Cross-cultural top-management-teams (cc-TMTs) are typically comprised of rational individuals. Yet cc-TMTs featuring uniformly wise and experienced executives often make irrational decisions (i.e., choices incompatible with reason or logic). Even most executives acknowledge this is true. Behavioral economics suggests a primary reason why is that iterative combinations of cultural and cognitive biases invariably arise and interact in cc-TMT settings. As they arise, these biases often undermine the rationality of decision-making processes used inside teams. The impact of such biases surely intensifies if they remain unacknowledged – and thus unmanaged.
From an example of Sino and Anglo cc-TMT interactions, six guidelines intended to reduce bias are developed. These approaches, and the analysis preceding them, explain the nature and scope of these cultural and cognitive biases, how and why they arise, and what actions executives might initiate to negate these biases’ potentially irrational influence on decision-making processes by consolidating divergent biases to secure mutual gain within cc-TMT settings. Cultural and cognitive biases hardly explain everything, but they explain enough of what happens inside cc-TMTs that ignoring their influence is foolish.
To succeed, cc-TMT executives must accurately interpret relevant external environments and pursue all reasonable (i.e., affordable) clarity regarding the current status of customers, suppliers, partners, competitors, regulations, etc. Executives also must assess and predict future trends associated with various factors that influence strategic choice. Pattern recognition, obviously, is crucial to success. But success becomes less likely if the interpretative process is confounded by misaligned and unaccounted for cultural biases.
Successful decision-making processes in cc-TMTs require coordinated management of uncertainty, risk, complexity and change. Such factors loom would large in the intrinsically dynamic decision-making processes executed inside cc-TMTs. Again, deep structures associated with their divergent cultural orientations may propel Sino and Anglo executives to approach the interpretation and management of these factors with differing biases in place. Stability biases, unchecked, would leave executives more or less likely to depart from the status quo even when rationality or logic suggests they should shift strategically in one or another direction.
Cultural biases hardly explain everything, but they explain enough in today’s world that ignoring their effects is foolish. When biases infect a cc-TMT, executives overly embedded in their own cultural biases too often irrationally ignore or reject good ideas produced by cultural outsiders. During an era when many executive teams are taking real-time, high-stakes tests on how well they can manage diverse cultural biases, the need to learn how to negate and/or leverage the legacy power of these unavoidable biases is more pressing than ever. The rules provide useful insights regarding how the irrational decision-making processes often provoked by cultural and cognitive biases interacting inside cc-TMTs may be improved.
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