How to address Cultural Differences in S&OP

The success of Global S&OP depends on, among other things, how well a company adapts to the local culture when developing and implementing it. Cultural issues are important. We may be able to change the culture of a company, but not the culture of a country.

A Global S&OP approach

Globalization has made it necessary for companies to plan and operate not only across different regions within a country, but also outside the borders of the country of origin. This has impacted, among other things, the Sales and Operations Planning (S&OP) process. The S&OP implementers now have to deal with geography-driven social and cultural differences in implementing and sustaining the process. In an S&OP meeting, they have to pay attention to cultural issues to arrive at a consensus. The S&OP managers and senior leaders have to be aware of their own regional culture as well as the cultures of other regions in which they operate.

Once a company starts crossing national borders, other complexities enter the S&OP equation. Cultural issues become even more significant; people in one geographic area prefer their culture to others. There is no right or wrong national culture, but it is important to understand preferences. It is also important to know that many leadership and business theories have been developed in the West under the assumption that they are universally applicable, which is not the case. The same holds for the S&OP process. National culture often plays a significant part in the way people think and behave. Research in this area shows that the best results can be achieved if the process is adapted to the local culture.

Each country preference has an impact on how leaders in different countries create a trusting and respectful environment. With that in mind, we have to decide how to deal with the key S&OP behavioral issues like open and honest communication, transparency, conflict resolution, maintaining discipline, and coaching others. From my western perspective and experience, I will show what those differences are and how to deal with them.

Open and honest communication

In my S&OP pulse check, I find every year that the key to success in S&OP comes from improvements in cross-functional communication. Communication in S&OP meetings needs to be open, transparent, and honest to bring all issues and information to the table. When working across geographies, leaders have to take into account how each culture prefers to communicate. In S&OP meetings, we have to ask and answer questions to arrive at a consensus. Generally, there are two ways that people in different cultures ask or respond to a question. For example, the American and Dutch cultures get directly to the point in asking as well as in answering a question. In other geographies (like Southern Europe, Asia, and Japan), people tend to circle around the point before asking or answering a question. One culture wants to get straight to the point but the other perceives that to be too direct, impersonal, and pushy. Such differences may stand in the way of making progress, thereby making the process less effective. The best way to work in such an environment is to keep in mind what is perceived to be best in the culture you are dealing with.

Conflict resolution and consensus

In a monthly S&OP meeting, we don’t always agree across functions or business units, but we have to resolve conflicts to arrive at a consensus. When trying to reach consensus in a cross-cultural environment, we have to keep in mind how different cultures prefer to resolve conflicts. In masculine or assertive countries like the United States, it is acceptable to resolve conflicts through an aggressive means and with a good fight: Let the best man win! In feminine countries like the Netherlands, Denmark, and Sweden, the preference is to resolve conflicts through negotiation and compromise. Furthermore, Southern European countries are more emotion driven in discussion, whereas Northern European countries tend to be more factual.

Example: As global supply chain manager in a beverage company, I once received a letter from an American customer, signed by both the vice president of supply chain and a lawyer. I never had any issues with this customer before, but now the customer was threatening to take legal action because of one late delivery. My first reaction was: “Why didn’t this guy just call me?” As stated before, in some countries, it is acceptable to resolve conflicts through such aggressive means; in others, it is better to resolve conflicts through negotiation and compromise. Threatening with legal action is not the preferred way to do business in the Netherlands and therefor was not perceived as a good way to solve a relatively small dispute.

Feedback

I like to end the S&OP meeting by gathering feedback on the meeting effectiveness, data availability, quality of decision-making, discipline in the meeting, or other criteria that impacted the meeting quality. I do this because I view it as an important part of the S&OP communication that helps to further improve the process. Direct feedback is typically better received in more individualistic cultures like those of Australia, the Netherlands, and the United States. In more collective cultures like those of Asia and Southern Europe, giving and getting direct feedback can be difficult. People in these cultures do not want to insult the group or lose face by making a critical comment in front of their superiors. Their feedback is preferred in a one-on-one setting. Therefore, when leading a cross-cultural S&OP process, we have to understand the cultures involved and apply the most effective approach for gathering feedback there. 

Discipline

Process and meeting discipline is very important for an effective S&OP process. Discipline is needed in many ways; for instance, gathering data in a timely manner, holding meetings, sticking to meeting agendas, etc. Which principle is correct here varies across geographies. Imagine jumping a queue in England—all hell would break loose. But if you don’t protect your position in a queue in Italy, you’ll never get served! For an English person, standing in an Italian queue would be horrible. Pedestrians in Switzerland don’t cross at a red light, but in the Netherlands it happens all the time. Still, both countries show similar discipline in starting their meetings on time and sticking to their agenda. In Southern European countries like Spain and Italy, time is perceived differently. There, people are less likely to stick to the meeting time and agenda than in Northern European countries. Different cultures have different levels of discipline, which should be kept in mind while running an S&OP process.

Coaching for improvement

In an environment where people trust each other, cross-functional coaching can be a powerful way to share knowledge, create shared interests, and collaborate. People are more likely to engage with peers, superiors, and subordinates across functional areas to provide their points of view on what is lacking and where the opportunities are. Subordinates and superiors are seen as equal, and thus are more likely to provide each other with feedback that is constructive and helpful. I have actually given well-received feedback on behavioral improvement opportunities to a superior and to a board member. This would have been unacceptable in Arabic and Asian cultures. A coach in Asia is not seen as an equal. He or she is seen as a respected elder or teacher. Asian collectivism and group thinking, on the other hand, make it easier to have common collaborative goals and work as a team towards them. In individualistic cultures, personal or functional goals often get in the way of group goals. Therefore, coaching for improvement and managing common goals have to be approached differently in individualistic cultures than in collective cultures.

Summary

Culture plays an important role in the success of an S&OP process. We can change the company culture, but not a country’s culture. Everybody must learn to adapt in order to have an effective Global S&OP process. In designing a Global S&OP process, it should be structured globally, but implemented locally by taking into account local cultures. Educate the S&OP process designers and implementers about different cultures and how to reconcile them. Pay attention to local HR as well as to the S&OP stakeholders’ feedback during and after meetings, and document it in a way so that improvement can be tracked. Make sure that local stakeholders know that the cultural aspect is part of the S&OP implementation, and continuous improvement is necessary for a sustained and robust S&OP.

This post first appeared in the Journal of Business Forecasting and on http://www.supplychainmovement.com/

Photo credit: http://www.startupsmart.com.au/

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