Mr Munoz, offered to mediate, Johnson readily agreed. It occurred to
her that Spanish culture might be closer to Italian culture, apart from the fact that Munoz
was some 20 years her senior, so could hardly be accused of an experience.

While hopeful that Munoz might succeed, Johnson was astonished to see him bring the
Italians back into the conference room in minutes. Munoz was not, in Johnson’s view, the
most professional of HR managers, but he was clearly expert at mending fences. It was at
once apparent, however, that Muñoz was now backing the Italians’ call for modifications to
the pay for performance plan. The problem as he saw it, and the Italians agreed, was that
under the current plan winning salespeople were going to earn more than their bosses.
Subordinates, they believed, should not be allowed to undermine their superiors in this way.
Mr Munoz explained that back in Spain his salesforce will probably simply refuse to

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embarrass a boss like this; or perhaps one or two, lacking in loyalty to the organisation, might,
in which case they would humiliate their boss into resignation. Furthermore, since the sales
manager was largely responsible for the above-average performance of his team, was it not
odd, to say the least, that the company would be rewarding everyone except the leader? The
meeting broke for lunch for which Johnson had little appetite.

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1. Analyze the situation from an external perspective: what do you think could have gone
better for MCC? What is the root cause of their problems?

2. Analyze the situation from the perspective of Johnson: what is her approach and at what
incidents or situations did it fail to produce what she intended?

3. The situation looks messy. How would you deal with it and which options would be the
best or most promising from an intercultural perspective?

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© GISMA Business School, Potsdam, 2021