Cultural competence is the ability to understand, communicate with and effectively interact with people across cultures. It isn’t necessarily an ability to understand a multitude of cultures – humans are so varied that it just isn’t possible for anyone to be able to pass seamlessly across all cultural barriers.
Instead, it’s a question of being able to identify which social and workplace encounters are most likely to be affected by cultural differences and to have a framework in place to help explain those specific differences.
At an organizational level, cultural competence involves understanding how that organization’s culture can translate into operational effectiveness in any territory in which it operates. It’s about valuing the diversity of the internal team and recognizing the diversity of the various external markets in which it operates.
It’s about cultural self-awareness too; a recognition that the prevailing organizational culture needs to be fit for purpose for every employee and for every external situation the business faces.
Groups of people that share traditions, beliefs, and customs, as well as language, history and institutions, are considered to have the same culture. This shared culture will tend to be expressed as a set of values and rules for cooperating with others. Organizations will also develop their own cultures, where values and beliefs are reflected in policies and procedures that draw on the values of their contributors.
Organizational culture can be an inflexible, self-contained system, which isn’t conducive to cultural competence. When organizational culture encounters a new group of people, such as following an acquisition, or expansion into a new market, there can be a clash of values. Culturally competent organizations are ones that recognize the dynamics of difference and are able to integrate diversity.
They have internal cultures and practices that bend but don’t break when exposed to new cultural practices. Their policies and practices can accommodate different cultural standards with minimal stress to all participants.
An organization that’s well-versed in cultural competence should also be able to identify cultural stress points and have strategies in place to mitigate them. For example, a global organization may understand that cross-cultural contract negotiations may be particularly challenging, and find a framework to help their team to conclude the process successfully.
An organization that lacks cultural competency might be blind to cultural stress points and lack any formal strategies for resolving them. A common example would be an organization that sends personnel on overseas assignments without supporting them through the cultural change.
Whilst some individuals may thrive by themselves, this is likely to be a difficult situation to thrive in without formal support and recognition at organizational level.
With market competition now taking place on an international stage, cultural competency has become a key component of business competitiveness. One former CEO of General Electric defined cultural competency as an advantage possessed by organizations that are able to exchange their hard skills and expertise globally. This isn’t just about circulating individual workers within global organizations.
It’s also a question of how capable the organization is of moving its own core expertise to other markets as seamlessly as possible.
The high cost of lacking cultural competence
There was a time when GDP hinged on the manufacturing of commodities – basic goods that are interchangeable with the same ones made by another manufacturer. Selling commodities overseas requires a low degree of cultural competency as most trade is done by intermediaries with those skills.
As an economy moves away from commodity manufacturing and moves towards branding or tailoring of products, then cultural competency becomes more important for reaching new markets. Exporting is no longer a matter of just replicating the core product for a larger audience but of adapting it for ones with new needs. To do this, an organization needs to possess cultural competency across multiple areas of its operations.
Cultural competency is particularly vital to the service sector. The UK is the world’s second largest exporter of services, behind the US. Britain’s service sector now represents around 80% of GDP (over 90% of London’s GDP).
Service-based organizations that operate globally need to find their own ways of translating their core services into different markets in which they operate. Finding local strategies for global success and continuously delivering them to new markets is an ongoing process.
Often this demands a great deal of cultural competency from central management in order to craft a global strategy. There is a high cost associated with getting it wrong, particularly if mistakes originate from the leadership team of a multinational organization which impacts on many markets.
One of the challenges of cultural competency is finding a way to institutionalise cultural knowledge across a global organization. This way, cultural understanding can be leveraged from the ground up to inform strategy decisions and make best use of organizational knowledge.
The second part to this challenge is making sure cultural knowledge is deployed effectively where it will benefit the organization.
In a world that’s increasingly interconnected, finding ways to best work together is vital to our ambitions. Perhaps the most important factor to achieving cultural competence at organizational level is recognizing that it needs to happen. Achieving cultural competence is a major strategic decision and one that requires significant buy-in across the board and particularly at senior management level.
Successful global organizations are ones that learn to make their culture an asset, rather than letting culture erect barriers to achieving their goals.