Friday, September 22, 2000

Stop, Look and Listen! : Expert Advice on Doing Business in the Pac Rim

Stop, Look and Listen! : Expert Advice on Doing Business in the Pac Rim
By Paul Beretz

(Reprinted with permission from IOMA's Report on Managing International Credit and Collections, September 2000 issue).

Understanding cultural nuances can be the difference between success and failure when dealing with customers in other countries. Most international credit executives are well aware of this fact and strive to avoid the obvious land mines. Yet, even the most seasoned international credit professional occasionally stumbles, especially when transacting business in the Pacific Rim, where business attitudes and behaviors are quite different than what most U.S. managers are accustomed to. MICC recently spoke with veteran credit professional and experienced traveler, Paul Beretz, about how international credit professionals could avoid cultural blunders when traveling to the Pacific Rim.

Observation

"In the Pacific Rim business environment," says Beretz, a managing director of Pacific Business Solutions, "the observant credit manager will remember the sign they may have seen at railroad crossings: "Stop, Look, and Listen!" He warns that this includes not only dealing with customers offshore, but also with a company's own "internal" customer, the branch office in the overseas country.

The international credit professional must be aware of many subtleties. To be successful in the Pacific Rim countries, the international credit professional will study behavior, learn about verbal and nonverbal differences that exist, and probably use a "go-between" (a shokaijo in Japan) to help develop the desired relationship. "The credit manager should understand how important the go-between is in the Pac Rim country," warns Beretz. That person may be the seller's country manager, a banker, accountant, or individual in a key position in the country who understands how to help achieve the objective.

Will credit managers understand that an immediate decision-in the expected, American way-may not be forthcoming in a Pacific Rim culture? Open conflict and public emotional displays are also counter to the culture that they are dealing with.

Trust

In the United States, trust is rarely an issue when conducting business. In the Pacific Rim, trust is extremely important and those who ignore it do so at the peril of their business. Trust takes time to build, adding to the frustration many feel when doing business in the Pacific Rim. (The same frustrations apply to Latin America.)

"In the Pac Rim," says Beretz, "cultures depend on trust, or the 'oil of life' as defined in Japan, known as amae." He warns that in any relationship in this region, a feeling of complete trust and confidence must exist, not only so that the other party will not take advantage of him but also so that he count on the indulgence of the other. Most American international credit executives are accustomed to some-thing quite different from this.

Those deemed most qualified for leadership positions in this region are perceived as being dependent on those people beneath them. "This is the purest form of an egoless relationship, which contrasts with the need to repress trust that Western societies foster," he says.

Listening is not easy for many Americans. Interrupting is second nature for some. Beretz says it is undoubtedly the origin for the Japanese saying "hollow drums make the most noise." One of the hardest concepts for Americans to understand is that many in the Pacific Rim will consider a matter for a while before answering. Long pauses tend to make Americans feel that they have to jump in and fill the void. Don't. Let your customer take time to think before answering. Having the international credit executive also think before answering is not a bad idea, especially since the silence will not put off your Pacific Rim host.

Examples of How Observation Can Work
  • Japan. In Japan, the concept of wa, meaning peace and harmony, is the basis for a working relationship. The highest priority is placed on wa. The Japanese person with closed eyes sitting opposite the credit manager is not necessarily being rude-he may be working towards inner harmony. "Speech is silver, silence is golden."

  • Korea. In Korea, the priorities are family, respect for authority, formality, and class. Koreans are aggressive, hardworking, friendly, and hospitable. A driving force in Korean relationships (and significant in all Pacific Rim countries to a degree) is "saving face." If no one points out any errors to the people responsible, the person might assume that no errors exist, so no "face" is lost.
In addition, the following provides advice to international credit executives on using an interpreter and on some of the more common mistakes westerners make when doing business in the Pacific Rim. The international credit executive who is aware of the cultural nuances is in the best position to succeed when transacting business in the Pacific Rim. Those who follow Beretz's guidance will have taken the first step on the road to that victory. Those who ignore it do so at their own peril.

How to Negotiate When Using an Interpreter

While English has truly become the international language, in the Pacific Rim, top executives have not mastered (or didn't care to master) it. In these cases, using an interpreter can help. However, the following caveats should be considered:
  • The presenter (the credit manager visiting his customer, for example, needs to find his or her own interpreter, probably through a go-between in the country.

  • A written text of the presentation (or at least, the gist of the notes for the meeting) needs to be given to the interpreter.

  • The English speaker should speak slowly around a single topic, avoid slang and puns, and only use metaphors and analogies with care. For example, would the speaker expect an interpreter to translate "what's good for the goose, is good for the gander" into an Asian language?

  • Charts and visuals should be used whenever possible.

  • Monitor facial and nonverbal expressions, and talk to the person, not the interpreter.
Common Mistakes Westerners Make When Doing Business in the Pacific Rim
  • A little humility. Those who travel from the United States to Asian nations in particular need to stop promoting the United States. ("That may be the way you write a contract here in China, but that's not the way we do it in the United States" or "Can't I find American food anywhere around this place?") These Americans are visiting their host, not the other way around.

  • Idioms. Why are we not more conscious of the use of idioms? Idiomatic phrases are extremely difficult for non-U.S. people to understand. Just think how a customer sitting across the table in countries such as China, Japan, South Korea, Vietnam, or Taiwan may react when phrases such as "better late than never," "in the long run," "put it on the back burner," "get the ball rolling," "get to first base," "quick on the trigger," and "beat around the bush" are used.

  • Business cards etiquette. Does the westerner stop to appreciate the significance of the "name" (business) card in Pac Rim countries? The high number of visitors to Asian nations who do not have the native language printed on business cards (especially if one does extensive, repeat business in Japan or China, for example) is amazing. The card is presented with both hands, with a slight bow or ojigi ("oh-jee-ghee" in Japanese). The name of the other person's company is looked at closely, and the cards are not written on or put away during the meeting. An insult tendered at the beginning of the meeting-even an unintentional slight-can destroy the chance for any successful outcome.

  • Group consensus. Japan's cultural roots have a strong middle management that has deep working relationships and seniority in rank. Japanese managers look after subordinates. Management is participative, problems are solved by consensus, and there is no open expression of conflict. A humble attitude by public figures especially is still considered an essential virtue. Westerners should realize that apologies in this culture may be real as well as "pretended" in the same way that Americans brag about their imagined skills. The purpose of the Japanese apology is to avoid ill will, friction, and anything else that may be seen as wrong.

International Skills: Don't Leave Home Without Them

International Skills: Don't Leave Home Without Them

By Sherry Schlossnagle

(Reprinted from the September 2000 issue of Business Credit magazine with permission of NACM.).

I asked Beretz to comment on the current changes occurring in the international credit industry.

"The key word here is consolidation -- both international and in North America," he replied thoughtfully. "More and more credit jobs are being consolidated. As a result, the role of the international credit manager is not only becoming more decentralized with those managers outside the country reporting back to the chief credit manager, but it is also evolving more into the role of a risk manager that may include insurance and cash management along with the credit function."

Beretz believes that it is imperative for all credit managers to begin to develop international skills. In light of this necessity, he emphasized the value of participating in FCIB. "FCIB can play a very important and pivotal role in the development of the international credit professional's career. It not only attunes the credit manager to an awareness of international business; it also provides tools, and educational and networking opportunities."
If you have not had the opportunity to read Beretz's publication, "How to Prepare for a Systems Application Installation or Upgrade," or his "Country Profiles" on how to handle credit and collections issues in South Korea and Singapore, then put them at the top of your To Do list. Not only do these articles offer a wealth of valuable information to professionals in the credit management field, they are also thought provoking and extremely well written. You can find them, as I did, on his website www.pacbizsolutions.com.
As a member of the Advisory Council, Beretz discussed some of the challenges that FCIB faces at this time. "Our primary focus should be how we recruit and retain our membership. FCIB is in the process of investigating a variety of new products that will address the needs of global clients. It is also discussing the development of new educational projects, as well as how to revitalize the existing ones. The issue of `time commitment' of members is another very important consideration -- more important even than cost, I think. We must be very accurate in targeting those products and services to meet membership needs since professionals are becoming more selective in attending meetings and participating in programs.

The second challenge we face has to do with the issue of `global awareness.' As businesses continue to expand globally, it is critical to their success that they understand what their international customers need and how to conduct business in the customer's own environment. FCIB can play a role in assisting members who want to achieve an expanded level of awareness.

The third challenge is the continued development of the Internet application to link members to more new products and services, as well as to facilitate and enhance the online communication process. It is important that FCIB continues to update its Internet applications and solutions and expands its web site to meet membership needs."

Regarding the value of the FCIB Certified International Credit Executive (CICE) designation, Beretz believes the new professional designation has provided an excellent vehicle to recognize and reemphasize that international credit management is a very specialized area of knowledge critical to business. "The CICE not only adds to the professional's credibility within the company and the industry, it is respected in other cultures as well."

Beretz began participating in FCIB in 1983 while he was working for the forest products industry. He has continued his FCIB membership in the semi-conductor and telecommunications industries in the `90s. "I knew next to nothing about international credit management when I first started out, so I went to FCIB for help. Of the many benefits available through FCIB, the two I value most are the networking and the educational opportunities. The professional network that I have developed through my participation in FCIB over the past 17 years is invaluable. I can call any number of people at any time and say that I have a client doing business in, let's say, Ethiopia and ask them about the credit situation there. These resources have the most current and accurate information available." Beretz was also quick to note that he utilizes the FCIB Country and Customer reports that are unique to the industry and provide very specialized information.

"I try to attend as many FCIB-sponsored regional and global meetings as I can. There is a tremendous amount of knowledge and wisdom shared at these meetings. Being privy to this very specialized information makes me more globally aware than I could possibly be otherwise. If international credit managers intend to operate successfully within a country, it is imperative that they be aware of and sensitive to the differences in cultures and customs."

As Managing Director of Pacific Business Solutions -- a consulting firm that evaluates and creates opportunities to improve cash flow for global manufacturing, distribution and service companies -- Beretz has successfully capitalized on more than 30 years of business experience.

For start-up to middle market sized companies, he has initiated tactical and strategic processes, guided management to evaluate the market place and competition, established personnel performance measures and utilized budgeting and forecasting tools. For middle market and larger companies, he has formulated "best practice" strategies, reorganized departments, and re-defined and authored "desk procedures" for worldwide operations. On the international level he has provided guidance to several multi-billion dollar companies in the recognition of economic, country, and cultural issues fundamental to selling products and services internationally, particularly in Pacific Rim countries.

Beretz received his BBA from the University of Notre Dame and an MBA from Golden Gate University. He has been an adjunct faculty member at the University of California, Berkeley and currently is an instructor in management and finance for St. Mary's College, Moraga, CA and the University of Phoenix. In addition, he speaks frequently covering a wide range of topics from cash flow management techniques to customs and practices in international business. He has written articles for trade magazines such as IOMA's Report on Managing International Credit and Collections and NACM's Business Credit, authored a book for the American Management Association and edited books on financial management.

I remarked that a business background such as his own was probably one of the major criteria for hiring someone to work in the credit profession. "On the contrary," Beretz replied, "I place great value on a strong liberal arts education. It is becoming increasingly more important for credit professionals to have well-developed verbal and writing skills, as well as an acquaintance, if not a familiarity, with other philosophies and cultures. A good liberal arts education should provide all of these. I can educate bright employees on the technical side of the business, but I can't teach them to be articulate or good writers or make them critical thinkers. If I can have both, then I have the best of both worlds."

Regarding his greatest professional challenges, "Two immediately come to mind," he replied. "First is the constant `selling' of credit within the organization to make certain that it is understood. The astute credit manager will always keep going back to ensure that upper management understands what the credit manager is doing with the receivables. You can't take that understanding for granted. It is an ongoing challenge to keep the appropriate people educated.

The second challenge deals with the issue of isolation. Credit people are often very alone because the company in general doesn't really understand what they do. There is this `shroud of mystery' surrounding the credit operation. To address this isolation problem, management should support credit managers in their desire to join professional associations where they can network, share problems and discuss common issues. FCIB, of course, is the perfect example of an association that offers such networking and education opportunities for credit professionals."

Over the years Beretz has been a speaker at numerous FCIB and NACM conferences and meetings. He will be leading a panel on International Credit Scoring at the FCIB Global Meeting in New York City in November 2000.

Sherry Schlossnagle is a freelance writer based in Laurel, MD.
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