Passport Paper

COM 4430 Paper

Topic

You need to:

 Choose one of the country passport documents to read, synthesize, compare and contrast

for your paper:

o Passport China

o Passport France

o Passport Germany

o Passport India

o Passport Israel

o Passport Italy

o Passport Japan

o Passport Korea

o Passport Mexico

o Passport Russia

o Passport Singapore

o Passport South Africa

o Passport Spain

o Passport Switzerland

Then, in a 5-7 page paper, compare and contrast the intercultural communication business

practices of the country you selected. You will be graded on the content of your answer, the

reasoning/argument you make between the theory and the facts of the case study as well as

writing (grammar and punctuation).

Use at least 4 academic resources (not used in class).

Include examples of your own when explaining/analysis your topic.

Submit your paper to the Turnitin dropbox within Canvas.

STRUCTURING YOUR PAPER

A few words about structuring your paper:

A good paper is one that is built around a clear structure, so you should outline the main points of

your paper before you start writing. It’s easier to overhaul your outline than it is to overhaul a fully

written paper, so spend some time thinking about the structure of your paper before you launch

into the writing.

Your paper should have:

A clear introduction

A body (in which you flesh out your analysis of rhetoric, audience, artifact, and

context)

A conclusion (in which you summarize your argument and findings and “open” the

paper to consideration of broader themes).

WRITING YOUR PAPER

A few words about WRITING your paper:

I require an “introductory paragraph.” It must introduce the topic, state the main

argument of the paper, set forth the plan by which the paper unfolds, and state the

paper’s conclusion. In brief, after having read the first paragraph, your reader should

know precisely what the paper is about, its main claims, how it unfolds, and where it will

end up.

Write the paper in coherent paragraphs. Each paragraph should flow naturally and

logically from the previous paragraph, and on to the next paragraph, following a clear

train of analysis.

Good writing is clear writing. Write in simple, declarative sentences. Use the active

voice.

Feel free to quote from books, articles or experts, but do not waste space with very

lengthy quotations – briefly paraphrase these passages instead.

A few words about acknowledging and citing sources:

Every time you use somebody else’s ideas or words, you must acknowledge the

source of the information (unless the information is common knowledge).

You may acknowledge these sources by using footnotes, endnotes, or in-text notes.

Don’t get hung up on details of citation style: what really matters is (1) that you cite your sources in

such a way that readers can identify your sources and check your facts, and (2) that you

use the same citation style throughout the paper. (When

citing Internet sources that do not have printed equivalents, identify the author,

document title, Internet address, and the date that you retrieved the document.)

Append a bibliography at the end of the paper, and include all the sources in APA

style that you used in writing the paper.

Review the student handbook for plagiarism statement and requirements.

SUBMITTING YOUR PAPER

When you have completed your paper, re-read it for clarity, grammar, spelling and

A few words about submitting your paper:

Your paper must be typed in Word Document in double-space in a normal font (e.g.,

12-point Times New Roman), number the pages, put your name and student number on

the title page. Your research paper should have a title other than

“ Research Paper”.

Use at least 4 academic resources (not used in class).

Include examples of your own when explaining/analyzing your topic.

Submit your paper through Turnitin dropbox (instructions posted online)

The paper is due on the date posted in your syllabus. No late submissions will be

accepted.

The Center for Academic Success is available on both campuses to support you. They provide personalized attention tailored to your needs in a user-friendly environment that includes online support. You can get help writing a paper, reading more efficiently and increasing textbook comprehension, or even creating an individualized learning plan. The center is located in GL 120 (305-348-2441) on the main campus and at ACI 160 (305-919-4044) on the Biscayne Bay campus.

Citations

South Africa

Mitchell, C. (1998). Passport: South Africa. San Rafael: World Trade Press.

Singapore

Alexandra, K. (1998). Passport: Singapore. San Rafael: World Trade Press.

Spain

Novas, H., & Silva, R. (1997). Passport: Spain. San Rafael: World Trade Press.

Switzerland

Micheloud, F. (2001). Passport: Switzerland. San Rafael: World Trade Press.

Russia

Mitchell, C. (1998). Passport: Russia. San Rafael: World Trade Press.

Italy

Gioseffi, C. (1997). Passport: Italy. San Rafael: World Trade Press

Israel

Rosenthal, D. (1997). Passport: Israel. San Rafael: World Trade Press

Germany

Flamini, R. (1997). Passport: Germany. San Rafael: World Trade Press

France

Joseph, N. (1997). Passport: France. San Rafael: World Trade Press

Brazil

Herrington, E. (1998). Passport: Brazil. San Rafael: World Trade Press

China

Li, J. (1996). Passport: China. San Rafael: World Trade Press

Korea

Keating, K. (1998). Passport: Korea. San Rafael: World Trade Press

�f,-\( Government & Business

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Good Cats Catch Rats

In keeping with its socialist philosophy, the Chi­ nese government controls the business sector. And though it claims to have replaced its traditionaL planned economy with a market-driven one, the gov­ ernment supervises every aspect of this sector, too.

Still, their approach is a pragmatic one. Credit is provided to industries that generate more exports, technology is subsidized, developing industries are protected with lower tariffs and private industry (slowly replacing state-owned enterprises) is encouraged.

The government explains these policies as part of an emerging, Chinese-style socialism. Perhaps Deng Xiaoping s political proverb puts it best: "It doesn't matter if a cat is black or white, as long as it catches rats." The role of China's government in the country's economic development will remain strong for the foreseeable future.

Perpetual Uncertainty

One of the most frustrating aspects of investing in China for non-Chinese is that the government

Govemment & Business 29

never discusses new business policies and regula­ tions with foreigners, nor announces such changes in advance. (For example, they recently withdrew the tax-free benefits given to foreign joint ventures' imported equipment and added on heavy duties.)

The most effective way to deal with such chal­ lenges is to have your local Chinese partner or con­ sultant work continually on obtaining government clearances or approvals of your project, while maintaining close relationships with local officials at different levels.

Perseverance has its rewards. Three major suc­ cess stories: • Proctor & Gamble has cornered China's sham­

poo market with Head & Shoulders (a dandruff product), despite the fact that it costs three times as much as some local brands.

•

•

Pepsi Cola has twelve factories in China, another nine under construction, and a total investment of $500 million. Volkswagens can be seen negotiating Shanghai's traffic both as private vehicles and as taxi cabs.

Lone Dragons

Traditionally, most Chinese enterprises were large, state-owned plants and factories infamous for their inefficiency. And until recently, their prof­ its and losses were absorbed by the government, thereby creating no incentive for the managers to become better organized.

But in recent years, the government has been promoting entrepreneurship. Two types of entrepre­ neurs have emerged. The first are managers of state­ owned enterprises who have been given fuller con­ trol over daily operations and responsibility for prof­ its and losses. Depending on their success, these

30 Passport CHINA

companies will eventually either close or be sold to private entrepreneurs (in China or abroad).

The second type of entrepreneur comes from the private sector. There are now well over twenty mil­ lion registered private and individual businesses in China, ranging from hole-in-the-wall shops to multi­ million-dollar feed-processing plants. And the num­ ber is growing every day.

This phenomenon is especially significant for foreign businesspeople, as it provides a basis for dialogue and negotiation. However, it's important to note that Chinese entrepreneurs - like tai-pans

of older, more traditional businesses - tend to take a dynastic approach, keeping ownership and man­ agement in the same hands. The downside of this approach is that such companies don't always sur­ vive when their stewardships are passed down. ("Wealth never survives the third generation" warns an old Chinese proverb.)

Building up a core of professional (non-family) managers who play a vital role in a company's deci­ sion-making processes is still considered "un-Asian."

Outsiders Welcome ... Sometimes

As part of its preparation for joining the World Trade Organization in 1992, the Chinese either abolished or reduced tariffs (an average of 7.3 per­ cent) on a total of 3,596 import categories. And effective April 1, 1996, they reduced them an addi­ tional 23 percent in an effort to promote free trade and foreign investment.

China has also established Special Zones for Economic and Technology Development (SZETO) in 32 cities. In them, foreign investors pay a 15 percent business tax rate, compared to 24 percent and 33 per­ cent tax rates elsewhere in the country. The govern­ ment has specifically expressed desire for foreign

Government & Business 31

capital for railroads, highways, power plants and telecommunications - all formerly protected "national industries."

However, foreign companies will still find it dif­ ficult to compete with local manufacturers, espe­ cially makers of consumer appliances. Market share can only be traded for advanced high technology. Import licenses are still required for sugar, fertilizer, grain, wine, tobacco, wool, steel, computers, timber and wood pulp. The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) publishes annual lists of items restricted for import. Quotas are estab­ lished for investments and, once they are met, no further investments are allowed for that year.

Politics and Business = Bedfellows

Politics and business go hand in hand. A com­ pany's activities are greatly influenced (even con­ trolled) by its political identity. A company owned by a government ministry will certainly be more successful and stable than one owned privately. In fact, government-owned companies openly adver­ tise their relationship, as it projects a sense of reli­ ability and financial stability. All enterprises try to enhance themselves by posting congratulatory messages from government officials, publicizing ribbon-cuttings by prominent leaders, or having photographs taken with high-level bureaucrats.

On the other side of this equation, Chinese gov­ ernment officials are eager to demonstrate their sup­ port for economic development any way they can. They understand that the best way to maintain power is to satisfy consumer demands and encour­ age foreign investment. As a non-Chinese conduct­ ing business in China, it's to your advantage to make friends with the Commission for Foreign Eco­ nomic Relations & Trade, the Planning Commission,

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32 Passport CHINA

the Tax Bureau and the Administration of Industry &Commerce.

Networking, Chinese-style

The business structure in China consists of invisible social networks. Members of these net­ works enjoy many advantages when it comes to licensing,. permits, compliance, market access, loans and the issuing of passports and visas. In response, foreign and joint venture companies work to main­ tain good relationships with current government officials and to hire former ones as consultants.

An increasing number of bureaucrats are leav­ ing their government positions for private business and its enormous potential for financial gain. Lack of appropriate regulations allows them to freely manipulate their government connections on behalf of their new employer.

In addition, many relatives of high-ranking Communist Party officials now hold senior man­ agement positions in prominent companies, posing substantial political, social and business challenges to those without such insider connections.

Although Party bureaucrats don't officially admit to the existence of government corruption, their recent and much-publicized campaign against just such corruption resulted in a number of arrests of per­ sons with family connections in the politburo. The penalties included a death sentence for a provincial governor's spouse found guilty of embezzlement.

Danwei: An Extension of Family

In times of hardship, war or social chaos, the Chinese family has always served as a bastion against the outside world. Even during peace and prosperity, business and social connections are first made with family members, and only then with family friends. This practice was eventually extended to include the danwei (work unit) to which every worker must belong. A Chinese who cannot be identified by family and danwei has no identity - and therefore no strength or protection.

In addition to a job, the danwei provides - or denies - housing, health insurance, child care, pen­ sion, and in many cases, facilities where employees and their family can eat, bathe and obtain childcare. The danwei also controls its members' professional lives by maintaining dossiers that include informa­ tion on family background, political activities and job performance. Without permission from his dan­

wei to transfer his dossier, it's virtually impossible for a worker to join another unit.

In many ways, the danwei is like a traditional Confucian family, with the supervisor acting as a father who commands the loyalty and respect of his

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34 Passport CHINA

wife and children, in return for which he looks after their basic needs. Although China has been strongly influenced by Western economic reforms in recent years, most Chinese still believe that being a model family member and danwei worker is the most responsible (and safest) course of action.

Iron Rice Bowl versus Porcelain Rice Bowl

The danwei system is commonly known as the "iron rice bowl" where people "eat from one big pot." The unbreakable bowl symbolizes guaranteed lifetime employment, protection from demotion, and a virtual lack of salary differentials on either a skills or performance basis. The only causes for dis­ missal are criminal activity or flagrant absenteeism without a medical excuse - either of which brings disgrace to the danwei, the employee and his family.

Jobs for university graduates are guaranteed, but they are assigned by government employment agencies that pay little or no attention to a worker's personal goals or interests. The government has recently begun to dismantle this largely inefficient system, exchanging the iron rice bowl for a porce­ lain one, that is, a more flexible approach to hiring and firing based on performance and skill levels.

An increasing number of people, university students in particular, now seek out positions with joint venture enterprises by attending "talent" or job fairs or by applying in person during their last year of school. Advertising is gradually becoming an accepted means of matching potential employ­ ees with positions. Although salaries in most newly established enterprises are considerably higher than for those who still hold iron rice bowl jobs, job security is not guaranteed.

The government has set a national goal of imple­ menting the contract-labor system in all enterprises

The Work Environment 35

by the beginning of the 21st century. But as the old job assignment system has not been abolished com­ pletely, private enterprises are finding that hiring workers away from their danwei is problematic. Workers must obtain both transfer approvals and res­ idence permits (without which they cannot move to another part of the country and for which the danwei

often charges large release fees). And to effectively compete for the best talent, foreign-owned and joint venture businesses must provide benefit packages that include housing, healthcare, childcare and a retirement fund.

So, while the government officially supports the notion of increased job mobility, it also main­ tains regulations that discourage the possibility.

Economic Boom - Rising Unemployment

Despite a steady economic growth rate (lately, among the highest in the world), China is experienc­ ing high unemployment and underemployment. There are two reasons: the financial collapse of many state-owned enterprises and the aforementioned transition from assigned, life-long employment to a contract-labor system. There are approximately 144 million workers in the cities. Although the official unemployment rate hovered around 2.5 percent in the early 1990s, off-the-record estimates by officials put the urban unemployment rate two to four times higher -which means that there are anywhere from 7 to 14 million unemployed in the cities alone.

In addition, shrinking rural employment oppor­ tunities have driven as many as 100 million - the "floating" population - to the cities. While many Chinese policy makers support the expansion of the private business sector as a way to reduce unem­ ployment, others are concerned that a more efficient private sector could put even more people out of

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36 Passport CHINA

work. Meanwhile, the government continues to prop up inefficient and oversized state enterprises.

Straddling Two Boats

Loyalty to one employer is almost nonexistent, as many urban workers maintain a second (or even third) job in order to survive. This is known as "straddling two boats"; if one boat sinks, the other will still be floating. In Beijing and Guangzhou, for example, almost one third of state workers have second jobs. In Shanghai and Chongqing, the pro­ portion is estimated at 40 percent.

Soaring Literacy

Education is highly respected in Chinese soci­ ety, largely because of the Confucian notion that "he who excels in learning can be an official." Although hampered by severe financial problems and endless political movements during the first fifty years of communist rule, China's literacy rate has soared from 20 percent to more than 80 percent.

Veterans of the Communist Revolution who, up until now, have held important positions at every level of the country's social system, are grad­ ually being replaced by much younger and better­ educated professionals.

Long Negotiations

Decision making in China is based on gather­ ing consensus. Major decisions are made by the leader of the collective within the system only after a wide range of reviews and discussions by all per­ sons concerned.

Tius approach has major implications for for­ eign businesspeople. One is that negotiations will

The Work Environment 37

usually take much longer than Westerners (in partic­ ular) think necessary. Expect many meetings with frequent recesses, during which the Chinese confer with their colleagues and superiors outside the meeting room. The advantage to this approach is that once decisions are made, they tend to be sound and easily executed, as all the implications and pos­ sible ramifications have been carefully considered.

Pitfalls of Bureaucracy

Bureaucratic meddling by party and govern­ ment officials is a major problem in northern and inland areas. Local party secretaries, municipal managers, tax officers and the like can make estab­ lishing and running a business very difficult, espe­ cially for foreigners. A tax may be imposed on a company simply because the local coffers are low, or worse, because a local official doesn't like some­ one in that company. Chinese bureaucrats are liable to engage in all kinds of intrigues, including the sabotage of projects for personal gain or revenge.

Having powerful officials for friends can be a major asset. Land-use rights, tax bases and many other regulations can be relaxed if the right people give their consent. This is especially true in more remote areas, where wages are lower and the need for business development is greater.

Feng Shui

In ancient times, a tradition arose that China sits atop an Earth Dragon, over which currents of wind (Jeng) and air (shui) flow. Chinese emperors con­ sulted feng shui experts before building a palace or waging war, to determine if the structure or battle in question rested on the dragon's back (ideal), neck or head (bad) or eyeball (the worst thing possible).

38 Passport CHINA

Despite the "destruction of four olds" (old thinking, old culture, old tradition, old customs) during the ten-year Cultural Revolution (1966- 1976), Jeng shui is still widely (if surreptitiously) practiced. Its principles are applied to the place­ ment of highways, telephone poles, offices, and even the chopping down of trees. Buildings, even in the best positions, must be aligned to prevent bad spirits from slipping in. The strategic place­ ment of a mirror can divert them; doors should always face south.

Some Chinese believe that the untimely demise of Bruce Lee (the Hong Kong screen idol and martial arts expert) had to do with the fact that he lived in an unlucky house.

Westerners tend to find the concept quaint. But most China-based employers will find that con­ sulting with, and following the advice of, a Jeng shui professional will reassure both their staff and their associates.

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Traditional Roles

For centuries, China's patriarchal society defined women as "accessories of a man." Women could be traded as commodities and a man could "own" several wives. An old Chinese proverb advises, "A woman's virtue is that she has no tal­ ent." Education for most women was limited to learning how to cook and sew. Upper-class women learned to sing, play chess, read and draw so they could better serve upper-class men. A man could divorce his spouse for being talkative, for only bearing daughters, or for being jealous (that is, for being reluctant to accept her husband's concu­ bines). For women, however, divorce was impossi­ ble. Although in recent history, many women have made significant contributions to (and even sacri­ ficed their lives for) social change, women were almost nonexistent in civil service and business until the 1950s.

To Be a Tigress

Nowadays, "Women hold up half of the sky," as Mao Zedong declared. Officially, a woman has the

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40 Passport CHINA

right to expect pay and status equal to that of a man holding the same job. It is becoming more common for women to hold executive positions in factories, companies and government offices. China's current Trade Minister, Wu Yi, is a woman.

Still, equality remains an uphill battle. "Tigress" is a widely used derogatory term for women who stand up for their principles. Confu­ cian male attitudes still linger in business environ­ ments, and it's not unusual to see women play a purely decorative role in a company. Even women who have senior positions encounter resistance to their leadership.

. However, most Chinese businessmen recog­ mze that Western women hold positions at the highest levels of business and government and try, therefore, to adjust their expectations of, and behavior toward, foreign women.

Strategies for Western Businesswomen

Foreign businesswomen coming to China are not li�ely to encounter overt discrimination. They may, m fact, be much admired and respected because Chinese (especially Chinese women) will assume that they must be persons of exceptional competence to be given an overseas assignment.

There are some things that Western business­ women can do to make their trip more successful. Negative comments or criticism on any aspect of women's rights in China must be avoided. Public discussion of anyone's sexual orientation will draw unwelcome attention and unnecessary trouble. Always, of course, show equal respect and profes­ s10nahsm to both Chinese men and women.

Before sending a female representative to China, the home company should prepare her and her dele­ gates thoroughly. An introduction letter that clearly

Women in Business 41

indicates the female leader's position, her creden­ tials and accomplishments should be sent to China in advance. Her business card should have an authoritative title (especially in Chinese translation) to emphasize her decision-making power.

At meetings, the female representative should always be introduced first to the seniors of the Chi­ nese team. She should then introduce her colleagues to the Chinese. Team members should avoid dis­ agreement with her in the presence of Chinese asso­ ciates. The female delegation leader should always be the first to respond to any questions and requests. Only then, if appropriate and needed, should she direct the issue to one of her colleagues. By display­ ing self-confidence and poise, a foreign business­ woman may, in fact, be able to accomplish things much faster than a male counterpart.

Foreign businesswomen are usually invited to business banquets, sight-seeing trips, or evening entertainment. If she's unable to attend, she should formally designate a member of her team to repre­ sent her.

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\'�0 \ Making Connections 7n_/�----------­

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The Chinese do not like to do business with strangers. They negotiate relationships rather than contracts. Attempts to establish solid connections often fail because foreigners simply don't pay enough attention to cultivating personal foundations.

You Gotta Have Guanxi

Guanxi (literally, "relationships") is best trans­ lated into English as "connections." Using one's guanxi to get things done which are impossible oth­ erwise is commonly known as zouhoumen (going through the back door).

Obtaining official approval for a joint venture in China takes from six to eighteen months. However, if you have cultivated relationships with the govern­ ment bureaucrats involved in the approval process, the process will probably take much less time. Con­ nections made through family or clans (those from the same geographical area or who speak the same dialect) tend to be particularly fruitful.

In today's business environment in China, executives and entrepreneurs work constantly to

maintain and expand their network of connections.

Making Connections 43

Networks can extend to other companies and indi­ viduals in Hong Kong, Taiwan, Southeast Asia, and even to Europe and the U.S. While the purpose of such contacts is often mutual financial benefit, the criteria are the same as for personal connections: trustworthiness and loyalty.

The Tea Gets Cold ...

Developing strong guanxi takes an enormous amount of patience and persistence. The Chinese dislike casual relationships. "The tea gets cold once the guest leaves," they say. To keep the tea warm, it's essential to maintain ongoing friendly contacts both in business and social situations.

Chinese identify three phases in the process of getting to know somebody: know their name, know their face (appearance), then know their heart (true self). It always helps if your name has been referred to them by someone they already know. Don't expect a Chinese to trust you simply because you've shown up. The process of getting to know your heart takes more time.

The effort required to cultivate a relationship will not be a waste of time. Frequent visits and calls to your business connections will provide you with the opportunity to evaluate their character and intentions. This knowledge can be crucial when it comes to deciding how far you should take the business relationship.

Intermediaries

The most effective way to develop your con­ nections is to involve a Chinese intermediary from your own country in the process. The Chinese go­ between should be someone who can introduce you to reliable connections in China, and who is

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44 Passport CHINA

culturally sensitive to the business etiquette of both countries. Such an intermediary will help you to:

•

•

be more quickly accepted, so that you can start building your guanxi more effectively

obtain more thorough and accurate informa­ tion about your potential business associates and their intentions

• avoid making mistakes in local customs

Going through an intermediary will also increase the comfort level of your Chinese associ­ ates, who are relative newcomers to the modem international business arena.

Written Introductions

If you have friends who have connections in China, ask them to write a letter introducing you and your company, explaining the reasons for your visit and providing an itinerary. As a next step, you should write to request an appointment. If you do get a meeting, bring an additional letter of introduc­ tion from your friend that affirms your character and trustworthiness.

If you don't have indirect connections to China, contact your government's consulates in the cities you plan to visit and request a list of appro­ priate businesses to contact. When you arrive, try to meet the consul who has helped you and ask him to introduce you to businesses before you actually visit them. Social standing is very important in China. An introduction from an official of your government will create a good first impression.

The Importance of Business Cards

Exchanging cards is a basic part of doing busi­ ness. Your card should be printed in both English

Making Connections 45

and Chinese. (Practice the Chinese pronunciation of your company's name well in advance.) Consult a native mainland Chinese for a good translation.

When you present your card, be sure that the side with the Chinese translation faces up toward the recipient. Hold the upper corners of the card with the thumbs and forefingers of both hands. Receive your Chinese associate's card with both hands, read it carefully and then be sure to put it away. Leaving someone's business card behind is considered rude.

A Few Tips about Telephones

About ten years ago, few people in China had them. Things were done in person, by messenger, or by telegram. Today, Beijing and Shanghai phone numbers have eight digits (up from only five as a result of the demand). Fax machines, pagers and cellular phones are in evidence, and e-mail and Internet connections are being introduced.

It's difficult for foreign visitors to find public telephones. Many are tucked away in small, family­ run shops (if it's sitting on the counter, it's probably for public use), and non-standard signs, sometimes handwritten on paper board, are usually in Chinese.

Pay phones are always available in hotels and post offices. Be sure to check the access code for an outside line before dialing from your hotel room, as they vary greatly from place to place.

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The Chinese proverb "Ru xiang sui su" (liter­ ally, "Enter place, follow custom") carries the same meaning as the English saying, "When in Rome, do as the Romans do." No matter how illogical or inef­ ficient Chinese ways seem, you still need to learn them. Here are some guidelines.

1. Understand the business-development pro­ cess and build your network around it. In China, direct solicitation is unnecessary.

Instead, concentrate on establishing a network with the appropriate institutions. If you are setting up a joint venture, it is important to not only become well acquainted with the local factory managers, but also to establish personal relationships with the local government officials who will be involved in your business plan.

2. Be patient with temporary rules. In addition to an increasing number of new

laws that govern foreign businesses in China, there are many temporary (and confusing) regulations. Failure to follow them can have serious conse­ quences; consider hiring an international business law firm that has continuing involvement in China. Such a firm will have current information as well as

Strategies for Success 47

model legal documents in which much of the word­ ing is approved by the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the highest authority for foreign investment approval.

3. Take your time. China's enormous bureaucracy and its ever­

changing legal and economic landscapes guarantee that nothing gets done quickly. In addition, Chinese culture teaches that one should be suspicious of too much haste and should proceed cautiously as a matter of principle.

4. Listen more, talk less. Saying something that later proves to be wrong

will damage your credibility with Chinese associ­ ates. "A single word is worth a thousand pieces of gold." Therefore, the accuracy and thoughtfulness of what you say is much more important than how quickly you respond. Being a good listener is con­ sidered a virtue.

5. Be modest and respectful. Chinese consider boasting or self-promotion to

be very poor form and will usually minimize their own accomplishments. In contrast, a knowledge­ able, capable person with a modest and respectful attitude enjoys great admiration and respect.

Time I( u V ------------

An Aversion to Deadlines

Written Chinese does not have tenses. There are, however, words to indicate the passage of time - tomorrow, now, and so forth. The Western concept that "time is money" is widely known among Chi­ nese involved in international business, but they generally resist being constrained by deadlines.

For the Chinese, time is fluid, rather than something that is best compartmentalized into min­ utes, days, weeks, months and years. This applies to both their social and business lives. While West­ erners pride themselves on guaranteeing delivery dates, with product quality sometimes suffering in the process, the Chinese take a different approach. They prefer to elicit consensus that a product is fully functional, wait for an auspicious moment, and then unveil a thoroughly tested prototype.

Appointments

Before telephone service became more widely available about a decade ago, the idea of an appointment was not practical, and time and energy wasted by one party's unavailability was usual. Now, however, Chinese businesspeople are i

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Time 49

beginning to realize that appointments are not only a matter of convenience, but also of respect.

There is a stark difference between the pace of government offices and private businesses. Bureau­ crats and minor officials like to keep customers waiting as a matter of face (it increases their sense of importance). Low efficiency costs the state, but workers have little to lose. However, in retail busi­ nesses where salespeople receive commissions, ser­ vice is swift and friendly and staff are eager to help.

Getting Things From Here To There

For every 1,000 square kilometers of land in the U.S., there are 640 km of road and 51 km of rail. In China, there are 108 km of road (their condition varies greatly) and 8 km of rail. Transportation con­ nections between air, water, railroad and highways are poor. It's not surprising, then, that things take a long time to move from place to place. And it costs more to transport a shipping container from south­ ern China to Hong Kong than to move it from Hong Kong to Europe or North America.

Many airports have only one or two runways and are inefficiently managed. A limited number of airplanes, combined with unexpected weather, add to the problem. Many Chinese prefer train travel, finding it more reliable and economical.

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Business Meetings

Preparation

Business meetings with foreigners are formal occasions in China. Nevertheless, many Chinese still believe that the burden is on the foreigners, since they' re the ones coming to do business. As a result, the Chinese often arrive at meetings ill-pre­ pared. Don't be discouraged, and remember that it's crucial to have an agenda and stick to it.

Before the meeting, send a list of your team members (in order of seniority or importance), along with a brief resume of each, to the Chinese, and request a similar list from them. Include trans­ lated materials about your business as well.

Even in big cities, the availability and quality of commercial clerical support is unpredictable, so bring enough copies of all your documents. If you need audio or video equipment, it's much safer to bring your own. (Don't forget a 220v voltage con­ verter and a standard Chinese plug.) Special requests should be made to the Chinese as early as possible, and in the absence of a definite response, assume that the request can't be met.

Business Meetings 51

Scheduling

Scheduling should be done well in advance. Not only do you need the time for thorough preparation, but you should also give the Chinese sufficient time to make proper arrangements. Although you are expected to meet with people of the same level as your team, request a meeting with the senior official of the company or government ministry. The meet­ ing may be simply symbolic, but it has important implications beyond a courtesy call - it demon­ strates sincerity and respect from your side and reflects seriousness and support from the Chinese.

Last-minute delays or cancellations are not unusual, especially when senior officials are involved. To make amends, the Chinese may arrange special functions for you, such as sight-seeing or banquets. Under such circumstances, express your understand­ ing rather than your disappointment.

Small Talk First

Dress formally and be on time. Punctuality is considered a sign of both respect and the serious­ ness of your intent.

On arrival, your team will be led into a confer­ ence room where your Chinese associates will prob­ ably already be waiting. Enter the room in order of rank; the Chinese always assume the first to enter is the head of the group. The head of the Chinese group is usually introduced by a subordinate, often the interpreter. Then, the Chinese leader will intro­ duce his team. Then, you should do the same.

During handshakes and an exchange of busi­ ness cards, you are expected to greet everyone by saying ni hao ("How do you do?") with a slight nod of your head. You will be led to one side of the (usually rectangular) table; the Chinese team will

52 Passport CHINA

sit on the other side, seating in descending order of rank, with their leader in the middle. Hot tea is usually served.

The Chinese usually start a meeting with small talk about your trip, hotel or the weather. Follow suit; or as the Chinese say, Ke sui zhu bian ("The guest follows the host"). Trying to initiate business right away will make the Chinese uncomfortable.

First Day Protocol

The head of the Chinese team usually delivers a welcome statement and then lets the guest present his business. As noted before, the Chinese look to the leader for all meaningful dialogues. Therefore, the head of your group should speak directly to the head of the Chinese team, rather than to the interpreter.

The Chinese approach to business discussions is to begin in general terms and only then move toward specifics. Avoid presenting too many details before "the big picture" is understood.

Your typical presentation for the first meeting should take no more than 20 minutes. Maintain a direct, candid approach and clarify anything that seems unclear. (Questions and details can be consid­ ered in the discussion that follows.) Acknowledge the importance of your deadlines but don't push too hard on this issue; it will only serve to mislead, or possibly even annoy, the Chinese.

Concluding the Meeting

The head of the Chinese team will usually sig­ nal the end of a meeting by making a closing state­ ment, which often sets the tone for future meetings and even the entire project. Your team leader should then express appreciation on behalf of your

Business Meetings 53

team and company for a good meeting and for the host's hospitality. This is also the time to emphasize your company's desire to establish a long-term, mutually beneficial, relationship. If you don't refer to the prospect of business in your closing state­ ment, the Chinese assume a lack of interest in mov­ ing ahead.

While handshakes are more common in Hong Kong than in Shanghai, they are appropriate at the meeting's end. As a guest, you should initiate the handshake with the head of the Chinese team, and then continue with other members in descending order of rank. As a courtesy, the Chinese will let your team leave the meeting room first and then accompany you to the elevator or front gate.

Be sure to document the important points of discussion, as well as general intents or agree­ ments, then distribute these notes to the Chinese soon after the meeting.

A Note on Responsibility

Many Chinese officials are hesitant to take responsibility for making decisions. While you may be ready, even before your business trip, to make choices and commitments based on your own best judgment, most Chinese will avoid doing so, in case their decisions turn out to be bad ones. Histor­ ically, this has been an effective tactic for self-pro­ tection in uncertain times.

The last thing you should do is push for a deci­ sion. Instead, expand your network of allies to include most of the personnel involved. Diplomatically assist your Chinese associates in reaching an agreement among themselves. Individuals are immune from blame if a decision is based on consensus.

�n) Negotiating with the Chinese "\___) l

Opening Protocol

The first goal in a negotiation is to reach yixiang shu (a letter of intent), which expresses mutual interest and a desire to cooperate. The language of these letters, which have no binding effect, is usu­ ally vague and ambiguous.

When setting up a joint venture, other documents required during the course of a negotiation will include a lixiang shu (project proposal), kexingxing baogao (feasibility studies) and a hezi qiye hetongshu (joint venture contract). Once these documents have been approved by the appropriate government authorities, a business license application can be filed.

East versus West

There are some very basic differences between Chinese and Western approaches to negotiation and understanding these differences is essential to success. • Honesty versus Deception. Generally speak­

ing, the Chinese believe that Westerners are friendly, honest and trusting and that they con­ duct business with a high level of integrity.

Negotiating with the Chinese 55

However, they don't feel compelled to behave in a similar fashion. Deception and the exploi­ tation of weaknesses are time-honored strate­ gies in China's business, military and political arenas.

• Naivete versus Experience. The Chinese believe that the lack of a sophisticated histori­ cal and cultural background (especially in the U.S., with its comparatively short and pleasant history) has left Westerners naive. Their own turbulent 5,000-year history, Chinese believe, has created hard-earned strength and shrewd­ ness, and the ability to take advantage of another's weaknesses.

Short Tenn versus Long Tenn. Chinese find many Westerners, especially North Americans, lack the patience to build up long-term busi­ ness relationships, concentrating instead on immediate financial gain. The Chinese value long-term benefits and are willing to wait.

"Old-Fashioned" Practices. Chinese society is based on commonly held ethical codes and moral principles rather than on legislation. There is no systematized code of business law, and enforcement of existing regulations is erratic. Business deals are often sealed with a handshake or the nod of a head.

• Toeing the Party Line. The Communist Party influences every aspect of China's social and business realms. All business terms must be compatible with official Party politics.

Sun Tzu's Art of War

Most Chinese negotiators are well versed in psychological bargaining tactics, and many of these were penned as military strategies over 2,000 years

56 Passport CHINA

ago by the mysterious Sun Zi Bin Fa (also known as Sun Tzu). His book, The Art of War, is based on the premise that as wars involve death and determine the fates of nations, they must be carefully and rationally planned.

The ideal victory, Sun Tzu explained, was to subjugate without actually engaging in combat - through diplomatic coercion, thwarting enemy plans and alliances, and frustrating enemy strategy. Avoiding strong force was seen not as cowardice but wisdom; analysis and self-control were key.

The Art of War was first translated about two hundred years ago by a French missionary, and its thirteen strategies for dealing with thirteen differ­ ent circumstances are believed to have influenced Napoleon Bonaparte, the Nazi High Command and even the planning of Operation Desert Storm. In 1972, during the excavation of a Han Dynasty tomb of a high-ranking official, archeologists unearthed previously unknown sections of Sun Tzu' s treatise - carved on remarkably preserved bamboo slips. Subsequent translations turned this ancient work, written for military commanders and their feudal overlords in an era of chariot warfare and bronze­ tipped spears, into an international best-seller. In the 1990s, The Art of War has found new life as a bible for top Japanese and Western executives.

Another source of negotiation tactics are the Taoist-based "thirty-six strategies," which date back about 1,500 years and were originally composed in six segments of six. (A traditional saying is, liu liu da shun - two sixes make a great success.) These seg­ ments (confusing opponents, gobbling up oppo­ nents, and so on) are so much a part of China's overall heritage that even children are familiar with a few of them. In the modem business world, they're seen as defenses against those who operate unfairly.

Negotiating with the Chinese 57

Top Ten Chinese Tactics

1. Using friendship to gain concessions. Friend­ ship is important in dealing with Chinese. However, warm hospitality, banquets and entertainments may be subtle manipulations to put you in the position of a debtor, making it difficult for you to refuse a proposed agreement.

2. Playing off competitors. Chinese may negoti­ ate with several competing companies at the same time, using offers from these competitors against each other.

3. Getting the other side to show their cards first. By requiring you to make elaborate pre­ sentations and asking many questions after­ ward, the Chinese are able to gain valuable information about your position, concerns and "bottom line."

4. Using proponents to practice their own skills. On multimillion-dollar projects, the Chinese usually conduct preliminary research to deter­ mine which company is considered best in its industry. They then carry out mock negotia­ tions with other competitors to gain experience and knowledge.

5. Taking advantage of foreigners' investment or fear of failure. The Chinese are well aware that foreigners must have spent a good deal of time and money to come to China, and that they do not wish to go home empty-handed. To increase the pressure, they may appear indifferent and/ or make increasing demands for concessions.

6. Using your own words against you. Chinese have been known to quote a foreigner's own words, which might have been spoken under very different circumstances, to refute his cur­ rent position.

58 Passport CHINA

7. Flattery. Chinese are not above heaping praise on foreigners, either for personal attributes or business acumen, in order to stroke egos and thus catch the other side off guard.

8. Delaying negotiations until the last minute. If they know the date of your departure, Chinese may intentionally hold up substantive negotia­ tions until the day before you plan to leave.

9. Inflating prices and hiding the real bottom line. When Chinese appear to give in to your demand for lower prices, it might be because their original price was abnormally high.

10. Using interpreters. The Chinese will use inter­ preters during negotiations, even when their English is fluent.

Tips for Foreign Negotiators

• Always maintain your integrity and profes­ sionalism, and behave in a friendly manner both inside and outside the negotiating room.

• Make impressive presentations, but be sure not to discuss any sensitive technological informa­ tion before reaching a full agreement.

• Take careful notes and promptly clarify any ambiguities on important points.

• Play by Chinese rules - including playing off competitors and padding the price.

• Leave room for compromise, but do not give in too quickly or dramatically.

• Show your willingness to walk away, and let the other side know that failure to agree is an acceptable alternative to a bad deal.

• Be patient and calm. • Have an attorney review the contract in both

languages before you sign it.

Negotiating with the Chinese 59

• Finally, approach negotiations and all business in China from the standpoint of long-term involvement. Compromising with the Chinese over a specific issue can sometimes result in enormous future benefits.

The Language Barrier

An interpreter is an important member of any business delegation. Although English is a required subject in the general curriculum of universities (and English instruction starts as early as elemen­ tary school in major cities), students are hampered by a lack of native English-speaking teachers.

Usually, a member of the Chinese delegation will act as their interpreter. But under no circumstances should you depend on him. Although there is little chance that he will intentionally try to mislead you, it's very likely that he will be more skilled at translat­ ing English to Mandarin than Mandarin to English.

•

•

•

•

Tips on Using Interpreters

Find an interpreter who is bicultural and bilin­ gual, and thus able to distinguish the nuances of both cultures and the inflections of both languages.

Spend as much time as possible getting acquainted with your interpreter before the negotiations begin.

Explain the significance of the negotiations to the interpreter and let him understand your position on issues in advance. Make sure that he has at least a general understanding of the technical terms in both languages.

Try to speak in short sentences. Avoid using any words and expressions that are vague or

60 Passport CHINA

subject to misinterpretation. Pause after every few sentences to allow for translation.

Unless you understand Chinese, you will have no way of knowing if your points have been accu­ rately translated and fully understood. Therefore, you should repeat your important points at different times, stating them in different words or from differ­ ent perspectives. And be aware that negotiations involving translation take two or three times longer than meetings conducted in a consensual language.

Contracts, Chinese Style

Because of a lack of institutionalized business law, many Chinese officials and business people, especially in remote areas, have little or no regard for written contracts. However, in those areas with a heavy concentration of foreign investment, the concept of contracts as legally binding documents has been widely accepted.

The Chinese prefer short agreements stating principles, with the details being worked out by sub­ ordinates at a later date. Avoid this kind of situation if you can. It increases the chance of misunderstand­ ing on both sides and necessitates further negotia­ tions, which will undoubtedly be time-consuming and costly.

).\

2)4(_ ( Business Outside the Law

�JV The Black Market

Until recently, the government's vice grip on the economy left little room for maneuvering for personal financial gain outside of official channels. However, with unemployment increasing and the inflation rate soaring,. the government has been "overlooking" the fact that many people are hold­ ing second (or even third) jobs without paying the appropriate taxes.

Illegal street currency dealers are not uncom­ mon (they like U.S. dollars best). They're very effi­ cient, and a lot faster, than the often rude and apathetic staff of official bank exchanges. They also trade in counterfeit bills.

Beware. Now and then, the local police con­ duct a dragnet, and along with the street vendors, they may scoop up a tourist or two. The vendors face severe fines and jail sentences; the tourists are set free with a stern warning. But if you're in China on business and the authorities are so inclined, you may suddenly find yourself being known as a cur­ rency speculator.

62 Passport CHINA

Pirates' Paradise

The piracy of international patents and intellec­ tual property in China is rampant, particularly in the designer clothing, computer software and laser disk industries. While there's no hard evidence that these violations are sanctioned, many of the busi­ nesses making huge profits on these goods are legitimate companies with licenses and approvals from government agencies.

What most non-Chinese may be unaware of, however, is that pirates are also sabotaging Chinese

trademark credibility. In the past, China criticized Western demands for copyright protection as bully­ ing and interference. But increasingly, demands for protection and compensation are coming from local talent.

China's leading rock star, Cui Jian, would prob­ ably top international lists for total record sales, if only there was a way to verify the numbers. His manager estimates that fans have purchased at least ten times the 1.2 million CDs and tapes on which Cui Jian collects royalties. (China has the largest pirate music market in the world. Most of the goods end up in eastern Europe, the EU and Russia.) The com­ pany that invented and markets the first Chinese­ language word-processing program sold in China estimates that one real program sells for every ten "knock-offs." A best-selling Chinese novelist who specializes in writing about pimps and prostitutes is frustrated that imitations of his work are being churned out in his name. Despite an exclusive license from the Ministry of Health, scientist Wu Cheng discovered that at least half a dozen factories were manufacturing his formula for a heart medi­ cine made from fermented earthworms.

In 1995, the government passed a law allowing consumers to return fake products for full refunds.

Business Outside the Law 63

Still, little has changed. Organizations set up to pro­ tect Chinese interests have pirates as members. Plants and factories that have been forced to close (often due to pressure from the United States) magically reopen, or simply move their warehouses. In the end, even flagrant piracy is very difficult to prove.

Graft at All Levels

In the more affluent South (notably in Guang­ dong Province), corruption is particularly preva­ lent, since opportunities for illegal payments are more readily available. Officials have been known to use inside information (along with public or company funds) to manipulate incipient Chinese stock exchanges. The government bond market cre­ ated in 1991 all but collapsed within one year because of rampant speculation by inept traders.

In mid-1993, the government announced the arrest of 100 of its own employees in Sichuan Prov­ ince for operating an illegal stock exchange. One of the latest political scandals was the dismissal of Chen Xitong, a member of the Politburo of the Communist Party (the most powerful core of China's ruling party leadership) for accepting kick­ backs from Hong Kong development interests.

And it is not uncommon for aid monies (col­ lected to benefit flood victims, for example) to be squandered on bureaucratic banquets.

An Evolving Legal System

China has voluminous regulations, but inter­ pretation and enforcement are arbitrary and often depend on the point that the authorities are trying to make at any given time. Traditionally, China has regulated its affairs by a combination of central decrees and local official discretion, rather than by

64 Passport CHINA

legislation and enforcement. Regulations are either too vague or overly specific, and sometimes even contradictory.

Moreover, China still lacks solid business, com­ mercial and securities laws, not to mention accounting standards. Civil laws are rudimentary and criminal laws are draconian" Although the Chi­ nese leadership has stated that it intends to reform the legal system and allow greater autonomy for attorneys and the judiciary, most lawyers continue to be government employees rather than indepen­ dent advocates.

Recent dramatic changes in China have brought into conflict the traditional desire for order and the Western-influenced desire for freedom from control. The next few years should see an increase in this tension, along with the establish­ ment of a more effective commercial and legal framework within which business can be con­ ducted with greater confidence.

--" - -----

<j�\ ___ _ ctfl;i.. Names & Greetings

The order of Chinese names is family name first, then given name. Thus, Zhang Wenqiang should be addressed as Mr. Zhang. Among some 440 family names, the 100 most common ones account for 90 percent of the total population. Brides in China do not adopt their husband's surnames.

Among Chinese, a popular way to address each other, regardless of gender, is to add an age­ related term of honor before the family name. These include: lao (honorable old one), xiao (honor­ able young one) or occasionally da (honorable mid­ dle-aged one).

Business

Unless you are good friends or have been asked to do otherwise, you should address your Chinese associates as Miss, Madam, Mr., or by their job title, followed by their family name (Doctor Li, for example). This form of address also applies to company directors, high-ranking officials and teachers. Rarely, if ever, do Chinese use first names on business occasions. And never call anyone "comrade," unless you are a communist also.

66 Passport CHINA

Common Chinese Business Titles

(In Government Agencies)

Chinese English Usual Typical

Translation Seniority Age Range

Buzhang Minister 40 years 60+

or more

Sizhang, Department 40 years 60+

(or) Director (or) or more

Chuzhang Section 25 years 45

Chief

Kezhang Office 15 years 35

Chief

(In Enterprises)

Chinese English Usual Typical Translation Seniority Age Range

Dongshizhang Chairman 40 years 60+

of the or more Board

Zongjingli President 40yearsor 60

more

Fu Zongjingli Vice 35 years 55

President

Bumenfingli Department 25 years 45

Manager

A title doesn't automatically indicate who is in charge. The person with the real power usually has "vice" or "deputy" in their title, while the top posi­ tion is often ceremonial. Communist Party officials usually have two business cards. To foreigners, they present themselves as businessmen, while to

Names & Greetings

-· · · -- - ---------

67

their countrymen they are, first and foremost, party members.

Chops

The custom of using name chops or seals - characters carved in relief on the bottom of a piece of stone - began during the early Chin Dynasty (about the second century B.c.) as a way of safeguarding government and military correspondence. Once a document had been sealed, a chop would be pressed into a dish of semi-solid red ink (known as "dragon's blood") and pressed on. Hand-carved, chops were almost impossible to forge.

Even today, danwei won't accept a document from another danwei without the latter's red chop print on it. Many well-to-do Chinese own several chops, in order to foil potential thieves - one to access a bank account, another for contracts. Chops are also used by artists to "sign" paintings and works of calligraphy.

They range from ancient imperial seals weigh­ ing several kilograms to small, personal stamps the size of a lipstick. Usually made of jade, marble or soapstone, chops often feature the carving of an animal from the Chinese zodiac at the top.

Shaking Hands

Unlike the Japanese, Chinese do not commonly bow as a form of greeting. Instead, a brief hand­ shake is usual. While meeting elders or senior offi­ cials, your handshake should be even more gentle and accompanied by a slight nod.

Sometimes, as an expression of warmth, a Chi­ nese will cover the normal handshake with his left hand. As a sign of respect, Chinese usually lower their eyes slightly when they meet others.

���'-----------c,tUJ--- Communication Styles

What's Left Unsaid

Many Westerners find themselves talking too much in China; they can't seem to tolerate silence as well as their Chinese counterparts. The Western concept of "brainstorming" in business meetings, for example, is unknown in China, where every­ thing that is said must be carefully considered in terms of its effect on others and on the consensus­ gathering process. Saying whatever comes to mind is considered immature.

Chinese communication is ambiguous, indirect and highly contextual. In conversation, the real

meaning, especially if it's negative, is often implied. What has not been said can be as important, or more important, than what has been.

Avoid Saying No

The Chinese use silence as a way to avoid saying "no." Silence also implies, "There are still problems, and we would like to reconsider the main issues."

Another way the Chinese avoid a negative response is to say, "Yanjiu yanjiu," meaning "We will do some research and discuss it later." Don't be

Communication Styles 69

too encouraged by the word "research." In many cases, it means "We're not interested." As a for­ eigner, you can best size up a situation by paying close attention to facial expressions, gestures and overall body language.

Questions

The Chinese standard of what is or is not per­ sonal differs from what's considered private infor­ mation in the West. They will ask directly about your age, your salary, your marital status, and about the price of your clothing, watch or camera. And they' re happy to answer such questions about themselves.

However, most Chinese do not openly discuss or ask questions about sexual matters or mores.

The Circuitous Route

One thing you can depend on is that much is accomplished indirectly. A market feasibility study, for example, must often be conducted by engaging Chinese colleagues who utilize their sources.

Until very recently, government agencies regarded virtually all business information (includ­ ing the size, history and annual revenue of a com­ pany) as state secrets to be kept from foreigners. Even if such information offered no possible threat, government employees would not risk being accused of the treason of releasing it. The only effec­ tive way of obtaining market information had been piece by piece.

Although much has changed, the fear of an unexpected reversal in the government's policies about cooperating with foreigners is not without justification. Giving indirect answers remains a form of self-protection.

28 Passport FRANCE

hili, Turkish, Portuguese and English among oth­ ers. And there are also regional patois - Breton (akin to Welsh) in Brittany, a German dialect in Alsace and Lorraine (only 85 percent of Alsatians speak French as their main language), Flemish in the northeast, Spanish, Catalan and Basque in the southwest, Proven�al (in which troubadours sang their romances in the 12th century) and an Italian dialect in Corsica and the southeast. About 21 per­ cent of all French claim to speak a regional lan­ guage well and another 14 percent fairly well. And not everyone speaks the same patois. In Brittany, for example, every village has its own particular dia­ lect, and the people think of themselves as being Bigoudens or Bidars, rather than Bretons.

Self-Determination

Of all the regional movements, the Basque and Corsicans have been the most vocal about demand­ ing autonomy. Over the years, terrorists in both regions have been successful in planting bombs. In 1983, the French government outlawed a separatist group, the Corsican National Liberation Front, which had claimed responsibility for 370 out of 800 terrorist incidents the year before. About one in ten Corsicans are autonomists.

C\� . .

�JGovernment & Business Traditionally, the role of the French govern­

�ent was to protect its industries and to promote its foods and wines overseas. At one point, the gov­ ernment even gave subsidies to owners of French cars, spouting a philosophy that one French comic summarized as "better inefficient and French than efficient and foreign." That protectionism is chang­ mg. Procedures have been streamlined and bureau­ cratic delays simplified. The European Union has made it harder for some other French habits to con­ tinue, as well: state subsidies and the overcharging of one state-owned company by another.

From Nationalization to Privatization

Three trends make this an auspicious period for �orei� in�es:ment !11 France: decentralization, grow­ mg pnvatization of mdustries that were once national­ ized and finally, France's participation in the European Uruon. The government is particularly eager to attract JOint ventures in the high-tech industry.

Over the past several decades, France has decentralized its government, which means that many decisions about granting permits for new

..J

30 Passport FRANCE

production plants are made at the local level, by the department, the city or the commune. Most other decisions (registering new corporations, for instance) are still made in Paris . Often, the local or regional chamber of commerce can act as an inter­ mediary or broker, taking the place of a more costly notaire (a lawyer-notary public whose rates are set by the government) or lawyer.

A large portion of French industry is national­ ized, and the government has been able to endorse several innovative ideas that turned into huge tech­ nological (and sometimes even commercial) suc­ cesses, including the TGV train, the airbus, the Concorde, and nuclear energy (France produces half of the E.U.'s nuclear energy).

But with growing privatization, France faces major changes. Many of the companies once owned by the state have inherited staffs t�at continue t? enjoy the job security - and sometimes, the tradi­ tional inefficiency - of public servants. In the past few years alone, the government has had to bail out five banks, an insurance company and Air France. Companies have also grown accustomed to the lux­ ury of leaving infrastructure projects and planning to the state.

As 1999 (the date for European economic and monetary union) approaches, there will be even more changes. In 1998, for instance, when Euro­ pean law opens all of Europe's telecommmunica­ tions monopolies to competition, France's giant government-owned telecommunications company will be open to private capital.

The Art of Pantoufler

Business and government are so cozy that the word for migrating from the public to the private sector is pantoufler (literally, "slipper").

Government & Business 31

It's not unusual for both Socialists and Conser­ vatives to move back and forth between the two in a "revolving door" scenario. In fact, it's taken for granted. Chambers of commerce play a quasi-gov­ ernmental role, and they sometimes even operate airports. There are lots of ex-ministers in French industry. Of France's 200 biggest companies, over 40 are headed by ex-public servants.

Regulated Retail

The government has clamped down on hyper­ markets, which are driving small shopkeepers (who can't compete with one-franc baguettes) out of busi­ ness. New laws have placed a moratorium on the opening of big stores (over 3,230 square feet) and pre­ vent others from selling goods at a loss. And stores that obtain discounts not noted on their invoices are forbidden to pass the savings onto customers.

According to one international study, deregu­ lated retail can create up to five jobs for every thou­ sand potential workers. In France, jobs are vanishing.

Fear of "Franglais"

No other country cares so much about preserv­ ing its language. An entire academy - l'Academie Frarn;aise - works nonstop to preserve the purity of French, excising any words that may have slipped in from other tongues. And as far back as 1966, committees were established to invent French neologisms to supercede such Anglo-American­ isms as "fast food" restaurants (restovites) and "brainstorming" (un remue-meninges ). Mitterand was once overheard complaining, "Must we give orders to our computers ... in English?"

The French are so wary, in fact, of what they see

,.J

32 Passport FRANCE

as the tyranny of English that, by law, all contracts with French companies must be written entirely in French - even if it increases the cost of the deal by 60 percent, as some have estimated. And in accor­ dance with a 1994 law dubbed "the Toubon Law" (after ex-culture minister Jacques Toubon), all ads, product labels, instructions, advertisements and public signs have to appear in French, (or appear translated into French next to other languages). Only trademarks are exempt.

The government, along with five independent organizations (such as Avenir de la Langue Frani;aise, Future of the French Language) are on the lookout for violators. Recently, the British cosmetics firm The Body Shop was fined US$200 (out of a possible $5000) for selling products with English-only labels, including a "no-frizz" hair treatment cream and "pineapple" facial cleanser.

As of January 1, 1996, radio stations are fined if they don't play at least 40 percent French music (and half of it new), and French TV is required to broadcast 60 percent European-made films, 40 per­ cent of which must be French. One leading private station was recently fined US$9 million for failing to comply.

Fewer Other Restraints

For companies used to navigating through myr­ iad laws and regulations, doing business in France may seem somewhat less restrictive. Pollution laws, which are relatively recent, are rarely enforced. There are no laws against expense account abuse or nepotism, for example. In addition, the French are not litigious. This is partly because lawyers are so expensive and partly because the loser has to pay all the costs of a lawsuit (and the French are adverse to taking such a risk).

�Ji The Work Environment

The most striking feature of a French office is its formality. The workplace is very hierarchical. Titles count. Executives rarely, if ever, go to lunch with their secretaries or their clerks, and in some companies, it's against the rules.

A Tightly Knit Elite

While intellectual accomplishments are highly respected (perhaps more so than in most corporate environments worldwide), what seems to count most in French business is one's blood. Seventy-five percent of the managers of the top 200 companies are the sons of wealthy, influential families - as compared with 25 percent in Germany and 10 per­ cent in the United States. And they all know each other.

Many of the top businessmen and engineers have been in government at one point in their careers. They probably attended the "right" lycee ( 6th grade through the second year of college) and then graduated from one of the country's top two grandes ecoles - the Ecole Nationale d'Administra­ tion (known as ENA) or the even more elitist Ecole

34 Passport FRANCE

Polytechnique (known as X) - where they were

groomed for leadership posts.

ENA graduates are nicknamed enarques. Their

ties are so strong that when they address each other,

they drop the formal vous for the more intimate tu.

The prestige of being part of a group that includes

prime ministers and presidents is enormous.

Being an X entitles you to walk beneath your

former classmates' crossed swords at your wed­

ding and to write on the invitations, ancien eleve de

['Ecole Polytechnique.

Security Above All Else

Historically, French industry has centered on

employment rather than profitability. People are

rarely fired, especially not after many years, or if their

fathers and grandfathers once worked for the same

company. "My secretary's husband left her for

another woman," says a young businessman. "I

would never fire her, even though she's a lousy secre­

tary. She's been here too many years and is supporting

too many children. It would be cruel and inhuman."

Until recently, students who graduated from

France's universities were practically guaranteed

good jobs. And many of those positions - as gov­

ernment lawyer, teacher or engineer - were for

life. However, all that has changed. In 1995, unem­

ployment suddenly jumped to twelve percent, and

it's even higher among those under the age of 25.

With job security being threatened, there's talk of

"national preference" - hiring and maintaining

native-born French people over immigrants.

Less Task Oriented

Because of the rigid hierarchy and lack of

mobility in many French corporations, workers on

The Work Environment 35

the lower echelons - be they government bureau­ crats or corporate secretaries - are less inclined to care about the tasks they're asked to perform. And they don't tend to be strong on teamwork. Execu­ tives often have secretaries who refuse to make cof­ fee or to work overtime to make a deadline. They find they have to cajole employees into taking per­ sonal pride in a project.

Managers tend not to delegate and not to keep employees beneath their level informed about deci­ sions. And they, too, are susceptible to a lack of motivation. In a survey by the Allensteig Institute cited in Polly Platt's French or Foe. managers in dif­ ferent European countries were asked how well they followed instructions from their bosses. The French scored lowest. However, when they under­ stood the rationale for the project and were con­ vinced that their input was valuable, they scored highest of all.

Not Defined by One's Job

A French person's work ethic is different from the one espoused by most Americans, Britons, Ger­ mans or Hong Kong Chinese, who tend to work nonstop and see money as an end in itself. An American may strive to be the first to produce a widget or to be the top salesman for his company in a given year. A Frenchman would find such ambi­ tions crass.

A French worker is more than the sum of his successes on the job, and he would be insulted if you implied that work defines him. While the power and prestige of his position may be enjoy­ able, and while he may take pride in it, he remains modest about his personal accomplishments and silent about the wealth he accumulates. He picks his colleagues more for their shared philosophy of

36 Passport FRANCE

life than for their business success. He works long hours only when he has to. His weekends usually remain sacred, reserved for his family.

Decision Making

Decisions are made at the top, not by consen­ sus. You'd think that things would move at a light­ ning-fast pace as a result, but that's not the case. The French fascination for details can make the decision-making process a slow one.

While little brainstorming takes place during meetings, there are, instead, time-consuming argu­ ments about issues that may not be central to the issue at hand - such as the rationale behind choos­ ing system A over system B. The debate usually focuses on a priori logical arguments, rather than on spontaneous or creative solutions.

In addition, caution is a French management staple. Managers in fairly large companies (as opposed to young entrepreneurs) tend to be suspi­ cious of risk and to distrust simple compromises or solutions. If it takes twelve meetings to define an issue, that's far more acceptable than rushing a decision in order to make a deadline. Managers are looking for full, sophisticated answers to their questions and believe that these take time.

Door Code

Most foreigners who walk into a French office are surprised by what they see: a hallway of doors, all of them shut out of habit. But the closed door has no real meaning in France. It implies neither privacy, security nor secrecy. A French secretary will simply knock on the door, open it and enter without waiting for her boss to ask her to come in.

$ Women in Business

Only One Woman in the Pantheon

France has its heroines - Jeanne D'Arc (Joan of Arc) and Marianne, the symbol of the French Revo­ lution - as well as several top female politicians (most recently, Simone Veil, Edith Cresson and Fran\oise Giroud). But societal equity has been slower in coming than most French feminists would like to admit.

In the 16th century, French women were con­ sidered chattel, classified along with children, luna­ tics and convicted criminals as having no legal rights. It's only since 1923 that women have even been allowed to open their own mail (as stipulated in an article of Napoleon's code civil). Suffrage didn't arrive until 1944; before that, even the three female ministers in socialist Leon's Blum's cabinet were forbidden to vote. And until 1965, no married woman was allowed to open her own bank account without her husband's written consent.

The prestigious Academie Fran\aise elected its first female member (novelist Marguerite Yource­ nar) in 1974, and women still only hold two Academie seats out of forty. Only one metro station (out of 454) is named for a woman - Louise

38 Passport FRANCE

Michel, an anarchist and teacher who took part in the Paris Commune and was subsequently deported to New Caledonia. And the only woman buried in the Pantheon, Sophie Berthelot, is there only because she happened to die at the same time as her husband Marcellin, who is buried there (he invented thermochemistry ).

Hesitant Feminists

Most women in France work. Their average salary is about 75 percent that of their male co­ workers, even though laws passed in 1972 require "professional equality" between the sexes. Women also hold the country's lowest-paying jobs, and two out of three earn minimum wage.

The good news is that women are increasingly moving into middle management. A handful are top executives. The higher their position, the harder it is to juggle family and career. A 38-year-old woman who graduated from ENA (the prestigious National School of Administration) remembers that when she took a senior post in a ministry, her male colleagues assured her, "You're one of us, one of the guys." But when she became a mother, they stuck ferociously to age-old traditions that she couldn't follow - long lunches and late-night meetings. "It was too much pressure and I felt like I was being sabotaged," she says.

For those who want to balance family with a job (as opposed to a high-pressure, high-visibility career), France is a haven. "Women don't define themselves by their career," says a wine executive. "It would be too narrow a definition." They marry later, on average, than in America - at age 25. And they stay in the work force. Part-time jobs are easy to find. Maternity benefits are generous, with over six months of paid leave. Women who've raised

Women in Business 39

three or more children are entitled to a state-funded pension. The quality of publicly funded education for children is high. And abortion is not only legal, but it's paid for by the state.

Perhaps, as a result of the state's mother-friend­ liness, there's little feminist militancy. One opinion poll showed that only one fifth of French women had an "aggressive desire" for change, while another two-fifths wanted it but were unwilling to help bring it about. The rest were content with the way things are. Not surprising. Simone de Beau­ voir's landmark feminist book, The Second Sex, sold more copies in the United States than it did in her native country.

Gallantry or Sexual Harassment?

French men still open doors for women (and are expected to), and they call older women Madame (because Mademoiselle would imply spin­ sterhood). They'll also stare at breasts, legs and der­ rieres, whistle at anyone vaguely resembling Brigitte Bardot, and trade sexual banter in the office. Many will make a pass at any new woman in the office ("I wouldn't want to offend her by imply­ ing she's too ugly for me," explains a middle-aged journalist).

French women take it in their stride. "We can flirt and know it will go nowhere," says a young businesswoman. In American businesses, she argues, there may be little flirting, but there's often a sexual tension in the air.

Until recently, no one lifted an eyebrow. But a law passed in 1992 pinpoints sexual harassment as a crime. If convicted, a man can face a fine of up to 100,000 francs (US$20,000) and up to one year in prison. But the law only applies to "hierarchical superiors," so if a male colleague harasses a co-

40 Passport FRANCE

worker, she has no grievance. "Nothing has really changed here," observes a 24-year-old public rela­ tions writer in Paris. "Nor should it. What's the big deal? A little flirtation. A little compliment. A little admiration."

Women Should Be Seen and Heard

In business, women who have clout dress ele­ gantly, argue intelligently and play hardball at the negotiating table. They know the men in the room admire their brains as well as their bodies. "Remember to take the time to smile at each com­ pliment," advises a female lawyer. "And then move on to your next point."

French businessmen like to poke fun at the "uniform" worn by most American female execu­ tives - namely, a dark, conservative, not-particu­ larly flattering suit, blouse and dark pumps, with no jewelry and little makeup. Frenchwomen see no need to abandon femininity and elegance in the business arena. They prefer soft colors, stylish clothes, silk scarfs, manicured nails, light makeup, and simple but elegant jewelry.

Walking to work in sneakers (with pumps in a handbag, even an elegant one) is a no-no in France. Sneakers or walking shoes are never worn in public, except when jogging, playing tennis or climbing mountains. Jogging suits are for jogging, not for strolling around the city on weekends.

Women should feel free to cajole and lobby for help or special consideration - but only in impec­ cable French. They should show their wit, intellect, ability to pun (the French love jeux de mots or word play) and understanding of politics, history and lit­ erature. Never be modest, passive or timid. These aren't perceived as admirable qualities in females of any stripe, businesswomen or otherwise.

$ Making Connections

Personal Relationships

The French trust each other if they've formed personal relationships, either through their families or through school. Family friendships often go back seven generations and include several intermar­ riages - so that, eventually, you have a scene out of the film "Cousin/ Cousine," with everyone related to everyone else.

In school, exams are difficult, and competition weeds out the less intellectually nimble. Strong bonds develop among the brightest, those who make it into the elite schools and later into top posts in the government and industry. When apply­ ing for a job, it doesn't hurt if your father served in the same World War II Resistance unit as your potential boss or went to ENA with him.

Few French tycoons are autodidactes ( self­ taught). Many of the elite have also studied abroad, earning MBAs at Harvard, Stanford or Columbia, and they tend to be more open to foreigners. A per­ sonal introductory note from a friend is always helpful. A shared passion - whether for Bizet or Coltrane, Voltaire or Camus, Apple computers or even Lhasa apsos - will pique a French person's

42 Passport FRANCE

curiosity and most likely lead to a lunch invitation. For many Westerners, developing a close rela­

tionship with a colleague is icing on the cake. But for the French, the long-term relationship is the cake. Keep in mind that the buzz phrase here is "relationship networking." If your host opens his photo album at the end of the last negotiating ses­ sion to show you a picture of his yacht or his trip to the Himalayas, you've probably got yourself a deal.

Close Encounters ....

Although the french are mefiants ( distrustful, wary) of foreigners, they let their guard down when on vacation - especially those who choose to travel outside of France. At Club Med in Morocco, for example, you might be invited to sit at a table with French executives and "bond." You may end up cor­ responding with each other and exchanging vaca­ tion photos. You may even discover that you've made new business connections in the process.

If you're a Freemason or a member of the Rotary Club in your own country, this can work to your advantage, in both the business and social realms. Find out the names of fellow members in the parts of France you'll be visiting and then con­ tact them, either through the mail or by e-mail. Attend a meeting of the local French chapter or club. You may end up having special access (such as being invited to people's homes) that would not have been possible otherwise.

Le Systeme D

The French have built a bureaucracy of compli­ cated and time-consuming procedures and regula­ tions that govern almost everything. The Defense d'Afficher notices are a good case in point- an 1881

Making Connections 43

law allows the government and property owners to put up notices prohibiting others from putting up notices on the walls.

To counter this sea of red tape, there's another French invention, le Systeme D. The "D" stands for debrouillard, which means being able to get out of a tight fix. Systeme D is an alternative code of con­ duct. For instance, people discovered quickly that the 1881 law never mentioned drainpipes. So that's where they started posting ads and notices.

People try hard to abridge procedures, avoid taxes, and bulldoze through pet projects. This is usually done by finding the right bureaucrat or company employee to bend, manipulate or ignore a rule that no longer serves the purpose for which it was written. A plea for the exceptional exception - le cas particulier - is made and usually granted. "Without the Systeme D," observes a 32-year-old architect, "life in France would be hell."

The Power of Penmanship

Who would ever imagine that a nation raised on Cartesian logic would be so impressed by hand­ writing? Yet companies have been known to con­ sult graphology experts before hiring or even interviewing a candidate. A young ad exec from Lyon found that agencies in Paris were lauding her as brilliant. "I soon discovered that my ads had not won them over," she laughs. "It was my handwrit­ ing - rounded, elegant and even. I phoned my mother that night to thank her for having me prac­ tice my ecriture all those years."

�IDs'. Strategies for Success

D From Walt Disney to Walt d'lsigny

The Euro Disney venture (1500 acres outside of Paris) is an excellent example of the importance of adapting one's business methodology to a particu­ lar culture. Opened to great fanfare in 1992, it took over three years to show a profit. This was due, in large part, to the shortsightedness of its American creators, who were convinced that what had worked for their theme parks in the U.S. and Tokyo would work just as well in Europe. Implicit was the belief that any cultural differences would be over­ come by the Disney Company's superior manage­ ment style.

But French employees hated the strict, 13-page dress code (a law suit was filed) and having to smile the "Disney smile" all day. European visitors wanted to sit down to leisurely lunches at about 12:30 P.M., not eat at arbitrary times or "graze" as

they walked around a l'americaine (like in America). They wanted wine or beer (both forbidden), less souvenirs, and one-night-only stays (projected guest spending was off by 12 percent). And they

resented the a l'americaine emphasis on glitz and size, rather than on having a unique experience.

Strategies for Success 45

Ten Golden Rules

1. Cultivate Relationships "I was really impatient with all his talk about

God and the universe," a German marketing exec says, recalling the first few meetings with his French counterpart. But by the second meeting, he had reread Teilhard de Chardin and could argue theology a little more intelligently. It wasn't until the fourth meeting that his French colleague even mentioned the joint project. You'll have to learn patience and to hone your debating skills. Don't be the one to bring up the deal first, but keep schedul­ ing the next meeting.

2. Do an Exhaustive Analysis Do your homework. Be prepared not only with

the facts and figures of the deal but also with the history of your French colleague's company, its organizational charts, any precedents to your ven­ ture, and logical arguments, both pro and con. The French will expect as much, even when it comes to minor details.

3. Pick the Right Partner The most important decision is to whom you

should address your initial request. Make sure it's the person who makes the decisions, not his less powerful (but titled) brother. It should be your direct counterpart in the French corporation. Check out alternative business partners while you're in France.

4. Time on Your Side Make sure you have large chunks of time to

devote to your new business contact, if things work out. The French hate to be rushed. They want to feel that you'll make time for them.

5. Beware of Boredom If your French counterpart suddenly stares into

46 Passport FRANCE

space or stops gesturing, you've reached a nadir in your talks. You may want to bring up a controver­ sial issue or give him a juicy piece of industry gos­ sip to liven things up.

6. Keep It Formal You'll probably use the formal vous (as

opposed to the more familial tu) forever. Remember to call him Monsieur X until he offers to call you Bob and asks you call him Herve - and even then, keep using vous. But don't count on achieving even that level of intimacy. Nor on taking off your jacket, loosening your tie or slumping in your chair.

Be aware that business hierarchies matter and that lower and higher levels don't mix. A foreign director of marketing for a high tech company made the faux pas of setting up a meeting with the junior product manager - the right person to help him out, but the wrong person in the company's hierarchy. Realizing his mistake, he then set up an earlier -meeting with someone at his level in the French company and sent his subordinate to meet with the junior manager. "We talked about our wine cellars," he recalls. "And they ironed out the details of the deal."

7. Avoid Casting Personal Blame One American executive might blurt out to

another, "You were 10,000 tons short on your ship­ ment, Charlie." But in addressing the same com­ plaint to a French colleague, he should say, "I think something is wrong here." Failure is taboo, and so is blame. Either find a way to make an indirect ref­ erence to the problem or ignore it.

8. Be Diplomatic Some of the shrewdest diplomats were French,

and they perfected the art of finesse. You may well encounter businessmen as skilled as Talleyrand in their persuasive arguments and in their strategies.

Strategies for Success 47

(Charles Maurice de Talleyrand-Perigord, a 19th century statesman, served Napoleon, Czar Alexander I, Louis XVIII and King Louis Philippe. And true Frenchman that he was, he used the per­ suasive power of his country's famous cuisine to help restore the French monarchy. During the Con­ gress of Vienna's peace settlement talks (1814), he began hosting embassy dinners four times a week that featured the culinary creations of Marie-Anto­ ine Careme - ris de veau Florentine, eggs with cray­ fish tails, elaborate sculptural confections and extraordinary sorbets. Talleyrand was soon presid­ ing over the Congress committees that had origi­ nally excluded him.

The collaboration between diplomat and chef lasted twelve years. Under the employ of the Rus­ sian czar Aleksandr I, Careme invented beef Stro­ ganov and Charlotte Russe - while, at the same time, sending secret information from the Russian palace back to Talleyrand.)

9. Leave Money Until Last Price is usually the most important consider­

ation in making deals. But not so for the French, who find it vulgar to bring up money too early in the negotiations. Although they'll want the upper hand in a deal, you can build in other benefits. "We do want to feel that we've outplayed you," offers a French lawyer. "But if we've established a relation­ ship, we also want to play with you again."

10. Relax Amidst the Storm The French will get emotional in the heat of the

debate. Be prepared for it and don't be afraid to argue, but try not to raise your voice. Your French colleagues will inevitably interrupt you. They may even turn bright red and gesture with their arms. "No better sign," says a German high tech manager. "It means they're deeply engaged and involved."

Time

Time Is Not Money

Time is a flexible concept in France. Things take longer than many foreigners expect. While Americans tend to think of time as something to be harnessed, compartmentalized or conquered, the French see it as more of a gift.

Meetings rarely begin on time, and they can be scheduled or cancelled without everyone ever being notified. So don't schedule only half an hour for clos­ ing your deal. Things move at a snail's (escargot's) pace. And executives always wait for the chef or PDG (president-directeur general) to arrive before beginning any discussion. Some businessmen walk in late without making excuses or even appearing apologetic. Others take great pains to apologize and charm you with long stories about the traffic jam or the state crisis that they were forced to handle.

Most people are on time for lunch, but at least half an hour late for dinner. Trains and planes run on schedule, but gynecologists and general practi­ tioners rarely do. Even the television broadcast schedule offers no guarantees.

In fact, the French habit of "polychronics" drives foreigners crazy. Executives almost seem to

Time 49

enjoy interruptions. They'll take a call from a wife or mistress in the middle of a presentation. They'll let a colleague walk in and join a one-on-one meet­ ing. "It's not considered rude," explains a French vintner. "You don't want to offend a colleague or a friend."

On the other hand, the American tendency to time everything is the butt of French jokes. "He probably also times his lovemaking," a French law­ yer says about an American colleague who times telephone consultations with clients.

The Meeting as Group Therapy

A meeting is more of a free-for-all than it is in the United States or elsewhere. It can take a half dozen of them to define an issue. The agenda is usually free­ flowing, with several discussions going on at once and no time limit set for agenda items. People inter­ rupt each other. It is an opportunity to exchange ideas and poll opinions. Much of the discussion may strike a foreigner as irrelevant to the issue at hand. And even if a formal decision is reached, no one may be charged with implementing it.

"We like to give everyone an opportunity to give their input on a proposal," says a high tech marketing exec, "in order to be thorough and thoughtful. Americans always want to rush every­ thing. We would rather take our time and create the perfect product."

Mercurial Deadlines

The French don't view deadlines as sacrosanct. If you do, be sure to write it into the contract - in French - and make sure that everyone signs. That, however, won't be enough. You must also keep checking on people. Make it clear that the deadline

50 Passport FRANCE

is a date butoir (critical deadline) and not a date cible

(general target date). Even if the contract is signed and the deadline

specified, the French may not meet it. They will usually produce the goods, but not necessarily on schedule. One reason is that efficiency is not a highly prized employee characteristic (loyalty is preferable). The other reason is that there is no fear of retribution or of lawsuits. French business pro­ ceeds at a gentleman's pace, and taking one's time is equated with prudence. And since most deals are hatched among friends, no friendship is worth spoiling over a missed deadline. The French are for­ giving and expect you to be the same.

@ Business Meetings

Phone Phobia versus Cell Mania

Your first contact with a French colleague may well be on the telephone. And that's unfortunate, because some French business people don't trust phones. They find them intrusive. They prefer meet­ ing eyeball-to-eyeball, especially before committing to even a brief business meeting. Don't expect warmth. Most people sound awkward and rushed (they may also have been raised in an era when telephones were a luxury and calls were more expensive). "I guess we don't visualize the person we're talking to," says a middle-aged entrepreneur. "The telephone is just another tool - and often a nuisance, when it inter­ rupts us when we're deep in thought." Many people use the telephone only to complain. It's less awkward than complaining in person.

Then, of course, as elsewhere, there are the cell phone maniacs. They talk in their cars, on the bou­ levards, even in the cafes. They prefer to make the calls, not to receive them. A young transportation executive uses his cell phone at dinner to check on employees working overtime. But his answering machine is also on, so that he can monitor incoming calls. "I just hate being disturbed," he admits.

52 Passport FRANCE

To be on the safe side, your first contact should be a letter (or even a fax) of introduction by a mutual friend or colleague, or a formal, elegant let­ ter (or fax) introducing yourself. The way you write your letter may carry more weight than its content. Your turn-of-phrase, and even your handwriting style, will be seen a reflection of your background and character. Your letter should be written in impeccable formal French. You can briefly outline your experience and background, but make an effort not to appear boastful. Never exaggerate the importance of your proposal. Try to address the let­ ter or fax to the person most likely to carry out the deal -- the person you've identified as having piston

(the ability to further your career through helpful connections or mentors).

ASAP? How Lin-French

Write your first letter months before your arrival, if possible. The French don't like to be rushed, especially by strangers. Nor do they answer letters and faxes immediately, if at all. They consider an immediate reply, and any pressure for one, to be vulgaire ("common"). As one executive puts it, "Exchanging letters and faxes is like a good conversation. It should flow, but there should be many pauses as well." You may want to write a fol­ low-up letter a few weeks later. If you haven't received a reply, you may want to write a third let­ ter near the time of your departure, mentioning the dates you'll be in France and requesting une rencon­

tre (a meeting) - which should be one-on-one. If others on your team have to get involved, that should be done later, after personal contact has been established and solidified.

But then, even if a meeting is set, it won't nec­ essarily take place. Before your host feels some

Business Meetings 53

kind of a personal commitment to you, he'll feel free to cancel your appointment if other pressing business comes up.

The First Meeting

When your first meeting is held, your French host will not necessarily go to great pains to make you feel comfortable. He may appear rushed and busy. He wants to feel superior, in a position of power. You're the supplicant - even if you feel that he should be salivating for your revolutionary product.

He's feeling you out - not on the business deal and not even on your character, honesty or efficiency. He wants to know if you' re someone he wants to do business with over time, someone with whom he wishes to develop a social relationship. Do the two of you share a philosophy of life? Do you have similar backgrounds and education? Are you well connected in your country?

You can prepare for this meeting by research­ ing your French colleague's company's history (as opposed to its net profits). You may flatter your French colleague by talking about his vision and the durability of his enterprise. The more you learn about his industry and his struggle to build a humane (though profitable) workplace, the closer you are to understanding him.

If you're fluent enough in French to conduct the meeting in it, you're at a big advantage. If you need an interpreter, it will make it harder to develop any kind of bond. "It's a barrier," notes a French commercial advisor. "The initial contact is not as good when a third party is involved." The French need to feel a sense of contact and a physical closeness, which an interpreter can destroy.

If you do need an interpreter, make your intro­ ductory comments in French. Look at your French

54 Passport FRANCE

counterpart throughout the discussions. And don't take notes. This is an intimate chat, at best.

Diplomas and Name-Dropping

The French are impressed by doctorate degrees and important social contacts, so it doesn't hurt to mention your Harvard MBA or your speeches at a national convention in Washington. But it should be done subtly. For instance, "When I was on a panel with ___ (president of Apple)." Or, "As a member of the board of alumni of Harvard, I .... " If you' re name dropping, remember to use given names or nicknames, to show that you really know the people.

Most of the conversation will center around politics, philosophy, history and literature - a kind of cultural quiz to identify where you stand intel­ lectually and whether you are someone he would like to get to know better over lunch. Try to refrain from quoting de Tocqueville (a 19th century French statesman who wrote insightfully about America). One French executive says that every American he meets does so to impress him.

Don't ask personal questions, and never men­ tion your wife or children. "If he wants to find out about your family, he'll probably find out through the grapevine," observes a French businesswoman. An American who has a fairly close business rela­ tionship with a French government official recalls that the first time the Frenchman mentioned his wife was during their seventh lunch date. "Oh, my wife says I eat too much," the Frenchman said and went into no further detail. The American knew better than to pry.

Business Meetings 55

No Pressure

If the first meeting is long, you' re fortunate. If it turns into an invitation to join your French col­ league for lunch, you have struck gold. But don't count on it.

Either your colleague will be interrupted by a phone call from his secretary or he'll look at his watch to signal the end of the meeting. The best way for you to conclude is with a phrase such as, "When I have the honor to have your answer." Don't appear to be in a hurry for his reply. Do thank him for his kindness. Follow up with a formally written thank you letter. (Dozens of books exist on how to write in French to everyone from a niece to a corporate executive. In each case, the degree of politeness and formality varies.) Then follow up that letter with a request for a second rencontre.

f � Negotiating with the French

u L/

Negotiation in France is an art not unlike cui­

sine and couture. (See Talleyrand, page 46). Negoti­

ation is treated like a verbal duel (something the

French excel at), and they prefer that proposals

build up slowly, so that each of its building blocks

can be analyzed and digested. Be prepared for long,

drawn-out debates. The French won't allow anyone

to bully them, con them or use "hard sell" tech­

niques. Often the negotiations are like a roller

coaster ride of emotions. Often, they' re embellished

with historical or literary allusions. And the French

would often rather argue the pros and cons of an

issue face-to-face than read a prepared summary

that states the same points. Indeed, foreigners may

find it wearing, even never-ending. But remember: Even if the discussions become

heated, your manners and your body language should

remain conservative. Never resort to outbursts.

Tipped Chairs and Other Persuasions

It's best to have your facts organized into posi­

tive and negative reasons for the deal. Rationalize

the negative away in terms of the benefits that out-

Negotiating with the French 57

weigh them. Don't try to downplay or sweep aside any problems. An accomplished rhetorical style, however, will win you points.

The French like to have the upper hand. "He doesn't really want you to feel comfortable," observes a French wine exec. You may be kept wait­ ing - either because your proposal isn't being well received, or just as a means of getting a negotiating edge." Pre-arranging for a secretary to interrupt a meeting is more common in France than in the U.S. The French may also set up appointments and not honor them, or they may bring along other people and conduct other business during your time slot.

A Parisian editor has a special seat for the writer he's negotiating with. The front legs of the chair are shorter, so that the writer is always in an awkward position, slipping forward in his seat. "They feel too awkward to ask for a better deal," he says.

Tips For Foreign Negotiators

Various tactics will help you in dealing with the French.

• Be Totally Prepared Your French counterpart will be well prepared

and ready to argue every point. (However, he may not have planned much in the way of fallback posi­ tions.) Your analysis should be thorough and your presentation clear and concise.

• Mention You've Looked Elsewhere Subtlety is important here. But feel free to

politely mention that you've spoken with competi­ tors about cost options. Or you can mention that there are people in the market who provide services beyond what your counterpart is offering.

• Never Take Notes If you' re the vice president or director, you

58 Passport FRANCE

shouldn't be the one taking notes. That task is best left to subordinates. If it's a one-on-one meeting, confirm the terms of agreement afterward and arrange to have your staff ( or your lawyers) iron out the details. Problems often arise, and you'll probably have to meet again to resolve them.

• Try Flattery By your appreciative look, you can let him know

that you appreciate his taste in clothes or the decor of his conference room. Compliment him on his efforts to create a humane work environment (sponsoring a company tennis court or gym, hiring the children of employees, etc.) Most business leaders want to be known as having companies in which employees' families stay for generations. Do your homework, so that you can be specific. (You can be sure that he's done his homework about your background.)

• Be Tactful. Though the French like to argue and debate,

they dislike being rigorously questioned, and criti­ cism of a proposal may be taken as a criticism of the person responsible for drafting it.

The French Approach to Contracts

Even though a handshake between two execu­ tives signals a deal, it's not the final word. Funny things happen on the way to the written contract.

In one case, after two directors shook hands on a deal, the Americans wanted a 4-page contract and the French an 86-page contract. They ended up with a 12-page document, but, the American bit­ terly points out, it took six months to work it out.

And while, in some cases, the French may abide by a contract only as long as it suits them, a foreigner may be held to it, word for word.

if /451 Business Outside the Law

D Underground Economy

From the moment you step off the curb outside of Charles De Gaulle or Orly airports, you'll see the US$250 billion underground economy at work. There will be taxi drivers trying to persuade you to hire them - without turning on the meter. On the streets, you can buy everything from Seiko watches to windup birds. Many shopkeepers will cut deals if you pay them in American dollars. And gypsy children (often from Eastern Europe) are extremely adept at removing wallets without offering any­ thing in return.

Across the border, in Italian towns like San Remo, you'll find French designer bags, wallets, ties and scarves -- "seconds" produced in Italy and for sale at a fraction of their retail price. The government has vowed to search cars crossing back into France in order to confiscate these bargains (Louis Vuitton, etc.), but the border patrols are fairly lax.

Drugs, Illegal and Otherwise

Marseille has been a drug port of entry ( opium, heroin, cocaine) for centuries. The guns of Fort St.

60 Passport FRANCE

Nicholas (built by Louis XIV) face inland, not out to sea. Today, drug use is on the rise, although no more so than in other Western countries.

But more surprising is the increase in the use of legal, prescription drugs. More than 400,000 French people take Prozac, and 2 million more take other psychotropic drugs. Tobacco consumption has tre­ bled in the last 30 years. And as can best be esti­ mated, almost half the teenagers in urban areas have smoked marijuana.

Graft and Corruption

France has had more than its share of political scandals - ranging from rake-offs from public con­ tracts to fraud and influence-peddling. While cor­ ruption has always been a part of French politics, its breadth, and the amounts involved, have risen sharply over the past 10 years. According to The Economist, the reasons for this shift are the higher costs of election campaigns and government decen­ tralization (which increases the power of regional decision makers and therefore the opportunities for payoffs). The good news is that this shift seems to be "a French thing" that doesn't affect foreigners.

In 1995, a French tycoon was tried for spending US$6 million to buy influence. The press said he con­ ducted his business a l' americaine, where "money is easy, the law doesn't count and politicians can be marketed like bars of soaps or cans of peas."

Prime minister Juppe authorized subsidized housing (domaine prive) for his son, his daughter, his ex-wife, his half-brother and himself. (The latter apartment, on the lovely Rue Jacob, featured a gar­ den and a terrace. He was subsequently forced to move.) Soccer matches were rigged by a business­ man. Water concessions in Grenoble were granted only after the mayor received US$4 million in gifts

Business Outside the Law 61

and favors. The mayor of Nice was in prison for pocketing millions in the name of a bogus opera association. His method for running the city included cooperating with organized crime. "You can't run Nice without the gangsters," another former mayor once said, "but you never give them a lift in your car."

Although there is a crackdown on corruption underway, the public is not too concerned. There is a tradition of corruption and a tradition of tolerat­ ing it. As one French commentator puts it, "In France, fiddles, great and small make people smile. What in the United States would send a politician into long-term retirement, here remains lackluster, almost insignificant." Tax fraud and tax evasion are rampant, and many deals are hatched for that express purpose. As one French businessman puts it, "Sometimes an invoice is not necessary. You understand?"

Sex and Prostitution

Prostitution was legal in France until 1946 (not coincidentally, two years after women won the right to vote). Today, it's rampant, and sometimes pricey. It ranges from erotic peep shows to intimate all-night clubs de rencontres. Some of the weirdest sex can be found in the Bois de Boulogne, the woods on the western edge of Paris where low class belles de nuits, young boys, transvestites and even housewives trying to make some extra pocket money congregate.

Rue St. Denis is a popular red-light district, and sexual favors can always be purchased near train stations and next to Les Halles. In Paris alone, there are some 20,000 full-time and 60,000 part-time pros­ titutes. The rates range from US$20 a throw (plus hotel room) to US$500 and up for fancier call-girls.

""---•--------------------------------------------

L

�;...._Na_m_e_s_&_G_re_e_tin_g_s __ \_J

The French trust their instincts about people.

As a result, first impressions count. To make a good

first impression, a foreigner should respect tradi­

tions and pay attention to cues. There should

always be a brief visual exchange - but not a smile

- in addition to the traditional handshake, when

you first meet someone.

Tu versus Vous

Foreigners always worry about whether to use

the formal vous or the familiar tu when addressing

French friends and colleagues. The former is

always polite and safe. A 42-year-old teacher says

he still calls his aging father vous, even though he

helps him with his personal care. "Tu," he laughs

"is only for kids and dogs." But that's the old

school. In the advertising, journalism, theater and

cinema professions, people call each other tu, even

when they don't know each other particularly well,

and those who don't are seen as snobs. In banks

and business, however, the atmosphere remains

formal. To be polite, always address your secretary

or your interpreter as vous.

Names & Greetings 63

One executive says that when his boss addresses him as tu, it's usually the prologue to a request to work overtime. "You can demand more of a person you call 'tu'," he points out.

Vous I tu is like a boundary or a border. Once you start calling someone tu, even by accident, you're stuck with it. Changing back to vous would be considered insulting.

Order, Initials & Gender

French business people usually write their first names in full, followed by their family name. Some­ times, however, they write their family name first, in capital letters, for example: DURAND, Claude. With a double first name (which is quite common), they sometimes use two initials. For instance the philosopher /writer Sartre's first name, Jean-Paul, might be J.P. Marie-Claude would be M.C.

Women and men sometimes share the same first names, with the letter "e" added at the end to indicate which are feminine - for instance, Pascal/ Pascale, Paul/Paule or Rene/Renee. From time to time, it's been fashionable to give boys' names to girls - such as Georges, Dominique or Claude. And the name Marie (as in Jean-Marie) may be given to a boy.

It's safest to address women as Madame, although young, unmarried women prefer to be called Mademoiselle. Women should be addressed by their surnames, as in Bonjour, Madame Dupont or Bonsoir, Mademoiselle Renaud.

A Nation of Titles

The French like titles, and many exist in the corporate hierarchy. The chief executive of a corpo­ ration is President-Directeur General (PDG). An

64 Passport FRANCE

Administrateur is a senior officer. Each department is headed by a Directeur-General. The department is then divided into "Directions" (headed by a direct­ eur) and then subdivided into "divisions," then into "services" and finally into "sections" - headed by a chef de division, a chef de service and a chef de section respectively.

In family names, a de or d' indicates nobility (or a desire for it). Academic titles (Ph.D., for example) aren't usually used.

Whole Lot of Shakin' Going On

The French shake hands both on meeting someone and on leaving a room. They do so with everyone they meet during the course of the day. On arriving at work, each employee shakes hands with everyone there - this ritual alone often takes half an hour. In an office of 20 people, that's 400 handshakes every morning and another 400 each evening.

Handshaking shows respect and personal rec­ ognition. And it's always accompanied by a per­ sonal greeting (Bonjour, Monsieur Leconte). Children are taught to shake hands before they learn how to walk. The handshake is a light grip and a single quick shake. As a general rule, women who wish to shake hands extend their hand first.

Faire la Bise

Good friends and family members greet and depart with a double cheek kiss. One usually starts with the right cheek. A triple kiss - and in some provinces, a quadruple kiss - is an even greater show of affection.

Some foreigners have reduced the intimacy of the kissing ritual by "kissing air" instead of touch-

Names & Greetings 65

ing lips to cheek. Women who don't really like one another, but who feel obliged to engage in the rit­ ual, also kiss air.

The Business Card Exchange

Handshakes are often followed by an exchange of business cards. They tend to be larger in format than American ones (probably because French paper currency, and therefore wallets, are bigger). Make sure that your cards have the proper tele­ phone codes so that your French colleague or friend can reach you.

When accepting a card, take a few moments to read it before tucking it into your wallet. It shows interest and respect.

Bataille de la Porte

Social standing becomes apparent when every­ one heads out of the room or into the elevator. It's called the bataille de la porte (battle of the doorway). The doorway is not a first-come, first-serve situa­ tion. Rather, it's a test of savoir faire and etiquette. In France, you must pay attention to the rank and gen­ der of those heading out the door with you. Women may go first. Junior executives let their seniors pass ahead of them. If your rank is superior, by all means, go through the doorway first.

Crazy. Enchante. Whal can I do?

�& Communication· Styles D

Conversation Starters

The French can be reserved and formal, espe­

cially when meeting new people. But they love to

discuss art and literature, cinema and cuisine,

music and history. Ask about the St. Germain

team's soccer exploits. Let them extol their favorite

restaurant or wine. They'll be curious about your

impressions as a tourist (so think about something

clever to say about the newest exhibit at the Lou­

vre), as well as about your academic background

and interests. Remember that repartee and nuance

are much admired, and that being well-read is con­

sidered a sign of intelligence. Certain topics may make your French host or

potential business partner uncomfortable:

• Personal questions. American executives love

to talk about their families and to ask about

other people's. In France, that's considered an

invasion of privacy. Wait for your host to bring

it up. However, you could talk about your

Golden Retriever. • Age & salary. It's impolite to ask someone's

age or how much they earn. It's also consid-

Communication Styles 67

ered crass to talk about how much money you or your company makes.

• Boasting. Avoid going on about your personal or professional accomplishments (or risk being seen as immature). If asked, try to sound modest.

• Politics, religion, etc. Remarks about how you voted, what faith you subscribe to, divorce or psychiatry may be considered too personal, and therefore offensive.

• The pace. Keep the conversation moving from topic to topic. It should be like a ping pong game. You make a remark, then the next person adds their bons mots. Expect your host to inter­ rupt you. And don't be offended if someone debates you on an issue.

• Humor. Don't tell racial, scatological or sexual jokes, but try to be witty, when it's appropriate. Keep in mind that humor doesn't translate well between cultures or languages.

• The war. Avoid talking about World War II, and don't ask what the French did during the Occupation, unless your host or business asso­ ciate brings it up. (Many people, including some who went on to hold powerful govern­ ment positions, collaborated with the Nazis. No one wishes to admit it.)

Nonverbal Communication

In France, appearances count. How you look in public affects your status. The French are aware of their bodies at all times. Both men and women sit with their legs crossed at the knees. They stand up straight, with arms at their sides and feet together.

Public displays of affection are common. Peo­ ple seem to need less space between them than some Westerners do. For instance, when you xerox

· -

68 Passport FRANCE

a document, co-workers will lean over and watch closely, almost touching you and often curiously staring at your work.

Guidelines

The best way to be considered bien eleve (well bred) is to observe French body language and mimic it. • Be physical

Remember, your initial daily contact with your host or business colleagues will be to shake hands, and if there are women and children, faire la bise (kiss on both cheeks). Shake the hand of every new person you meet. . In business meetings, lean over when making a point. Look your colleague or host in the eye. • Stay Close

Britons, Americans and Germans stand 18 to 24 inches apart in formal situations. The French stand closer -- at a distance of 12 inches or less. When standing in line at the post office or at a bar, the French practically bump each other. They look over each other's shoulders and no one seems offended. • Don't Smile, Unless They Do

The French are not big on smiling. They find it childish and phony. They prefer to offer an empty stare. If you smile at a French man, he'll think you' re either poking fun at �im, that you' r� hypo­ critical, or that you're stupid. If you smile at a French woman, you are flirting with her. • Speak Softly

The French people have been taught to modu­ late their voices in public. Raising one's voice is considered mal eleve ( of poor breeding) for two rea­ sons: because it might disturb others and because you might be overheard. In business meetings,

Communication Styles 69

speak clearly and loudly enough to be heard by all. But never resort to shouting, even in the heat of an argument. • Don't Point

Pointing is considered rude. To indicate some­ one or something, use your entire hand, with the palm open. • Keep the Conversation Moving

In business as well as at dinner parties, the con­ versation should sizzle. The debate should move along, with each person in the room participating. You should neither be.passive nor deliver a mono­ logue. Plan what you'll say, so that your remarks are concise and cogent. Be witty. (It's not enough to have wit, goes one old French proverb. You must know how to use it wittily.) And don't overstate your case. • Posture Counts

Never look too relaxed. Always look in control of your body and your emotions. It's been said that traditional French chairs were made to be uncom­ fortable so that people would hold themselves up straight in them. Slouching or putting your feet up on a desk are considered impolite. During a meet­ ing or dinner, never rest your elbows on the table. • Be Aware of Protocol

Watch for subtle signs of hierarchy among your colleagues. The person in charge of making deci­ sions will listen to all opinions and talk about reaching some compromise. Avoid trying to appeal directly to the boss (unless you share his level of authority). Remember that you're the outsider.

$ Government & Business

Consensus Politics in Action

After World War II, the German economy was in a shambles and dependent on Allied aid. In 1948, Economics Minister (and later Chancellor) Ludwig Erhard launched the Soziale Marktwirtschaft, a bold plan that abolished the rationing of essential goods, removed price and wage controls (introduced by the Nazis and kept in force by the Allied Occupying Powers), reformed the currency, and slashed tariffs on imported goods, thereby slowing down inflation and forcing German manufacturers to be more competitive.

As devised by Erhard, the system combines the principles of a free-market economy with an elabo­ rate social security program (health insurance, free medical care, and unemployment and old age bene­ fits). An income tax schedule that bears down heavily on all classes of society keeps prices in bal­ ance, but at the same time creates tax incentives that boost productivity.

. The interests of business, government and soci­

ety, as well as of management and labor, are �re­ sumed to be the same. This culture of cooperation

Government & Business 29

(or Mitbestimmungsrecht) is designed to avoid the recurrent union confrontations that have plagued market economies in other Western countries. Workers are brought into the decision-making pro­ cess in German corporations, and union representa­ tives into the boardroom to run those corporations. In the health system, for example, German doctors and insurers quietly agree to reasonable rates, keeping customer costs relatively in check.

There's general agreement that German com­ petitiveness is being undermined by the astronomi­ cal cost of labor and that any solution to the country's current economic ills must include reform of the welfare state. But despite much dis­ cussion, there's still no consensus on how to go about rectifying things. The federal government, unused to confrontation, seems to lack the political will to take the bull by the horns. The Social Demo­ crat opposition and the unions, meanwhile, are insisting that any reforms be "socially just." So while a deal will probably be made eventually, the road to it is going to be difficult.

Help for Exporters

The closeness of government and business is best seen in the export field. As domestic demand and investment slowed down in the 1980s, German manufacturers stepped up exports and the Federal government backed them all the way. Government support takes the form of credit guarantees through Hermes Gmbh., the German export credit bank. In high-risk markets, German manufacturers and con­ tractors can receive up to 100 percent government guarantees - giving them a distinct competitive edge over other foreign exporters who often have to seek financing in private sector banking.

30 Passport GERMANY

The country's specialization in investment goods such as cars, machinery and industrial equipment allowed it to profit considerably from the world economic buoyancy of the second half of the 1980s. In recent years, high prices have eroded Germany's position as the world's number one exporter, but per capita, Germany still sells four times as much abroad as the U.S. and more than twice as much as Japan.

Rabattgesetz

Domestically, Germany's free-market econ­ omy is limited by such higher considerations as "fairness" and the sacrosanctity of weekends and evenings. Retail competition is regulated by Rabatt­ gesetz, a federal law that requires stores in the same area to coordinate price reductions, so that sales people don't become involved in anything as undignified as a sales war and consumers don't waste their time shopping around for the best buys. The Center for the Combatting of Unfair Competi­ tion forbids advertisers to make direct comparisons with competitors or to offer anything as "free."

Rabattgesetz also puts strict limitations on shop­ ping hours. Stores are not allowed to stay open after 6:30 P .M. on weekdays or after noon on Satur­ days. There's also some fear that any move toward American-style, 24-hour, seven-days-a-week shop­ ping may disrupt family activities and ultimately erode family values. This system is particularly hard on working women and single/ divorced men, who have no choice but to shop before they go to work, during their lunch breaks, or on Saturday mornings.

Efforts to expand shopping hours ( encouraged by the presence of such foreign retailers as Block­ buster Video, Gap, Inc. and Toys "R" Us) have met

Government & Business 31

with sharp resistance from retail workers' unions, as well as from small retail outlets, who argue that hiring shift workers isn't practical.

A Welter of Regulations

As Germany is a member of the European Union, protective tariffs against the importation of foreign goods aren't allowed. Still, tough German regulations controlling domestic production keep many would-be foreign imports off the shelves. Products must conform to any of the more than 40,000 regulations and standards governing their manufacture and content, as well as to more than 25,000 other "norms" compiled by DIN, the national standards agency.

It's important to know, going in, which stan­ dards apply to your product and to obtain timely testing and certification. The organization respons­ ible for testing technical or mechanical products and issuing the necessary certificate is the Technis­ cher iiberwachungsverein e. V (TOV). TOVs are pri­ vate companies set up by each state; many have offices in other European countries and in the United States, and there's one in Japan.

While the welter of regulations may be dis­ couraging, it's not impenetrable, says Leo Welt, head of the Washington-based German-American Business Council. "If you want to be in Germany, you work your way through them," he says. "It takes time because they cover many important areas. For instance, there are a lot of safety regula­ tions." The presence of many American and other foreign manufacturers shows that it's possible to establish a foothold in Europe's biggest single national market. Procter & Gamble, a longtime presence in the Federal Republic, did more than US$3 billion worth of business in Germany in 1996.

32 Passport GERMANY

Other firmly established U.S. companies include Kraft Foods, General Motors and Avis. A marketing expert in Frankfurt singled out the launch of Milky Way candy bars by the Mars Company as a success­ ful campaign by a foreign manufacturer to sell in Germany. Germany is also an important market for U.S. horticultural products. In 1993, American exports of citrus, raisins, prunes, almonds, etc. reached $300 million.

CDLJ, SPD, CSLJ & The Greens

Since the 1950s, the pendulum of political power in West Germany has swung between two major parties, Konrad Adenauer's (and now Hel­ mut Kohl's) Christian Democratic Union (CDU) and the Social Democratic Party (SPD) of Willy Brandt and Helmut Schmidt. But Germany's com­ plex proportional electoral system - which favors small parties - consistently robbed both major political groups of an absolute majority, thereby turning two smaller parties into minor, but indis­ pensable, coalition partners.

The Bavarian right-wing Christian Social Union (CSU), the CDU's traditional parliamentary ally, was led by Franz Josef Strauss, a flamboyant, saber-rat­ tling, anti-Soviet rhetorician who wore Bavarian led­ erhosen (leather shorts) and whose favorite term for the SPD was "a party of traitors." The SPD relied on support from the liberal Free Democrats, whose leading political light was Hans Dietrich Genscher, Germany's longtime foreign minister. European­ style German liberals favor business and a free mar­ ket. In 1982, however, the liberals switched their sup­ port to the Christian Democrats. (This had little impact on business, as the system functioned regard­ less of the party in power.)

The 1980s also saw the emergence of die Grunen

Government & Business 33

(The Greens), a group committed to protecting the environment, nuclear disarmament, dropping out of NATO, and slashing defense spending. The Greens lured away young Social Democrats and were a major factor in the SPD' s 1982 election defeat and Kohl's success. The Greens' politics struck a chord with the traditional German love of nature; as a result, German manufacturers became more ecologi­ cally conscious and recycling became a national con­ cern - more so than in most European countries. The Greens leading figure was Petra Kelly, the daughter of a German mother and an American father. (In 1992, she died in what appeared to be a double suicide pact with her lover, a retired German general.) Other parties quickly jumped on the envi­ ronmental bandwagon, and the Greens remain a minority group. At one extreme of the political spec­ trum is the now virtually inexistent German Com­ munist Party (the KPD); at the other are right-wing groups with neo-Nazi overtones.

After reunification, West Germany's national parties (the CDU, the SPD and the liberal FDP) filled the power vacuum left by the demise of the East Germany's communist regime, and the politi­ cal structure in the larger context remained essen­ tially unchanged.

Business and the unions exert influence on the federal government, as do the regional administra­ tions (Lander) through hundreds of registered lobby­ ists. However, the traditional corporate ploy of winning favors through campaign contributions is largely a thing of the past. A decade ago, a major scandal - in which leading German corporations received massive tax breaks in return for illicit pay­ ments to the main parties - scared corporations into cutting back their donations. As a result, political parties now rely largely on government funding.

34 Passport GERMANY

"Guest Workers"

vs. "Foreign Fellow Citizens"

During the Wirtschaftswunder years (Germany's economic recovery in the 1950s ), jobs were offered to workers from less affluent European countries. Ital­ ians, Yugoslavs, Portuguese and Turks who came flooding in were called Gastarbeiter (guest workers); successive German governments saw them as a tem­ porary workforce to meet the country's labor needs of the moment, rather than as immigrants. Many took over jobs that Germans wouldn't do (street cleaning, garbage collecting, janitoring) or found work in factories. All were better off financially than they would have been at home.

Though the economic boom is a thing of the past here, the foreigners keep coming: Aussiedler ( outsettlers ), Russians whose German ancestors emigrated to Russia 200 years ago; any Russian Jews who request entry; refugees from the Balkan war; and, until 1993, a goodly number of asylum­ seekers from the Third World. Those who can't find work often sign up for government aid. According to The Economist, these many thousands lessen the nation's already suffering coffers by DM3 billion (US$2 billion) annually.

When Germany's economy slowed down, the German government introduced incentive schemes designed to tempt Gastarbeiter into return­ ing to their respective countries. Six million of them, mostly Turks, opted to stay put.

Many have lived in Germany for more than 30 years, and their children often speak German exclu­ sively. Neither the Germans nor the Turks them­ selves are doing much to integrate what amounts to a sizeable ethnic minority living in virtual ghettos, with their own schools, churches, shops and restau­ rants. They're now officially referred to as "foreign

Government & Business 35

fellow citizens," but few qualify for citizenship. Those who do remain isolated on the margin of society, and few of them exercise their right to vote in German elections. There are no Turkish parlia­ mentarians in the Bundestag to speak on their behalf, and no Turkish TV newscasters to remind the general populace of their presence.

While the intermittent attacks on Turks or Turkish property by right-wing "skinheads" are condemned by the leading political parties, the continued presence of these now-unwanted "guests" remains an increasingly contentious issue. The pressure on the Turks has increased since reunification. With nationwide unemployment higher than it's been in many decades, more and more people are questioning why foreigners should be allowed to fill "German" jobs or to collect "Ger­ man" financial aid.

Ordnung in Cyberspace

Juergen Riitterger, the minister of technology and research, is in the process of drafting Ger­ many's first federal multimedia censorship law, which would make both providers and users liable for content deemed pornographic, violent or racist. In 1996, German authorities briefly closed down a number of pornographic sites on CompuServe, the U.S. Internet provider.

Because Europe's largest multimedia conglom­ erate - Bertelsmann (now in partnership with AOL and Deutsche Telekom) - is based in Ger­ many, the country is in a position to dominate Europe's Internet scene. Riitterger is lobbying with officials in leading industrial countries to establish an international "code of conduct," which the aforementioned federal multimedia censorship law would implement.

@ The Work Environment

The Work Ethic: West vs. East

A society deservedly proud of its reputation for precision and order inevitably attaches great importance to individual performance, and that starts with proper training. Germany's tradition of corporate apprenticeship dates back to the 14th century, the same era during which Reformationist leader Martin Luther spoke of Beruf - the calling to which each person is assigned by God and to which he or she is duty-bound to perform as well as possible. The result is the most highly skilled labor force in the world. Extensive apprenticeship training and retraining programs not only maintain low youth unemployment but are also crucial fac­ tors in ensuring quality. Mercedes-Benz AG, to cite one example, put 6,000 managers and workers through a one-year retraining program before building its first S-class model.

In East Germany, however, this commitment to excellence had been undermined during commu­ nist rule by poor pay, lack of motivation, inade­ quate training and overstaffing. At least one East Berlin office building employed a woman full time

The Work Environment 37

to water the plants near the elevators on its five floors. An East German hotel manager explained the difference in approach under Communism this way: "Relations with guests in East Germany were com­ pletely different. You didn't have to care for the guest. The waiter chose who to serve and it was a privilege to be seated. Today, we [in the east] have to get used to the idea that the guest is king."

Still, compared to the workforces in other com­ munist countries, the East Germans were models of efficiency. But this, too, had its drawbacks. In the unified East European economic system (Come­ con), different countries were often assigned to pro­ duce different parts of the same product. Thus, while East German factories made locomotive bod­ ies, other communist countries were assigned to produce the wheels, the engine parts, etc. This cum­ bersome arrangement infuriated the East Germans, as it forced them to slow down in order to keep pace with the slower factories outside their borders.

In 1992, the government launched a campaign to help former East Germany "catch up" to its west­ ern counterpart. Subsidized retraining courses, ranging from heavy engineering to hairdressing, were offered. Corporate managers, hotel workers and waiters attended sessions on the importance of such unwritten rules as eye contact, wardrobe, politeness, tact, deodorant and an overall pride in one's work. Today, the work-ethic gap is, in many cases, a thing of the past. Some East German hotels, for example, exceed their western counterparts in efficiency, elegance - and cost.

The Good Life

The 1950s built up the image of the German workforce as determined and hardworking. Today, German workers have the highest net incomes in

j

38 Passport GERMANY

Europe. And they put in fewer hours than anyone else in the industrialized world - 1,651 hours a year, compared with U.S. workers (1,907 hours annually) or Japanese workers (2,201 hours annu­ ally). Despite recent cutbacks and proposed reforms (loss of four weeks at a health spa every three years paid for by the state; the threat of pen­ sion reductions for early retirees, reduced unem­ ployment benefits and sick pay, and possible loss of job protection guarantees), six weeks paid vacation and thirteen months pay a year are still standard in most German enterprises.

Germans are used to feeling secure in their jobs. Unlike American workers, once Germans are hired, they're there for life. But with unemploy­ ment rising (to 4.7 million, or 12 percent of the workforce, as of January 1997, the highest since the 1930s), employers are reluctant to continue hiring, as they fear the high cost of benefit contributions and are concerned about being burdened with a large workforce if business declines.

This raises the question: How can a country with the world's highest labor costs and (at least on the surface) least industrious workforce remain a leading exporter of high-quality, competitively priced products? Part of the answer is that the com­ mitment to training pays off: craftsmen and work­ ers are frequently highly skilled. And the expectation of high performance is so ingrained, says one American executive who spent years in Frankfurt, that it's considered the norm. Also, exec­ utives tend to have college degrees augmented with specialized courses, and German universities have a strong business and marketing bias.

What Fish Has A Dark Spot?

International polls consistently show Germans

The Work Environment 39

to be less satisfied with their jobs than employees in other major European countries (with the exception of Britain) or in the U.S. This reflects the wide­ spread view that work is, in fact, Beruf- an obliga­ tion that enables them to enjoy the good life: A nice home, long weekends, travel, sports and a Mer-

sidered Initiative is rarely a shortcut to promotion. The

route up the corporate ladder is through training, qualification c\nd experience. In terms of the latter, age is a factor( A man of 3? is perceive� as so��one who is still gamm ex enenc for semor positions. A man m is mid-S0s is said to be in is prime. Although job mobility is increasing, it's still com­ mon to spend one's entire working career with one company.

To fill a vacant post, an applicant usually has to have successfully completed the requisite courses, whether it be a technical course, a graduate degree or advanced on-the-job training. The Germans have courses for everything, including leisure activities. Getting a German driver's license requires six months of expensive lessons in both driving theory and practice. A would-be fisherman will spend three months at night school preparing for a writ­ ten test. Sample question: "What fish has a dark spot just behind the first backfin?" There's also a practical test in which the applicant puts together a rod and reel.

Pyramid Hierarchy

The corporate decision-making process is pyra­ midal, with a handful of professional managers ( or sometimes just one person) ruling from the top down. Middle-level managers involved in the groundwork may not even be aware of the final purpose of their efforts. "Despite everything we

40 Passport GERMANY

have done, we remain more hierarchical than the rest of the West," remarked Heinrich Stahl, a pro­ fessor of cultural and media studies in Berlin. There's much discussion about American-style decentralization of decision making, but so far, it's rarely practiced. Gut reactions and instinctive feel­ ings are mistrusted. Recommendations from below are not usually expected and go unheeded.

At Volkswagen, for example, the Berlin Wall had hardly come down when chairman Carl Hahn announced that VW had signed a joint venture to start producing cars for the new East German mar­ ket (an opportunity he called "an unimaginable gift of fate"). It was the chief executive's call, and he made it. For the 30 or so years that Hermann Josef Abs was head of the powerful Deutsche Bank, a Bonn economist recalls, "Nobody ever told him what to do."

Middle management's main responsibility is the operational day-to-day overseeing of strategic decisions they've often had little or no say in for­ mulating. Their traditional deference to authority makes this acceptable. To executives used to a more collaborative system, it seems too authoritarian. But one positive side effect of the German system is that it cuts down on staff infighting.

Planning and More Planning

Regardless of the size of the organization, Ger­ man executives plan for the long term and in detail - and they often criticize U.S. corporate strategies for being shortsighted. Spontaneity is neither encouraged nor appreciated, and risk taking is avoided, though what Germans define as "risk'' is often normal market uncertainties in other countries. German banks domi­ nate business and set a very cautious tone; venture capital is virtually nonexistent.

The Work Environment 41

Prior to a launch, market and product testing can sometimes be carried to extremes. At the main Mercedes-Benz plant in Stuttgart, visitors are proudly shown the testing rooms where the doors of a vehicle are hydraulically slammed shut and re­ opened again and again for days, until the door finally falls off its hinges. The number of openings and closings is meticulously recorded and com­ pared with previous door slammings to ensure that the component has lost none of its toughness.

Mittelstand: Changing of the Guard

Two-thirds of the workforce is employed by the Mittelstand - the thousands of small and medium-sized businesses, often family owned, that are scattered around the country. Many are export­ ers with world share markets in the range of 80 to 90 percent. Many of the postwar entrepreneurs who founded Mittelstand firms are now dying or retir­ ing. It's estimated that by the year 2000, some 300,000 companies will be in need of new owners and that less than half of them will be passed onto younger family members. Moreover, many who do

inherit are hiring bosses from outside the family. As a result, changes in management style seem

likely in the next few years. Some firms are actually allowing customers to dictate what products will be developed. They're also encouraging teamwork (rather than isolation) between departments, mak­ ing greater use of outside suppliers, and even con­ sidering the possibility of bringing in partners. Foreign management buyouts (with former owners often retaining a minority share) are on the increase.

�-""--_W_o_m_ e_ n_ i_n _B_u_ s_in_e _ss __ _

The Three Ks

Historically, German women were considered inferior (both intellectually and spiritually) to Ger­ man men, but like Eve in the Garden of Eden, capa­ ble of doing great harm. In 18th-century Hamburg, it was considered improper for them to sing in church; they were there to worship, not to be heard. As late as the 19th century, a widow was required by law to have a male guardian for her children, even if she was able to be their sole support, and to let him administer her family property, including what may have been added to it by her own efforts. In 1851, the respected German philosopher Arthur Schopenhauer wrote that women existed "in the main solely for the propagation of the species and were not destined for anything else."

The phrase "Kinder, Kirche, Kuche" (children, church, kitchen) sums up their traditional role. To that end, Adolf Hitler dismissed women from government posts, as well as from medical and legal professions in the 1930s, while at the same time offering tax breaks and maternity benefits to those who married and devoted themselves to raising families.

Women in Business 43

It wasn't until the 1960s that German women were assured the right to own property on their own. In the 1970s, paragraph 1356 of the pre-World War II Civil Code (which defined a German woman's duty as "housework") was finally deleted. The marriage and divorce laws of 1977 established that family roles were to be defined by mutual agree­ ment and protected women's property in case of divorce, which women have the right to initiate.

Current Trends

Though these days women are highly visible in the workplace, the overall picture remains uneven. Until 1994, a married woman could not retain her maiden name in her work. Chancellor Kohl sub­ scribes to the popular view that there's nothing to stop a woman from holding down a job, if she can master the logistics of being a devoted wife and mother, too. At work, women often receive lower wages than men, and a low "glass ceiling" limits advancement. According to a 1963 survey, only 3.4 percent of all leading West German executives were female. Today, the percentage remains virtually the same.

Reunification has proved to be a setback for East German working women. Many were dis­ missed to create places for men who lost their jobs when inefficient factories were closed down. For the women who remained employed, there was both good news and bad. Wages and salaries were higher than under Communism, but instead of equal pay regardless of gender, as before, the women now received less than their male counter­ parts. Other changes followed. In 1995, militant feminists from former East Germany, where abor­ tion was legal, joined forces with feminists in West Germany, where it wasn't, to try to introduce legal-

44 Passport GERMANY

ized abortion throughout the "new" Germany. But the German parliament voted against the measure, and abortion was declared illegal nationwide.

Still, some German women have done spectacu­ larly well within the system, among them fashion designer Jil Sander and Beate Uhse, owner of Europe's largest retail sex-oriented products busi­ ness. In 1994, Jutta Limbach, a former law professor, was appointed Germany's first female chief justice (it's a 12-year position). There are twenty-six women members in the Bundestag (roughly 10 percent of the total), more than in any other European parliament, and two women hold office in the senate.

Strategies for Foreign Businesswomen

Interpersonal relations in the German work­ place are formal, though not as formal as in Japan, for example. Colleagues who have worked together for years still start the day by shaking hands with each other; and it's still unusual for secretaries and executives to be on a first name basis. Some work­ ers boast that they don't even know the first names of coworkers. However, one result of this formal atmosphere is that it makes it harder for males to become overly familiar with female coworkers or subordinates.

The task-oriented atmosphere at meetings can also be an advantage to women. Business is con­ ducted with the minimum of small talk or other distractions. The thing that matters above all else to German executives in a business meeting is the expertise of their interlocutor or interlocutors, regardless of gender.

The title Ms. has no equivalent in German, and a businesswoman can expect to be addressed as Frau or Mrs., whether she's married or not. Fraulein or Miss is nowadays used only to address those

Women in Business 45

under the age of 18. So if a woman insists on being addressed as Miss, she should make that clear when she's first introduced or when she introduces herself ("This is Miss So-and-so ... "), and she should consider having the title printed on her card. If, despite all effort, the German side addresses her as Mrs., a correction - even a tactful one - could prove awkward.

Many Germans will shake hands with the males present but will wait until a woman offers her hand to be shaken, so be sure to do so. An older German may kiss a woman's hand. This is not a romantic gesture: it's old-fashioned, formal behav­ ior. Some younger executives may follow suit, par­ ticularly those from aristocratic families. If the senior German is an older man, he'll expect to be treated with formality and courtesy by men and women alike.

Incidentally, he's more likely than an American counterpart to still be married to his first wife. In fact, one of the surprises of meeting senior German executives socially is that their wives tend to be the same age as they are, rather than Younger Wife Number Two, or possibly three.

®--M_ak_ i_ng_c_on_n_e_ct_io_n _s __ _

Tasks First, Friendship Later

German friendships tend to be deep and highly selective. The same applies to close business rela­ tionships. Repeated visits, a few dinners, and a good performance record in the shared business venture should improve and consolidate the con­ nection.

But dealings can remain on a formal basis for years. Unlike many Asian and Latin cultures in which relationships come first and set the tone for business, the German culture is definitely task ori­ ented - focusing on the essentials and advantages of the deal at hand. But while trust may not be as important initially as it is in other countries, once it's lost, it will be difficult to regain.

Like all Europeans, Germans are masters of the quick day-trip to a neighboring country for a busi­ ness meeting that allows them to be home in time for dinner. Europe's air and rail services are geared to these tight schedules, which leave little time to develop personal relationships or to study the com­ plexities of another culture.

Making Connections 47

Go-Betweens

Networking across borders is an old European tradition. The 19th-century French statesman Prince Charles-Maurice de Talleyrand (who man­ aged to serve both the monarchy and Emperor Napoleon without skipping a beat) used to receive a fee from both sides after n_egotiating a treaty between countries. In more modern times, socially connected Europeans (often with titles) have trans­ ferred this skill to facilitating business connections and collecting a cut as "consultants."

Modern transport, international business schools, and the European Union have brought European countries closer together, and even in a technological world, "who you know" remains an important factor. As many introductions take place in musty gentlemen's clubs in London, Paris and Hamburg (many of these establishments have exchange facilities), while shooting boar in the Alsace or Buckinghamshire, or in the first class lounge at Heathrow or Fiumicino, as they do in cor­ porate offices and dining rooms.

Most international firms have branches or agents in the Federal Republic who can introduce you to prospective partners. Chambers of com­ merce and embassies can also help with your initial approach.

But a more focused approach is to enlist the services of a German bank. Though they have a jus­ tifiable reputation for being conservative and prefer to place "safe bets" on established businesses in proven fields, they are in a position to provide use­ ful inside information about specific industries and even help with key introductions and important contacts. For example, Deutsche Bank's controlling shareholdings range from 28 percent of Daimler­ Benz to 35 percent of the Holzman construction

48 Passport GERMANY

c?mpany, and the bank is represented on 400 super­ visory boards throughout German industry.

Almost without regard to the nature of the initial approach, you can be sure of one thing: German firms take nothing for granted. Even before your first scheduled meeting, your German interlocutors will have screened your company to determine whether it would be a suitable partner, and they'll have familiar­ ized themselves with what it is you're selling.

Trade Fairs

Participating in an industry trade fair is another excellent way to make business contacts. Three of the world's five largest fairgrounds are here� and t�ey claim to host two-thirds of the top 150 mternahonal fairs. New fairgrounds are being built and older ones expanded and upgraded.

Berlin's biennial Funkausstellung specializes in consumer electronics; new events (added in 1996) include one for the food and hotel industry and one for kindergartens. Frankfurt hosts (among others) an international car show, the publishing world's most important book fair, and a quality control �evices .show. Nuremberg has a toy show. Cologne is the site of Fotokina, the world's leading photo­ graphic equipment fair, plus 39 others. Dusseldorf �osts �etween 40 and 60 such events annually, mcludmg the world's largest fairs for health care, packaging, plastics and confectionery machinery. In 1995, Dusseldorf's Messe (exhibition center) headed the country's list with 1.8 million visitors and a turnover of DM450 million. Hanover and Munich weren't far behind.

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� Strategies for Success Well-Trodden Ground

The global spread of German business is illus­ trated by the two-decade presence on the Mediter­ ranean island of Malta (pop. 350,000) of a Playmobil factory, which produces plastic toy fig­ ures. Bertelsmann (the Hamburg-based media com­ pany) has interests in North America, the U.K., Italy, France, Russia and elsewhere. German firms have been active in the U.S., both as exporters and capital investors (and more than 700 American companies have branches or subsidiaries in Ger­ many, with investments totalling US$10.7 billion). Siemens bought out American companies in areas like telephone exchanges and automobile electron­ ics, and Hugo Boss, the fast-growing German cloth­ ing group, has also expanded into the U.S. market.

The privatization of East Germany's former state enterprises has opened up a whole new mar­ ket, but to date, foreign investment remains slug­ gish. (The U.S. heads the list with 15 corporations, including Coca Cola and Philip Morris.)

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50 Passport GERMANY

Ten Guidelines

1. Your product or service will almost certainly require compliance with a host of complex (and generally inflexible) regulations. Study t�em carefully. Make sure your product quali­ fies, or can be made to qualify, before venturing further. Most Germans are concerned about the envi­ ronment. (The demand for recycled paper is so great that manufacturers have to pulp new

paper to make it.) So if you're selling to Ger­ man consumers, make sure that your goods conform to environmental regulations, which are the toughest in Europe.

2. Almost as important as the product itself is after-sales service. Your company's reputation for su�h service is likely to be a determining factor m the German firm's decision to do busi­ ness with you. You might want to consider set­ ting up a service office in Germany.

3. Your German partners will want to establish proper lines of communication with your orga­ nization. As quickly as possible, provide them �i�� the relevant names, titles, areas of respon­ s1b1hty and brief professional biographies of staff members with whom they'll be in contact, keeping the numbers down to avoid confusion and crossed wires. Once these personnel have been identified, keep changes to a minimum and explain them, should they occur.

4. The Germans will base their actions on the signed agreement, and they'll expect their busi­ ness partners to do the same. In case of a dispute �r problem, that agreement will be their guide­ lme. If a problem does arise, explain it clearly,

unemotionally and in detail. Spell out what

Strategies for Success 51

steps have been taken both as damage control and to ensure that the problem won't occur again. Provide as much information as possible: better to supply too much than too little.

5. Respect delivery dates. In fact, try to beat them. That way, your associates will forgive later slips and problems. If you foresee a delay, give as much advance warning as possible.

6. Though verbal contact may be in English, the Germans are most likely to write to you in their own language, though they won't expect you to reply in German. All promotional materials and instruction manuals should be translated. To avoid bloopers that could cause embarrass­ ment or possibly even give offence, have the German text rechecked by a professional (pref­ erably a German). The Germans tend to use sans-serif typefaces for their printed brochures and materials. Sales literature in a serif font will look foreign to them.

7. Put forward advertising campaigns based on facts, not emotions. "Madison Avenue" adver­ tising may emphasize the glamour or excite­ ment of a product, but a Hamburg ad agency will focus on the reasons why the product is superior. Be aware that the law forbids compari­ sons with competing products. Case studies and personal testimonials are highly regarded.

8. Arrange for an early exchange of visits by key staff members. Besides providing a detailed and intensive program of business activities for the visiting Germans, plan out leisure activities as well, such as the touring of historical sites. (Unless you're very sure of your ground, avoid theatrical performances that require a fluent knowledge of your language.) Your counter­ parts will certainly do the same for your staff.

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9. Keep all correspondence brief, formal and to the point. Unless told otherwise, address letters to the company ("Dear Ladies and Gentle­ men"), rather than to an individual executive.

10. When doing business with German business­ women, attempts to use flirtation or charm as a substitute for a direct, businesslike approach will probably kill a deal. American business executives are often surprised at the abrupt change of mood once the brief opening pleas­ antries are over and serious discussion with a female German counterpart begin.

Every presentation or sales pitch is a perfor­ mance of sorts, but keep yours low key. Let the strength of your proposal speak for itself. Avoid sweeping gestures, dramatic declamations, boast­ ing and jokes. Avoid keeping your hands in your pockets, as this is considered slouching. Above all, avoid keeping your left hand in your trouser pocket while shaking hands with your right. This is con­ sidered bad manners.

��-Time __

Time Waits For No Man

The Germans are sticklers for punctuality. If a German couple is invited to dinner at 7 P.M., they're likely to arrive early and wait in their car for the hour to strike.

In theory, you're allowed 15 minutes' grace - das akademische Viertel - the quarter of an hour that German university students traditionally have to wait for a tardy professor before a lecture is offi­ cially canceled. Similarly, in a business situation, if you're a no-show after 15 minutes, your meeting may be called off. And keep in mind that to be even a few minutes late for a scheduled appointment, whether business or social, will be taken as a sign of inefficiency or disinterest.

One advantage of all this is that you're not likely to be kept waiting. (Arrive a few minutes early and you will be received as the hour strikes.) Another advantage is that Germans don't allow themselves to be interrupted. The norm is to con­ centrate on the task at hand, to the exclusion of all others. Once a meeting has started, you can usually count on your interlocutor's undivided attention.

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A Nation of Clockwatchers

With the exception of senior executives (who arrive early and leave late), employees in factories, stores and offices leave promptly at quitting time. Working late is often seen as a sign that the worker can't finish the job in the time allotted to it. Should your business drag on beyond closing time, you'll be very unpopular, and your German hosts will let you know it by pointedly looking at their watches.

Deadlines, German-style

Germans regard deadlines as sacrosanct. Once there's agreement on a date, they take the commit­ ment seriously. To ensure that agreed upon dates (and quality standards) are met, they may ask for penalty clauses (and a warranty) to be built into a contract.

If you' re unable to meet a deadline, give your German partners as much advance warning as pos­ sible and be clear about the reasons. Above all, don't waffle.

@,.;... __ B_u_ s_in_e _ss_M_e_e_ti _n _gs __ _

Arranging the Meeting

Making appointments in advance shows that you' re well organized. Two weeks' notice isn't unusual if the meeting is scheduled by fax, longer if a top executive is involved. You have the best chance of getting everyone's undivided attention if the meeting is scheduled between 11 A.M. and 1 P.M. In the afternoon, your German interlocutors might start getting restive as quitting time approaches. Avoid Friday afternoons. Some offices close by 3 P.M., and everyone is anxious to begin their weekend.

It's worth remembering that virtually every German takes at least four weeks vacation a year, generally in July and August. Some factories actu­ ally close down during this time (though this is less usual in Germany than in France, Italy or Spain). So check to confirm that your counterpart will be available. Also, little work is done during regional festivals such as Oktoberfest and the Carnival that precedes Lent in Catholic areas.

Send background documentation, spreadsheets and figures in advance, whenever possible. This is particularly important in the case of an introductory

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meeting between organizations. If the material is presented in German, the gesture won't go unno­ ticed. Make sure you're thoroughly familiar with every aspect of the issues to be discussed, down to the smallest detail. Have backup charts (they like visuals) and figures available to illustrate your argu­ ments. Discreetly inquire as to whether the meeting will be conducted in English, or whether your hosts will be using an interpreter. In the latter case, it would be wise to engage one of your own.

Arriving at the Company

Be on time. Arriving even two or three minutes late will create a bad impression. Most firms have a conference room for such meetings. The senior visi­ tor should enter the room first, followed by the rest of his team in order of rank. The Germans consider themselves polite and expect visitors to recognize this. They are also protocol minded, and a meeting will begin with handshakes all round. It's not a bad idea to ask permission before taking notes.

Identifying Who's Who

Protocol requires that the highest ranking visi­ tor introduces himself, or is introduced, to the senior manager present, and then the senior man­ ager is introduced to the visiting team - again by seniority - with brief descriptions of their area of responsibility. Then it's the German host's turn to do the introductions. Smiles aren't required. The senior German manager will be seated in the center, with the next senior executive on his right.

Business cards are always exchanged before the start of the meeting; they should provide fur­ ther indication of who's who on the opposite side of the table. Geschiiftsfuhrer corresponds to corpo-

Business Meetings 57

rate president, the top man. Generaldirektor is the general manager or managing director, Finanzdirek­ tor is the chief financial officer, and a Direktor is a senior manager. In addition, the card will include personal titles, such as Doktor (used by anyone with a doctorate). Titles of nobility take precedence over professional titles, and you're likely to occasionally met a manager who is a Graf (count), a Freiherr (marquise) or a Freifrau (marchioness).

Don't even think of using first names (most business introductions are, in any case, limited to surnames only). Your hosts are, and will for a long time remain, Herr Schmidt, or Doktor Schmidt, or Frau Doktor Schmidt, or Graf Schmidt. It may be years before your German counterpart says, "Please call me Otto."

Common German Business Titles

& Their English/ American Equivalents

Vorstand

Geschiiftsfuhrer

Generaldirektor

Bereichsleiter Abteilungsleiter Gruppenleiter Finanzdirektor

Chief Executive Officer (AG corp.)

Chief Executive Officer (GmbH corp)

President or managing director Division head Department head Group head Director of Finance

Some Meeting Guidelines

1. The highest-ranking or eldest person usually enters the room first. All things being equal, men enter before women.

2. Your hosts are looking for solid information on

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which to base their judgment. Leave out the hyperbole and the "hard sell." Just present the facts as systematically as possible. Also, be pre­ pared for requests for further details. Some of their requests may seem puzzling, but the Ger­ mans will have their reasons. When you ask questions, avoid a confrontational tone.

3. Germans tend to put more physical space between each other then do Asians, Americans or other Europeans when holding a conversa­ tion. Though you may feel uncomfortably far away, don't move your chair in closer. Rearrang­ ing the furniture in a German office is consid­ ered highly insulting. While an Italian businessman might put his hand on a counter­ part's arm or elbow while talking, a German executive would leap away from such a gesture.

4. Expect people to smoke before, during and after the meeting. Germans light up every­ where they please. Hospital waiting areas are notorious for trapping clouds of smoke in often windowless rooms.

5. Unlike the Asian style, in which an exchange of pleasantries serves as an overture, the Ger­ mans expect to plunge straight into things without the benefit of jokes, humor, small talk or photos of the kids. After formal introduc­ tions, a visitor may find himself launching straight into his presentation.

6. German executives tend to separate their pri­ vate and professional lives, and they' re not likely to volunteer information about their families. Americans should be aware of the fact that, in Europe, they have a reputation for cross-examining people they've just met about such personal details.

Business Meetings 59

There's no direct German equivalent for the expression "small talk" - Germans would be shocked to think that anything they said was frivolous - but some suitable standby topics of nonbusiness conversation include vacations (and how much you need one), sports (Ger­ mans are passionate soccer fans), and the U.S. (presidential elections, environmental issues or movies).

7. The German language is low context, and Ger­ mans are low-context communicators. Too much gesticulation or volubility will not be received well. Nonverbal cues and signals aren't widely used, and eye contact is so com­ monplace that it hardly counts as an indication of anything.

If your voice is high pitched, try lowering it a little. German voices tend to have a deeper tim­ bre than those in the English-speaking world, and a high voice is a disadvantage.

8. Don't expect more reaction than a formal "thank you" at the end of the meeting or pre­ sentation. The Germans are likely to leave the room without offering any reaction at all. To start a detailed discussion at that juncture would be considered hasty. Don't look for hints, winks or nudges. If an opinion is expressed, it should be taken at face value. When a German says your proposal is interest­ ing, he's not making polite conversation. He means it.

Every aspect of a proposed deal will be exam­ ined with care; Germans aren't obsessed with immediate results. And they tend to dislike intuitive thinking or trial-and-error methods. Feel free to send a follow-up letter, perhaps repeating points you think need to be stressed,

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but don't expect it to speed things up. How­ ever, once a decision has been made, the Ger­ mans will stand steadfastly behind it.

9. When the follow-up meeting takes place (assuming that one does), the senior German executive will open the proceedings, and then either explain the company's negotiating posi­ tion himself or introduce an expert in the field under discussion. The German arguments will be empirically based, backed by figures and detailed information. And they'll expect their response to be studied before receiving an answer.

10. At no time is it good strategy to "trash" the competition, either yours or theirs. German business is nonconfrontational. Comparisons with the similar products and services aren't primary factors in strategic planning. "There is a kind of general attitude that says you should compete on the basis of your own product's strengths, not on the weaknesses of the compe­ tition," says Wolfgang Hansen, president of the German Quality Foundation.

11. Open-ended or ad hoc meetings aren't wel­ come, so it's important to determine in advance how much time will be needed. If you run over into the German executive's next appointment, it's unlikely that you'll be told to wait or to return later. Few Germans are pre­ pared to be that flexible. They like to believe that their schedules are packed to capacity, and whether or not that's the case is irrelevant.

f � Negotiating with Germans

Hard Bargainers

German negotiation goes from receiving infor­ mation and subjecting it to expert scrutiny to mak­ ing a decision and signing an agreement. It can be a long and painstaking process. German negotiators will present a unified front. And they'll be watch­ ing the way the meeting is planned and organized for clues about your working methods and those of your company. Conflict is seen as dysfunctional and a symptom of being unprepared. Open dis­ agreement among your team members could "kill" the negotiations. Your presentation must not only be thorough, it must be seen to be so. Supporting statistics should be used liberally to illustrate points. When citing figures or technical data, it helps to distribute copies or to use slides, so that everyone can follow.

Charts and graphs are a must. It's rare for a German firm not to have its proud collection of charts; companies virtually function based on them. A computerized color video presentation with pie-charts and graphs would be an effective visual aid and would indicate that your firm is

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computer literate. But avoid the temptation to make it cartoonlike. Germans don't appreciate mix­ ing business with humor; they consider such an approach frivolous.

Discussion is likely to be to the point. Well­ briefed executives will ask questions aimed at get­ ting all the necessary facts, and substantive issues will predominate. As one European executive who has spent years doing business in Germany put it, "You don't know what a businesslike meeting really is until you've experienced German negotiators." As most decisions are taken at the highest level, the managerial big guns tend to be brought in early, pro­ vided you or your team are sufficiently senior.

While German executives envy American cor­ porate dynamism, flair and flexibility, they' re not about to embrace such an approach themselves. They want to be really sure that something will work before they get involved. Therefore, they need time to study the pros and cons of a particular project with care.

Be aware that Germans are very good at push­ ing for concessions, and often at the last minute, so consider holding something in reserve.

Interpreters

Many Germans like to show off their English, but consider it prudent to use an interpreter during serious negotiations. Although there's little risk that your host's interpreter would intentionally try to mislead you, he or she is, after all, a member of their team. It's prudent not to rely on his or her skill alone.

Having an interpreter of your own can be expensive, but it's money well spent, especially in sensitive, high-stakes negotiations. Your interpreter should be multicultural as well as multilingual and able to pick up on feelings and intonations in both

Negotiating with Germans 63

languages. Ideally, you should locate an interpreter in advance, but even after you've arrived in Ger­ many, your hotel business center staff can refer you to companies that provide competent interpreters and translators.

Tips on Using Interpreters

1. Establish Guidelines

Before a meeting, plan the mechanics of how you and your interpreter will work together. For example, how long will you speak before pausing for translation? Ideally, you should practice exten­ sively with your interpreter before your meeting. Go over any specialized vocabulary, brief him or her thoroughly, and provide as much written mate­ rial as possible.

2. Don't Exhaust Your Interpreter

During a meeting or negotiating session, stop every couple of sentences to allow for interpreta­ tion, and try to limit each sentence to one main point. Don't begin another sentence before the interpreter has finished translating the previous one. Interpreters need to rest at least every two hours. If negotiations will continue for more than a day, you may need two interpreters. Using an inter­ preter can stretch a meeting to three times its nor­ mal length, so prepare to be patient.

3. Address Your German Counterpart When using an interpreter, look toward the

head of the German team, not at the interpreter. Speak slowly and clearly, and avoid idiomatic and slang terms.

4. Review What's Been Said - Anticipate What's Coming After a meeting or during breaks, review with

your interpreter the main points that both sides

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have made. Ask your interpreter what he or she observed about the other side's position or behav­ ior. Try to get a feel for the direction in which nego­ tiations are headed, and anticipate what will need to be said later on.

5. Emphasize Important Points As They Arise Abstract and complicated discussion is seldom

directly translatable. An experienced and qualified interpreter tailors translations to reflect your style, level of formality, tone and intended meaning. You can help ensure that important points get across by repeating or emphasizing them and by making cer­ tain that your verbal and nonverbal (body lan­ guage) messages are consistent with each other.

� Business Outside the Law uu

Underground Economy

Until recently, the law-abiding nature of the Germans and the closeness of the unions to various employers' associations discouraged employers from hiring cheap, nonunion labor and dissuaded private individuals from engaging "moonlighting" workers. But the recent removal of border formali­ ties in the European Union has begun to change that situation, as more and more foreign workers enter the country.

There have been press reports of cheap labor being used in the building industry - contractors hire East Europeans (and even British workers) at lower rates than Germans would accept. The cater­ ing sector is another area with a growing reputation for hiring waiters and other staff at "bargain base­ ment" wages.

Some employers also blame Germany's overly generous unemployment benefits for creating a favorable climate for a burgeoning underground economy. During a recent German radio broadcast, a restaurant owner complained that he'd been given the names of three out-of-work chefs by the

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district employment office to fill a vacancy, but none of them even replied to his offer of a job. And why should they? he said. They were better off col­ lecting unemployment while they continued "moonlighting."

Liberal Drug Policies

Germans worry about the rising crime rate, which has doubled in less than 20 years. They com­ plain that lenient judges do little to discourage non­ violent crime, such as burglaries, which have increased almost threefold in the past decade. Still, the overall crime picture remains less troublesome than elsewhere in western Europe or in the U.S. Critics say that Germany's rosy crime figures are partly due to the country's liberal drug policies. Like several other European countries, notably the Netherlands and Spain, Germany takes a tolerant view of the use of so-called soft drugs - marijuana and hashish. Although these aren't exactly legal­ ized, as in the Netherlands, "soft drugs" were effec­ tively decriminalized by a 1994 decision of the German Supreme Court.

But the issue of dealing with drugs illustrates the wide-ranging power of the states to act indepen­ dently of each other and the Federal Government. Some Lander (such as Bavaria and Lower Saxony) continue to take a tough line on drug abuse, but in North Rhine-Westphalia, even the use of small amounts of heroin and cocaine goes unchecked. In Berlin and Frankfurt, you're likely to see junkies shooting up more or less in the open - in the train stations or in certain parks. Berlin's Bahnhof Zoo, the subway station for the city zoological gardens, was long notorious as a haunt for drug peddlers and addicts, though not so much anymore.

Business Outside the Law 67

Graft and Bribery

Beamte (senior federal and state bureaucrats) who accept as much as a ballpoint pen from an individual or company doing business with the government face possible dismissal and/ or jail, and this sets the overall tone for the business sector. Because they' re rare, cases of bribery receive wide media attention. Most German executives would be insulted by a bribe, and such an offer could do irreparable damage to a business relationship. Cor­ ruption on the scale of the recent Tangentopoli case in Italy - in which dozens of leading businessmen were investigated, and some were subsequently indicted for obtaining government contracts through large-scale bribery of officials -would be inconceivable in Germany.

Present Changes and Future Outlook

Germany backs the E.U.'s drive for more open­ ness and honesty in business. At the same time, the Germans have also tightened up their already high ethical standards, particularly with regard to doing business overseas.

®,......___N_am_es_&_G_r_ee_tin_g_ s __ Small children address their father as Papa or

Papi and their mother as Mutti. (In fact, mother remains Mutti even to grown-up children, though Papi may became Vater.) Grandfather and grand­ mother are addressed as Opa and Oma by all gener­ ations. Grown-ups often call a young boy or teenager Junge or mein Junge (literally, "my young one"). Small girls tend to be called Liebling (or Schatzi in the south); both mean "honey" or "sweet­ heart." School children and younger coworkers use each other's first names. Children use titles - Herr, Frau, etc. - when addressing elders, with the exception of close family friends.

A 1994 law abolished double surnames as too cumbersome. Wives can now opt to be known by their maiden name (they couldn't before), or they can adopt their husband's, but not both. Children must also choose. And children's given names must be chosen from a list - which generally excludes non-German names - approved by the municipal authorities.

a� Communication Styles

UL/ Beneath their surface politeness, Germans are

wary of strangers. This is the combined result of natural reserve, a lack of skill at dissembling, and, among the older generation, a residual unease about the past. For example, to avoid being demon­ strative in public, a German will wait until he or she is quite close before greeting you. Only the young or the impolite wave or shout at each other from far away.

To a non-German speaker, Germans often sound brusque or even aggressive. This is due to the guttural sound of the language, its speech pat­ tern monotones, and to the fact that Germans tend to converse in louder tones than almost anyone else. The style is typified by Chancellor Helmut Kohl, who speaks in long, rapid-fire sentences delivered in a rich baritone, monotone voice.

Because Germans believe that content is more important than style, they can be brutally frank. Rarely is there anything to read between the lines, and hardly ever is the conversation so subtle as to be open to more than one interpretation. The plus side of this trait is that they'll never tell you some­ thing because they think it's what you want to hear.

70 Passport GERMANY

Varnishing the truth isn't a German trait, nor is it a trait Germans appreciate in others.

In meetings, it's a good idea to pause at strate­ gic moments and invite questions - and they'll have them. This avoids interruptions and gives you an opportunity to check that you're being under­ stood.

Be aware that German humor doesn't lend itself to taking the Kultur lightly. Jokes about the seemingly interminable length of German operas, for example, will not be appreciated.

Public versus Private

German media exercise great self-restraint when it comes to reporting the private lives of Ger­ many's politicians and other public figures. Separa­ tions, divorces and extramarital affairs aren't seen as newsworthy unless they have major political implications. When tabloid reporters recently began sneaking more details of politicians' per­ sonal lives into their stories, there was an angry reaction, from the media as well as from the politi­ cians themselves. The belief that private and busi­ ness lives should be kept separate is widespread in Germany, and a clear distinction exists also between business associates and personal friends.

<� Customs 2W---------

Carnival (Fasching)

This pre-Lent carnival lasts from November

through March. It's more a season than a holiday,

and Germans celebrate it with gusto. The festivities

date back to ancient times, when it was believed

that the spirits of winter had to be driven out to

make way for spring. During Fasching, also known

as die Tollen Tage ("the Crazy Days"), business

grinds to a halt and even somber Germans let their

hair down ... somewhat. Fasching' s three main days

are Weiber Fasnacht (when women are allowed to

cut in half the ties of any man they see); Rose Mon­

day (day of the big parades); and Fastnacht, which

means "Night of Fasting," but in fact, people eat,

drink and carouse wholeheartedly day and night.

Don't think Rio de Janeiro, but there are

parades, and evenings are spent making merry at

dress balls complete with a king and queen and a

cabaret. The dancing ends at midnight, just as Ash

Wednesday heralds the start of Lent. In the Rhein­

land, carnival is in October, and so is Munich's

famous Oktoberfest - two weeks dedicated to beer­

drinking, eating and Bavarian band music.

28 Passport INDIA

its large Chinese population, some 20,000 strong. (Most slowly drifted away due to prejudice and lack of employment opportunities.)

Gujarat, Rajasthan and Maharashtra comprise the western states. Gujarat's port of Surat was where the British East India company established its first trading post. Today, Gujarat remains a major textile, cement, chemical, petrochemical and pharmaceuti­ cal center. Rajasthan is best known for its great forts and desert scenery. Maharashtra is India's premier industrial state. Oil, petrochemical, automotive and engineering industries are concentrated here, and software is also burgeoning.

Mumbai (Bombay)

The city came to the British as part of the 16th century dowry of a Portuguese princess. It wasn't much of a city then, more a malarial island with a small trading post, but it grew into a bustling industrial port and India's largest city.

Due to expansion limitations, the price of office space has increased as much as 500 percent since 1991, giving Mumbai the distinction of having real estate rates that top those in Tokyo or New York City. Antique red London buses and wooden lorries compete with Mercedes and BMWs. The city's air is so polluted that spending 24 hours there is said to be the equivalent of smoking a pack of cigarettes.

But despite its problems, Mumbai provides the largest share of India's direct taxes, channels nearly half its foreign trade, is headquarters for a number of top corporations, and home to a stock exchange that lists over 6,000 companies. The city has another side, too. It's home to the Parsis (Zoroastrians), an ancient fire-worshiping people who lay out their dead on the Towers of Silence as food for local vultures.

$ Government & Business

Self Reliance vs. Nationalization

Politics and business have always been bedfel­ lows in India. The Congress Party, established 27 years after Britain annexed India, fought an ongo­ ing battle for national self-rule, and a number of top Indian businessmen played important roles as advisers and quiet fund-raisers. Mahatma Gandhi, the Party's dominant leader, advocated peaceful non-cooperation (satyagraha) and the boycott of British goods. When the Mahatma (literally, "great soul") was assassinated during a prayer meeting in Delhi in 1948, it was in a businessman's home in which Gandhi had been a regular guest. (The house was subsequently donated to the nation and con­ verted into a shrine.)

Gandhi had advocated self-reliance and the promotion of small and rural ind us tries. After his death, Jawaharlal Nehru (India's first prime minis­ ter) endorsed an ambitious program of industrial­ ization, central planning, and state ownership of core sectors of the country's steel, power, coal min­ ing and transportation industries. Industrialists supported these ideas (known as the 'Bombay Plan') in the belief the burden of infrastructure

30 Passport INDIA

development would fall on the government, leav­ ing the lucrative fields of consumer and light engi­ neering ind us tries to them.

The License-Quota-Subsidy Raj

Established in the 1950s, the license-quota-sub­ sidy raj (governance) allowed those who possessed a bit of paper signed by a bureaucrat or minister to raise investment capital or find a business partner. Many industrialists used their influence to ensure that no one could get a license that would allow them to create products that might threaten their monopoly. On top of this, import controls were introduced in 1957, in the wake of a foreign exchange crisis. Some imports were banned; others were restricted. All were subject to tariff.

Because government quotas restricted capacities and closed areas, companies were forced to look for profit in whatever business they could land a license for, or an import quota. Even a venerable company like Tatas, whose core competency was in steel, heavy engineering and automotives, ended up involved in tea gardening, oil and soap production.

Very tangible examples of this flawed system were the ubiquitous Ambassador and Premier cars, both manufactured from licenses obtained in the 1950s from the U.K. and Italy. Since cars were deemed luxuries, the government refused permis­ sion to anyone to modernize them. The Indian con­ sumer was forced to accept whatever was offered. Indian entrepreneurs, often through "influence," obtained dirt-cheap licenses for obsolete consumer electronic products, then retailed them to a captive market at fantastic profits.

Since the state owned the power companies, dis­ tribution, railways, roads and ports, people assumed that it was their right to obtain these services at little

Government & Business 31

or no cost. Union workers believed that the main purpose of these companies was to provide them with employment. To compound all this, the govern­ ment nationalized all banks in 1969, having previ­ ously nationalized the insurance industry.

By the 1970s, the license-quota-subsidy raj had become a Frankenstein with a stranglehold over the country's economic progress. The industrialists' previous support waned when they realized �at these rules and regulations, far from promoting socialistic or any other ideals, had helped to create a vast network of corruption and graft. Some of them worried that political rivals were manipulat­ ing tariff rates, license regulations and financing to their detriment.

The denouement occurred in the 1980s, when an "outsider" (a person with no fortune to back him) - Dirubhai Ambani - allegedly used the sys­ tem to manipulate import duties and tariffs, issue duplicate shares, switch thousands of stock certifi­ cates to avoid capital-gains taxes, and buy up shares to bolster prices, thereby creating Reliance Industries (India's biggest and most widely held enterprise) within the space of fifteen years. Reli­ ance, in turn, accused a "bear cartel" of hostile bro­ kers of intentionally depressing Reliance shares and selling borrowed shares in the hope of replac­ ing them at a lower price. (Ambani's company spe­ cializes in textiles and petrochemicals. As of late 1996, no final determination on the allegations has been made.)

Though the Raj had been implemented, to a large extent, in the name of the poor, it was the Indian middle and upper classes who benefited. University education was virtually free, reflecting a subsidy mainly to those who were already well-off, while vast pockets of rural illiteracy remained.

32 Passport INDIA

Metro-rail fares in Bombay and fertilizers were both subsidized, but neither were used by the poor. Likewise, parking was free or very inexpensive in most Indian cities, once again reflecting a subsidy for the well-to-do.

Why Politicians Are in the Game

India's politicians are aware of their failure to deliver the goods. The grand Congress Party, the one that brought about national independence, is in tatters, along with its "socialistic" policies. Their dream scenario was to change the way things are done without forfeiting the elections to other par­ ties. The challenge is to formulate policies that both increase economic growth and ensure that the ben­ efits of that growth trickle down to all strata of the population.

Trying for Change

Today, almost all major companies have the government of India as a major, if not dominant, shareholder via institutions such as the Life Insur­ ance Corporation (state-owned), the Unit Trust of India, the Industrial Development Bank of India and the Industrial Credit and Investment Bank of India.

Current government policy is to disassociate itself from much business-related activity and instead focus on regulatory activity, poverty allevi­ ation and social reform. However, past habits die hard, especially lucrative ones.

In any case, as of today, the top three compa­ nies in terms of sales still belong to the government. These are the Steel Authority of India Limited (SAIL), Bharat Petroleum and the State Bank of India (SBI).

� The Work Environment Generalizing about India's work environment

is difficult. One reason is that a substantial number of companies are proprietorial firms whose meth­ ods are shaped by family members. Another is that the range of companies varies so sharply - from small sweat-shop-type garment or handicraft mak­ ers to MBA-staffed business conglomerates that manufacture everything from trucks to toothpaste.

A Beehive of Workers

While some modem offices in the private sec­ tor aren't very different from their counterparts in other countries, more traditional private sector offices employ a lot more people. This is also true of many public sector and government offices.

There are "personal secretaries" (PSs), who manage appointments and schedules. There are also deputy secretaries and joint secretaries. Beneath them are the babus ("personal assistants"), mostly male clerical workers who type letters and maintain files. At the lowest rung are cleaning per­ sonnel and the chaprasis (peons or tea boys). The latter fetch and carry files, get the tea and snacks, cash or deposit checks, pay telephone bills, pick up

.J

34 Passport INDIA

airline tickets, and so on. They often belong to impecunious, semi-literate, upper-caste families from rural areas.

The divisions are quite rigid (and familiarity between the ranks discouraged), though an ambi­ tious person can move up if he or she can clear the requisite examinations. While female workers and executives are not uncommon, middle-rung per­ sonnel (such as shop-floor supervisors) tend to be male. While private sector careers are open to tal­ ent, caste prejudice continues to play a role.

Status in the Workplace

Indians are a status-conscious people, and this manifests in a number of ways. It's not uncommon to see a senior executive leaving the office with his chaprasi carrying his briefcase. A babu will not fetch tea for the boss, as that's the chaprasi's job.

In government, there's a Warrant of Prece­ dence, which lays down the hierarchy in detail. Sal­ aries are another measure of rank. Formally, the President of India gets a salary of Rs 10,0000 (US$280) per month, along with various allow­ ances; a top-most civil servant may draw a basic pay of Rs 8,000. (Typical private sector salaries may be five to ten times that amount, plus allowances.) Of course, the president gets to stay in the Lutyens­ designed Presidential Palace in New Delhi. Civil servants live in rental houses, in choice localities, for which they pay 10 percent of their salaries.

There's one important caveat. Because many firms are proprietorial, rank doesn't always desig­ nate true status. Family members may not have for­ mal titles or positions, but they're above all the others, including the company's president, in the totem pole.

The Work Environment 35

Seniority

Indian culture promotes deference for age and seniority, particularly in government. Date of birth, when one was promoted to a particular basic salary scale, and in some instances, even the time of the day one was hired, A.M. or P.M., can affect how seniority is gauged - and that in tum forms the basis of appointments and promotions.

In the corporate sector, with profit as the main incentive, seniority doesn't weigh as heavily, but it's still associated with experience. The colonial mind-set may allow an Indian to accept a younger person from the West as a boss, but accepting a younger Indian boss will be difficult.

Nepotism

Assisting members of one's extended family is considered a duty. Hiring or promoting caste broth­ ers is seen as a means of building up lobbies within the work environment. The person assisted may be a third cousin's wife's brother or an aunt's son's brother-in-law. Be it the elite Indian Administrative Service or the police forces, establishing and taking advantage of such networks is viewed as the natu­ ral Indian way of doing things. While the business and corporate world is relatively free of jati-vad (caste-ism), bureaucracy and administration are strongly influenced by such informal career "sup­ port groups."

The Indian Work Ethic

Peasants, craftsmen and private sector employ­ ees work hard, and many don't hesitate to put in extra hours out of a sense of both self-esteem and duty. But this work ethic tends to disappear at the

36 Passport INDIA

government level. Workers arrive late and leave early, and in between they follow the dictum: "Do tomorrow what you ought to do today."

In small villages & communities, participation in festivals and ceremonies is considered part of everyday life. Attending a relative's funeral, for example, is considered a duty. And, of course, the definition of "relative" is far more extensive than in the West. Seeking leave from work for such occa­ sions is not considered shirking.

Decision Making: Often Behind the Scenes

In the hierarchical Indian system, committees don't really work. Indians aren't comfortable with an "upfront" style, and they distrust "smart aleck" juniors who roil the atmosphere of meetings with unsettling comments or criticism.

A lot of horsetrading and discussion goes on behind the scenes. It's not uncommon, for example, for the Congress Party's president to discuss con­ tentious issues with individual members of the top Working Committee in private, and then to call a meeting at which a show of consensual decision is made. This tendency is strengthened by the fact that most businesses are privately owned and oper­ ated. Decisions regarding new commitments, espe­ cially those relating to equity, may be decided within a small family circle over dinner.

Some proprietors still treat their managers as munshis (clerks who, traditionally, were chosen more for their ability to ingratiate themselves to bosses than for their knowledge or skills). But the younger generation of managers, educated in pri­ vate schools and top technology and management institutes, refuse to be treated with condescension. Fortunately for them, their skills are in great demand and this, more often than not, is what's

The Work Environment 37

transforming the culture. Accelerated economic growth is another contributing factor. As firms grow, the top brass of both proprietorial businesses and corporations are being compelled to delegate more and more authority to professional managers.

The Indian Administrative Service

In its day, the Indian Civil Service (ICS) consti­ tuted the "steel frame" that upheld the British Empire's presence and authority in India, and it was the preferred career choice of many a British middle-class youth. Members of the ICS were well­ paid and many were scholars - like John Maynard Keynes (1883-1946), an economist whose monetary theories have influenced generations.

After Independence, the ICS was replaced by the Indian Administrative Service (IAS), the organi­ zation that runs the "license-quota raj." Within its ranks can be found a species of influential govern­ ment manager unique to India.

As with the ICS, entry into the IAS is through a competitive exam. Typically, officers join up after a graduate or post-graduate degree. Such jobs are cov­ eted, as they confer both power and prestige on mid­ dle-class Indians. As state control has expanded to include a gamut of economic activity, IAS officials (originally meant to be general district adminstrators) have become managers of State and Union (federal) government public sector corporations. In some cases, they have magisterial powers. They've even gone on to head top government companies like Air India and the Mahanagar Telephone Nigam (the government monopoly that runs telephone services).

More important, perhaps, is that virtually all decisions regarding licenses, proposals, exemptions and the like are made within the government administrative divisions they head. Some IAS

38 Passport IN DIA

members also serve in an ex-officio capacity on the Board of Directors of many top financial institu­ tions, banks and public sector corporations.

Since the minimum qualification for the IAS is a bachelor's degree in liberal arts, many members lack the management education backgrounds their positions require. To compound this, seniority, rather than previous experience, is the key consid­ eration when it comes to job appointments.

An earlier generation of IAS officials saw them­ selves as guardians of the public trust. But today, with a newer breed of official willing to do the bid­ ding of corrupt ministers, honest officials are, more often than not, sequestered into out-of-the-way jobs. For better or worse (largely the latter), these are the people who run the government. In the opinion of many, they constitute the biggest obstacle to further liberalization, and they're not likely to give up their regime of rules and regulations, the source of their power and authority, without a fight.

Many professionals, engineers, doctors and managers in the public sector resent the IAS's intru­ sion into their sphere, but they're helpless to do anything about it. However, in recent years, with the opening of the economy and the relative decline of the government's influence over society, IAS jobs have become less attractive. The best and the brightest now follow careers abroad and in the cor­ porate world, and they do so based on their educa­ tion, skills and on-the-job experience.

� __ w_o_m_ e_ n_ i_n _B_u_ s_in_e _ss __ _ No Suttee, But No Re-Marriage

Traditionally, Indian women were homemak­ ers. Even the status of upper-caste women was completely dependent on their roles as wives, mothers and sisters.

The upper castes (especially in the north) were kept in purdah - in public, their heads and faces were covered with the end of their saris (the tradi­ tional one-piece garment), and in private, they were confined to special portions of the house where out­ siders, especially males, were prohibited. Today, except in the northern countryside, purdah is no longer observed.

And widows are no longer required to perform suttee (literally, "virtuous woman"), throwing them­ selves on their husband's funeral pyres - a sacrifice that purportedly earns the couple 35 million years of bliss together in the afterlife. Still, widowhood is considered the end of "normal" life, as upper-caste Hindus frown on women re-marrying. (No such restriction applies to Hindu men, or to Muslims or Sikhs.) Widows without means are often forced to do menial work for their families or in-laws, or are cast away entirely, regardless of their age. (It's not

40 Passport INDIA

unknown for an elderly woman to have been a widow since the age of seven or eight.) Some fami­ lies insist that widows become vegetarians, as eating meat is believed to arouse sexual desire.

On the agricultural front, upper-caste men are seen as masters, so only they may actually plow the land, but women do virtually everything else. They sow (especially rice transplantation), tend and har­ vest fields, and seek out firewood and water, often walking miles to do so. Upon returning home, they prepare all family meals and clean up afterward, meanwhile bearing the babies and rearing them. Females (including children and pregnant women) often eat least and last, and receive less medical care than males.

Some women own and manage small busi­ nesses like grocery shops, but always with the help of male relatives. The mandi (central vegetable mar­ ket) in every town boasts a significant number of female stall managers. Women craftpersons play an important role in the traditional weaving and dying industries.

Trends

Suffrage arrived with the Constitution of Inde­ pendent India in 1950, but with female literacy holding steady at 38 percent, its value to the major­ ity is questionable. Western-style feminism, viewed by many as emphasizing individualism and self­ interest, isn't readily embraced in a culture based on family and community loyalties.

While the lot of peasant women remains unchanged, middle-class women are moving into every profession in the land, including government service, law, accountancy and management. (In the 1950s, school teaching was considered the only "proper" profession for middle-class, well-edu-

Women in Business 41

cated women.) Commercial airlines employ female crew members and in the 1990s, even India's armed forces opened up to them. Camellia Panjabi (hotel management) and Naina Lal (investment banking) are well known within their industries. Shobhna Bhartia, scion of the major branch of the Birla fam­ ily, is an executive director of the family-owned Hindustan Times. Anu Aga is CEO of Thermax (India) Ltd.

Still, vast areas of middle and upper manage­ ment remain all-male preserves, particularly in the engineering and heavy industries. And while, tra­ ditionally, women were protected from sexual harassment by conservative social mores, within India's business environments, such considerations no longer apply.

Strategies for Businesswomen

Western businesswomen should be careful to maintain some distance from their male Indian col­ leagues. At social events, Indian men cluster at one end of the room, downing one drink after another and talking shop, while Indian women gather at the other end, sipping soft-drinks, discussing school problems, exchanging gossips and the best bargains in town. Visiting businesswomen should make efforts to mix with both groups.

Women are advised to dress modestly, perhaps even more so than in their native countries. Short shirts and any other garments that could conceiv­ ably be interpreted as provocative are associated with "loose" and "available" women. On the posi­ tive side, foreign businesswomen may be treated with greater courtesy and consideration than they are at home.

GOVERNMENT �l>E: REST1'\CTION5

The New Business

Environment

India Joins the World

The shift toward opening the economy began in the early 1980s, but it took a near-default (of interest payments on foreign loans) and a fiscal crisis in 1991 to shock the country into taking steps to dismantle the license-quota-subsidy-raj, lower tariff barriers, and throw open its doors to foreign investment. These changes have yet to filter down to the babu in New Delhi or, for that matter, to company executives and managers. And while there seems to be political consensus on the need to "open up," bureaucrats and politicians are trying to hang on to reins of power that are no longer economically viable. • All industry sectors (with the exception of insur­

ance and railways) have been opened up to the private sector, including state-owned basic tele­ phone services. A similar system is at work in the domestic civil aviation sector, where state­ owned airlines compete with private operators.

• Import licensing restrictions on intermediate and capital goods have been removed, and tar­ iffs in certain sectors have been reduced from

The New Business Environment 43

•

•

•

300 percent in 1991 to 50 percent in 1996. (The goal is to reach 25 percent by 1997.)

The Indian rupee has become convertible in the current account. (That is, foreign investors can repatriate profits and dividends from their Indian companies in dollars, but they can't sell or convert fixed assets.)

Foreign banks have been in India for 100 years, but the limitations and barriers established between 1950 and 1990 have started to ease.

A Security & Exchanges Board of India (SEBI) has been set up to protect investors and enhance the transparency of stock market operations.

Works in Progress

Most Indian corporations realize that the only way to survive - better still, to thrive - is to build on "core competencies" and to enhance quality and productiv­ ity to world levels. Then, they can benefit from their main competitive edge: the low cost of manpower.

Having flourished in a protected seller's mar­ ket, Indian industry is now demanding a "level playing field." Some breathing space will be required before India can compete one-on-one with international companies. All are savvy and ambi­ tious, but many lack the size, capital, technology and managerial skills to produce world-class prod­ ucts, or the marketing expertise to sell them abroad.

Indian Stock Market: An Insider's Game

Ordinary Indians look down on the "specula­ tive" nature of the stock market, and those who invest are seen negatively as "gamblers." Unscru­ pulous businessmen and brokers have not hesi­ tated to bilk the unwary.

44 Passport INDIA

Since 1991, India has been trying, through reforms, to provide the market with the sophistica­ tion needed to play a role in the country's economic development. Some regulations still need to be loosened and, at the same time, some regulatory mechanisms need to be tightened up.

With 7500 listed companies and a market capi­ talization of US$150 billion, the twenty-two Indian stock exchanges are among the most extensive in the so-called Big Emerging Markets. The Bombay Stock Exchange, founded in 1875, lists 6000 of the 7500 companies.

Since 1991, 400 foreign institutional investors have been registered by the Security and Exchanges Board of India (SEBI). Investments have gone from a mere US$4 million in 1992-93 to US$500 million in one month alone (February 1996). U.S. investment during the last few years is more than double the amount invested over the preceding forty years.

But Indian markets are, in the words of Victor Menezies, Chief Financial Officer of Citicorp, "over­ regulated and micromanaged, ironically without effective supervision." They're not a place for the faint of heart. Reliance Industries (see page 31) used the stock market to finance its meteoric rise, raising US$1 billion through 2.6 million shareholders. (Stockholder meetings took place in football stadi­ ums.) Though efforts are being made to reform the system, the stock market remains an insider's game.

Business: An Ancient Tradition

According to an Anthropological Survey of India study, as many as 543 communities have reported having ancestors who were traditional businessmen. While caste-occupation links are fad­ ing, there's one area in which they still work. Prow­ ess in trading and entrepreneurship seems to be a

The New Business Environment 45

specialty within the Marwaris and Banias jatis. They've been moneylenders and traders since medieval times, and possibly even before.

The Marwaris, hailing from Rajasthan, first established themselves in Calcutta and Kanpur, and then expanded their influence across the coun­ try. Today, Marwari families like the Birlas, Bajajs, Dalmias, Bangurs, Goenkas, Khaitans and Sing­ hanias dominate India's industry and commerce.

Among the major Bania-caste families (the term "Bania" is mildly derogatory if used for a big industrialist or trader) are the Gujarati Banias like Walchand Hirachands, the Sarabhais, Lalbhais and Ambanis; Punjabi Hindu Banias include Sri Rams and Thapars. In some cases, it is quite easy to iden­ tify Banias by their surnames, such as Gupta, Aggarwal, Jindal, Khandelwal and Maheshwari.

In southern India, their equivalents are the Chettys, but Tamil and Konkan Brahamans are also prominent. The Tatas and Godrejs are arguably the biggest industrial families of India. Zubin Mehta, the noted conductor, comes from this community, and, it's said, still retains his Indian passport.

Maharashtrian and Gujarati brahamans occupy a unique position in that their entrepreneurial instincts cut across caste lines. The legendary busi­ ness skills of the Patels of Gujarat have taken them to enterprises in East Africa and to hotel and motel ownership in the United States. The most ancient business community is that of the Jains.

Muslim traders have been in India for a long time, particularly in the west and east coasts. Among the better known communities are those of the Bohra Muslims, members of the Ismaili sect.

� Opportunities & � ___ C_hal_len_g_e_s ___ _

During the past forty years, within protected con­

fines, India's industry has gained tremendous mana­

gerial and manufacturing expertise. Companies make

everything from steel and steel products, trucks, auto­

mobiles, tires, brake-linings, aircraft and aircraft parts

to glass, electronics, chemicals, pharmaceuticals, yam

and leather goods. They've trained cadres of execu­

tives and workers whose skills could be upgraded to

world-class competency with very little investment.

This industrial base provides low-cost, high

quality components and services, as well as a built­

in market. Did you know that:

• By the year 2000, India will require 40 million

telephone lines. In 1996, only about 8 million

serve the entire country.

• India plans to double its electricity production

within the next ten years.

• There's one car for every 700 people in India

today, compared to one for every two persons

in the U.S. • India's food processing industry is particularly

on the lookout for foreign investment as a

Opportunities & Challenges 47

means of both upgrading agriculture and creat­ ing rural-area jobs.

Diverse, Burgeoning Opportunities

In 1996, PepsiCo added US$75 million to its previous investment into snack food, beverage and agribusiness, and Coca Cola is investing US$800 million. E. Merck is in the process of shifting its fungicide production with a 100 percent buy-back provision to Hikal Chemicals in Bombay. Fanatome of France has a production base in Kerala for its global operations. Swissair has shifted its accounts offices to Bombay.

International Equity Partners (a Washington firm specializing in private equity placement in India) is using its India Direct Fund to capitalize on the inefficiencies of the Indian capital markets - where interest rates are high (15 to 20 percent) and IPO (Initial Public Offering) costs are steep.

Indian businesses also offer "solutions" for for­ eign companies. Robert McIntire, a senior executive and management consultant, hired Mukand Steel to make special cast hopper frames for several major US railway companies who were in a bind when the last U.S. plant that made them shut down. General Motors is purchasing radiator caps from Sundaram Fasteners, a blue-chip Indian com­ pany in Madras.

Information is the fastest-growing industrial segment. Now that India is opening up its telecom sector, most big players - Nokia, AT&T, Nynex, US West, Ericsson and others - are already into or are bidding for the cellular services and basic tele­ phony market. Meanwhile, the sales prospects for hardware like printed circuit boards, resistors, capacitors, oscillographs, test equipment, Digital Signal Processing chips and DRAMs are good.

48 Passport INDIA

Areas with potential include bio-technology (cheap manpower), agro-industry, food processing (the Indian diet is based on seasonal fresh food with virtually no processing or packaging) and pharma­ ceuticals. And then there's the automotive sector. Just fifteen years ago, two models of cars were made here, both via licenses obtained in the 1950s. Today, Suzuki has the largest presence, as it got started a decade ago through a joint venture with the Govern­ ment of India. But Mercedes Benz, GM, Honda, Dae­ woo, Peugeot, Fiat, Hyundai and BMW are making themselves known. And Ford Motor plans to build a US$800 million plant in Tamil Nadu state with an Indian partner.

India's computer and software industries earned over US$1.2 billion in 1995 and they're growing at a rate of 40 percent annually; in 1985, the industry barely existed. About half the revenues come from export, and the country is moving from churning out foreign designs to developing its own. (Infosys, for example, has created software for G.E., Oracle, Ree­ bok and many others.) Companies like John Deere and Caterpillar use Satyam Computer Systems of Hyderabad to manage their data via satellite link-ups. The fact that nighttime in the U.S. is daytime in India is especially useful; the Indians set to work while the Americans sleep. India-based Motorola operations have achieved the industry's SEI Level 5 certification, the highest in the business; only one other Motorola facility, in the U.S., has earned it.

Persistent Challenges

The largest single hurdle that India must over­ come is its inadequate infrastructure. Power, roads, telecommunications, ports and airports are major bottlenecks. With the government reluctant to touch the state-controlled monopolies, movement

Opportunities & Challenges 49

has been slow. But now, they have little choice but to institute reform and throw open these areas to private sector development.

Several barriers to trade and competition remain. Industrial licensing may have been removed, but the Companies Act continues to gov­ ern, among other things, takeovers, amalgamations and inter-corporate investments. Certain levels of foreign investment must be approved by the For­ eign Investment Promotion Board (FIPB), which is supposed to provide a fast-track but ends up slow­ ing things down.

No reform has been carried out to alter rules that industries say work against them in labor disputes, and government approval is needed before a com­ pany can "downsize" its workforce to reduce expen­ ditures. Despite liberalized import regulations, a ban on importing consumer goods (toothpaste, soap, pro­ cessed food, liquor, canned soups, electronic goods, plants, seeds and animals) remains. And ultra-nation­ alist politicians continue to decry the arrival of U.S. companies like Colgate, Coca Cola, McDonald's and Kentucky Fried Chicken as cultural imperialism.

Despite dramatic reductions, tariffs remain high, and it's unlikely that they'll reach the prom­ ised 25 percent average by 1997. The U.S. Trade Representative's 1996 report estimates that without the Rs 44 per kilogram tariff, U.S. producers alone

could sell about US$100-$150 million worth of shelled almonds to India.

There's also a lack of intellectual property protec­ tion. Brand names are widely reproduced. While India claims it's committed to patent protection, the necessary domestic legislation failed to pass Parlia­ ment in 1995. India's 1995 copyright law meets inter­ national standards, but popular fiction, videos, records, tapes and software remain highly vulnerable

50 Passport INOIA

to piracy. While the scale of the problem is nowhere near China's, implementation is left to individual states, which are often not very active in this area.

Insurance remains closed to competition, though the government has committed itself to remedying this. Restrictions limit the ability of for­ eign banks to open sub-branches, and operating ratios are based on the local capital of foreign branches, rather than on their global assets.

Another barrier is the so-called "inspector-raj," which allows minor bureaucrats to shut down busi­ nesses on (usually specious) grounds that they vio­ late hygiene, public health or labor rules. What is irksome is not the rules, which match the best in the world, but their selective misuse against foreign competition. Kentucky Fried Chicken, which was shut down in New Delhi and Bangalore, is a case in point. Fortunately, India's courts came to the rescue.

Some foreign investors have been able to create opportunities out of challenges. Dupont Nylon, which is tied to the Thapar group, found it impossi­ ble to carry on its project in Goa because of environ­ mentalists' resistance. So, it quietly scouted around and one day announced it was shifting to the state of TamilNadu.

Joint Venture or Go-it-Alone?

A lot depends on the nature of the business, equity, the location of the target market, and on cor­ porate philosophies and goals. Whichever route you follow, be careful if relatives and family friends of your supplier, distributor, partner or senior exec­ utive come into the picture.

Companies seeking to maintain quality control, secrecy of technical know-how and all profits often prefer to go-it-alone (GIA). However, one such com­ pany, Citicorp's Information Technology (India)

Opportunities & Challenges 51

Ltd., benefited from its parent company's long­ standing presence in India. And because India is a complex market, the GIA approach can land you without friends when you need them. The Dabhol Power Company, owned by a consortium of Ameri­ can giants that includes Enron and General Electric, found that out when their power project near Mum­ bai got entangled in political controversy in 1995. After a year-long rollercoaster ride, the project is almost back on track. DPC has now taken the pre­ caution of taking on an Indian partner.

Still, an Indian partner may not be enough of a buffer for all eventualities. CMS Energy of Michi­ gan has not been able to get promised counter­ guarantees from the government, despite four years of effort.

Firms with intellectual property rights worries may choose both GIA and joint venture routes. Microsoft has a joint venture with India's biggest software firm, Tata Consultancy Services, as well as an India-based 100 percent subsidiary. As one wary American chemical engineer (ironically of Indian origin) points out, "Indians are very clever. Before you know what's happening, they'll reverse-engi­ neer your product."

J. M. Huber went it alone after two attempts to work with partners. Its first joint-venture partner was technically sound but naive about legal issues that tied him to a competitor. Another partner, affiliated with an influential Indian family, didn't go along with the 153-year-old American company's corporate phi­ losophy regarding certain ethical matters.

India or China?

Several thoughtful analysts believe that, of the two countries, India currently represents a lower risk investment because:

52 Passport INDIA

• it has a history of cooperation with foreign firms

• it provides higher returns • it has a more developed legal system • it has a more developed financial sector • it has an established entrepreneurial class that

understands modern business concepts and ethics, and therefore provides greater opportu­ nities for fruitful partnerships.

• much skilled manpower is available • English is widely spoken

Strategies for Success

Indians are hospitable people who go out of their way to cultivate good relationships with West­ erners. But it takes time to graduate to the status of a genuine friend. India's business community tends to be socially conservative, and its members like to ensure that potential friends fit their mold.

But be careful about "friendly" relationships. As one businessman put it: "Friendships are useful. They cement business. But at the core of the rela­ tionship, there must be a good business 'fit,' an agreement on what constitutes sound business practices and ethics."

The Go-Between

You'll be told that connections mean every­ thing and that the only way to do business is through bribery or by using someone's third cousin's friend to do this or that work.

A trusted friend or associate is fine, but proba­ bly the best approach is to work with a professional. The Confederation of Indian Industries (CII) and the Federation of Indian Chambers of Commerce and Industries (FICCI) play the role of go-betweens, as

54 Passport INDIA

do top banks like the State Bank of India, Ex-Im Bank, the Industrial Development Bank of India, Cit­ icorp, ANZ, Standard & Chartered and investment houses like Jardine Fleming. American consulting firms like Ernst & Young subsidiaries and Cooper's and Lybrand have offices across the country. The US­ India Business Council (with a membership of all top corporations functioning in India) works out of the U.S. Chamber of Commerce in Washington D.C. and has extensive expertise.

Choose A Partner With Care

When Ford Motor Company decided to go to India, they selected Mahindra & Mahindra for a partner, a blue chip company best known for pro­ ducing the Willys Jeep. But M&M is also India's largest tractor maker, and this has provided it with a nationwide dealer and servicing network.

Expect a potential partner to contribute both top-calibre management and institutional depth - for a start. Equally important are "core competen­ cies" and financial staying power, and, to a lesser extent, the partner's market share.

Because of cultural differences, management style and vision are also important considerations. Some Indian businessmen still look at industrial enterprise through traders' eyes: Go into a busi­ ness, make a quick buck and leave. This approach encourages a disregard for quality and a tendency to underpay management.

Many companies seek Indian partners on a 49- 51 or 50-50 basis as a means of securing a foothold in India, with the hope that they can take over later, eliminating the partner altogether or reducing their holdings to minor ones. Indian companies, on the other hand, see partnership as a means of gaining needed time, technology and expertise to become

---- - --

Strategies for Success 55

global players. It's necessary, therefore, for partner­ ship goals to be clarified before any agreement is finalized, or before "hidden agendas" can derail things. This seems to be the case with the Tata-Mer­ cedes Benz venture, which began with Mercedes as a junior partner in 1994 but now seems to be abort­ ing because both parties want a majority stake.

1 O Keys to Business Success

1. Set up appointments before going. Meet with a merchant banker or representative of one of India's financial institutions (like the Industrial Credit and Investment Corporation of India (ICICI) or the Industrial Development Bank of India). Consult a specialist lawyer who deals with joint ventures and collaborations. A meeting with someone in the government, either state or federal, may be needed in the beginning. Allow time for short-notice, off-the-cuff meetings. Also, try to meet with the commercial or eco­ nomic staff of your local Indian Embassy or High Commission.

2. Make connections in India. Once in India, seek out people from your own embassy or consu­ lates. Officers there are now geared to promote business, they're very well informed, and they have extensive contact and easy access to the top echelons of business, industry and govern­ ment.

3. Look beyond the first friendly face. There's no dearth of people with connections. Always keep in mind that partner selection requires patience and good judgement.

4. Do research on potential competitors. Before Dun & Bradstreet signed up Satyam Comput­ ers in Secunderabad for a joint venture, they

56 Passport INDIA

spent two months in India checking out thirty other companies.

5. Be patient. Don't go with the mindset that you'll make a breakthrough or strike a deal during your first visit.

6. Don't under-rate India's legal system. It's strong, and it's based on a Western (British) model. When political one-upmanship shut down the previously mentioned Kentucky Fried Chicken outlet in New Delhi, a court order had it promptly reopened.

7. Beware of "under the table" tactics. Bribery and corruption aren't needed if you have a good product and some patience. There are many Indian businessmen, government offi­ cials and ministers who take pride in their hon­ esty and integrity.

8. Offer your best. The market can be both lucra­ tive and competitive, so offer your best tech­ nology. By the same measure, be wary of people offering deals that sound too good to be true. They probably are.

9. Use Indian talent. India has a lot of managerial talent. Don't assume that an expatriate Indian who works for you in your home country is your best choice. He may be as out of touch as you are. Non-resident Indian managers can stir up resentment among Indian staff, who may feel they're just as qualified and more experi­ enced. Hire locally, preferably from competi­ tors, and then train him or her to your needs.

10. Be flexible about deadlines. Things move at a different pace in India. Overestimate comple­ tion dates.

Time

A Seasonal Approach

Indians are arguably the least time-conscious people in the world. In Hindi, the word Teal means both yesterday and tomorrow. While it doesn't jus­ tify, it certainly conveys the latitudes Indians often seem to take with punctuality and deadlines.

Call it philosophy or cosmology, but the aver­ age Indian believes that things will happen when they have to happen. No human agency can change that. Perhaps it's because the bulk of India's popu­ lation lives in villages or were brought up in one. In the countryside, time is measured by seasons, not by calendar dates or wristwatches. And the ties between city workers and their village families remain strong. At festival times or for the marriages and funerals of relatives ("relatives" can be an extensive category), a worker is liable to take leave or just prolong a leave of absence.

Government employees don't feel any need to be punctual, and rules are such that they aren't punished for it. However, the Bombay worker remains a model of punctuality and discipline. In the monsoon season, when rain floods the roads and metro-railway tracks, hundreds of women can

58 Passport INDIA

be seen wearing rubber footwear and carrying a change of clothes tucked under their arms. Upon reaching their offices, they quickly change clothes and footwear - now neat, clean and ever efficient.

God's Will

Time is sometimes "stolen" by unscheduled occurrences - processions blocking the road, a small quarrel that balloons into a bandh (general strike), visitors (especially friends and relatives) who show up without prior notice, the summons of a boss who will feel slighted if not immediately attended to, or various unforeseen problems of a business or personal nature.

A Ludhiana, Punjab businessman, whose com­ pany is renowned for making wool sweaters, told this story: In November 1984, in the wake of Indira Gan­ dhi's assassination, there were horrific riots and two trucks carrying a shipment of his goods were burnt near Delhi. As a result, he failed to meet his deadline and a German retailer terminated his contract. 'We did not argue, it was God's will. Who could have done anything at the time? But three years later, the retailer was back. What we gave him was costing him US$4 to $5 per piece more in Hong Kong .... "

Appointments

"Dropping in" or calling in at short notice is a completely Indian way of doing business, but it's not an advisable approach for foreigners or visitors from out of the city. Though the corporate culture is normally methodical and punctual, it's difficult to generalize. Many firms are still proprietor-owned and therefore depend on the business culture stan­ dards of chairmen, CEOs and company principals.

The offices of government officials tend to be

Time 59

disorganized, and appointments suffer accordingly. Visitors are advised to add or subtract thirty min­ utes or so to their schedules to compensate for this. Ministers and their bosses may summon meetings at a moment's notice, without regard to time over­ runs. Most senior bureaucrats work late and over week-ends to catch up.

Call in if you have a problem meeting a dead­ line. Indians are aware of the hazards of keeping schedules and can be quite accommodating, once they've decided to meet you.

Time Zones

There's only one time zone across the country, though India could do with at least two, consider­ ing that it extends across 30 degrees of longitude. This causes the sun to be up unconscionably early in eastern India. But some things are left well enough alone. In a country where things are already chaotic, the addition of time zones would only add to existent scheduling headaches.

Indian Standard Time is 5 1/2 hours ahead of Greenwich Mean Time. This often causes confusion for international businesspeople, especially when other countries switch to Saving Time and Daylight Saving Time during the winter and summer months.

Business Meetings

In the 1990s, Indian corporate culture cultivates an up-front style. Issues are laid out and discussed in sequence, with bluntness and skill. Discussions can be free-wheeling, but deference is still made to seniority, age and corporate hierarchy. Still, many proprietorial businessmen continue to honor the old-style, feudal approach, i.e. loyalty is more important than competence or qualifications. Their's is a style similar to a poker game in which the ability to bluff is prized.

Arranging the Meeting

Initial contact may be through a friend, con­ sultant or agent. Contact must be planned, but don't be surprised at last-minute rescheduling or cancellations.

Notify your Indian counterparts in advance about the officers traveling with you and their func­ tions. This will be more than a hint to the other side to have comparable personnel at the meeting.

Before your initial meeting, have a clear idea about what kind of relationship you're seeking (to license your technology, establish a 100 percent

Business Meetings 61

subsidiary, establish a joint venture), as well as its scale and quality. Keep in mind that your Indian counterparts are likely to have done their home­ work on you.

The First Meeting

No formal order or format applies. Initial meet­ ings may occur between core staff, including Chief Operation Officers and their finance and legal aides.

India's business elite are quite Westernized. On the outside chance that your meetings, or the nego­ tiations that follow, aren't conducted in English, a colleague or associate can be called upon to help. Indian businesses are quite comfortable with pro­ fessional slide and audio-visual presentations. Courtesy and a restrained style are useful, even when "putting all of one's cards on the table." Fig­ ure out the hierarchy and always defer to age.

There's a class of small businessmen who may put themselves across as having far greater substance than they do, or who may promise to meet deadlines that cannot be met. If you insist on open and transpar­ ent dealings, things probably won't go wrong. Though they may have lower labor costs, they still have to deal with production costs, overhead and depreciation. The point is that there's no such thing as a "dream" deal. Weeding out people "on the make" should be an important goal of a first meeting.

Business cards are now the norm in corporate circles but not so much in government offices, unless the officials are running state-owned companies. The rule of thumb is that the higher the rank of the per­ son you meet, the less the chances are that you'll be offered a business card in return. The unspoken mes­ sage is: You asked for the meeting, so leave your card. You know how to get in touch with me.

13 Negotiating

<, R with the Indians �l/,"'--

__ _

Lake Swimming vs. Ocean Swimming

For the last forty years, Indian businesses

swam and flourished in a protected lake. They're

now being asked to swim in the ocean and aren't

entirely convinced that they have the stamina. But

as they're not about to abandon what they've built

up, they've moved quickly to understand this new

business climate and are aggressively seeking capi­

tal, expertise, technology and partnerships.

Tactics

While there are no specifically "Indian" negoti­

ating tactics, the following guidelines may be useful:

• Indian businessmen are tough, hardheaded

negotiators. They're very focused, very ambi­

tious, they. listen well and have clear agendas.

Figuring out what those agendas are is half the

battle. • Be thoroughly prepared. (Your Indian counter­

parts certainly will be.) Identify your negotia­

tion issues and put them in hierarchical order.

Negotiating with the Indians 63

However, don't get overly committed to the order.

• Threatening to take your business elsewhere is a useful ploy. Make it clear at the outset that you're considering several other firms - but only if, in fact, you are. It's very difficult to keep secrets in India.

• Don't be swayed by such superficialities as a pol­ ished English accent or elegant table manners. And don't confuse politeness with diffidence.

• Flattery is an ancient and well-practiced art; Indians can be very articulate and persuasive. You may be told things that you want to hear, only to find that you've "lost the shirt off your back."

• Gestures count. Carefully planned ones (invit­ ing a CEO and his wife to dinner, providing a cake for the birthday of a main negotiator or a modest gift for the child of an executive you're working with) can promote good will.

• Openly questioning a senior's point of view isn't the Indian style. If a question needs to be broached, it should be done by an officer of comparable rank.

• Nothing is immutable. Just as divorce is rearing its head in Indian marriages, corporations are changing character. It's not unusual to encounter the reserved, closed-style decision-making pro­ cess and the more open style within two branches of the same family-owned enterprise.

• Negotiations can be intense. Issues are laid out in sequence and discussed threadbare. If stuck, it may be useful to bring in a third party (an auditor, lawyer, or even a fellow businessman) who is acceptable to both sides to break the deadlock.

-----

64 Passport INDIA

• Particularly contentious issues can be dealt with separately, between the two top negotiators, then presented to the group for finalization. Others can be taken up on the side by the respective specialists (say, financial officers and attorneys).

• Keep some "goodies" in reserve and give them up at strategic intervals. Present them as good­ will gestures, not as concessions requiring return favor.

• Many Indian companies have a dominant pro­ prietor or shareholder, so it's important to ensure that decisions about equity participa­ tion, raising finances, market share and level of technology transfer have his or her approval. Otherwise, the deal you worked so hard on may end up being short-lived.

Contracts, Indian Style

There was a time when business was based on trust and goodwill and one's word was binding. Even today, many commission agents, moneylend­ ers and traditional businesses operate on promises that wouldn't hold up in a court of law.

But the modem sector of the economy believes in detailed legal documentation. The Companies Act and the Partnership Act, both modeled on British law, regulate everything from the formation of a company, partnership or joint venture to their dissolution.

While most companies have their own legal divisions, business also functions on "reputation." Dubious practices or breaches of contract often lead to an informal black-listing. (However, there's still the problem of pinpointing what constitutes "sharp" practices - actions on the boundary between legal and illegal.)

Business Outside the Law

A Brief History of Corruption

Most of the men who came to rule India in 1947 were from humble backgrounds. Even those who were well-off, like Jawaharlal Nehru, India's first Prime Minister, were inspired by Gandhi's example to spurn worldly possessions and cultivate a simple life-style. But within a generation, corruption and graft became all-pervasive.

Corruption, like water, finds its own level. Some, to salve their conscience, took bribes and payoffs in the form of traditional gifts during festivals and the marriages of their children. Others preferred cash, jewelry, Cartier wristwatches or even expensive foun­ tain pens. A number of politicians and officials took money for services rendered through relatives and frontmen, and not a few had secret bank accounts in Switzerland or the Cayman Islands.

After Independence, in an effort to eliminate the notion of officials as sahabs, salaries were allowed to decline in value. At the same time, an impecunious political elite took over the reins of government and, in the name of creating an egali­ tarian society, inaugurated a system that took con­ trol of virtually every element of the economy.

66 Passport INDIA

The new system lent itself to greed. Even today, businesses must obtain certain government permis­ sions, licenses or clearances in order to establish themselves or to expand. While some politicians are content to take a cut in exchange for expediting things, others demand a stake in the business via relatives.

Bureaucrats, for their part, have played the role of scavengers, dining on the not-insubstantial left­ overs. Initially, the British-trained bureaucracy made a stand, but they realized that the politician­ as-minister was their master. Many good men decided to·side-step the process by taking appoint­ ments where there were few opportunities and pressures for graft. Others succumbed. The latter discovered the mother lode of money that could be made by slowing down, hastening, blocking or facilitating the progress of files relating to particu­ lar licenses, quotas or proposals. Telecom workers routinely turn off lines until their payoffs arrive.

Traffic cops are known to take systematic payoffs so as not to report overloaded trucks. The police have been accused of letting off murderers for a "con­ sideration" and the judiciary, particularly its lower echelons, has been charged with abetting some of these practices. And yet, in the past decades, it's hard to recall any major politicians, businessmen or senior bureaucrats who've been convicted of taking or giv­ ing bribes - though many have been charged, including several prime ministers and their kin.

The Art of Tax Evasion

During the era of the license-quota-subsidy­ raj, foreign investment was restricted, and within the country, expansion, establishment of plants, importation of raw materials, etc., were determined by who was willing to contribute what to "party

Business Outside the Law 67

funds" or who could deliver the votes. In addition, businesspeople were expected to pay off an increas­ ingly large army of politicians, babus, policemen, inspectors and others.

But such large amounts of money couldn't be raised by businesses that paid the lawful tariffs and obeyed the prevailing tax regulations. A complex underground economy developed. Big business houses employed an army of accountants and law­ yers to shield them from the tax/tariff net via tax breaks and tax shelters. India's tobacco giant, the India Tobacco Company, may owe the government over US$300 million in excise, but the case has been languishing in the courts for years.

Some companies create a "parallel" economy, with its own books and methods of exchange. For example: An artificial silk factory smuggles in yam from abroad or buys it from a producer who, in order to evade excise taxes, hasn't declared his total production. The factory then churns out the material in excess and fails to declare its total production, again, to evade paying duties. After government excise inspectors are paid off, the material is sold to wholesalers who will fudge their books. Finally, the material is sold, perhaps in the form of saris, by myr­ iad petty retailers who keep no books at all.

Black & White Money

In a similar manner, through processes of under/ over-invoicing exports and imports, many industrial­ ists and traders (as well as doctors, lawyers and small retailers) have salted away fortunes abroad. The amounts of this so-called "black" money are impossi­ ble to quantify. In real estate deals, two prices are cited - one ''black" and the other "white." In most cases, a deal is struck with a mutually agreed upon propor­ tion of each being used.

68 Passport INDIA

The tax authorities often organize elaborate

raids on factories, homes and other premises to

check the stocks of raw material and tally them

with production, and to seize bank account books

and "black" money (which, being "hot," can't be

kept in banks). The Reserve Bank of India has

directed all commercial banks to report the details

of all cash deposits and withdrawals that exceed Rs

1 million (US$27,000).

Rebels, Bandits & Thugs

The Dacoits, a kind of mafia that prey on pil­

grims and traders, have a legendary, Robin-Hood­

like status. Some gangs have developed interna­

tional links, mainly in the drug trade. Opium

comes in from neighboring Burma, Nepal and Paki­

stan, is refined in Indian laboratories, and then is

shipped abroad. Criminal gangs, often formed

along caste lines, excel at robbery, extortion and

smuggling. Many politicians have developed links

with such persons, since they provide "muscle" for

intimidating political rivals at election time.

But it's in India's premiere city that organized

crime steps to the forefront. Bombay's underworld

extends as far as Hong Kong, Thailand, Singapore

and the Gulf Emirates. Bombay's Fort area is lined

with shops displaying empty cartons for foreign

consumer goods - hair dryers, cameras, perfume,

watches, you name it. Strike a deal, and the friendly

shopkeeper will go around the comer and fetch the

actual stuff. It's said that if you pay the premium,

you can get anything from refrigerators and wash­

ing machines to Nikon cameras and French per­

fumes, all illegally brought into the country.

The most lucrative operations center around

gold, which holds, for Indians, a fascinating allure.

(Crime syndicates purchase gold abroad with drug

Business Outside the Law 69

smuggling profits, "import" it in 'biscuits,' and then sell it to local jewelry makers.) Gangs are also involved with prostitution, busting labor unions, money laundering and within India's movie indus­ try, where gangland high-interest money is some­ times the only capital available for such a high-risk industry.

Another major area of operations is real estate. Bombay's rent control laws forbid the eviction of ten­ ants, but street toughs will do the job for a fee. In the 1990s, many have made fortunes by assisting devel­ opers to clear sites they wish to build on in a city whose office rental rates are higher than Manhattan's.

Such "sleeping with the Devil" tactics have, of course, attendant risks. It's said that involvement with gang affairs cost the industrialist Sunit Khatau and the managing director of East West Airline their lives. Both were killed by professional assas­ sins on the streets of Bombay.

By and large, such activities remain in the underworld, but they do sometimes surface. The horrific anti-Muslim riots of 1992-1993 divided the gangs along communal lines. With the help of a neighboring country, Muslim gangsters set off a series of car-bombs in Bombay that killed 400 civil­ ians in one day.

Graft and Corruption

In 1995, India was rocked by what has come to be known as The Hawala Scandal (hawala = a traditional monetary transaction). A meticulously kept diary of a New Delhi businessman revealed a web of bribes and kickbacks totally 650 million rupees (worth US$33 million at the time) to politicians and bureaucrats of every stripe over a four-year period. The businessman in question not only bribed officials, but also func­ tioned as an intermediary for the bribes of others.

70 Passport INDIA

Some prominent European companies figured in his lists. The government (which controls the Central Bureau of Investigation responsible for federal cases) tried to block investigation, which is currently being carried out under the aegis of India's Supreme Court.

In yet another scam, a state-owned fertilizer company paid money to a Turkish company (better known for its travel agency services) for 200,000 tons of urea worth US$38 million. While the com­ pany paid the money - allegedly to relatives of the then-prime minister and to the Minister of Fertiliz­ ers - the urea never materialized. Here, again, India's Supreme Court was called upon to force a CBI investigation. But unfortunately, the CBI's record of successful convictions is woeful. In a sim­ ilar case, officials are accused of having created nonexistent herds of farm animals and siphoning off hundreds of millions of dollars for their upkeep under a government husbandry program.

In August of 1996, when police raided the home of a former communications minister, they found so many rupees tumbling out of plastic bags, suitcases and bed linens that it took them almost two days to count it all. The money is believed to be kickbacks for telecom licenses.

Such scandals have inspired tortuous investi­ gations that involve everything from foreign and off-shore bank accounts to global front companies. Many have involved alleged "defense purchases." Apparently, no sector has been left untouched.

Present Changes & Future Outlook

Some businesses refuse to be "in the game." Indeed, India's premiere industrial house of the Tatas has a reputation both for the quality of its products and for its non-involvement in political shenanigans.

Business Outside the Law 71

American businessmen, faced with the Foreign Corrupt Practices Act back home, have little choice but to say "No!" to officials who expect under-the­ table remuneration. The road, though rocky at times, can actually become smoother later. The American chemical giant J.M. Huber refused to pay for the issuance of an environmental protection board clear­ ance for its plant. Huber officials went repeatedly to the local Pollution Control Board Office but the doc­ ument, for a clearance already granted, was never avail­ able. Finally, they got the American Ambassador in India to intervene. "Now," says a Huber official, "we have no problems. Word is out that we won't pay. You compromise once and you're stuck with the leeches forever."

As the government gets out of the "control" business and its role in everyday life shrinks, hope­ fully so, too, will corruption. (During the first half of 1996, an unprecedented 26 politicians were indicted for bribery by India's Supreme Court, including seven cabinet ministers who were forced to resign.) But such changes will be a long time coming, even in light of the present liberalized economy. Said one Indian politician, quoted recently in The Economist, "A government that lives within its means lacks imagination."

�---� Names & Greetings

Order of Names

Naming practices in India can be bewildering. Fortunately for foreigners, Western-style name order (given name, middle name, surname) is becoming increasingly popular. An important caveat is that in parts of the south, both men and unmarried women place their surname and/or their father's name first, with their given names at the end. Often, the former appears in the form of initials, as in HD. Deve Gowda (the Indian prime minister from Karnataka). The H stands for Hardanahalli, his native village and D for his father's name, Doddegowda. Both in the south and in Maharashtra, a father's given name becomes his offspring's middle name.

Sharma and Singh are the most common sur­ names in northern India. The former is always a bra­ haman, the latter never. Then, it gets a little more complicated. All Sikhs take the name Singh as their surname or middle name, though other Singh's belong to the upper kshatriya caste. In fact, surnames often indicate one's caste. Rao is a title in the north and a surname in Andhra Pradesh, but it's used only by brahamans or members of the kamma farming community.

Names & Greetings 73

Some people dispense with surnames that depict caste (such as Chandrashekhar, the former prime minister of India); others have begun using their father's given name as a surname. Thus, a well­ known industrialist family uses Sriram as a sur­ name, though it was actually the given name of the family's patriarch, Lala Sri Ram.

Traditionally, the suffix Kumari was used to indi­ cate an unmarried woman and Devi a married one. Today, married women adopt their husband's sur­ names as their own.

Forms of Address

Like the traditional greeting namaste, the suffix ji (pronounced gee) is appropriate for both sexes, regardless of age, and for almost every occasion. Attach it to a given name or surname and you take care of everything, as in Michael-ji, Jane-ji or Jones-ji.

A more familiar (though still suitably humble) suffix is sahab (pronounced like Saab, the car). For example, "Smith sahab has been very kind to visit us." It can also be used along with a title, as in "Doctor-sahab ," "Professor-sahab ," "Minister-sahab" or "Engineer-sahab."

Elders (everyone, not just relatives) are almost never addressed by their given names alone. The English Uncle and Aunty have become popular, catch-all suffixes. A colleague's college-going son will always address his parent's friends as Usha­ Aunty and Vivek-Uncle, never as simply Usha or Vivek. So popular are these titles that teenagers and young persons routinely address anyone over the age of thirty-five as Uncle-ji or Aunty-ji in the North and Sir (pronounced saar) in the south. And it's not uncommon to hear someone addressed as Sir-ji

Teachers are always addressed as Sir or Ma'am, and it's not uncommon for Indians to address their

74 Passport INDIA

professors or grade school teachers in this manner for life.

In the corporate world, the American habit of using given names alone has become common, but it's best reserved for peers and people of equal seniority. It's safer to use Mr. Tata, Dr. Srinivasan or Ms. Gupta until asked to do so otherwise. For mar­ ried women, Mrs. is fine.

When addressing government officials, the prefixes Shri and Shrimati are used instead of Mr. and Mrs. (Su-shri is the equivalent of Ms.) In the south, Thiru and Thirumathi are favored among senior government ministers and bureaucrats,

Greetings

The traditional Indian greeting namaste (also naamaskar or, in the south, vannakam) is uttered while holding the hands together, as if in prayer, under the chin, slightly nodding the head and looking down. However, in business meetings, a firm handshake is most appropriate. (Indeed, a Westernized executive will be somewhat baffled if a foreign colleague greets him with a namaste.) When expressing sincer­ ity or when saying good-bye, both hands may be used for the clasp. There's one key caveat. Most Indian women are unlikely to follow suit. The sim­ ple rule of thumb is to wait for the woman to offer her hand in greeting. If she doesn't, respond with a polite half-bow and a simple "Hello."

Indians are not quite used to saying "Good morning!" "Good night!" or "Good-bye," though the younger generation is learning. Likewise, "Thanks" and "Thank you" aren't part of the Indian greeting system, though Bahut Shukriya (Lots of thanks) or Dhan-ya-vad (Thanks) are used formally. One reason for this is that the feelings they signify are contained in the tone of the Ian-

Names & Greetings 75

guage and in accompanying gestures. An especially humble namaste, for example, could pass for a "Thank you" or a "See you soon!" for "Good-bye."

Traditional greetings are very important. Hin­ dus will often bend low, touch the feet of their interlocutor, and then touch their own head. This is related to caste, but mainly to one's family relation­ ship and the age of the person in question. A son will touch his father or mother 's feet or those of his uncles and elder brothers. In less traditional fami­ lies, a simple namaste suffices.

Muslims greet each other with the Arabic As Salaam Aleikum. A Muslim may also use the secular Aadab Ar.: (I offer you my greeting) while raising his right hand, palm facing inward, to his forehead in a salute.

Embracing members of the opposite sex is con­ sidered unacceptable. However, members of the same sex may hold hands in public or embrace if they happen to be old friends meeting after a long time or on special occasions. They may also do so on religious occasions, like Eid or Holi, by first plac­ ing their neck and face on a friend's left shoulder, then his right, and then the left again, three times.

NORlliERN \NOIA

I

WESTE.RN INOIA

I

I EMPHASISING "YES• A POINT

®5_c_o _m _ m_u_n _ic_a_tio_ n_S_ty1_es __ _

Gestures Derived from Classical Dance

For non-Indians, the most misunderstood

Indian gesture is the northern habit of nodding

one's head and shaking it from side to side. A West­

ern engineer was baffled when, after an Indian sup­

plier nodded energetically throughout their

conversation, the suppler turned down the deal.

"He said 'Okay.' What happened?" But in fact, the

supplier was merely indicating "Yes, I understand

what you're saying." Indian classical dance has taken many common­

place Indian gestures and refined them into an art

form. There are ones for every mood - anger, pain,

happiness, and so on. The Buddha's classic gesture

of the palm facing outward, with thumb and forefin­

ger making an 'O' is the abhaya mudra, which signi­

fies "Have no fear." At an Indian classical music

concert, people sometimes shake their heads from

side to side as an expression of deep enjoyment or

ecstasy. At certain moments, they may loudly praise

a particular movement by saying Wahl Wahl

So don't be surprised to see a lot of very differ­

ent mobile gestures and expressions. By and large,

no gesture is made with the "unclean" left hand (tra-

Communication Styles 77

ditional used for personal hygiene), though Muslims may make a traditional prayerful gesture, with both elbows at their sides and palms facing upward.

Humor

Indian humor ranges from "sick" (handi­ capped persons can be the butt of jokes) to slap­ stick. Though people joke about other people's castes or religions, they're quick to take offense at jokes directed at themselves.

Western-style jokes, even somewhat risque ones, are fine if restricted to the company of one's peers. Wit and sarcasm are best avoided. India's version of "Polish jokes" are Sardarji jokes, told at the expense of Sikh males. It's well known that most of the jokes, self-deprecatory in nature, are made up by the easy-going Sikhs themselves.

•

•

•

•

•

Behavioral Guidelines

Public displays of affection aren't encouraged . And deliberately touching someone you don't know very well, even as a friendly gesture, will only serve to make an Indian uncomfortable.

Pointing is rude. A gentle signal with the right hand, palms facing upward, is polite when referring to a person or emphasizing a point.

Indians may eat at street stalls, but you won't see any educated well-dressed persons eating in public, not even an apple or a piece of candy.

While sitting, avoid touching those next to you with your feet. And take care not to drape your feet across each other, with your shoe pointing at anyone or your sole exposed to them.

Indian's have a deep respect for books and learning. They dislike books to be left on the

78 Passport INDIA

floor or for books to be touched by someone's foot or shoe. It's not uncommon for an Indian to apologize for such oversights by touching the book and then his forehead.

• Indians are open and intensely curious about other people. Asking about salaries, marital status and age is considered friendly, rather than rude. You don't have to provide specific numbers, but do respond. If a question strikes you as too personal, the most gracious tactic is to smile evasively.

• When it comes to topics of conversation, poli­ tics is fine. As for religion, it's better to ask and listen than to comment.

• Be aware that some people can be "stuffy," especially in the presence of people they con­ sider to be their juniors.

• As elsewhere in the world, "old money" family members rarely reveal the extent of their wealth. The "nouveau riche," on the other hand, can be uncomfortably flashy.

• Indians are used to foreigners and foreign ways, so don't hesitate to be politely firm on issues you feel strongly about. But do so in a manner that doesn't cause your interlocutor to "lose face" in front of juniors, peers or superiors.

• Like many Easterners, Indians don't like to say "no" outright. Sometimes, the lack of an answer is tantamount to a "no." In other instances, a "yes" without a follow-up can mean "no."

@ ___ c_u_s_to_m_s ____ _

High Culture

India has a well developed classical music and dance tradition. Young Indians from middle-class families learn to play or sing Indian notes and scales and about compositions called ragas. They may learn to play traditional stringed instruments like the sitar, sarod, veena, or violin (played more like a viola), or wind instruments like the bansuri or the two-drum combination called the tabla. Indian girls are taught the Indian equivalent of ballet - the Bharat Natyam, Orissi, Manipuri, Kuchipudi and Kathak dances.

Classical music and dance are divided between the northern (Hindustani) and southern (Carnatic) traditions; both have their origins in devotional and religious music. Indian music has a much wider range of scales than traditional Western harmonics, and its scale notes are purer in terms of mathemati­ cal intervals. Another difference is that there's no pitch in Indian music, nor are there specific keys.

Popular or "Low" Culture

India's rich folk music and dance traditions

,1

[8 �Government & Business \._)

No Dinosaurs

Despite impressive economic growth under the Labor government - an impressive $90 billion GNP - the new Likud government says it will make economic reform a top priority. Soon after his May 29th 1996 election victory, Prime Minister Net­ anyahu (an MBA from Massachusetts Institute of Technology's Sloan School of Management) unveiled sweeping proposals to lower taxes, lift regulatory barriers and privatize the heavily state­ run economy.

Netanyahu says Israel's potential for having one of the world's most productive economies is shackled by centralized planning and a rigid bureaucracy; he wants his government to dismantle those barriers. With the help of Finance Minister Dan Meridor, he will likely speed up privatization by allowing the public to buy shares in such state­ run companies as Telecom, the airline El Al and major banks. Israel, he said recently, has been sad­ dled with "twin curses" - an extremely large defense industry and a socialist economy - but that those obstacles have become "twin blessings." Israel's defense industry has created an enormous

Government & Business 35

pool of highly educated workers, and socialism never burdened Israel with the outmoded indus­ tries that now dragging down Europe and, to a lesser extent, the United States. "As a result," he said., "there are no dinosaurs walking around."

Wooing High Tech Investors

Israel is second after the U .S. in the amount of venture capital relative to the size of the economy, according to a recent study. Multinationals pouring in funds include Nestle, Intel, Volkswagen and Motorola. In the U.S., only about two-thirds of ven­ ture capital goes into technology; in Israel, it's 100 percent. Between 1991 and 1994, the amount of ven­ ture capital swelled by a factor of 10 - to US$500 million. Two-thirds of it comes from abroad. In 1995, overseas investors poured in US$2.3 billion into promising Israeli start-ups, joint ventures, mergers and acquisitions. International investment banking houses with offices in Israel include Leh­ man Bros. Salomon, Smith Barney, Goldman Sachs and Merrill Lynch, as well as key financiers of Cali­ fornia's Silicon Valley.

Netanyahu hopes to lure even more invest­ ment from top Wall Street money houses. Soon after his election, he made a rousing luncheon speech at the New York Stock Exchange to about 150 of America's most powerful executives and cor­ porate financiers. Within a decade, he said, "we could have an economy of a quarter trillion dollars. An economy with the most powerful resource of all: a gifted people with a technological base, able to compete in the world marketplace of tomorrow."

During the first five months of 1996, almost a third of the 36 new foreign issues on NASDAQ were Israeli companies. (Israel is second only to Canada for the number of its companies publicly

36 Passport ISRAEL

traded on NASDAQ). And Netanyahu has prom­ ised that "many more" Israeli stocks will be traded on the New York Stock Exchange during his admin­ istration than the current three. There are presently over eighty Israeli companies on the three New York stock exchanges.

Netanyahu' s government is continuing what the previous Labor administration began: develop­ ing roads, pipelines, a Tel Aviv regional commuter rail, and spending about $830 million to expand Ben Gurion Airport. Tourism and business travel are expanding rapidly: In 1995, seven million trav­ elers boarded over 30,000 international flights to or from Israel, and the annual figure is expected to reach 16 million within the next two decades.

Government Encourages Entrepreneurs

Government cooperation is bound up in almost every start-up operation. In 1995, for exam­ ple, the chief scientist's office of the Ministry of Industry and Trade gave $346 million in grants to 1,213 civilian Research & Development projects. After receiving these, many Israeli firms then get investments from international venture capitalists.

A number of government-assisted interna­ tional companies are opening facilities in Israel: • The single largest European investment in

Israel is a $350 million partnership between Volkswagen and Dead Sea Works to manufac­ ture magnesium parts (the lightweight metal is increasingly popular with automakers). The Israeli government subsidized 38 percent of the project's total cost - about US$133 million.

• The cornerstone had been laid for the new Intel factory in Kiryat Gal that will produce flash memory for mobile telephones and computers.

Government & Business 37

The total investment will be US$1.6 billion, 38 percent of which will be funded by an Israeli Government grant. Peak proEluction capacity is expected to be $1 billion per year.

• Rockwell Semiconductor Systems and Analog Devices (one of the largest semiconductor com­ panies in the U.S.) are establishing Israeli research and development centers.

• Johnson & Johnson will open in Israel in 1997. • Smith Barney, one of Wall Street's leading

investment banks, is opening an Israeli office. • Vishay Intertechnology, manufacturer of a

range of electronic resistors and sensors, opened its fourth plant, a US$175 million fac­ tory in Migdal Ha' emek, to produce multilayer ceramic capacitors for electronic equipment.

• The Italian insurance company, Generali, has recently invested US$400 million in return for 40 percent of Israel's largest insurance company.

---.-.:..:.

<\ \\

c"9 � The New Business Climate r,- (lj

L/

Israel is no longer an emerging market: it has emerged. Israel is among the twenty richest coun­ tries in the world and living standards are high. The Bank of Israel says $2.1 billion was pumped into the economy in 1995 by overseas investors,

which is over twice the 1994 level. Israel's white­ hot economic growth should hit 6 percent in 1996. Foreign investors are building factories, setting up R&D facilities, buying up Israeli companies and forming strategic alliances. "Corporations are beginning to understand that the Israeli economy provides all sorts of opportunities for them, not just in terms of marketing, but also in terms of invest­ ment," says Martin Indyk, the U.S. Ambassador to Israel. "Word is getting out that Israel is a potential 'Asian tiger' in the Middle East."

From Socialism to Free Enterprise

In 1985, Israel had an inefficient socialist econ­ omy crippled by South American-style inflation. Then the government restructured the cumbersome state-controlled system. Its sweeping pro-growth reforms included trade liberalization, privatization

The New Business Climate 39

of government monopolies, the removal of unnec­ essary currency controls and the elimination of much red tape. The budget deficit was curbed, end­ ing its galloping 1985 inflation rate of 450 percent. By 1995, inflation had been reduced to a manage­ able 8 percent.

In 1985, the GDP was $22 billion; ten years later, it had quadrupled. In 1960, almost 70 percent of Israel's exports were agricultural products; today, these constitute only 2 percent, while high­ tech products (microprocessors, CD-ROMs, medi­ cal diagnostic equipment and biotech/ telecom/ software protection systems) make up 60 percent. Israel is the third-largest exporting nation in the world on a per-capita basis.

Israel is the only country that has Free Trade Agreements with Europe (the E.U. and E.F.T.A.), the United States and Canada, and it spends a higher percentage of its GDP on research and development than any other nation. With its small economy and limited domestic market, Israel must expand exports to boost growth.

Brain Power

Israel has few natural resources but an abun­ dance of intellectual capital. As previously men­ tioned, the influx of highly educated Jews from the former Soviet Union has boosted Israel's brain power. (In certain high tech industries, about 30 percent of the engineers are recent Russian immi­ grants.) Per capita, Israel has the world's highest number of engineers and scientists; the U.S. has 70 per 10,000 people, while Israel has 135 per 10,000. And three times more of them are engaged in research and development per capita than any­ where else. According to former Prime Minister Shimon Peres, in 1996, "Israel will make more out

40 Passport ISRAEL

of her brains than the Saudis will make out of their oil wells." (Israel's annual per capita GNP is about $16,000, compared with the Saudi's $6,000). Twenty-six percent of Israeli professionals work in technical fields (compared with 18 percent in the U.S.), and Israel ranks ahead of Japan, Britain, Swe­ den and The Netherlands in the percentage of peo­ ple seeking higher education.

Israelis are world leaders in biomedical and agri-tech research. Israeli scientists have produced sophisticated magnetic resonance image machines, ultra fast x-ray imaging cameras, and improved breast cancer and prenatal diagnosis. Researchers have discovered new drugs or treatments for can­ cers (including leukemia, ovarian cancer, malignant melanoma), multiple sclerosis, herpes, hepatitis B, arthritis, lupus and osteoporosis, developed anti­ tumor vaccines, improved bone-marrow trans­ plants and new treatments for infertility and heart attack victims. Israeli scientists have developed items ranging from more nutritious potatoes and strains of wheat with twice the protein of other varieties to innovative solar energy technologies and fire-resistant plastics.

The High Tech Promised Land

Israel is as close to the technological cutting edge as the U.S, or any country in Europe. Your automobile was probably designed, in part, on a software system created by an Israeli company, Cimatron. When you read a magazine (such as Time, Sports Illustrated or National Geographic), there's a good chance that the color printing used a system developed by Israel's Scitex. The Intel 486 chip on your personal computer was designed (and likely manufactured) in Israel. The Intel 8088 microproces­ sor - the "brains" of the original !BC PC that helped

- -------------------�. ___ .::1

The New Business Climate 41

spark a worldwide personal computer revolution - was born here, too. In 1998, Intel will open its third facility in Israel, a $1.6 billion flash memory chip plant. This represents the largest foreign investment ever made in Israel. (Israel encourages foreign capi­ tal investments and start-ups with cash grants and excellent tax breaks.) In 1996, Israel's first communi­ cations satellite, Amos, was launched in French Guy­ ana. (It's expected to provide improved services for cable TY, cellular phones and on-line data links.) About 3,000 new tech companies have been formed here since 1990.

Peace = Investment Opportunities

In 1993, there was almost no foreign investment in Israel, because many companies were afraid of being blacklisted by Arab states. But since then, the picture has changed radically. Due in great measure to the signing of the Oslo Peace Accords, 50+ coun­ tries have made ties with Israel. El Al, the national airline (which had lost business for decades because many countries were too intimidated by the Arab boycott to offer landing rights) has more than doubled its number of destinations.

Encouraged by the peace process, Israel has made a dramatic shift from using its expertise for military fields to applying it to innovative civilian commerce. In 1967, the defense budget ate up a whopping 30 percent of the GDP; today, it accounts for less than 10 percent. Previously, Europe and the U.S. had been Israel's biggest markets. But with the erosion of the Arab boycott, 45 percent of Israeli exports now go to such previously closed markets as China, South Korea, Vietnam, Indonesia and India.

An Israeli company is installing the air traffic control system in Hong Kong's new airport. Other

42 Passport ISRAEL

Israeli companies are installing new phone systems in Eastern Europe and parts of the former Soviet Union. And Israeli exports in telecom, computer­ ized medical electronics, agri tech and educational software are skyrocketing.

Trade with Asia has grown over 85 percent since 1990. Japan opened a trade office in 1995 and is already Israel's second largest export market. As a Japanese official explained, "Israelis are great at innovation and have a Japanese sense of teamwork and loyalty to the company."

Briefcases, Not Guns

Of the $20 billion that will be earned in export markets in 1996, only 1 / 50th will derive from exports to the Arab world. But this meager percent­ age is destined to change in the future as Israelis and Arabs - separated by almost fifty years of con­ flict - plan joint ventures and import-export arrangements worth billions of U.S. dollars. Busi­ nesspeople from the Gulf states, Saudi Arabia, Jor­ dan and Egypt are arriving in Israel with briefcases instead of guns. Israel and Jordan are currently planning over US$25 billion worth of projects, from joint water conservation to international roads, rail­ ways and canals.

In July 1996, Israel and Egypt co-signed a deal to build the Middle East Oil Refinery, a US$1 billion investment, in Alexandria. It's expected to yield up to 100,000 barrels a day.

Arabs + Israelis = Tourism

A joint Israeli-Jordanian Red Sea international airport, Shalom-Salaam, will serve the adjacent port cities of Eilat and Aqaba and open up the Red Sea Riviera. Royal Jordanian Airlines and El Al are

The New Business Climate 43

flying regularly between Israel and Jordan. Jorda­ nian and Israeli motorists can now drive across the border. Tourism in both Jordan and Israel is now a major source of revenue. International tourists spent $2.5 billion in Israel in 1995, and the figure is expected to triple over the next ten years. "I think that tourism may have a greater effect upon the Middle East than the wars," says former Prime Minister Shimon Peres. "If you ask me what will bring more security -- a hotel or a military position, I'd say a hotel."

'4A (15::v)

"'

c[Qs The Work Environment

Small Town Atmosphere

Many Israeli offices resemble small towns. Peo­ ple talk loudly, shmooze and gossip, and the line between their professional and private lives is often thin (if not invisible). "I guess I seemed stand-offish and distant because I used to drink coffee at my desk," says an English computer programmer who was based in Haifa for three years. "After a few weeks, I joined them (my Israeli co-workers) dur­ ing coffee breaks. Then I really saw their warmth. When my wife got sick, everyone offered advice about doctors and my boss ordered me to leave work early. In Israel, family comes first. When I mentioned I was buying an apartment, two co­ workers volunteered to be guarantors on my mort­ gage. I hadn't even asked them. In England, I wouldn't have dared ask my best friend to co-sign."

Some Israelis who have worked abroad (in non-Mediterranean and non-Latin countries) find office atmospheres there unfriendly or lonely. "After only two weeks in my Tel Aviv office, I knew more about my co-workers than I did after two years in America," says an Israeli computer soft­ ware designer who works for a Seattle company.

The Work Environment 45

He says his American co-workers "rarely show their true emotions. They smile a lot and ask, 'How are you?' but they don't really care. People work together, yet never visit each other's homes."

The Israeli work environment tends to promote group cooperation, rather than competition. An Israeli lawyer who worked in a Washington D.C. law firm describes her American co-workers as "coldly competitive," adding, "In America, I kept hearing words, like 'self-esteem' and 'self-reliant.' I rarely hear those words in Hebrew. Our (Tel Aviv) office is a collective 'we.' We're a team. We share both the blame and the glory."

"Why Do It Your Way?"

Usually, Israelis are more interested in goals than roles, and the lack of difference in status between bosses, managers and secretaries stuns some outsiders. Instead of hierarchical leadership, many prefer leadership by "natural authority." In some offices, it seems as though everyone's in charge. You might overhear a secretary lose her temper with her boss and loudly blurt out, "Yossi, what are you talking about? Are you crazy?" Such behavior might strike outsiders as insubordinate, but to Israelis, it's honest and direct.

Many Israelis love to challenge authority. "When I tell my Israeli engineers to do something, they start arguing. 'Why do it this way? Why not that way?' At first, their attitude drove me crazy," says an American CEO of a Massachusetts telecom­ munications company with a Tel Aviv subsidiary. "But now, I love having these Israelis who impro­ vise and innovate. I'm smiling all the way to the bank."

46 Passport ISRAEL

Risk Takers

In many countries, employees are expected to work within a system. But in Israet workers test �nd bend rules. You might see a bank official sitting m a cloud of cigarette smoke, ignoring both the "No Smoking" sign above her and the law that bans smoking in public places. In the workplace, if you go by the rules, you might be seen as afraid, rigid, or lacking initiative. Finding short cuts and taking risks are co,lsidered virtues. "If you tell an American the shortest distance between two dots is a straight line, he'll take it for granted," says the Massachusetts CEO. "An Israeli will try to find an even shorter way. If you're looking for shortcuts to save on costs and make money, he'll find them."

Creative Problem Solving

When France stopped selling Mirage fighter planes to Israel after the Six Day War in 1967, Israel starte� its own defense industry. Many Israelis prize a particular story of a soldier stationed in the Sinai during the 1973 war. His tank was misfiring, but he d_idn't have tools, so he used the hair pin holding his k1pa (skullcap) to fix it. Life in Israel means learning to expect the unexpected. "In America, if you don't have an antenna to operate your communications equipment, you wait until headquarters sends it. An Israeli will find a wire and stretch it between two trees," said one former IDF colonel. "When the tech­ nical manual says you need parts A, B, and C and part C _ is missing, Israelis don't wait for it; they improvise. Because so many countries obeyed the Arab boycott, for decades we've gone without a lot of things and had to improvise with what we had."

_ When citrus exports were facing stiff competi­

tion from Greece, Italy and Spain, Israeli growers

The Work Environment 47

began exporting flowers to Europe in winter. They'd discovered that flowers took up less space than orange groves and could be raised in hot houses. Today, flowers outnumber citrus exports (which dropped from 11 percent in 1970 to 0.7 percent in 1994). For almost fifty years, Israeli volunteers with expertise in innovative, low-cost agri-tech have been working in many developing nations in Africa, Latin America and Asia/Pacific, as well as training stu­ dents in Israel. (Israel has the highest producing cows and the highest yield of wheat per acre in the world, and most of the world's cucumbers come from a new Israeli hybrid.) Recently, insects threat­ ened to destroy much of Fiji's ginger crop, and export customers refused to buy ginger that had been sprayed by pesticides. The Fijians called in an Israeli agronomy expert, who covered the fields with sheets of a new Israeli plastic that raised the ground temperature and killed the insects.

Balagan = Organized Chaos

"Israelis have the right mix of creativity and discipline," says the co-founder of a leading Israeli biotech firm. "Development is particularly cost­ effective here in the land of well-organized balagan (disorder or mess)." America, he explains, "is the land of standardization. In the U.S., when I need to deal with drug approvals, I get a stomach ache. If the instructions say the margins on the application page must be one-third of an inch and mine is one­ quarter, the Americans will return the whole appli­ cation and make me start the whole process over. Israelis are less finicky."

A few years ago, a Ministry of Foreign Affairs official was awaiting foreign dignitaries, who were coming to inspect a prototype of the Lavie airplane at Israel Aviation Industries. "Workers were in blue

48 Passport ISRAEL

jeans and sandals and stained shirts. It was a bala­ gan, with hammers, pliers and screws all over the place," he recalls. "I told the foreman that if he was trying to sell planes, he should make the workplace orderly, get the workers to look professional. He answered 'Why? If everything is clean and neat, that means we're putting all our energy into look­ ing good, instead of working. Who cares what the place looks like if our planes fly great.' "For Israelis -who've produced the world-famous Kfir fighters and remote pilotless planes - appearances are a lot less important than results.

A New Breed of Entrepreneurs

A rapidly growing faction of internationally­ minded Israelis are filling language classes in busi­ ness Arabic, Japanese or Chinese. Many have stud­ ied and worked abroad and learned marketing, advertising and public relations, which are new fields in Israel. Many speak the international lan­ guage of high tech. Visitors are surprised to see how much Israeli high-tech industrial parks resem­ ble their counterparts in Silicon Valley, both exter­ nally and internally.

Women in Business .1.D····l! lV"'\\,

-"

r-------------

T rad it ion a I Roles

Israeli women are "strong," "emancipated" and "sexually liberated." Like all stereotypes, this one is partially true. Pioneer women drained swamps, built roads and sang songs of equality. Brave female soldiers fought on the front lines dur­ ing Israel's War of Independence. Today, women still drive tractors and hold key positions in kibbutz factories - but they've always outnumbered men in kibbutz laundries, kitchens and kindergartens. Women corporals train male privates to fire guns and drive tanks, but it wasn't until 1996 that the Air Force admitted women into pilot training courses. An orthodox woman can be divorced by her hus­ band, but she cannot divorce him.

Golda Meir was one of the world's only female prime ministers (the late Prime Minister David Ben-Gurion dubbed her "the only man in my gov­ ernment"), but not many women politicians have followed in her footsteps. Prior to the 1996 election, women held 12 out of 120 Knesset seats; currently,

they hold nine. The Middle East, as a whole, has the world's

lowest rate of female employment (9 percent); in

50 Passport ISRAEL

contrast , 52 percent of Israeli women work. How­ ever, since husbands are called to military reserve duty each year, many working mothers spend more time with their children than they do on career fast tracks. Until there's genuine peace in the Middle East, true gender equality will be difficult. "When a nation is at war, all other societal issues are second­ ary," says one Israeli feminist. "Sexual equality is secondary to survival. Israeli women are second to the male 'warrior-soldier.' "

Trends

In 1961, there were virtually no Israeli women in top and middle management positions. Today, over 24 percent of these pasitions are held by women. In 1996, the Knesset passed a law giving Israeli women the same salaries and benefits as their male counterparts. And there's been a dra­ matic upswing in the number of women directors at government-owned companies (especially since the Israel Supreme Court upheld a 1992 law requir­ ing affirmative action). But women are still rare in Israeli boardrooms in the private sector.

One of the first Israeli women to make a signif­ icant mark on the business world was Lea Gottleib. Her company, Gottex, is the world's top producer of designer bathing suits (with exports to over 90 countries and a 60 percent share of the U.S. designer swimwear market). Two Israeli women single-handedly put Israel on the international art auction map when they opened a Sotheby's in Tel Aviv. A top Israeli high-tech consulting firm was started by two Israeli women with Harvard MBAs. In June 1995, when Galia Maor was appointed head of Bank Leumi (Israeli's second largest bank), the local press focused on her economic acumen, not her gender. That same year, Aliza Shenhar, the first

Women in Business 51

woman to head an Israeli (Haifa) university, became Israel's new Ambassador to Russia. And in 1996, Labor Minister Ora Namir was appointed Ambassador to China.

Chromosomes & Family Issues

"I encounter many more cross-cultural issues being an American in Israel than as a woman in Israel," says a software marketing executive who worked with Israeli high tech companies for three years. "Savvy Israeli businessmen will appreciate your skills, whether you have a different chromo­ some or not. If you're outspoken and strong, they take you seriously. If you don't play "the weak woman," you'll be treated as an equal. As an Amer­ ican businesswoman, I was trained to be nice and accommodating. Working in Israel taught me to get right to the point and say what I mean. I'm now using those skills in my Boston office."

The Israeli workplace tends to respect family issues. An Israeli high-tech executive who works in Silicon Valley put it like this. "In Palo Alto [Califor­ nia], I hire baby-sitters whenever my kids are sick. I'm afraid to take time off. In Israel, whenever any­ one had a family emergency, my (Israeli) boss was understanding and flexible. I miss my Tel Avi v office. It was such an extended family that you often saw your children playing there after school."

Flirting

An English computer programmer who has lived in Israel for 18 years says, "I find a lot of pluses being a businesswoman in Israel. It's cer­ tainly more fun than in England and America. I've used harmless flirting to butter up my macho Israeli boss - I've gotten him to sign contracts my

--

52 Passport ISRAEL

male colleagues couldn't. Many Israeli men enjoy trying to get a woman's adrenaline going. Part of it's ego, most of it's a game." Now, she works for a San Francisco branch of the same company, where the atmosphere is "asexual." She adds, "If I tried to use my womanly charms here, men wouldn' I take notice for fear of law suits."

In an Israeli meeting, a businessman might give a female associate a nickname like meydeleh (Yiddish for "little girl"). To him, it's a sign of affec­ tion, not condescension. During the meeting, he might touch her hand, noting in a velvety voice, "Your eyes are so beautiful." To him, it's a compli­ ment, not a sexual suggestion. When he learns that she's the marketing director, he might ask, incredu­ lously, "You're just a baby. How old are you?" To him, it's praise, not prying. And at the meeting's end, he just might embrace his associate with a good-bye bear hug.

If rampant flirting makes you feel uncomfort­ able, ignore it. Rarely will an Israeli man make a sexual move if a woman isn't responding. Let's say he misinterprets your friendly smile as an invita­ tion. He might look deep into your eyes, squeeze your hand and gush, "Does your boyfriend appre­ ciate that gorgeous smile?" Pull your hand back and answer firmly, "Yes, and I'm very faithful." An unattached American-Israeli radio reporter esti­ mated that men asked her if she was married at least four times a day. Finally, she bought herself a ring, and whenever a man asked, she held up her ring finger. The questions stopped.

But for all the admiration and attention, it's noteworthy that women in Israel can walk alone safely, even at night (but keep to well-lit areas). The crime rate is very low; Seattle, Washington has seven times more murders than Jerusalem.

Doing business is usually easier with the help of friends or contacts. Israel is so small that when two Israelis meet for the first time, they often dis­ cover within minutes that they have friends in com­ mon. For this reason, it's not difficult to find out whom you need to know. The key Israeli players in your field probably know each other.

Easy Access

Contacting high level Israeli officials is usually much easier than getting in touch with their Euro­ pean or American counterparts. Israelis are amaz­ ingly accessible. Many mayors and Knesset members list their home telephone numbers in public directories. Don't be afraid to call the CEO of a company, even before you arrive in the country. If you don't have a name to drop, just say, "It was suggested I ring you." It's stunning how open the Israeli business community is to outsiders. Once you know at least one Israel in the right field, it's usually easy to "network."

But don't get too excited if the managing direc­ tor of a large Israeli firm invites you to a long,

54 Passport ISRAEL

friendly lunch. And don't think that you "have it made" when the chairman of a large Israeli bank says, "Call me at home this weekend with any ques­ tions." Though you may have gotten along wonder­ fully, it's not "a done deal" until the deal is done.

Favors: A Constant Exchange

Israelis rarely hesitate to ask friends or business contacts, "Asseh Ii tova?" ("Do me a favor?"). It's a way people build relationships, expand their con­ tacts and, most importantly, get people to owe them. When someone owes you a favor, it's often more advantageous than if he or she owes you money.

Don't be shy about asking an Israeli for help when you need it. Ask Tali to set up a meeting with her friend Noam, the inventor of XYZ medical imaging devices. If the deal works out, you'll both owe her a favor for successful matchmaking.

An American and three other high-level execu­ tives needed emergency seats on El Al in the mid­ dle of the night. The American dealt with various ticket agents, and it turned into a mess. When he returned to Israel, he described his ordeal to his acquaintance, Uri, a mid-level official at El Al. "Why didn't you phone me at home?" asked Uri, obviously upset. "No matter it was 4 A.M., I would have arranged everything for you." Uri doesn't earn a large salary, but he would have demon­ strated his power by helping the American execu­ tives. Word travels fast in Israel. Had people heard about "the favor," Uri's image as a "guy who can get things done" would have been enhanced.

Protektzia or "Vitamin P"

Knowing people who can open the right doors - that's protektzia, a.k.a. "Vitamin P." Protektzia is

Making Connections 55

knowing the person who can put you at the head of line, it's the phone call to the person who can cut through red tape. It's hard to live without protekt­ zia in Israel. To illustrate its power (and with typi­ cal cynical humor), Israelis invented a joke about Nazi war criminal Adolph Eichmann's trial in Jerusalem in 1961. When Eichmann was found guilty of genocide, the judge gave him a choice of punishments - "Either die by hanging or spend the rest of your days living in Israel without protek­ tzia." Eichmann chose hanging.

Protektzia means that instead of waiting a week to get a loan approval, your bank contact gets it for you within an hour. A story goes that some years ago, a mother couldn't enroll her daughter into an elementary school class because it was full. The limit was 40 students. After she called a high­ level friend at the Ministry of Education, he changed the maximum national class size to 41. A British-Israeli landed a job as a producer at Israel Television, despite the fact that she had no previous television experience. But she had protektzia - her neighbor, a news director.

Times are changing, however, and protektzia is less likely to help overcome the odds. Today, Israel has more institutional checks and balances. Official tenders and contracts are determined by quality and price. If you're nominated to be an Israeli eco­ nomic consul, you must appear before a govern­ ment committee, which will make sure that you' re qualified (and that you're not the economic minis­ ter's best friend).

Prepare Before You Land

Contact a knowledgeable Israeli economic attache in a local embassy or consulate. Read about Israeli business culture, history and politics. There are some useful Israeli magazines, newspa­ pers and newsletters in English - such as the Jerusalem Report, the Jerusalem Post and Link Magazine - and many helpful Internet Web sites (see Chapter 27).

Make Face-to-Face Contact

When you're in Israel, it's best not to do busi­ ness by telephone. Personal connections can make all the difference. Face-to-face, getting-to-know­ you meetings are to your advantage. Keep in mind that distances are amazingly short. You can drive from Tel Aviv to Jerusalem in less than an hour and from Jerusalem to Haifa in just over 90 minutes. It's worth fighting the traffic.

Be Flexible - and Honest

Israelis rarely plan far in advance. If you say,

Strategies for Success 57

"Let's have lunch two weeks from today," an Israeli might look at you strangely and respond, "Why not right now?" Be spontaneous and join him.

Don't say, "Let's meet again soon. I'll call you," unless you mean it. Israelis get offended by unkept promises. You don't want to be perceived as unreli­ able, or as a superficial person who "talks a good game" but never follows through. Israelis working in the same field usually know each other, and word travels fast.

Know That "No" May Mean Maybe

He said "No"? Call him again and try another approach. Consider "no" to be a challenge. You can push, or use your contacts to push for you. Israelis admire initiative and persistence. They tend to think that virtually anything is do-able and that even hard-and-fast rules are negotiable. If you're fairly sure that the no you received really does mean no, try speaking to the top person. From an Israeli point of view, if you're not willing to fight for what you want, you're not really motivated.

Learn to "Nudge" (Yiddish for "make a

nuisance of yourself")

In your country, it may be impolite to phone the day after a meeting for an answer. In Israel, if someone doesn't respond as quickly as you'd like, call and ask, "So, what's happening?" Don't be afraid of alienating him or of losing the deal. It's hard to "nudge" too much. The Israeli you're pes­ tering will probably admire your persistence. You might even develop a friendship.

58 Passport ISRAEL

If Nudging Doesn't Work, Try Guilt

Israelis generally respond to guilt. Try these examples from Guilt & Manipulation 101: • "For this I flew fifteen hours to Israel?" • "After what I did for you yesterday, is this how

you thank me?" • "If, God forbid, I don't get this signed by

tonight, I'll miss my daughter's wedding." • "Your employees must be incredibly busy.

That's probably why no one can get me the report before my deadline."

• "Too bad you don't have an extra copy of the current Statistical Abstract. If I only had it, we could wrap this deal up quickly."

Say What You Mean

Be straightforward. If Israelis think you're sin­ cere and not just out to make a quick dollar, you'll gain their trust and loyalty. If you're tactful and say, "This proposal sounds interesting," you might be misunderstood. Speak Israeli-style. Say bluntly, "This proposal won't work. Here's why."

Be Decisive

Some cultures tolerate or encourage uncer­ tainty and ambiguity, but Israelis get uncomfort­ able if there isn't a clear resolution. Make a decision and stick with it. A well-known Israeli joke pokes fun at former Prime Minister Levi Eshkol' s well­ known indecisiveness. When a waiter asked Eshkol whether he'd like coffee or tea, Eshkol hesitated, and then finally stammered, "Make it chetzi-chetzi (half and half)."

Strategies for Success 59

Hire a Local Consultant, Rep or Advisor

It's often useful to have an Israeli who can guide you, read between the lines and explain what's really going on. When an Israeli engineer who runs a Belgian high tech company realized he didn't have up-to-date connections, he hired a local Israeli rep. Though Israeli himself, the engineer had been working abroad for eight years and was, he explained, "out of the loop. That's why I needed an Israeli who knew the right people and the latest short cuts."

It helps to have someone who understands the local games and can keep the pressure on after you leave. Choose an advisor, consultant or rep who understands your country's business culture and does the same type of business, whether it's real estate or bio tech. If you're selling a product in Israel, it's important to hire someone who knows how to sell it the Israeli way (which is often differ­ ent from the slick, American way). Draw up a sim­ ple, short, unambiguous legal agreement. Set clear expectations about financial terms, payments, delivery schedules, inspection details and penal­ ties. Know that even with such legal agreements, you may have to re-negotiate as the situation changes. Make certain that the Israelis you hire can communicate clearly, work the system, pressure the right people and speed the waiting time for approvals, grants or loans.

S-:'

�i})-__ T_im_e __ _

Mediterranean versus Manic Modern

Time in Israel can be a confusing mix of "laid back" and ultra efficient.

A revealing joke in both Israel and Egypt goes like this:

Question: What's the difference between mahar/bukrah (tomorrow) and manana?

Answer: They're the same, only mahar I bukrah is less urgent.

"Your telephone will be installed tomorrow." In Israel in the 70s, "tomorrow" meant waiting for years. In the 80s, tomorrow meant months. In the 90s, tomorrow means that your phone will be connected within twenty-four hours. Doing business used to involve spending hours in long lines at different min­ istries, endless red tape and surly clerks. Permits were needed for almost everything - from having bank accounts in dollars to running an import-export busi­ ness. There's still plenty of bureaucracy, but since the mid 80s, the Israeli government has been streamlined and greatly deregulated.

While everyday life is more efficient, Israelis still maintain a Mediterranean joie de vivre, which means that their attitude about time can be flexible.

Time 61

If a business lunch conversation is getting juicy, why rush off to the next appointment? If an Israeli is meeting another Israeli, it's not considered rude to be at least twenty minutes late (though the one who's running behind might call on his cell phone with an excuse). But if an Israeli is meeting an inter­ national visitor or an Israeli with a German-Jewish background (a yekke ), he's usually savvy enough to arrive on time.

Deadlines

Many Israelis don't like being controlled by watches (like they were in the army) or planning too far in advance. In Hebrew, you don't often hear expressions like "lost time," "saving time" or "Let's meet in a few months." An employee doesn't con­ sider it "wasting time" to counsel an office mate about marital problems for an hour. His work will get finished, and hopefully on time. The Israeli ten­ dency to do things at the last minute often means improvisation and some ad hoc (and often better) solutions.

If you ask an Israeli employee if he's finished writing a report, he might answer optimistically, "Yihiyeh b'seder" (which, loosely translated, means "Not to worry, everything will be fine.") That expression means that he probably hasn't started writing yet. It's wise to double check that the dead­ lines an Israeli sets are realistic and to keep tabs on the status of the work as the deadline approaches.

"Israelis tend to have a macho bravado, and reassure themselves that things will be fine even when they won't," says Israeli therapist and cross­ cultural trainer Rachel Biale. "This healthy denial," she adds, "may be a response to the uncertainty of everyday life in Israel, or, on a deeper level, to their parents' helplessness in the face of the Holocaust."

62 Passport ISRAEL

But on the other side of the coin, survival in Israel has always meant reacting quickly and intel­ ligently under pressure, both on and off the battle­ field. Israelis make quick decisions and may have difficulty understanding why their international business partners process a decision to death while pondering twenty different options.

When the Iraqi Scud missiles were hitting Tel Aviv, the CEO of a Santa Clara, California telecom­ munications company feared that his joint venture partners in Tel Aviv would miss a crucial deadline. "Our Israeli engineers worked around-the-clock with their gas masks on," he said. "They' re so phe­ nomenal, they delivered the system component two weeks before the deadline." The American com­ pany was so happy with the results, it bought the Israeli company.

t�f,...._B_u_s_in_ e_ss_M_e_et_in_g_s __ _ It's important to figure out with whom you're

dealing and how they work. Meetings, like Israelis, vary greatly. Some are quite formal and begin on the minute with military precision. In others, partici­ pants may wander in at different times and up to thirty minutes late. It may be difficult to tell who's in charge, especially when subordinates challenge the boss. And don't be surprised if the meeting fre­ quently is interrupted - a daughter telephones, a secretary rushes in with papers to sign, a corporal announces he's back from military reserves.

Avoid Small Talk And Name Dropping

Israelis are generally inept at small talk. What some cultures consider to be social graces may seem superficial, insincere or artificially formal to Israelis. Don't bother commenting on the lovely weather or the view from your hotel. Israelis love the Yiddish word tachles, which means cutting through the ver­ biage and getting to down to business.

In your country, others may be impressed by your Harvard MBA or Oxford Ph.D; Israelis, how­ ever, are often more impressed by what you've

64 Passport ISRAEL

accomplished in "the real world." An Israeli may be an MIT or Technion graduate, but that fact prob­ ably won't slip into the discussion. In business, goals and results are more important than titles. Israelis want to know if you're trustworthy, serious about doing business and able to deliver on your promises.

Why Bother With Icing? We'll Show You The Cake

In Israel, the product is much more important than the presentation. Some Israelis get suspicious if the icing is too sweet and thick - it may be hid­ ing something. Don't be disappointed if the Israeli presentations are uneven, or if they lack elaborate brochures, slide shows or expensive video presen­ tations. Many Israeli companies don't see the need for a hard sell approach. Their attitude may be, "Our product is the most technically advanced in the world. There's nothing like it on the market, so it'll sell itself. Why do we need a glossy brochure?" (This approach sometimes leads to headaches, the result of hastily written materials with English mis­ spellings and bad grammar.)

Increasingly, however, Israeli companies with international affiliations are becoming sophisti­ cated. They're learning the importance of market­ ing, sales, public relations and advertising. Some even have fancy brochures.

Forget About Finishing Your Sentences

If Israelis don't interrupt or ask questions, it could mean that you' re not capturing their atten­ tion. If three or four Israelis talk at once, that's a good sign. The more interruptions, the better the meeting. If they get excited and speak loudly, they're probably quite interested. If someone starts

Business Meetings 65

pounding the table, you may be close to making a deal. Don't worry if they suddenly start arguing between themselves in Hebrew. They're not dealing behind your back. Israelis think faster and work better as a team in Hebrew. They'll translate after they reach a consensus.

Be Flexible

Israelis tend to be spontaneous (which can be good for creativity), so keep your agenda fluid. Be ready to change your plans as you receive new information. Let's say that your company has approved A, but during the meeting you find out the situation is B. If you take a long time to get new permission from your home office, Israelis may write you off as unresponsive and unable to make decisions.

Put It in Writing

Even Israelis fluent in English usually think in Hebrew (or Russian, or whatever their native tongue is) and then translate their ideas into English. So, your words may be interpreted differently from how you meant them. If you may say, "You should do X and Y," an Israeli might think, "Okay. That's your opinion. But I'll do what I want." To avoid crosscultural mis­ understandings, make a verbal and/ or written sum­ mary after every meeting. Flush out the issues and pinpoint what you've agreed and disagreed on. Then make clear exactly what you expect from each other.

As the business relationship progresses, trade informal memos, so you constantly understand where you agree. Convert these to formal docu­ ments only when all sides are ready to make a seri­ ous commitment of time and resources.

(11£6,,,.-, cJ ( Negotiating with the Israelis \J

An Art Form

Israelis are experienced negotiators both in the boardroom and abroad. They've negotiated deals with an alphabet soup of different groups -- from the EU to the UN, to the PLO and the PRC (People's Republic of China). They're known for being tough but fair and have even been asked to help mediate foreign conflicts - between the Spanish govern­ ment and the ETA (the Basque separatist group), for example, and between the Guatemalan govern­ ment and the URNG guerrillas.

Many Israelis are multilingual; others hail from various parts of the globe. If the meeting is with English-language speakers, it will be conducted in English. However, if you wish to negotiate in Ara­ bic, French, German, Russian, Spanish, Mandarin, etc., it's not difficult to find Israelis who can accom­ modate you.

Straight Talk = Talking Dugri

"Talking dugri" (an Arabic/Turkish word) means speaking bluntly, assertively, honestly and with a thorny sabra edge. When Israelis talk dugri,

Negotiating with the Israelis 67

there's little posturing, subtlety or gamesmanship, and negotiations usually move quickly as a result. A positive aspect of talking dugri is that everyone knows where they stand. It can mean that an Israeli is showing you respect and thinks you have the strength and integrity to take frank, to-the-point talk. It can also mean that he thinks you want action, rather than empty words.

The New York Times recently quoted Israel's revered poet, Yehuda Amichai, as saying that "Jerusalem has no subconscious .... Everything is out in the open, even the infighting." Just substitute the word "Jerusalem" with "Israelis." This is talk­ ing dugri � the shooting-from-the-hip Israeli way.

Keep it Short and Simple

Israelis rarely soften their sentences with phrases like: "Perhaps you might consider ... " or "If you wouldn't mind ... " Instead, they'll say, "You're wrong!"

Israelis think in Hebrew, which is an extremely concise language. A three-word sentence may require eighteen words in French. A four-word Hebrew proverb may become sixteen words when translated into English. Israelis often speak English like they do Hebrew: tersely, economically and explicitly. Many English speakers love the eloquent speeches of former Israeli UN Ambassador Abba Eban. Many Israelis, however, criticize his rhetori­ cal flair and "high sounding" language. If an Israeli observes that someone "doesn't speak like 'one of us,'" it isn't a compliment.

Assume They're A Few Steps Ahead

Israelis are adept at thinking strategically and anticipating what you might do next. That's why

68 Passport ISRAEL

it's important to be even more prepared than you might think necessary. Don't let them surprise you. Anticipate in advance which angles might arise. Assume that the Israelis have already figured out your game plan and what they can get from you. If you feel that the negotiations are moving too rap­ idly, say that you need time to think. Don't be afraid to take a short break.

They'll test you, but if you're convinced you're right, be assertive and stand up for what you want. Speak dugri to them. Say, "These are the issues on your side and these are the ones on mine." Draw a line in the sand and stand firmly behind it. Israelis respect toughness. If they think you'll be a good partner, they'll probably compromise. If you're offering them a fair deal, they may be happy with a nice piece of a nice pie.

Finish the negotiations with a written agree­ ment. Hire an experienced Israeli lawyer who knows your culture and your language. Beware of loopholes, but keep the agreement as short as pos­ sible. Most Israelis can't be bothered with forty­ page contracts.

(1 \\ r

cl?� Business Outside the Law

\_)'

According to a 1996 survey of businesspeople from 54 countries conducted by Germany's Gottin­ gen University, Israel ranks fourth as the least cor­ rupt country in which to conduct business. (The United States ranks fifth.)

Drug Trafficking

The same peace process that now makes it eas­ ier for former enemies to work together also makes it easier for Israeli and Arab smugglers to ply their trade. Over the past decade, drug trafficking in Israel has shot up about 2,000 percent. About 95 percent of drug shipments go uncaught by under­ staffed and underfunded Israeli police squads.

Most of it is heroin from Syrian-controlled Leb­ anon, where the drug trade is a multi-billion dollar business. Lebanese and Syrian drug lords and army officials oversee poppy fields in the Bekaa Valley, where Interpol sources estimate that about 100 drug labs transform the flowers' bitter, brownish juice into a potent narcotic. Lebanon also is a key switch­ ing point for heroin, cocaine and hashish shipments originating in Turkey, Iran, South America, India,

70 Passport ISRAEL

Afghanistan, and Pakistan - destined for Euro­ pean and North American markets. As drug trans­ fers are less likely to be intercepted when sent through Israel, Arabs have formed partnerships with Israeli smugglers. Sometime smugglers enter with the few thousand Lebanese who legally cross the Israeli border daily to work. Most drugs just transit through Israel; fewer than 0.3 percent of Israelis use them, and only five percent of those 18 years of age and under have ever even tried drugs (compared to 50 percent of that same age group in the U.S.).

Anti-drug surveillance at Israel's entry points is getting tighter and more officials are undergoing anti-drug training and using sniffer dogs. Recently, Israeli port officials intercepted a container ship filled with hashish from Bombay.

But Israeli officials are much more preoccupied with security. Vehicles crossing the border from Egypt, Jordan, Lebanon and the Palestinian Author­ ity are searched for weapons and explosives, not drugs. Although Egyptian authorities are working much harder than their Lebanese counterparts, smugglers continue to slip across the largely unguarded Sinai border with Israel .

The Organizatsiya

Israeli officials have little experience with large-scale organized crime. Like Europeans and North Americans, they're unprepared for the ruth­ less Organizatsiya (Russian Mafia), which is heavily involved in international drugs, prostitution, extor­ tion and theft. Until recently, Israel's liberal foreign currency rules and banking regulations (drawn up to help new immigrants) attracted corrupt former Communist party and KGB officials who "laun­ dered" money in Israel and then transferred the

Business Outside the Law 71

funds electronically to fellow Russians in the West. Israeli banks eventually caught on and no longer allow major deposits from Russian foreign cur­ rency reserves. Only a handful of these mobsters are Jewish immigrants in Israel. Most, according to Israeli officials working closely with Russian police, are non-Jewish Russians living abroad.

Taxi Drivers

Unless you tell them, taxi drivers often won't put on their meters. Play it legal and insist that they do. A driver may try to convince you ("It's cheaper if I don't use my meter, okay?") If you want to sharpen your negotiating skills, try bargaining. But first find out the official meter charge: ask your hotel con­ cierge, call the taxi company, or consult the taxi's official rate book. And be aware of the fact that driv­ ers can spot a virgin bargainer. If you're skilled, you and the driver may end up splitting the difference on the meter price. During your ride, he'll probably talk non-stop, giving you his opinions about everything, especially politics. In Israel, the taxi drivers even started their own political party!

Stolen Cars

The recent "peace dividend" with the Palestin­ ians has brought with it a dividend of another sort. Israeli police have been unable to stop a serious wave of car-thefts - in 1995, over 35,000 vehicles were stolen. With 25 thefts per 1,000 cars, Israel has a higher rate than any western European country. Most end up in the West Bank and Gaza and are openly driven around. Recently, a Palestinian offi­ cial drove a new Volvo to a meeting. His Israeli counterpart recognized the car as the very one that had been stolen from him a few days before.

2[r,,.l..\ __ T_it_le_s_&_S_ta_t _us __ _

First-Name Basis

The egalitarianism of Israel's socialist founders encouraged people of all stripes - employers and employees, schoolchildren and teachers - to inter­ act on a first-name basis. The former Mayor of Jerusalem is referred to by all as Teddy, not Mr. Kollek. Golda Meir was Golda, not Mrs. Prime Minister. Waiters, hotel clerks, bellhops and taxi drivers treat visitors "just like everybody else." In this land of rampant informality, most people are treated with an equal lack of deference.

Even in the IDF, soldiers show little respect for rank. Privates and generals call each other by first names. What's important is to be one of the hevreh

(the group). After the army, however, service in an elite unit like the paratroopers often carries more weight than an engineering degree from the Tech­ nion. Ex-generals and war heroes (some of whom may have flunked out of the Technion) have a great advantage when it comes to securing key jobs in the public sector. A number of war heroes, such as Generals Moshe Dayan and Itzhak Rabin, decided to continue their fighting careers on the political battlefield.

Titles & Status 73

As more and more Israelis enter the global business arena, they're becoming aware that most cultures are far more title and status-conscious than they are. Sometimes, it's a shock. "A few years ago, on my first trip to New York, I asked a young woman at an advertising agency if she was the sec­ retary," said the founder of an educational software firm. "She glared at my sandals and informed me, in a huffy tone, that she is an 'account executive.' I couldn't stop laughing. Americans make such a big deal about titles." The next year, however, after a business trip (sans sandals) to London and Tokyo, he stopped laughing. "My Japanese business asso­ ciates didn't know how deeply to bow until they'd studied my business card. I'd had engraved ones printed up and I'd given myself a big shot title - president and chief executive officer and Ph.D. They bowed very deeply."

The New Materialism

As the economic gap widens, Israel's egalitar­ ian legacy is weakening. For years, bus drivers earned more than doctors. In the 1970s, many Israe­ lis earned about the same salary: $300-400 a month; today, a software engineer can earn over ten times that. Society frowned on materialism so much that the few affluent Israelis were reluctant to display their wealth. Today, shekel-laden Israelis are flaunt­ ing their newly found affluence - moving into glass and chrome offices, driving new BMWs, wearing designer sun glasses and eating tofu burg­ ers in trendy bistros.

But the government is another story. Some gov­ ernment jobs may come with prestigious titles, but not the big salaries or state-of-the-art offices to match. The mayor of Jerusalem (Ehud Olmert) earns only $24,000 annually. Former ambassadors

74 Passport ISRAEL

who work for Jerusalem's Foreign Ministry spend their days in cramped offices in a dilapidated former army barracks. Only the Director General's unpretentious office has air conditioning. However, in 1998, when the Foreign Ministry moves into a new building, all offices will have air conditioning. Israel's socialist founding fathers and mothers would probably be shocked.

M.D., Ing., Ms.

Academic titles and degrees (such as M.D. and PhD.) are used by businesspeople. The European­ style Ing. (Engineer) is used in Hebrew. The appro­ priate address for women is Ms., because in Hebrew, geveret is the form of address for both mar­ ried and unmarried women.

(1�v, cl?( Communication Styles

With so many high volume conversations, few Israelis need hearing aids. As you've read, Israelis love to debate and negotiate. They thrive on con­ frontations. If you see someone arguing and then exploding, it's probably just a healthy discussion. He or she will probably calm down quickly. Just watch and enjoy the show.

Israelis are often quite humorous. Sometimes, however, outsiders misunderstand their sarcastic edge. For example, when an American told her Israeli friend. ''I'll call you soon," the Israeli answered: "Don't threaten me." The American was offended. History has taught Israelis to inject cynical or black humor into extremely grave situations, especially fol­ lowing a war or terrorist attack. After the recent spate of bus bombings, the monthly "free pass" bus ticket (you pay for a month's worth of rides and get one ride free) was dubbed "Free-to Heaven."

Body Language

Many Israelis express themselves with their shoulders, their hands and their faces. They can laugh with their entire bodies or undress you with

76 Passport ISRAEL

only their eyes. When Israelis speak, they often stand close together and touch each other to make sure they're being understood or listened to, or to emphasize a point. It's difficult for an Israeli to express a profusion of ideas without gesturing. In an experiment, when Israelis were instructed to sit on their hands, they couldn't articulate their thoughts clearly.

Common Nonverbal Expressions

Sounds and nonverbal expressions you may encounter include:

• Tsk. Instead of saying "no," Israelis make a loud "tsk" sound with their tongues. (This can also indicate disapproval or impatience.) Here's a conversation with a secretary. "Is Mr. Gur here yet?" "Tsk." "Do you know when he's expected?" "Tsk."

• Ech? Ech? This means "What?" or "I don't understand."

• Nu? With different inflections, this Yiddish word can mean almost anything. For example: Nu? as in "How are you?" Nu??? as in "You expect me to do everything at once?" Or nuuuu????? as in "You're impatient because the line is too slow."

• To indicate "Slow down" or "Wait a minute": Raise your right hand, palm upward. Touch the tips of your fingers together and move your hand back and forth.

• To indicate "Oh no!" or "Now what?": Put hands on your head, then lift your shoul-

Communication Styles

ders in a shrug. • To indicate "Wow!":

Smack your lips and say, "Ooo-wah." • To indicate "Come here":

77

Put your right palm up, then open and close it. • To indicate "Go away":

Put your right palm down, then move it as if shooing a fly.

• To indicate "Great!" or "Yesss!": Make your right hand into a fist, with the thumb pointing upward.

32 Passport ITALY

Lazio

This barren, uninhabited landscape was once the cradle of ancient Rome. At Lazio' s southern end, where the Tiber River passes through on its way to the sea, the city of Rome itself- the country's capi­ tal and most sprawling metropolis - stands in vibrant contrast. Rome is a collage of neighbor­ hoods, buildings and ponti (bridges). Trastevere (liter­ ally "across the river") is the quarter that was old medieval Rome; the area known as Bacca della Verita ("the mouth of truth") was named after a manhole cover in front of its church. Not far from the Ghetto (a lively Jewish community) stands the Roman Forum and Circus Maximus (an ancient Roman amphitheater similar to the Coliseum). The seat of government and the Papacy, Rome is populated by diplomats, civil servants, and clerical workers going about their business among architectural wonders. Most of them walk, as relentless traffic snarls make driving in Rome a Felliniesque experience.

Sicily

The largest Mediterranean island and perhaps the most gorgeous one, Sicily looks as if it's being perpetually kicked by Italy's boot. It was founded by Phoenicians and later colonized by Greeks, Romans, Spaniards and Arabs. Sicily is particularly notable for its Greek temples, which are more abun­ dant here than in Greece. (In the eighth century B.C., the Romans called Sicily Magna Graecia or Great Greece, due to its plenitude of Greek towns.) Ruins include the acropolis at Selinus, the Temple of Athena at Syracuse and the Greek theater in Taormina. Overripe with ancestry, vegetation, reli­ gion and the Mafia, Sicily is Italy's most intriguing and disquieting region.

$ Government & Business

Entitlements & Red Tape

Since ancient times, Italians have excelled at business. The Etruscans were trades people and merchants, the ancient Romans, financiers and bankers who honed their skills handling the Vati­ can's vast tax network. Before the Middle Ages ended, Italians had invented double-entry book­ keeping, the bill of exchange and the insurance business. In modem times, their intrepid creativity ensures business success despite the ongoing bureaucratic nightmare of revolving and corrupt governments.

To understand the Italian approach to business � (to all aspects of life, for that matter), one must real- ize that Italians are content with their country's socialistic orientation. They expect the government to bestow entitlements which, in essence, promul­ gate the red tape that Italians so creatively avoid. Free medical care, JE tredicesima (Italy's national Christmas bonus of four-weeks paid vacation ·for -�Tcl lunches for workers-have helpeafo rocket the top tax bracket to 51 percent and Italy's public debt to 124 percent of its GDP.

34 Passport IT ALY

La Lega

Media darling and propagandist Umberto Bossi leads La Lega, a powerful movement aimed at splitting Italy into three independent states - northern, central and southern. Supported by Gian­ franco Fini of Italy's NeoFascist Party, Bossi believes that central Italy (Tuscany and Lazio) is the seat of government corruption, and that the south (from Naples down) is an unbearable weight for the north, whose higher revenues per capita and resulting higher taxes carry it. Many Italians believe that some kind of separation is inevitable.

La Bustarella

-* Conducting business in Italy often involves la bustarella (literally, the envelope) - paying off someone in the government to secure a contract or permit, or to ensure that an official "looks the other way." The long-term consequences of recent efforts to end this practice (along with other aspects of government corruption) remain to be seen. In the meantime, serious attempts are being made to cut spending (in order to reduce national debt to acceptable European Union standards), to stabilize the currency, and to reduce inflation and unem­ ployment (which currently stands at 25 percent in southern regions). The new government may also lessen restrictions on private enterprise, thereby let­ ting the commercial market experience more of a natural ebb and flow.

Chiaroscuro

Under the umbrella of Italy's 1992 privatization program, many business sectors are shedding govern­ mental controls. While retaining major share holdings

Government & Business 35

in the defense, energy, utility, financial, insurance and communications industries, the government is expanding its list of privatized industries to include petroche�cals, telecommunications and electricity. As Italy 1s dependent on foreign trade and sees it as a vehicle for increased employment as well as for eco­ n_omic and technological growth, its investment poli­ cies tend to be very liberal, with few regulations.

Also recently open to private investment is Cinecitta, the Rome-based film studio that produced such 1960s blockbusters as Cleopatra, Quo Vadis and, more recently, the internationally acclaimed Cinema Paradiso. Its facilities are considered the best in Europe, second only to England's Pinewood studies. The Italian Treasury, Cinecitta' s owner, is actively seeking foreign investors. It's noteworthy that while American investors are seen as potential culture pol­ luters, and are therefore unwelcome, American film­ makers are being encouraged.

But it's the small, family-controlled businesses that are the economy's backbone. Thanks to them, business in some northern regions is booming. You could say that successful Italian businesses have taken a cue from the 16th century painter Caravag­ gio, a master of chiaroscuro. Bringing light out of darkness, they've turned a country bound by red !ape a1:d _corruption into one of the seven largest mdustnahzed economies in the world. It might be noted, too, that Caravaggio was a maverick. Ital­ ians don't like rules, governmental or otherwise, and when necessary, they find ways around them.

Barriers to Trade and Competition

Italy produces state-of-the-art industrial equip­ ment and products, as well as high quality con­ sumer goods. Its central Mediterranean location also makes it a gateway to the EU. (Italy has been a

,J

36 Passport ITALY

member since the EU began in 1958.) Since 1993, all commercial barriers affecting the free circulation of goods, capital or services between EU . countries were abolished. As a result, other EU nationals can operate as freely in Italy as they do in their own respective countries. A French company, for exam­ ple, can employ French workers and exercise French labor and social security laws.

With a work permit, job opportunities for expa­ triates who are EU citizens are available, as are opportunities to start a business. If you're not an EU citizen, finding an Italian business partner might be the best way to enter the Italian bu�iness community (short-term or long-term). Creating a business presence by establishing local operations is mandatory. A foreign citizen wishing to establish a temporary or permanent residence in Italy to manage a business or corporation should obtain a business visa for this purpose. All individuals and firms must be registered with the local Chamber of Commerce, Industry and Agriculture. Making selective acquisitions is the best way to expand your presence once you've become established.

International eco-labeling (seals for products whose manufacture, use and disposal are not harm­ ful to the environment) may force Italy to raise its environmental consciousness - although some American trade officials consider eco-labeling a potential trade barrier that may, ironically, end up being detrimental to the environment. :his. con tr<: versy aside, until recently, Italy has derued its envi­ ronmental problems. It's finally addressing them via several government ministries and regional authori­ ties. These are responsible for protecting the air from industrial emissions and the coastal and inland riv­ ers from industrial and agricultural pollutants.

Government & Business 37

Imports & Exports

There are two Free Trade Zones {FTZ) in Italy, Trieste and Venice. Numerous warehouses located in port cities throughout the country also enjoy some FTZ privileges, including deferred customs duties. Free trade agreements have also been developed with the European Free Trade Association {EFTA).

Italy's EU tariffs and duty rates range from 5 percent to 8 percent on manufactured goods and are somewhat higher for agricultural items. Many raw materials enter duty free or at nominal rates, and materials used to manufacture and distribute a product for export can enter without duties or taxes. Almost all goods can be imported without import licenses and restrictions, including petro­ leum products, chemicals and machinery. How­ ever, some apparel, textiles and arms and munitions are regulated. Prohibited imports include foodstuffs, food colorings, drugs, narcotics, animal products, plants, seed grains, alcohol, cos­ metics and toiletries.

Italy recently eased export regulations to other EU countries, except for high-tech and gas products. Exports include the following sectors: software and services, cosmetics, pollution control, computers, telecommunications and transportation (including aircraft, parts and energy). Export controls are lim­ ited to shipping under general licenses that don't require formal approval and carry no regulations.

Export products include textiles, apparel, eye­ glasses, footwear, iron, steel, chemical goods, food products and transportation equipment.

EMLJ & ECLJ

The European Economic and Monetary Union (EMU), envisioned in the Maastricht Treaty, is

38 Passport ITALY

expected to be completed by 1999. Designed to help empower Europe for the 21st century, its advan­ tages include eliminating exchange rate variability, reducing interest rate premiums, and promoting the expansion of EU trade and direct investment.

As an EU member, Italy's government will be required to curb its national deficits and outstanding debts. Social unrest - a result of preliminary pelt tightening - has already begun. Universal health care is already being scaled back, along with other social welfare programs.

The single currency of the Ei\ill, the European Currency Unit (ECU), will compete with the U.S. dollar and the Japanese yen as a key currency in international trade transactions, as well as in the denomination of private investors' portfolios and official reserves.

L'arte di Arrangiarsi

The Art of Getting By

The corruption that distinguishes Italian politics should have crippled the country by now (see Chapter 13). Italy's public debt is up to 24 percent of its GDP and income tax rates are as high as 51 percent. Milan's stock market is still recuperating from its 1987 crash. The local Communist Party has diminished. Yet amaz­ ingly, Italy's 1995 economy outperformed all major industrialized economies except that of the United States - despite the fact that per capita income in the non-industrial south is half that of the north.

The reason? Internationally recognized quality and Old World craftsmanship are ultimately what drive the country's business fortunes.

Italians are running thousands of cottage indus­ tries, many with revenues of over 200 billion lire

(US$130 million); in some cases, stockmarket values have increased fifteen-fold in a decade. They produce

Government & Business 39

everything from sunroofs, racing car brakes, silver­ ware and leather furniture to Uzis and Berettas. Their sales and profits are doubling every two or three years, and the valley of Lumezzane has one registered business for every twelve inhabitants. Belluno prov­ ince is home to the largest community of eyeglass­ frame manufacturers in the world. Most likely responsible for the Armani and Calvin Klein eye wear sold worldwide, these family-run businesses buy all their parts from hundreds of local suppliers, thereby keeping labor and profits at home. Larger family-run businesses currently dominating Italy's private sector include Pirelli (tires); Agnelli (automobiles), De Bene­ detti (computers), Benetton (clothing) and Fininvest (broadcasting and television).

Ingenuity is another factor. The province of Bergamo in Lombardy has recently experienced great success with lottery scratch-cards created by the state's finance ministry. Revenues amounted to 1.2 trillion lire in 1995, double the ministry's reve­ nues from football pools. Transforming trouble into opportunity, a small Mafia-infiltrated town in the region of Abruzzi is combating its negative reputa­ tion with a proposed film festival.

To sum up, even though recent political uncer­ tainty threatens Italy's financial markets, Italians, accustomed to setbacks, choose to conduct business as usual. Successful entrepreneurs save their money, keep their overhead lean, put profits back into their businesses, and make low-risk invest­ ments such as real estate. Immunity to political change for some means keeping more than one set of books. Since appearances are what matter, the banks and tax man might see edited versions. Many wealthy Italians believe a tax revolt is immi­ nent anyway, so why comply to the letter of the law? The Swiss banks are just across the border.

I $ The Work Envi�nment

The Italian Work Ethic

Italians work to live, not the other way around. Enjoying life to the fullest with plenty of leisure time for family and friends is the most important aspect of life. (The month-long summer vacation is consid­ ered sacrosanct.) Tan to la morte ci ha a trovar vivi, they say. Don't worry, death has to find us alive. In other words, everyone dies, so don't get too stressed about living. Money allows for pleasure, but it's not an end in itself. A sharp distinction is maintained between one's work and one's private life.

Workers in the private sector work longer hours than bureaucrats, who are notorious for devoting their careers to perfecting the art of doing as little as possible - government offices some­ times open late and close early, when they open at all. The industrialized north has adopted a more "serious" work ethic and, as has been noted, con­ siders the south to be an albatross. Most Italians work just enough to provide for their families needs, and those who do work hard don't appear to, because they also manage to enjoy themselves. Ownership of a business is highly valued.

The Work Environment 41

Mountain Climbers on a Rope

Company hierarchies are always upheld. Cor­ porations often have a horizontal chain of authority called a cordata (literally, a team of mountain climb­ ers on the same rope). A foreigner's best tact is to have a reliable contact who's familiar with a com­ pany's internal structure.

Senior members of a business are deferred to and act as mentors. (The expression 11 marcio comin­ cia dalla cima - A tree rots from the top - is a way of saying that the boss sets the tone.) CEOs don't become "familiar" with subordinates and don't feel an obligation to keep them apprised of pending upper-level decisions. Managers are expected to look and act the part. Younger members are consid­ ered apprentices.

Employees are expected to prove themselves over time before being accepted into the inner cir­ cle. Leadership is by example, not written in a busi­ ness plan. Senior executives tend to be autocratic when dealing both with their own staff and with outsiders, and they don't delegate authority or responsibility freely.

Nepotism: Giovani lmprenditori

Italians are impressed with degrees and schol­ arship, especially in science and engineering. But when it comes to family businesses, Italians like to keep the power within family hands. And at the moment, a widespread generational shift is in progress.

So many young, future tycoons are inheriting (or are being groomed to inherit) high positions within their family's firms that they've formed a club within Italy's Confindustria (the industrialists' confedera­ tion) called Giavani Imprenditori - "young business

42 Passport ITALY

people." As of mid-1996, membership stands at 9,000 and growing; the average age is thirty-two.

Among this up and coming group are Marina Berlusconi, the eldest child of Finivest's founder; Alberto Agnelli, nephew of Fiat founder Gianni Agnelli and member of the family that owns Piag­ gio, maker of Vespa scooters; and Emma Marce­ gaglia, who runs a 3 trillion lire (US$2 billion) a year steel and engineering group, founded by her father, that employs 3,000 people.

Business Cards vs. Calling Cards

From members of Parliament to esteemed history professors, Italians in positions of power and author­ ity expect to receive preferential treatment. Italians can be touchy about perceived insults and a too­ casual approach. (Ha la coda di paglia - He has a straw tail -the expression goes, i.e. he's so sensitive that he could go up in flames in an instant.) Proper business procedure and protocol includes never addressing a person by their first name and using their title in all forms of address, both spoken and written.

Yet as proud as Italians are about their status, they consider it an insult to be asked their profes­ sion in a social situation. For this reason, business cards (which should be translated into Italian on one side) are never exchanged at social gatherings. Personal calling cards, containing only one's name and address, are the accepted alternative.

Women in Business

In previous centuries, Italian women were viewed as property and were passed along in mar­ riage as such. There were, however, a powerful few -women such as Lucrezia Borgia, duchess of Fer­ rara; Caterina de Medici, queen of Henri II of France (whose 9th-generation great granddaughter operates a cooking school housed in an ancient de Medici summer estate in Tuscany); and Simonetta Vespucci, the great love of Pope Clement VII.

One or None

Despite the sacrosanct, omnipresent image of Madonna and child, today's Italy has the lowest birthrate in the world. Over the past ten years, grade schools have closed in some regions (Emilia-Roma­ gna in particular) due to low enrollment. Analysts predict that if the trend continues, there'll be 20 mil­ lion less Italians in Italy in the next century-almost half of today's population. There's even talk of rees­ tablishing government subsidies to encourage the creation of larger families, an idea promoted by Mussolini during Italy's Fascist regime.

The low birthrate is attributed to the fact that

44 Passport ITALY

Italian women now have the freedom to choose. More than 36 percent of the work force is female. Perhaps many Italian women are acknowledgi�g that the difficulties of maintaining both a family and career outweigh the benefits. They also know that they're expected to be the primary caretakers of both their children and their homes, regardless of the size of their salaries or the professional demands made on them. As a result, working women, especially in the north, tend to marry later and to follow a very un-Madonna-like edict: "Have one or none." This is particularly true of those pur­ suing careers in law, medicine and education.

Other reasons for the decreasing birthrate include the Catholic Church's dwindling influence and the Italian romance with "the good life." Working women and their husbands have grown accustomed to the higher standard of living that a double income affords, and giving up ski holidays in the Alps or summers on Costa Esmeralda to start a family are sac­ rifices that many couples are unwilling to make.

The changing role of women has no doubt also contributed to Italy's rising divorce rate (which remains far below the U.S. rate). In the past, Italian women remained married for the sake of their chil­ dren. Today, divorce Italian-style is creating more and more households headed by women - who always get custody and often move back in with the� parents.

These societal changes have come swiftly. Only fifty years ago, Italy emerged from the rubble of World War II; in 1947, women nationwide were officially granted the right to vote. While many young Italian women today are heady with newfound freedoms and affluence, older Italian women (grandmothers and great-grandmothers) tend to take the blame on them­ selves for having spoiled their daughters.

Women in Business 45

Madonnas vs. Working Moms

From early Byzantine mosaics to Raphael's paintings, from stained glass windows to statues carved in marble (or molded in plastic), mother­ hood is enshrined on high pedestals. No surprise, then, that the Italian government supports family issues vigorously. Even if a woman has been work­ ing for a short time when she gets pregnant, mater­ nity leave (in the most loophole-exploited cases) can last five years.

Combined with free medical care, monthly payments for each child during infancy, and sala­ ries for mothers on leave during childhood ill­

nesses, government spending for women has peaked. Cutting these benefits may be unavoidable if Italy wants to streamline its economy along with the rest of Europe. Italians, however, object to giv­ ing up any entitlements and consider proposals to reduce maternity benefits blasphemous.

This "official" support, augmented by family support (relatives often assist), makes it easier for Italian mothers than for their counterparts elsewhere in the West - in some ways. But in other ways, it remains more difficult. Even working women are expected to cook il pranzo (the large, midday meal) for their families, as well as la cena (dinner). Many don't have modem appliances such as dishwashers and clothes dryers. Although the younger genera­ tion of men help with the house and children, the older generation doesn't. And you won't see many Italian men - of any age - pushing a baby stroller while their wives are off attending a "power" lunch.

Progress: Slow but Sure

Government support of Italian working women, however generous in theory, can some-

46 Passport IT ALY

times backfire. Employers avoid paying benefits to women of child-bearing age by simply not consid­ ering female candidates for jobs, or by choosing part-time, contract laborers instead. Lost opportu­ nities also result when women choose to take time off to raise their children - they're not welcome when they attempt to reenter the increasingly com­ petitive job market, even on a part-time basis. In the south, where unemployment is especially high and where a cultural bias against women w0rking remains strong - the few jobs available, often in the government, automatically go to men. And proud southern women often refuse to accept some of the fairly lucrative manual labor jobs that are

available to them. These days, many live-in maids come from Poland, not Calabria, and they earn up to US$1,000 a month, plus full benefits.

Massive immigrations of workers from the south (especially during economic expansion) increase the competition for northern jobs, a situa­ tion that's further aggravated by a recent influx of immigrants from Albania, northern Africa and east­ ern Europe. High paying professional jobs are at a premium, and unemployment among the country's most educated citizens is high.

Political depictions of women pursuing alterna­ tive roles are often extreme. A traveler passing a kiosk in Pisa stopped in his tracks, diverted by a sign upon the wall. He stood face to face with a woman in black pointing an Uzi at him. The message: if you want to be an independent, powerful female, you must join the Communist Party. Conversely, Italian women with career aspirations who aren't communists might have second thoughts about following their dreams if they think they'll be perceived as militants.

There are a handful of powerful women at the helm of a few large, international family busi-

Women in Business 47

nesses, including Ferragamo and Gucci. Fendi is run by five sisters and features sophisticated goods designed for working women. Benneton ( a clothing design company with outlets worldwide) is headed by a brother and sister team, as is Versace. And, as mentioned at the end of the previous chapter, sev­ eral young women are about to inherit the reins of major companies founded by their fathers.

Strategies for Non-Italian Businesswomen

Depending on where a foreign businesswomen travels, however, she may encounter what she consid­ ers to be sexist behavior. It should be stressed, how­ ever, that as she's visiting someone else's country, she shouldn't expect its inhabitants to share her values.

Italian business people will show their respect for foreign businesswomen by not broaching cul­ tural, political or religious issues. Women who hold important positions will be considered competent and professional simply by demonstrating the win­ ning qualities that influenced their professional advancement in the first place.

Today, neither Italian women nor visiting for­ eign females attract raised eyebrows if they're seen walking alone or unchaperoned with a man. While care should always betaken, walking around the towns and cities of Italy unescorted at night is safer than doing so in major U.S. cities. Although petty crime is common in bigger Italian cities, violent crime is not. Overly appreciative glances are some­ times annoying, but rarely threatening. To avoid trouble, it is best to travel without valuables or to check them into a hotel safe. If this isn't an option, wear a money belt inside the waistband of your clothing and under a jacket, not exposed around your waist. As thieves often work in pairs or groups, they're sometimes easy to detect and avoid.

Making Connections

Clientelismo is the key to business success in Italy. It means bestowing a favor for a favor, "put­ ting in a good word," or asking a family connection to do so for you. Personal relationships are essential in the world of Italian business, and they're based on honor, loyalty and trust.

Building that trust takes time. Foreigners who are used to short-term, impersonal business rela­ tionships must adjust their approach accordingly. The time invested will pay off. Favors will be granted and a level of personal commitment reached that's worth more than money, skills or experience (though these are important attributes).

Insiders and Outsiders

Foreigners may feel uneasy about doing busi­ ness in Italy after reading newspaper accounts of volatile local politics. The active underground economy, which includes hundreds of small family­ run businesses with tough family control, isn't visi­ ble to outsiders. How can a foreign investor fore­ cast the true business climate? Homework and thorough research are crucial. Obtaining guidance

Making Connections 49

from professional advisers regarding specific issues is a must. Such advisors are best found the Italian way - through family contacts or via friends in one's own country.

Class Distinctions

Awareness of family, regional, financial and professional status is acute, and the resulting snob­ bery can be blatant. Since education often deter­ mines class distinction in Italy, being cultivated, well read and well versed in the arts are seen as being especially important.

Most of this is focused internally, but depending on where you're visiting and where you come from, you may be judged for your perceived pedigree - or lack of one. In business, it's best to cultivate rela­ tionships with an equal. If you're a middle manager, approach your Italian counterpart, not his or her boss. Likewise, the CEO of a foreign company shouldn't invest time with an Italian of lower rank.

Written Introductions

Italians like to receive introductions and requests in writing, either by mail or messenger. Picking up the telephone and making a "cold call" won't accomplish much, and telephone service in Italy is sometimes unreliable. A formal letter (intro­ ducing yourself and presenting your proposals and credentials) is required for all business transactions, no matter how preliminary or small. Be sure to use the addressee's full title in your salutation.

Be aware that most firms are dosed in August for summer vacation. If you write for an appointment in mid-July, you may not get a reply until September.

Strategies for Success

Don't expect an Italian to get straight down to business at the first meeting. They like to get to know the people they're considering doing business with, which is one of the reasons that they're com­ fortable doing business with family members. Only when they've been given ample opportunity to assess your character, background and purpose will they be open to your campaign, proposal or bid.

After-business socializing is an important aspect of Italian business relationships. Non-Ital­ ians should never refuse an invitation unless it's absolutely necessary to do so.

Eleven Golden Rules

1. Learn Italian. Mastering the basics of the Italian language is

crucial if you want to compete in business and a good idea if you're planning an extended stay.

2. Build personal relationships in order to gain trust. This will take any number of meetings to

accomplish. Be patient; think "long term." Don't be in a hurry to "wrap things up." Engage a strong

Strategies for Success 51

contact representative who can make introductions and appointments for you well ahead of time.

3. Find a go-between. It's best to begin your business dealings in Italy

through the auspices of a friend or business associ­ ate. If you know somebody who knows somebody, you're on your way. Anyone who has done busi­ ness in Italy or dealt with a specific player qualifies. An invitation to one of Italy's more prestigious pri­ vate clubs, where fellow businesspeople gather, would be of great value. Management consultants, the Italian Trade Commissions and Chambers of Commerce may also assist. Dealing with the last two will give you a taste of Italy's unhurried busi­ ness approach before you even get on a plane.

Documents from mutual business associates and friends from your country or Italy, well-known corporate leaders or government officials (either active or retired) are particularly impressive.

4. Embark on a fact-finding mission Go to Italy. Assess your business prospects by

researching the country and its culture. Set up appointments with potential contacts or businesses of interest before you leave your home country. Schedule your visit to coincide with pertinent trade conferences and shows.

5. Be flexible and patient. Doing business in another country means that

you'll be entering a world not unlike the one in Lewis Carroll's Through the Looking Glass, a place where up is down and down is up. Adjusting to Italy's adagio (slow) tempo will help you maintain a degree of patience you never thought possible.

Once you've evaluated candidates for doing business and decided on a prospect, plan on con­ suming plenty of pasta and becoming a nimble practitioner of clientelismo.

52 Passport IT ALY

6. Don't confuse 11style" with informality. Despite their proclivity for doing business on a

personal level (kisses may be exchanged between the sexes in both business and social situations), Italian business people are quite formal. As you're getting to know one another, it's important to avoid becoming too familiar and casual in your approach and manner. Always acknowledge titles and seniority during introductions and the course of conversation.

7. Stay·above the fray. Always maintain self-control and certainty, no

matter how excited the Italians get in a business meeting. Even if the Italian team disagrees among themselves about an item under discussion, you and your associates should maintain a united front. Save any debates for after the meeting.

8. Appreciate imagination and inventiveness Italians thrive on ambiguity and risk, and

they're very good at on-the-spot, creative problem solving. Rules are seen as guidelines, not strict directives. Expect digressions and loose adherence to the points you want to cover during meetings. Rather than resisting, stay open to unusual ideas.

9. Don't jump to conclusions. Cultural and language differences can cause

confusion. Before you react to a statement, gesture or change of mood, take a moment to consider that you may have misunderstood the situation or mis­ read the signals.

10. Discover what the Italians really want. Understanding cultural traits and learning to

"read between the lines" will give you a distinct advantage. For instance, Italians don't like taking orders. If something is presented to them as a strict directive, they may resist - even if they like the idea. And make sure that your Italian counterpart

Strategies for Success 53

understands the specifics of a contract or agree­ ment the same way that you do.

11. Be logical. Italians have a way of cutting to the essence of

a concept or situation. They're quick to recognize hypocrisy, insincerity and superficiality. Present your ideas clearly and rationally; don't embellish. A good idea backed by solid, logical thinking will stand on its own. And be sure to maintain an air of confidence. Since Italians are highly visual, graph­ ics that clarify your proposals can be very effective.

A Marketing Primer

Northern Italy accounts for approximately 65 percent of total Italian imports and it has twice the per capita income of the country's southern regions. The north's leading marketing area is Milan. Rome, Naples (not considered "southern" by marketing opportunity standards) and Turin fol­ low.

Direct marketing through mail order catalogs is an effective method for introducing foreign prod­ ucts in Italy. However, these ventures should be preceded by substantial research in order to ascer­ tain sales potential and to design the best strategies for attracting a sophisticated populace.

In an effort to attract foreign business, Italy's retail distribution system is currently being refur­ bished with more streamlined and efficient large chain stores. Trade shows also help foreign firms attract Italian customers. Fiera di Milano, Milan's large trade fair site, organizes a number of trade shows annually.

Franchising is another effective approach. Approximately 18 percent of all retail trade in Italy is franchise-controlled, with 54 percent of all fran-

54 Passport ITALY

chising networks concentrated in the north. Activi­ ties include housewares, apparel retailing, and fast food restaurants, service-oriented franchises include health clubs, beauty salons, and quick printing and photo shops. The most promising sec­ tors appear to be travel and tourism organizations, management consulting firms, software and con­ sulting services, and courier delivery services. Lesser-known franchisers who set their sights on the Italian market face the challenges of gaining local name recognition and of mastering local busi­ ness practices.

Since distribution is less than efficient, espe­ cially for the sale of industrial products, foreigners would do well to engage an Italian firm familiar with the local system to help with contacts.

Regardless of the business enterprise, Italians expect high-caliber personalized service, and repeat business is dependent on it. All deliveries should be prompt and all deadlines met. Late deliv­ ery is one of the biggest complaints Italians have about foreign suppliers.

Time

The Italian attitude toward time is relatively relaxed. Time isn't equated with money. On the one hand, Italians aren't particularly punctual; on the other hand, they understand that being on time is a sign of respect and consider deliberate lateness to be rude. They tend to cancel meetings at the last minute or postpone items on an agenda until the next meeting. The best way for a foreigner to cope is to make appointments well in advance, to recon­ firm them up until an hour or two before they're scheduled to take place, and to be punctual (espe­ cially in the industrial north). It's also important to remain patient and flexible, and to graciously keep a schedule or discussion on track when it goes astray.

Deadlines

Italians will not consider a deadline to be iron­ clad unless you repeatedly and firmly make a point of it. To avoid any misunderstandings, it's crucial that expectations and timelines be presented with­ out any ambiguity, and that the consequences of not adhering to those deadlines also be made clear.

61 I

@ __ B_u_s _in_ess_M_e_e_ti_ng_s __ _

Arranging the Meeting

The visiting company should make arrange­ ments for a meeting far in advance. Do so in writ­ ing first, then follow up by fax, E-mail or telephone. Letters written in Italian get the most immediate response. Provide as much detail as possible about the issues under consideration. (Summer vacation periods and holidays are not a good time to attempt to make such arrangements.) It's generally best to schedule appointments to be held between 10 A.M.

and 11 A.M. or after 3 P.M., although northern Italian business offices prefer to get an earlier start.

Preparing the Italians

Supply your Italian associates with the names and titles of your team members ranked in order of importance and seniority. Indicate the designated speaker or speakers so that the Italians will know to whom their major communications should be directed. The leader of your team should know Italy well, be flexible, patient, congenial and authoritative, and be able to work well with an interpreter.

Business Meetings 57

The Italian firm may send someone to the first meeting to test the waters who isn't the decision maker, someone of middle-management ranking. Italians tend to view early meetings as a means to evaluating a situation.

Arriving at the Company

When you arrive at the Italian company, announce your name and purpose to the adminis­ trative person. You and your team will be led into the conference area. Your leader should proceed ahead of everyone else and, when the time comes, make formal inrod uctions to the most senior per­ son on the Italian side. Shake hands with everyone; a handshake that includes grasping the arm is appropriate. Once everyone has been introduced and seated, the Italians will want to spend some time getting acquainted. Initial small talk gives everyone an opportunity to get comfortable with each other, as well as to size up the situation. It's possible that the Italian leader will make a grand entrance after everyone is seated around the table and will give an informal welcoming speech before inviting visitors to state their business.

Telling Who's Who

Discerning who is actually in charge and who will be an ally can be a complex matter. Italians often conduct their study of proposals and impor­ tant contracts behind the scenes. Business decisions are made at the top by one person, or a select few. Decision by consensus is uncommon. Yet, it's often difficult to pinpoint the decision maker. Business titles don't always coincide with levels of responsi­ bility. Foreigners dealing with an Italian managerial hierarchy may discover that the brother or sister of

58 Passport ITALV

the person they've been dealing with - someone they've never met - is actually the person with final approval power.

Present your ideas with enough enthusiasm that, if there is an invisible higher-up, the com­ ments passed along by the Italians you do speak with will capture his or her attention.

Italians tend to conduct business "close to the vest" and to remain vague and ambiguous. espe­ cially at the beginning of a business encounter. They'll open up when they feel comfortable with the relationship and when they think that the moment is opportune. It is important to look below the surface - what's said isn't always what's meant. Italians may say the polite thing rather than express their true opinion.

Presenting Your Business

Italians relate to and develop confidence in a business associate as a person first. They're not impressed with procedures so much as with an individual's talents. Typical meeting presentation methods, including audio and visual aids, can be used, as long as these are original and captivating - Italians value pragmatic improvisation and innovation.

Present your business as logically and con­ cisely as possible. Be specific about applications. Since style is so important to the Italians, make your presentation elegant. Always remain calm and confident. If you're interrupted frequently, keep your focus. Bursts of tangential conversation in the middle of a presentation aren't unusual, and you shouldn't be offended. Don't, however, allow your presentation to deteriorate into an unruly debate.

Business Meetings 59

Concluding the Meeting

The Italian team leader will signal the end of the meeting. Once he or she stands up and thanks everyone, you should again shake everyone's hand before taking leave. Close friends often embrace and slap each other on the back. It's best not to con­ tinue the discussion with your team members until you've left the premises.

Guidelines for Conducting the Meeting

• Observe the Italian hierarchy. Formality and status are important, and

neglecting to adhere to the established hierarchy will not go unnoticed. The rank of the person pro­ posing an idea may have more influence than the idea itself. • Keep presentations concise.

Elaborate, highly structured presentations aren't common in Italian companies. Stress the facts and highlight the details; keep your presentation formal, orderly and brief. Be sure to talk about any local implications. Avoid a "hard sell" approach. And don't expect your presentation to elicit an immediate decision. Consider the meeting an opportunity for both sides to "test the waters." • Brace yourself for emotional outbursts.

Although disagreements will arise, don't expect to resolve them in the meeting. Often an Ital­ ian businessperson wants a forum in which to pon­ tificate and show off his charisma. Let them say what they have to say and move on. • Be confidant, but not arrogant.

Italians are compassionate, but they have little tolerance for arrogant or rude behavior.

(f,i? Negotiating with

�---•_he_ltal_i_an_s ___ _

Outgoing and charming, Italians appreciate the art of business and enjoy the process. Their informal atti­ tude toward negotiations means agendas are loose and impromptu meetings can tum out to be pivotal. Some­ times lunch is the venue. (While an Italian business person will rarely invite you into his or her home, res­ taurants are often the scene of meetings because of their convivial atmosphere.) Italians appreciate "Renaissance people," those who know about food, wine, literature, opera and art. It's also to a foreigner's advantage to get to know the nuances of the region in which he'll be working- its particular sense of humor, revealing vocal intonations - as these can offer invalu­ able insight into an Italian counterpart's way of think­ ing. Although Italians tend to negotiate diplomatically, they're more subtle and less open than Americans.

Opening Protocol

Protocol for negotiation meetings is no differ­ ent than for regular meetings, Italians always shake hands before and after, and good friends hug. Friendly, warm-up conversations go on longer in

Negotiating with the Italians 61

Italy than other countries, although in the north business gets underway more quickly.

Ideally, negotiations should take place between executives of equal rank. Preliminary negotiations usually involve middle managers, with the top level staff getting involved only during the final negotia­ tion stages. Treat these middle managers as you would the CEO - use their professional titles when addressing them and demonstrate respect for their position. Although Italians are casually formal, they display and expect courtesy and good manners at all times.

Negotiation Techniques

• An air of urgency is considered a sign of weak­ ness. The "soft sell" is much more effective than a direct, high-pressure approach.

• You may not get what you want until you've attended a number of negotiation meetings. If you've reached a point where you know that an agreement is not in your best interest and will never provide you with what you want - walk away.

• When Italians refuse a proposal, they manage to do it with such charm that you may not real­ ize at first that you've been turned down.

• A dramatic change in demands often takes place at the last minute. Stay calm. Chances are that the Italians are close to coming to an agree­ ment with you and are just making one last attempt to unsettle your bargaining position.

• Italians are notoriously good businesspeople. Don't let the Italian flair and relaxed manner distract you; Italians take business seriously.

• Italians can get emotional during negotiations, appearing more volatile than they actually are.

111.lu �-------------------------------------------------

62 Passport ITALY

Again, don't be distracted. • In spite of their demonstrative manner, Italians

present their ideas rationally and clearly, but they may try to argue points as a way of weak­ ening your position. Italians also like to bar­ gain about price, and this can delay the proceedings.

• Vagueness is another Italian technique. Italians introduce information on a need-to-know basis, guarding it until it can be utilized for a transaction. Letting such "nonchalance" inspire a sense of urgency will put you at a dis­ advantage.

• Be aware that Italians will often interject opin­ ions and ideas spontaneously. This sometimes makes them appear as autocratic, manipulative and disorganized to outsiders. Anticipate this behavior and allow extra time for it; don't expect the Italians to adapt to your country's way of doing business.

• If you say "no," mean it. Italians don't always re-extend an offer once it's been firmly rejected.

Interpreters

Even Italians who are fluent in your language aren't likely to put themselves at a disadvantage by having to speak a foreign tongue during serious negotiations. (While the study of English is com­ mon in schools, few Italians speak it regularly.) One member of the Italian delegation will probably act as an interpreter, but it's not advisable to depend on that person for communication. Although there's little risk that he (or she) would intention­ ally try to mislead you, the chances are good that he won't understand all of your nuances and infer­ ences, and he is, after all, a member of their team.

Negotiating with the Italians 63

And even if you're fluent in Italian, using interpret­ ers gains you more time to think about your responses while the translation is going on.

Having an interpreter of your own can be expen­ sive, but it's as essential to high-stakes negotiations as engaging an attorney. Your interpreter should be mul­ ticultural as well as multilingual, and able to pick up on feelings and intonations in both languages. Ideally, you should locate an interpreter in advance, but even after you've arrived in Italy, the business center staff of your hotel can refer you to companies that provide competent interpreters and translators.

Tips on Using Interpreters

1. Establish Guidelines Before a meeting, plan out the mechanics of

how you'll work together - for example, how long you should speak before pausing for interpretation. Ideally, you should practice extensively with an interpreter - with whom you've previously estab­ lished a rapport - before your trip. Go over any specialized vocabulary, brief him thoroughly in advance of negotiations, and provide him with as much written material as possible. You should also give him time to become familiar with your style, humor and body language, so that he can accu­ rately convey your message.

2. Don't Exhaust Your Interpreter During a meeting or negotiating session, stop

every couple of sentences to allow for interpretation, and try to limit each sentence to one main point. Don't begin another sentence before the interpreter has finished translating the previous one.

Interpreters need to rest at least every two hours. If negotiations will continue for more than a day, you may need two interpreters. Using an inter-

111U ___________________________ _...., ___________________ _

64 Passport ITALY

preter can stretch a meeting to three times its nor­ mal length, so be patient.

3. Address Your Italian Counterpart When using an interpreter, look toward the

head of the Italian team, not at the interpreter. Ital­ ians value personal communication and may understand more English than they let on. Speak slowly and clearly, avoiding idiomatics and slang. Realize that there will be semantic and syntactic differences, and try to compensate.

4. Review What's Been Said and Anticipate What's Coming After a meeting or during breaks, review with

your interpreter the main points that both sides have made. Ask your interpreter what he observed or noticed about the other side's position or behav­ ior. Try to get a feel for the direction in which nego­ tiations are headed, and anticipate what will need to be said later on. This will help your interpreter to present your case to the Italians in the most favor­ able way possible.

5. Emphasize Important Points As They Arise Abstract and complicated discussion is seldom

directly translatable. An experienced and qualified interpreter tailors his translations to reflect your style, level of formality, tone and intended meaning.

You can help ensure that important points get across by repeating or emphasizing them and by making certain that your verbal and non-verbal (body language) messages are consistent with each other.

Contracts, Italian-style

Reaching a mutually beneficial agreement (a "win-win" situation) is important to Italians, and contracts are binding. However, they're not inter­ ested in spelling out all contingencies- remember,

Negotiating with the Italians 65

Italians don't like too many rules. They can also be selective about the importance of specific terms and may consider others open to interpretation. It's important to reinforce contracts verbally, emphasiz­ ing the key elements of your agreement and under­ scoring your expectations. As previously noted, Italians value their personal relationships with business partners and associates and will dedicate themselves to those more so than to any written contracts that exist between them.

� Business Outside the Law Black Work

An estimated one quarter to one third of Italy's

economic activities are carried out "off the record."

This hidden economy, known as lavoro nero (liter­

ally, black work), parallels many types of legitimate

businesses and is responsible for the fact that, while

the country is reportedly falling apart, some of its

citizens are among the most affluent in Europe. It's

not unusual for an Italian to hold two jobs - one

official, the other underground.

The beautiful leather coat you purchased at

such a fabulous price in Florence's open-air market,

or the rare coins for your collection, might well be

Black Market items. Some enterprising Italians

excel in marketing counterfeit and stolen works of

art. Many citizens consider the labor and social

security regulations untenable, and the Value

Added Tax (VAT) can reach as high as 19 percent.

So rampant is tax evasion that the government

established the Guardia di Finanza (Financial

Police), who roam the country in grey jeeps ran­

domly searching cars and trucks for unreported

goods.

Business Outside the Law 67

Mafia

The family is the structural paradigm for the Mafia or cosa nostra Qiterally, "our thing"). Formed in Sicily many centuries ago as an underground organi­ zation to protect villagers from the corruption of invading Arabs and Normans, it grew to international proportions in the form of powerful, often rival, fami­ lies. Over the years, the Mafia became corrupt; extor­ tion rings, sex and drugs became means to power and money and have been ever since. (Sicily's location makes it a natural focal point for drug distribution between Europe, Africa and the Middle East.) Today,

Mafia involvement often means manipulating votes and laws or granting huge contracts (such as those for highways and roads) in return for favors. (In Calabria, the Mafia's known as 'ndrangheta, meaning to surprise or grab someone from behind.) The Mafia is also to blame, at least partially, for the continuing disparity between Italy's rich north and poor south, as it keeps legitimate business and investment away from the large regions of Sicily, Campania and Apulia.

The "Clean Hands" Revolution

The tangentopoli (a.k.a. Bribesville investigation) began in early 1992 as an effort to eliminate the Mafia's power and influence once and for all. Within eighteen months, the courts had charged 447 mem­ bers of parliament (over half the total number) with bribery. High-level businesspersons and members of the ruling class were also exposed. Two former prime ministers are currently behind bars, one for Mafia collusion and arranging the murder of an inquisitive journalist, the other for various corrup­ tion charges. A third, convicted for accepting bribes, is hiding from the authorities in Tunisia. Such tan­ gentopoli successes have resulted in the retaliatory

68 Passport ITALY

- murders of law enforcers. The 1993 car bombing of two important Italian judges - with enough dyna­ mite to blow up a village - is an example of the Mafia's trademark use of symbolic gesture.

Eliminating an organization so intrinsically linked to Italy's culture will be a long and difficult task - especially since breaking omertti., the code of silence, is the worst thing a Mafia member can do. Italians are quite used to living with the problem. In a recent reply to criticism of his small town, the mayor of mob-ridden Aversa proclaimed, uwe have very high-quality criminality." Still, hope exists that the younger generation will ultimately succeed in dilut­ ing the Mafia's strength, and that the organization itself will invest its substantial energy and talents for efficiency and effectiveness into legitimate business.

The Red Light Debate

In 1958, when Italy abolished its state-con­ trolled brothels, there were 200 official "houses" and approximately 4,000 registered prostitutes, most of them native-born Italians. Today, the num­ ber of "ladies of the night" is estimated to be at least 45,000, with the large majority being from Albania and Nigeria. And as most of them solicit business in daylight - on streetcorners, park benches, railway stations and commuter trains - they've become the subject of heated debates.

Attempts at reinstituting legalization are being fought by both the Catholic Church and the political left. As in all things, Italians tend to take a regional approach to the problem. Lombardy has voted to reopen the brothels. Brescia's mayor has implied that the sex trade should be legal, but kept behind closed doors. Rimini has set up a parco d'amore, an official red-light zone to accommodate them.

�--N_am_ e_ s_&_G_re _et_in_g_s ___ Family names, like everything else in Italy,

vary by region. For example, Montovani and Fer­ rari are common last names in Emilia-Romagna. Two of the most common surnames in all of Italy are Rossi and Bianco, Paolo Rossi being the equiva­ lent to John Doe in the United States. Fellini is uncommon, and most Italians with that surname are from the same village and are related to the famous director. If an Italian carries a last name derived from the name of a town such as Modena or Ancona (towns most likely named after Jewish families who settled there), he or she is probably Jewish.

When Italian women marry, they adopt their husband's family name and no longer use their own. In general, Italians don't have middle names.

Common Italian Titles

Always address an Italian by his or her title and surname. If someone has an aristocratic title, use it, at least at first; it's best to err on the side of formality. The most common title is dottore, widely used by all levels of university graduates with

70 Passport ITALY

degrees in medicine, engineering, finance, law, etc. Other common graduate titles include Ing. (Engi­ neer), Avv. (lawyer), and Arch. (architect). Cav. (Cav­ aliere, literally "knight") and Comm. (Commendatore, or "commander of the order") are public-service honors. Profess6re is reserved for middle school teachers and up; maestro for elementary school teachers and musicians, although orchestra mem­ bers are called professore d' orchestra.

If you don't know a person's title, address them as Signore (Mister or Sir), Signora (Mrs. or Madam,) or Signorina (Miss), if the woman is not married or a young lady. Women in business are usually addressed as Signora, regardless of their marital status.

Greetings and Protocol

Men shake hands when meeting or departing, even if the encounter is brief. The handshake may include grasping the arm with the other hand. Male friends may embrace and slap each other on the back. However, in both business and social situa­ tions, they tend to be conservative and stand on ceremony - asking permesso even upon entering the home of an old friend or every time they light a cigarette.

Men meeting women shake hands on occasion, but more often they kiss the woman's hand. Women either shake hands or kiss the cheek of a man in greeting; it's best for a man to take the woman's cue. When exchanging business cards, be polite; be sure to read the card before tucking it into your briefcase or jacket pocket.

Don't address someone using the personal pro­ noun tu (you) unless you know them well. The less familiar pronoun lei is considered appropriate in all situations.

GoSlow. Smart. What do you Friendly Warning. really want?

� Communication Styles

Italians like physical contact. They'll grab your arm, tap your shoulder or pat you on the back dur­ ing conversation. Male friends often hug each other, and it's not unusual to see a businessman conversing while holding his counterpart's elbow - a gesture meant to underline the confidentiality of the discus­ sion. During encounters, Italians will stand close to you ( even if the two of you are standing alone in a football field) and look you in the eye.

Guidelines

• Remember your host's status and social standing Your body language should reflect respect for

your host, client or business associate and your position as guest. Laughing and a general loosen­ ing up should be reserved for social occasions only. • Remember that Italians are proud

Italians generally stand tall, dress well and project an air of pride and confidence, and they feel comfortable when their guests do the same. It's considered poor taste to remove your shoes in pub­ lic, such as when visiting someone's home.

72

• Listen and watch carefully

Passport ITALY

Italians like to monopolize conversations. They love to argue and often interrupt. Apre la bocca per rinfrescare i denti, they say, both of others and of themselves. He's so full of hot air that he has to open his mouth to cool off his teeth. In business situations, it's best to let them have their moment in the spotlight before making your remarks. Use this silent time to study mannerisms, observe nuances, and make sure that what you think is being said is really what's intended. Ha piu lingue della Pentecoste: He has more tongues than Pentecost (there were twelve flames, one for each Apostle). • Don't use your hands

Unless you know the meaning of Italian hand gestures, it's best to avoid using your hands when speaking. You may inadvertently communicate something you didn't intend. • Be prepared for emotional outbursts

In stressful situations, Italians can become emotional. Their gestures may become broader and more dramatic and their voices louder. If a negotia­ tion isn't going their way, they may not hesitate to express their great disappointment. Even if it appears that the other side is being offensive, it's essential to maintain a calm demeanor. La minestra della vendetta va mangiata fredda: Vengeance is a soup best eaten cold.

� ___ c_u_s_to_m_s ____ _ Feast Days & Festivals

Every Italian city, village and town celebrates its own saint's day, or feast day - St. Peter for Rome, St. Gennaro for Naples. Special days are also dedicated to local and prominent luminaries, including politicians, saints, artists and poets. On these occasions, Italians gather in the piazzas and streets for exuberant food and wine celebrations that can last all afternoon and into the evening. Don't expect to conduct any business. The days preceding Ash Wednesday, the onset of Lent, are devoted to Carnival (most lavishly celebrated in Venice), which culminates on Marted'i Grasso.

Regions, cities and villages also hold annual cultural celebrations. These include the Venice Film Festival, the Festival at Spoleto (which showcases avant-garde theater productions and music) and the Venice Biennale (held every two years), an important art exhibition featuring the work of internationally acclaimed contemporary artists.

Christmas

St. Francis of Assisi (1182-1226) began the tradi-

•

�s Government & Business

The collaborative relationship between the Jap­ anese government and business is among the stron­ gest in the world. Since the end of World War 11, the government has supported the rebuilding of the economy through financial and banking incentives, development consortiums, gyosei shido (administra­ tive guidance) and sponsored research. And though Japan already spends a larger percentage of its gross domestic product (GDP) on the aforemen­ tioned research than any other country in the world, the government has recently committed itself to doubling that figure.

Barriers to Trade and Competition

In addition to creating an environment where business can thrive, the government has long sought to protect Japanese businesses from foreign competition by such informal practices as restric­ tive distribution and licensing agreements, finan­ cial pressure on distributors and retailers, and complex registration procedures and requirements.

While formal barriers to trade, such as tariffs and overt discrimination, are almost all gone, the

Government & Business 27

highly developed structure of the Japanese econ­ omy makes it difficult for newcomers to compete. But as usual, when an economy is protected and too highly structured, niches and cracks appear - and as exemplified by the success of such innova­ tive companies as Amway (consumer goods), Dom­ ino's Pizza, Starbucks Coffee and Apple Computer.

The Iron Triangle

Alliances between big business, Japanese min­ istries and politicians are often referred to as the Iron Triangle. This three-way relationship was probably the principal cause of the recent setbacks suffered by the long-dominant Liberal Democratic Party (LDP). Until recently, support for a political party and its candidates - in the form of large con­ tributions, informal agreements between a govern­ ment agency and a particular company, and special consideration for favored legislation - were all common aspects of "doing business."

Probably the most powerful members of the Japanese government are the bureaucrats of the 12 national ministries. While the word "bureaucrat" in most cultures implies a petty and obstructive offi­ cial, the position in Japan is highly revered. Only the top two percent from the top four universities join the ministries. These bureaucrats are over worked, underpaid and very powerful, and in most cases, they're able to easily overpawer the Japanese Prime Minister and parliament.

Most prestigious and powerful of all is the Ministry of Finance (MoF), through its control of the government budget. Next is the Ministry of International Trade and Industry (MIT!) which is often credited with engineering the Japanese eco­ nomic miracle. (The turf battles between ministries are intense.)

28 Passport JAPAN

Recent events concerning Japanese bank regu­ lation have highlighted two aspects of the govern­ ment bureaucracy with regard to business.

First, government agencies are so large and complex that it's even difficult for people within them to understand what's going on. The business of licensing, permits, compliance, visas and clear­ ances can be impenetrable (or, at the very least, costly and time-consuming) for most foreigners. The only hope is an alliance with someone in the government, or more probably with a Japanese spe­ cialist in government-business affairs.

Second, the Japanese do not like to "air their dirty laundry" in public. This was especially appar­ ent in the failure of Japanese financial regulators to promptly notify their U.S. government counterparts of irregularities in Daiwa Bank's U.S. operations. The conventional wisdom is that the government will quietly intervene (in ways that are often surpris­ ing to Western observers) to clean up or eliminate a problem before it becomes widely known.

Insiders and Outsiders

Put simply, those inside the system benefit from it; those outside have little opportunity to manipulate (let alone penetrate) it, and they stand little chance of obtaining favors. Business offers lucrative positions to bureaucrats who retire from the government, and the rate of transfer of govern­ ment bureaucrats to private companies is rising.

Former bureaucrats serve on the boards of 23 percent of Japan's major companies, despite restric­ tions on accepting positions in industries that they previously regulated. Interestingly, even many for­ eign companies have learned how to play the game and have become successful at recruiting former Japanese bureaucrats to their boards.

��5,.__T_h_e_W_o_rk_E_nv_i_ro_ n_m_e_n_t_

Lifetime Commitment

The traditional job in Japan requires a lifelong commitment in return for a career of predictable promotions and increasing benefits. Promotions are based not so much on merit or accomplishment as on an employee's age and length of tenure.

Traditionally, management practices focus on long-term development. Employees are neither hired nor fired on the basis of their ability to aggres­ sively produce short-term results. In fact, laying off an employee is seen as a disgrace for all parties con­ cerned. Until very recently, top companies only did so in the face of great financial difficulty.

However, this approach is increasingly giving way to the realities of the world marketplace. Employees are no longer assured lifetime employ­ ment, and companies find that they must compete to attract and keep "talent." While some huge con­ glomerates retain traditional promotion systems, many companies are now trying to base pay raises and promotions on an individual's particular ability and contribution (albeit with very limited success).

In major companies, changing jobs is almost unheard of. The company becomes both one's work

30 Passport JAPAN

group and social group . In many cases, there are also financial and housing ties. The reputation of one's company can give instant credit at restaurants ijust by passing a business card to the cashier) or can serve as an irrefutable reference when seeking an apartment . Separation from the company would mean a life change, not just a job change.

Those Who Sit By the Window

After they are recruited from universities, newly hired employees in large companies are expected to follow a prescribed path. Until the age of about 45, they will be trained and educated in the company ways and rotated from one area or location to another. Then, a decision is made as to whether they should be promoted to the position of a company director. If so, they can then work well beyond the normal retirement age, perhaps even into their eighties. If not, they are expected to retire at 55. Those reluctant to retire are shunted aside to become madogiwazoku, or "those who sit by the window."

Assignments Abroad

An overseas posting is a dilemma for a Japa­ nese executive. The plus sides are many, often including an expatriate expense package that allows a standard of living unheard of in Japan, the prestige of being picked for an overseas assign­ ment, and a chance to experience another country.

On the other hand, many companies insist that those assigned to foreign posts be married; wives are expected to drop whatever they're doing to accompany their husbands. It's relatively easy to bring younger children overseas, but older (partic­ ularly male) children usually stay in Japan so as not

The Work Environment 31

to lose their place in the race to enter a prestigious university.

Many executives stationed overseas loose jimy­ aku (personal connections), which are what Japa­ nese companies look for in their top executives. This can be particularly problematic when the over­ seas assignment has ended and the executive returns home.

Seniority and Status

In ancient Japan, every person was categorized as belonging to a distinct class based upon family background and occupation. The lowest were the menial laborers, the highest included the Emperor and his family. Within each class, there was another ranking system, often with the youngest and least skilled people in a particular occupation at the bot­ tom and the oldest (presumably the most skilled and experienced) at the top.

This structure, based on the tenets of Confu­ cianism, remains the basis of Japanese society. The words sempai (senior) and kohai (junior) are used to express hierarchical relationships in both business and education. Everyone assumes that senior grad­ uates of top universities (Tokyo, Keio and Waseda) will mentor and try to ensure the success of their junior alumnae within a company.

Businessmen in Japan are so concerned about status that they cannot be sure how to behave at an initial meeting until everyone's relative status has been established. For this reason, they exchange name cards before bowing. If the name cards are too vague, they may ask each other about company position, seniority and alma mater. If they miss the appropriate level of humility based on the new knowledge they've received, they may start over and re-bow.

32 Passport JAPAN

Education

Even if a person is from a well-known and powerful family, he will nominally still be junior to any group members who graduated from a more prestigious university or who graduated before him. In the event that two employees in the same work environment have nearly identical creden­ tials, their rank will be determined by their ability to make personal connections.

The Japanese Work Ethic

Loyalty to the company is seen as an extension of loyalty to the family, so conflict between the two - which is common in Western cultures - is almost nonexistent in Japan.

Although Japanese are reluctant to take indi­ vidual credit or praise, they are driven by a strong sense of shame and will take responsibility for work "failures" that are beyond their direct control, or for situations from which their counterparts in many cultures would be distancing themselves. An example would be the resignation of the president of an airline because one of its planes crashed on the other side of the world.

Relationships between labor and management, and between blue collar and white collar, tend to be harmonious rather than adversarial. Individuals don't generally compete. However, the Japanese are fiercely competitive team players, both within their own company and against rival companies. Japa­ nese management techniques are designed to har­ ness this competitive spirit; workers are often organized into teams that try to out-produce each other.

Individual employees will rarely act on their own and almost never against the will of the group. Thus,

The Work Environment 33

it's both foolish and a waste of time to say to a Japanese business contact, in effect, "Look, if you work with me on this, it will do you a lot of good in your company." Nothing could be further from the truth, and such a ploy is not likely to gain you favor. And as the group often shares in both successes and failures, commission sales designed to reward individuals may cause alien­ ation of the person they' re intended to reward.

Decision Making

_ Traditionally, decision making in Japanese bu�mess was a long, time-consuming process. Thmgs are changing in today's fast-moving econ­ omy, but long turn-around times are still normal particularly in larger companies. In theory, deci'. sions include almost every employee involved in the endeavor under discussion and cannot be com­ pleted without consensus. While strategic planning and pohcy making take into consideration the desires of upper management, decisions are often influenced from the bottom up. Ideally, they are then articulated and implemented with resources provided from the top down. "No" is hardly ever an acceptable response tq a request from a superior or group, and when unavoidable, it comes in the form of an apparent "yes."

Foreigners managing Japanese employees need to accept the upward flow of decisions as funda­ mental and learn how to participate in the system. Authoritative management styles are certain to meet with resistance and create ill will.

Ringi-Sho

_ An important decision usually begins as a sugges­ tion from a kacho (middle-level manager) or group of managers. Then it's circulated in written form (known

34 Passport JAPAN

as ringi-sho or "project proposal") among all those whom it may affect. Those who approve affix their per­ sonal seal to the document, then pass it on to other per­ sons of equal or higher rank. The suggestion gains credibility as seals of approval accumulate. Individuals may suggest modifications. In the end, if there is suffi­ cient support, the ringi-sho will be forwarded up to the board of directors. A suggestion that makes it that far is usually authorized for implementation.

Shakun

With a fervor that might be seen by Westerners as almost childlike, Japanese employees repeat what they call sluiken (slogans). A typical example of these can be seen in the seven principles that are reaffirmed on a daily basis by employees of the Matsushita Electric Company:

1. National Service Through Industry 2. Fairness 3. Harmony and Cooperation 4. Struggle for Betterment 5. Courtesy and Humility 6. Adjustment and Assimilation 7. Gratitude

Most successful foreign companies in Japan have made considerable efforts to translate, publi­ cize and commit their employees to their mission statement. Masami Atarashi, the former President of

Johnson & Johnson Japan, often remarks during lec­ tures that committing his former company's employees to a previously forgotten mission state­ ment was the crucial step that pushed the Japanese subsidiary's accounts into the black, after years of bleeding red.

<'� Women in Business < L 'Jv,_.__ ____ _

Traditional Roles

Historically, Japanese have believed that it is in the best interest of their families and their nation for women to devote themselves to being wives and mothers. In most households, women are responsible for the family budget (with men com­ monly complaining that their wives don't give them enough allowance) and for making decisions about the education and disciplining of children. They also take responsibility - and public blame - for problems that family members may have.

The majority of Japanese women still believe that marriage and family are the ideals to which they should aspire. There is also a strong belief that the attention given by Japanese women to their families has led to the low level of delinquency and good classroom behavior of Japanese children, compared with the children of dual-income families in the West.

Changing Trends

The labor shortages of the 1980s inspired an unprecedented influx of women into the Japanese

36 Passport JAPAN

workplace. To date, they've gained the most accep- tance in production and service industries, but their pay remains significantly lower, in many cases, than that of their male counterparts. It's not uncom­ mon for young working women to be referred to as office "flowers" and to be expected to quit when they marry. Help-wanted ads often specify the sex of employees sought and set an age limit for female applicants.

Many women still hesitate to assert themselves professionally for fear of offending their more tradi­ tional families, boyfriends or husbands. However, Japanese businessmen are beginning to recognize that women in the West hold high-level positions in business and government and have adjusted their expectations and behavior to some degree.

Recently, many young Japanese women have rejected both the idea of early marriage and of climb­ ing the corporate ladder. Having observed their older male counterparts endure years of drudgery and overtime for the vague promise of rewards in the far future, they're happy to simply take their sal­ aries, bonuses and full vacation time and leave work at five o'clock.

Avoiding "Foreign Intervention"

It's important to understand that the business arena is not an appropriate forum in which to express political views regarding woman's rights or to attempt to show the Japanese the error of their ways.

Such behavior will serve only to embarrass the Japanese on your behalf and create a level of dis­ co�fort almost certain to ensure failure of purpose. Social changes are slow in coming in Japan, and they are internally driven.

Women in Business 37

Strategies for Western Businesswomen

A female team leader can make it abundantly clear that she is in charge by putting her name at the top of a list of team members, by including more bio­ graphical information on herself than on other mem­ bers, and by emphasizing her credentials and accomplishments.

She can ensure that the Japanese do not ignore her status by instructing her team to defer to her all questions directed to others that should appropri­ ately go to her. Perhaps most important, her team should refrain from disagreeing or engaging in a "brainstorming" session in front of the Japanese.

Foreign businesswomen should not expect to be included in the evening business activities and should not be offended if they are not. The Japanese business-entertainment industry simply hasn't had a great deal of experience catering to women, and they don't know how to entertain them.

This doesn't have to be detrimental and can be turned into a tool. As the senior manager, a busi­ nesswoman has a chance to politely bow out of a drinking session and then suggest a male associate attend instead. Provide the associate with a specific agenda of items for feeling out Japanese counter­ parts, maybe a modified version of the good cop/ bad cop strategy. The informal setting will provide a venue to push agendas, test limits, smooth over rough points or mistakes from a previous meeting, test new proposals or engage in a variety of other similar activities.

If you are included, however, count it as a plus and enjoy yourself.

2;J;J Making Connections

Cultivating Relationships Is Key

The Japanese place tremendous value on per­ sonal relationships in their business dealings. This point cannot be overemphasized. Foreigners often fail to establish long-term ties in Japan simply because they do not take the time to earn the trust and respect of their Eastern counterparts.

There are few, if any, ways to shorten the pro­ cess. And be advised that the Japanese are very skilled at recognizing superficiality, haste and what they consider to be a lack of respect. While they may never say "no," they will hesitate to move for­ ward if they feel that a genuine rapport has not been established.

A number of personal visits to your prospective associates is mandatory, and there will be little appar­ ent progress or tangible results for quite some time. Although some agreements and contracts can be made within a year, foreign companies that have firmly established themselves in Japan report that the process took a number of years. Budget accordingly.

When starting out in Japan, most executives try to make their trips as quickly (and cheaply) as pos­ sible. However, it's very difficult to learn about a

Making Connections 39

large and complex market like Japan when on the run, especially given today's tighter-than-ever schedules. And such behavior is likely to be inter­ preted as a lack of commitment by your Japanese counterparts.

The Go-Between

"Cold" calls and unsolicited marketing materi­ als are not good business strategies in Japan. The best course is to find a chukaisha (mutual friend or connection) who can introduce you to prospective customers and give assurances about your reputa­ tion and business acumen.

A Japanese will probably not do business with you until he has had time to develop a sense of your ethics and intentions. In fact, he will sometimes avoid meeting with a stranger altogether, until someone he knows (usually also Japanese) intro­ duces you. Remember that the chukaisha is, in effect, loaning you his reputation and that people, compa­ nies, organizations and schools extend constant, tre­ mendous effort over a period of years to build and keep a reputation. Considering this, it's not surpris­ ing that unless a potential connection knows you very well, you may receive an excuse instead of an introduction.

If you can't identify a chukaisha, you may be able to get a bank or other company to introduce you as a reliable client of theirs. For years, large Japanese companies have employed retired gov­ ernment officials, well-known Japanese political figures, and others of prominent stature to act as go-betweens (komon or sodan-yaku). Western compa­ nies, especially those seeking strategic partner­ ships, should consider this strategy as money well spent.

Beware. There are lots of so-called consultants

40 Passport JAPAN

who claim to know all of the "key" players; in many cases, these are limited to companies or exec­ utives the consultant knows, and they may not always make the best possible partners. And if your chukaisha' s reputation is not good, or his contacts do not pick up your project, you can find yourself in a bind.

Many times, a good consultant is necessary to shorten learning curves and avoid costly mistakes, but it is advisable and prudent to get a second or third opinion and then personally verify your find­ ings, as well as the reputation of your chukaisha.

Written Introductions

Before attempting to meet with representatives of a Japanese company, you should arrange for sho­ kai-jo (letters of introduction) from well-known business leaders, overseas Japanese, or former gov­ ernment officials who have dealt with Japan. The usual procedure is for your reference to write a let­ ter directly to the person whom you want to meet, asking him to give you special consideration. Writ­ ten introductions are most effective if they come from a high-ranking executive in a company with which your target company does business or from a close family friend of the person you want to meet.

Although shokai-jo are less effective than the personal introduction by a go-between, they can pave the way for an initial meeting. As in the case of the go-between, the person who writes your let­ ters of introduction should, ideally, be Japanese.

If you represent a smaller company and cannot get high-level introductions, all is not lost; it does, however, usually take more effort. As a foreigner, you may not have to play by all the Japanese rules. If you don't have someone to vouch for your repu­ tation, you must make the attempt yourself. This

Making Connections 41

may include repeated business trips to Japan, atten­ dance at industry trade shows, extending invita­ tions to Japanese to visit you at trade shows in your own country, and the creation of corporate materi­ als that emphasize your company's reputation (as opposed to its products).

Always keep in mind that persistence and patience are highly valued in Japan. Ishi no ue nimo san nen - you must have the patience to sit on a rock for three years in order to warm it.

Common Japanese Business Titles

Since status is largely determined by title in Japan, the Japanese will appreciate it if your title matches something they are familiar with. There is a tendency by foreign managers to directly trans­ late their titles into Japanese via phonetic spelling; nothing will confuse your Japanese counterparts more. After having your title translated, always have it checked by a native speaker. On the next page is a listing of common Japanese business titles.

42 Passport JAPAN

Japanese Business Titles

Japanese English Usual Typical Translation Seniority Age Range

Kaicho Chairman 40 years or 60+ more

Shacho President 40 years or 60+ more

Senmu Senior 40 years or 60+ Torishima- Managing more riyaku Director

Jomu Executive 40 years or 60+ Torishima- Managing more riyaku Director

Torishima- Director 35 years or 55+ riyaku more

Bucho General 25 years or late 40s Manager more

Bucho Dairi Deputy 25 years or late 40s General more Manager

Kacho Section 17-27 years 40-50 Chief

Kakaricho Assistant 11-20 years 33-43

Section Chief

No Title Assistant 8-10 years 23-33

Clerk, etc.

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Establish Relationships

Take the time to get acquainted with your Japa­ nese peers and to establish respect and trust. Wait patiently at each meeting and business-social gath­ ering for signs that your rapport is increasing. Do not expect to come home from the first ( or second or third) trip with a deal. Relationships are para­ mount in Japan.

If you should break a relationship, no matter how logical the reasons, you will always be seen as a typical unreliable foreigner. Don't burn bridges, and always put the best face-saving slant on the story, regardless of what really happened. It will earn you respect and assure others that you're con­ scious of their circumstances.

Find a Matchmaker

Find someone who can introduce you to the right people in the target company. Third-party introductions, especially by Japanese, are extremely important for making initial contacts and creating first impressions. A go-between not only introduces you, but is often involved in negotiations until the deal is closed (and sometimes beyond). In Japan a

44 Passport JAPAN

matchmaker is commonly asked to ease tensions in times of trouble.

Be Calm and Cordial

Japanese are more concerned with maintaining harmony and avoiding embarrassment than they are with achieving higher sales and profits. This doesn't mean that they're not interested in mone­ tary success, just that they prefer to achieve it under harmonious circumstances.

Aim High at the Beginning

Approach a Japanese organization at the high­ est level possible. It's likely that you won't meet with the senior executive at first, but the fact that he was the contact means that he will be involved and kept apprised from the beginning.

Use Both Sides of Your Brain

Don't rely solely on logic and persuasion to make your case. The Japanese are not "logical" or dorai ("dry") in the usual Western sense. Although they value a thoughtful, cognitive and intellectual approach, they also consider intuition, instinct and emotion to be important factors in business.

The Japanese are, in fact, very concerned with the conditions and feelings of others. When they consider you a friend, or when they have decided to include you in their circle, they will act with much more sensitivity and compassion than is usual in Western business.

Keep It Formal

Always maintain an air of formality in your business dealings with Japanese. Seniority and roles should be sharply defined, and your team should always present a united front.

Strategies for Success 45

Don't Criticize or Complain

In a group setting, never refer to a failure on the part of a Japanese who is present or of one of their colleagues who is not. And never put a Japa­ nese in a position where he must admit failure. In general, criticism and complaints are best handled delicately. If a mistake made by a Japanese business associate is obvious, take the blame on yourself; everyone will admire you for it.

Be Modest

Kenson (modesty) is both a virtue and an indica­ tion of good character and breeding. Avoid praising your own abilities, products and services; let your materials or reputation speak for themselves. Japa­ nese virtually always deny the importance of their accomplishments and the level of their expertise. It's considered gracious for others to do the same.

Leave Money Out of It

Unless it is on the agenda, avoid speaking directly about money. Financial details should be left for a later time or worked out by your go­ between or subordinates. The relationship comes first, money second.

Keep Your Sense of Humor

Expect inexplicable delays. The thoughts and motivations of your Japanese associates, when they are not simply impenetrable, will seem to contradict their actions. You'll sometimes feel very far from anything that is familiar, and many of your lifelong strategies just won't work. A sense of humor (and of perspective) is essential. The alternative is to suffer a great deal of frustration and anxiety.

Time \_JV

In Japan, particularly in the business sector, the question is not how much time things take, but when the time will be taken.

Many Westerners will announce a new develop­ ment or decision as soon as the key players decide to proceed, and then take months or years to imple­ ment it. Japanese will take as long as is necessary to gain consensus before announcing a decision, and then immediately implement it. If the Japanese hold a press conference to announce that they have devel­ oped a new computer operating system, they will usually unveil it the same day. Westerners, in com­ parison, will likely have made their announcement months or even years before showing their working prototype.

Deadlines

The Japanese tend to resist any pressure placed on them regarding deadlines or delivery dates, as they can't predict how much time the consensus­ gathering process v•ill take. If they seem to agree to a deadline, they may be doing so in order to main­ tain harmony, not because they expect to meet it.

Time 47

It may take years to negotiate a joint venture, licensing or distribution agreement, but once the Japanese side has agreed, they will expect immedi­ ate action. If the foreign partner is not ready to move, the Japanese will likely accuse him of "end­ less" delays and procrastination.

Appointments

Traditionally, Japanese were accustomed to meeting both with and without appointments, but the pace of modem business has made appmnt­ ments the norm.

Being on time is important, but senior execu­ tives and other important figures are expected to be five to seven minutes late - to reflect their "busy" schedules. No one, however, should be more than 10 minutes late.

Breakfast meetings are extremely unpopular. In general Japanese offices open at 9 A.M., and workers are expected to be there - at least physically. But constant twelve-hour workdays, commutes averag­ ing an hour and a half each way, and night after night of drinking and singing result in very little work getting accomplished in the morning.

In Tokyo, especially, allow time to compensate for heavy traffic and the possibility that your taxi driver may not know how to find your destination. The layout of the streets in many areas was designed to confuse invading armies, and the address system can be almost incomprehensible. Even Japanese seek out koban (small comer police stations) for directions. If you want to tell a taxi driver where to go, mention a famous location near your destination, and the specific address later. Plan no more than three meetings a day. Once you become more familiar with Japan, you may be able to do more, but don't count on it.

rtzr:,... __ B_u_si_n _es_s_M_ e_et_in_g_s __

Arranging the Meeting

Business meetings, especially ones with a large company, need to be scheduled weeks in advance. Meetings are conducted formally, and Westerners should prepare for them thoroughly. While the Jap­ anese are reluctant to deny a meeting outright, their response may send signals indicating their degree of interest in your offer, or they may send no reply at all if they are not interested.

In setting up a first meeting, it is imperative that you try to meet with people who are on the appropriate levels and can make important deci­ sions. You may meet the boss, but top Japanese executives are often jealously guarded by a host of senior directors and junior executives.

If your delegation includes senior-level execu­ tives, Japanese section managers may arrange for a superior to meet with you briefly as a courtesy. The absence of a high-level Japanese counterpart in your first few meetings is not necessarily a bad sign, as business relationships are usually initiated by junior executives. Higher-ranking executives are introduced as the relationship progresses, or at cer­ emonial functions.

Business Meetings 49

Whomever you see first, even if he is the head of the company, you will still need to meet people on many different levels if you want to ensure good relations. If you don't establish good relations with the middle- and junior-level managers (who are actually going to do the work), they may resent you for having bypassed them.

Preparing the Japanese

Once a meeting has been set, send a hierarchi­ cal list of the team members who will be visiting, including their full names, genders (indicated in the "old-fashioned" way by Mr./Mrs./Miss) and titles. Put the team leader's name at the top of the list and include more biographical information, cre­ dentials and accomplishments for him or her than for the others. Before the meeting, mail or fax a detailed agenda of the matters to be discussed. This will allow the Japanese time to confer among them­ selves and to send an appropriate reply. Do not sur­ prise your hosts by bringing an unannounced face to the meeting, particularly if that person is of high rank.

The Role of the Japanese Leader

Many foreign businesspeople have been dis­ mayed because top Japanese executives seem to have little interest in the details of the proposal or project at hand. This is mainly because the role of a Japanese company leader differs from that of their Western counterpart. Japanese senior executives are primarily consensus builders who have risen to their positions as a result of seniority, loyalty, amia­ bility, and their ability to garner trust.

Rarely does a rugged individualist with a flair for cutting deals make it into Japanese leadership

50 Passport JAPAN

circles - that type of person is not well suited to maintaining the sense of harmony, peace and tran­ quillity so central to the Japanese management style. Don't burden a company head with the intri­ cate details of your plan unless he asks for them. Concentrate on listening carefully and answering his questions thoroughly and sincerely. These ques­ tions will likely be about the structure of your com­ pany, your experience with the business, and the guiding philosophy of your company's founder.

Determining Who's Who

Sometimes, it's difficult to tell who among the Japanese is the most senior, especially on a first visit. Age and an air of authority are good clues. Studying Japanese business titles is useful, but remember that the English-equivalent titles are not as exacting as the Japanese ones.

Don't be fooled into judgments about a per­ son's importance based on how much he talks. Jap­ anese senior executives are well known for saying little, even to their own colleagues; often, they only utter an occasional word or make a noise to indi­ cate approval or disapproval.

Some senior executives do not speak English as well as their subordinates and may choose not to do so for fear of making mistakes. Others may refuse to converse in English for purely tactical reasons.

Presenting Yourself

Both before and during your visit, state the nature of your business concisely and with confi­ dence. The Japanese are a thorough, orderly people, and the way in which you present yourself is the most important element of the beginning stages of a business relationship.

Business Meetings 51

Typically, Japanese in the business world read English better than they speak or understand it. Speak slowly and clearly, and avoid slang or idioms.

Most importantly, your presentation should take into account the profile of the audience - their positions in the organization and their probable levels of technical expertise.

It's a good idea to translate as much of your presentation material as possible into Japanese. Ide­ ally, you should send a kit of materials to each indi­ vidual who will be attending the presentation. A typical kit should contain:

• A brochure describing your company • An overview of your company that includes the

names and titles of its top executives, its philos­ ophy, values and mission statement, a list of its products and services, and a short history

• A short biography of the top executive, as well as the leader of your delegation

• Information demonstrating the success of your company in providing the products or services that you're proposing to offer, as well as facts that demonstrate that they are innovative and superior to similar offerings by other companies

During the meeting, your delegation should open the presentation kit and explain its contents. The kits

should be undamaged, unsoiled, and carefully pack­ aged in high-quality materials. The Japanese concern with appearance was reflected in a recent air freight survey in which customers reported that they pre­ ferred receiving a package in perfect condition to get­ ting it on time.

Do not worry when Japanese executives, particu­ larly senior ones, close their eyes during a meeting. In most cases, they are concentrating, not sleeping.

52 Passport JAPAN

Meeting Guidelines

1. Your team should enter the room in order of rank, and your team leader should be ready to greet the leader of the Japanese side. He or she should then introduce the Japanese leader to the members of your group in descending order of rank.

2. Exchange name cards, first with the senior Jap­ anese executive, then with his subordinates.

3. Your team leader should open the meeting for your side by presenting the other members and identifying their roles and/ or specializations. Remarks should be addressed to the senior member of the Japanese team, who will most likely be seated directly across the table.

4. Establish team protocol in advance to ensure that questions mistakenly addressed to other team members are deferred to your team leader.

5. Don't disagree in the presence of the Japanese team. Save any brainstorming and "devil's advocate" discussions for private meetings.

Concluding the Meeting

As the meeting concludes, your team leader should thank the head of the Japanese group person­ ally and express appreciation for the opportunity to meet.

If appropriate, ifs always good to emphasize a desire to establish a long and mutually beneficial rela­ tionship. You needn't be as specific with regard to deadlines as you might be in the West. Vagueness and ambiguity are the preferred means of expression.

If possible, your team should say good-bye per­ sonally to everyone in the room (again, in descending order of rank). The same guidelines with regard to bowing and/ or shaking hands apply.

g� Negotiating with the Japanese

\__) Once you have established a personal relationship,

substantive talks can begin. The number of negotiation team members can vary widely, depending on the nature of the business. The Japanese will try to match each of the visitors with a member of their team.

Avoid bringing attorneys to negotiating sessions; the Japanese will interpret their presence on your team as a sign of your distrust.

Formality versus Small Talk

Negotiations are often held in meeting rooms at the Japanese place of business, and the Japanese will probably be already assembled there when you arrive. The head of the visiting delegation should enter the meeting room first. This is Japanese custom. If an inter­ preter escorts the visiting team, he should enter close behind the leader and remain by the leader's side throughout the negotiations.

After a round of handshakes, bows and smiles, the visitors are seated opposite their Japanese cormter­ parts, with the team leaders sitting directly across from each other at the center of the table. Other team mem­ bers are often arrayed in descending order of irnpor-

54 Passport JAPAN

lance. Most likely, the guest delegation will be seated facing the door as a matter of courtesy. Tea or other drinks are provided.

The Japanese are patient people and do not expect to immediately jump into substantive negotiations. "Small talk" is used to establish an initial rapport and to help both sides get a feel for each other.

Opening Protocol

After initial courtesies, the head of the host dele­ gation usually delivers a short welcoming speech, then turns the floor over to the head of the guest dele­ gation. Japanese customarily allow visitors to speak first in negotiations. In some ways, this can be to their advantage, but the participants usually know enough about each other's positions to preclude surprises (the Japanese don't like surprises at the negotiation table). The team leader is looked to for all meaningful dia­ logue. Conflicting statements from team members will be interpreted as a weakness in position or com­ mitment. Team members should speak only when they are asked to do so by their leader.

Describe your basic positions at the very begin­ ning. It can be useful to distribute sheets summariz­ ing your main points in Japanese. W hen it is the appropriate time to tackle a business issue, the Jap­ anese appreciate directness. Do what you can to clarify their understanding of your position. In most cases, it's best to begin your presentation with "the big picture" and to wait until later in the talks to discuss specific details.

After the visiting team leader outlines his team's position, the Japanese team leader will respond point by point, noting any perceived omis­ sions. From this point on, the negotiation will run with the rhythm of a controlled conversation, rather than an open-ended chat.

Negotiating with the Japanese 55

Top Japanese Negotiating Tactics

• Extremely well-prepared and orchestrated team • Use of long pauses and silences (don't give any-

thing away by filling these in) • Delayed or ambiguous answers • Frequent "side conversations" in Japanese • Use of an interpreter to gain time for thinking • Change of venue to a more informal setting • Use of emotional pleas • Oosing "squeeze"

Japanese know that Westerners (especially Ameri­ cans) are very time conscious. In general, a foreign businessman's trips to Japan are short, and he intends to return home with something accomplished. Japa­ nese may take advantage of this by delaying their deci­ sions until the last minute, forcing the visitor to either accept their position or go home empty-handed.

There are several ways to combat this. • Don't specify your departure date (and imply that

ifs earlier than it really is) • Cushion your departure time so that you can

extend your trip if the meeting isn't successfully concluded (then the Japanese will be worried about their own schedules and will want to reach a quick agreement)

• Conclude the meeting as "successful" (surface har­ mony), agree to follow up, and schedule another meeting in the future. In general, the more you go to Japan, the less the delaying tactic will be deliber­ ately used against you.

Interpreters

Even those Japanese who speak English are not likely to put themselves at a disadvantage by hav-

56 Passport JAPAN

ing to negotiate in a foreign tongue. A member of the Japanese delegation will probably act as an interpreter, but it is not advisable to depend on him exclusively. Although there is little risk that he will try to intentionally mislead you, chances are good that he will not understand all the nuances and inferences of English, and he is, after all, a member of their team.

Even someone as experienced as Edwin Reis­ chauer (the first post-World War II U.S. ambassador to Japan and a man who grew up bilingual in Japan) used interpreters, if only to gain time to think about a response as the translation was going on.

Interpreters can be expensive, but they're essential, especially in sensitive high-stakes negoti­ ations. Most Japanese interpreters are women - possibly because women are less afraid of losing face during the years of mistakes that precede becoming bilingual. She should be multicultural as well, able to pick up on feelings and intonations in both languages. Ideally, you will have located an interpreter in advance, but even after you've arrived, your hotel business center can refer you to a service that specializes in providing them.

Tips on Using Interpreters

1. Establish Guidelines Before a meeting,. discuss the mechanics of how

you will work together. (For example, how long should you speak before pausing for interpreta­ tion?) Brief your interpreter thoroughly, go over any specialized vocabulary, and provide her with as much written material as possible. Give her time to become familiar with your style, humor and body language. This will help ensure that your messages are conveyed accurately.

Negotiating with the Japanese

2. Don't Exhaust Your Interpreter

57

During a meeting or negotiating session, stop every few sentences to allow for interpretation, and try to limit each sentence to one main point.

Interpreters should rest at least every two hours. If negotiations continue for more than a day, you may need two interpreters. Using an interpreter can stretch a meeting to three times its normal length, so be patient with the flow of discussion.

3. Address Your Japanese Counterpart Look toward the head of the Japanese team,

not at the interpreter; Japanese value personal com­ munication. They may understand more English than they let on, so speak slowly and clearly, avoid­ ing idiomatic language and slang.

4. Review What's Been Said - Anticipate What's Coming After a meeting or during breaks, review with

your interpreter the main points made by both sides. Ask what she observed about the other side's position or behavior. Work together to get a feel for the direction in which negotiations are headed, and anticipate what will need to be said later on. Doing this helps your interpreter to prepare the interpre­ tation so that your views will be received in the most favorable possible way.

5. Emphasize Important Points as They Arise Abstract and complicated discussion is seldom

directly translatable; an experienced, qualified inter­ preter tailors her translations to reflect style, level of formality, tone and intended meaning.

You can help ensure that important points get across by repeating or emphasizing them and by mak­ ing certain that your verbal and nonverbal messages are consistent with each other. For example, serious concerns should be reflected in your face, the tone of your voice and your bearing.

58 Passport JAPAN

The Japanese Approach to Contracts

Successful negotiations may result in the signing of a contract, but this is no guarantee that the business relationship is solid. The Japanese consider a contract to be a general commibnent to do business, not a docu­ ment outlining every aspect of a deal. Contracts are seen as far less meaningful than personal commitments between associates. When Japanese do business with each other, they sometimes do so based solely on ver­ bal agreements.

Most contracts in Japan are subject to jijo henko ("circumstances change"), which is used to amend or even negate agreements. It's not unusual for there to be a jijo henko clause in the initial contract- which means, from a Western point of view, that the contract isn't legally binding!

If a strong relationship has been established and the signatories remain in close cooperation, the contract will usually remain workable. However, if the foreign party is relocated or leaves the company, the Japanese may view the contract as null and void, and insist that it be re-negotiated by new individuals.

Contracts with foreigners are becoming more common in Japan. However, it's important to remem­ ber that, while many executives graduated with law degrees, lawyers are uncommon both in Japan and in Japanese companies. It can take months to translate large legal documents into Japanese so that your coun­ terparts can understand them.

<}4\ Business Outside the Law c�ju

The Yakuza

The Yakuza manage a large, pervasive econ­ omy dealing in illegal goods and services, particu­ larly real estate. Its attempts to invest its profits in legitimate businesses have led to scandals linking yakuza godfathers with politicians.

The name Yakuza derives from an ancient card game similar to blackjack. The organization brought "socially accepted vices," such as gam­ bling and prostitution, to Japan during the conser­ vative reign of the Tokogawa Shogunate (1603- 1867). Today, they rule their fiefdoms with threats, intimidation and violence. They're mostly left untouched by police, as long as there is no overt trouble. Surprisingly, Japanese police o ften tell vic­ tims that they that should not complain because it stirs up trouble.

There are over 2,500 recognized Yakuza gangs in Japan, the largest of which is the Yamaguchi­ gumi. Many of the low- and medium-level Yakuza are easy to recognize by their tattoos, white shoes, permed hair, gold teeth, missing knuckles (knuck­ les are chopped off, one at a time, as punishment for failure) and even little lapel pins that identify

60 Passport JAPAN

their particular affiliation. For the most part, they do not bother foreigners. However, it pays to con­ duct a background check on your potential busi­ ness associates; once you're involved with a Yakuza member, it's difficult to sever the relationship.

Besides the Yakuza, there are also the Soukaiya. They extort money in return for leaving citizens alone (thus taking advantage of the Japanese desire for peace and surface harmony). They're a constant fixture at Japanese stockholder meetings, where they verbally abuse the corporate officers and often resort to spitting and even physical assault. Unfor­ tunately, the companies usually encourage them by paying them off.

It should be noted that while street crime hit a postwar high in 1992, it's still negligible when com­ pared with other developed countries.

Graft and Corruption

Traditionally, corrupt politicians were allowed to resign in quiet but affluent disgrace, meanwhile making way for the next candidate from the same party. In the 1970s, a scandal involving payoffs and influence peddling in a major procurement deal with the Lockheed Corporation actually brought down the Takeda government - criminal charges were filed against many top goverrunent officials, includ­ ing then-Prime Minister Takeda. (It's noteworthy that the case against Takeda faced continual and sus­ picious delays and was not resolved until after his death.) This pattern has since been repeated, most recently in the 1980s by the Recruit scandal, in which a number of political insiders were caught taking illegal stock gifts in return for favors.

Business Outside the Law 61

Present Changes and Future Outlook

In the early 1990s, a number of major securities firms (with the aid, or at least knowledge, of the government) were found to have reimbursed the investment losses of certain large customers at the expense of smaller investors and the firms' stock­ holders. The public was outraged.

Voters suddenly became less tolerant in March 1993, when a high-ranking LDP leader was con­ victed of tax evasion (and, coincidentally, was found to be in possession of US$51 million). Aug­ mented by a lingering recession and a revolt in the party's ranks, the scandal resulted in a stunning upset victory for a newly formed coalition commit­ ted to changing the rules for campaign financing and to cleaning up corruption.

The government has made significant inroads toward curbing the Yakuza' s influence, and politi­ cians are careful not to appear connected with the organization in any way. But given the degree of overlapping holdings and high-level business cooperation that still exists, insider trading,. market manipulation, price fixing and compliance irregu­ larities remain relatively common.

In addition, bid rigging and kickbacks are con­ sidered by most observers to be rampant. The importance placed on consensus means that collu­ sive practices tend to be viewed with far more leniency than they would in the West. In fact, some argue that these practices help to even out the dis­ tribution of profits, rewards and benefits, thus keeping almost everyone on the inside happy.

Still, the system as a whole can be said to oper­ ate in a generally clean (if hardly transparent) fash­ ion, and many of the practices cited by foreign businesses and governments can be attributed to differences in cultural perceptions.

<iu-5J5 . �\'�-----2-i --�� Names & Greetings

The Japanese use their surname first, followed by their given name. However, they typically intro­ duce themselves to Westerners using the Western style of given name followed by surname.

Gender and Designations

Until recently, given names often revealed gen­ der by the ending - ko (as in Yukiko, Akiko, Michiko) ore (as in Yukie, Akie, Michie) indicated female and o (Kazuo, Yukio, Masao) or ro (Taro, Ichiro, Ken taro) indicated male.

But in the past few years, "modem" (and some­ times more Westernized) names have become popu­ lar, especially for women (such as Mari or Ami).

The suffix san serves as Mr., Mrs. and Miss. For example, Miss Tanaka is referred to as Tanaka-san, Mr. Ichikawa as Ichikawa-san, etc. Sensei (teachers) are addressed as such, so Professor Mori would be Mori-sensei. If you want to be particularly respect­ ful, use the honorific samma (Yoshida-samma), but don't overdo or you might appear to be insincere.

The Japanese will quietly suffer foreigners call­ ing them by their first names, but it's a privilege

Names & Greetings 63

usually reserved for close family and intimates. When in Europe or the United States, the Japanese may call non-Japanese associates by their first names, but they'll revert back to their traditional style upon returning home.

Bowing

Japan is a very formal culture, and greetings and leave-taking are both important and elaborate. First impressions are likely to set the tone of rela­ tionships. If you don't want to drive yourself crazy, accept the fact that you are unlikely to ever master the system. Nonetheless, there are some things you can learn to do.

Bowing is a sign of respect and humility, not subservience. However, if it makes you uncomfort­ able, a nod of the head will usually serve the same purpose. If you're going to bow, the question is how much and who goes first. The short answer is - you (the guest), and not too deeply. Generally, the person of lower rank goes first and bows low­ est. But as a foreigner, you are not expected to fol­ low the rules unless meeting someone of extremely high rank. A proper bow is executed from the waist. For men, hands should be at one's sides; for women, hands rest on one's thighs.

The Importance of Business Cards

Meishi (business cards) are serious tools for establishing business contacts. Failure to present one at a first meeting can indicate that you're unaware of proper business etiquette or that you lack interest.

Always carry an ample supply (at least 100 for a one-week visit), with English on one side and Japa­ nese on the other. If you're not able to have bilingual

64 Passport JAPAN

cards printed in advance of your trip, large hotels in Japan can arrange to have it done for you within twenty-four hours. A Japanese who is familiar with you and your company should verify that the Jap_

a­ nese translation is accurate. Having your name wnt­ ten in Japanese phonetic symbols will prove enormously helpful to your Japanese counterparts.

Protocol dictates that the person of lower rank present his card first. (It doesn't hurt to take the ini­ tiative.) Here are some guidelines:

•

•

•

•

•

Be form.al. Present and receive business cards with both hands and with a certain amount of ceremony. The card should be held between the thumbs and forefingers, with the print facing the recipient.

Respect seniority and rank. Always present your card to the most senior person first.

Take your time. After you receive someone's card, study it carefully for a few seconds, per­ haps looking up again at its owner. Then care­ fully place it on the table or hold it until you sit down.

Treat the card with respect. Business cards are considered to be an extension of the person they represent. You should not write on some­ one else's business card in his presence; doing so would be comparable to someone writing on your personal property. Don't bend it or drop it, and be sure to not leave it behind.

Shaking hands. A Japanese businessperson will probably not initiate a handshake, but most will readily accept one. Shake hands gen­ tly; a Japanese handshake is likely to be as ten­ tative as your bow.

Communication Styles

Consider the Context

Japanese communication styles are implicit and nonverbal - that is, highly contextual. The language itself encourages vagueness and ambigu­ ity, which is why haiku poetry usually fails to trans­ late well into Western languages. The reader is reduced to a single interpretation of the many pos­ sible meanings of the original text.

Traits of Japanese communication include: • Vagueness and indirection, rather than direct,

specific references. Conversations are framed in such a way that they are always open to per­ sonal interpretation.

• Sentences are frequently left unfinished, so that the listener can finish them in his own mind.

• A great deal of attention is paid to the tone and levels of politeness (subtleties not easily under­ stood by non-native speakers) .

• Listeners frequently repeat "hai" to suggest understanding and encouragement, or to dem­ onstrate that they're following the conversa­ tion.

66 Passport JAPAN

The Mythical Etiquette Book

In virtually all aspects of Japanese culture, from tea ceremonies to baseball games, form is as important, if not more important, than content. Many long-time foreign residents of Japan are con­ vinced that there is a book somewhere (possibly a whole set of books) that outlines every nuance of Japanese behavior for every possible situation. This enormously valuable resource is, however, perma­ nently unavailable to non-Japanese.

Therefore, it's up to you to learn, at first on your own, and later from Japanese friends and per­ sonal experiences. The Japanese emphasis on politeness, along with their concern about not caus­ ing you to lose face, virtually ensures that they will rarely correct you or give you unsolicited advice in this area.

Guidelines

The following will help you become more con­ scious of your body language and the ways in which it might be interpreted.

1. Avoid Physical Contact The Japanese are uncomfortable with displays

of emotion and with physical contact (even a move­ ment as casual to Westerners as loosely touching someone's elbow or shoulder). They certainly do not want to take part in such behavior, and they don't like seeing it displayed by others. Except for shaking hands, it's a good idea not to touch a Japanese.

2. Keep Your Distance

Westerners typically stand 18 to 24 inches apart; Japanese are most comfortable with a dis­ tance of about 36 inches. Standing closer than that will probably force your conversation partner to retreat until he or she is backed up against a wall.

Communication Styles 67

In informal situations (a karaoke bar, for instance), Japanese observe different boundaries, with the distance shrinking noticeably. Westerners may be surprised by the sudden change and be tempted to interpret it as a sign of increasing inti­ macy. But the next morning, the usual distance will have been reestablished.

All proximity rules are suspended in subways and elevators, where physical contact is unavoid­ able. Individuals simply withdraw by averting their eyes; thus, they can "touch" without "feeling."

3. Adjust Your Behavior to the Circumstances Sophisticated travelers are good observers and

mimics. Watch your hosts and follow their lead.

4. Speak Softly Because of the high regard for graciousness

and restraint, you should avoid raucous laughter and raising your voice, especially in anger.

5. Keep Your Hands Down Japanese don't "talk" with their hands, and

even if they did, they'd be "speaking" Japanese. So they're not going to understand your gestures. Large hand and arm movements while talking are considered unrefined and rude (at the very least) and possibly threatening. Broad gestures may be interpreted as anger. However, small, effective ges­ tures that illustrate what you're trying to say are much appreciated.

When they're standing, Japanese typically clasp their hands in front of them or keep them at their sides. W hen seated, they put them on the table in front of them or in their lap.

6. Listen More - Talk Less Listen carefully, wait for others to finish, and

don't talk too much. The most typical complaint that Japanese have about Americans and some Europeans is that they don't do any of the three. Programs that

68 Passport JAPAN

enhance listening skills for Japanese are currently among the most popular corporate training offerings in large Japanese organizations.

7. Posture Counts

Balance is a much-valued principle that applies to all aspects of Japanese life. Avoid slouching, stand­ ing with hands in your pockets or leaning back in a tipped chair; these behaviors will not be well received. Don't lean against the door frame or wall when you' re talking with others.

8. Don't Act Like You Own the Place

Walle slowly and allow your host to be the one obviously in charge. For example, when you're mov­ ing around an open area, follow slightly behind him, especially if he is of superior rank. Foreigners, espe­ cially those of large stature, should never loom over others - in particular, elders and superiors. It's seen as a sign of disrespect. When passing in front of a Jap­ anese who is seated, it's polite to hunch over a bit, thereby acknowledging his presence.

9. Don't Point

It's a good idea to avoid pointing altogether (especially at people). To call someone over, extend the hand and fingers, palm down, and "scoop" the air in a downward motion. To get the attention of a waiter, catch his eye and nod your head downward.

These general guidelines will not always be fol­ lowed by your Japanese hosts, but it's better to err on the side on conservatism. In general, be polite, obser­ vant and a bit reserved, and your Japanese hosts will think of you as a majime (an unexpectedly pleasing foreigner).

Customs

Shoe Protocol

You'll probably be taking your shoes off at least once during the day, so always wear socks or hosiery that you'll be happy to be seen in. If you see shoes lined up in the entryway to a public or pri­ vate building, remove yours and align them with the rest. Slippers are generally provided for walk­ ing in wooden hallways and should be used. When passing from a wooden hallway to a room with tatami (rice mats), leave your slippers in the hall outside the door.

In ryokan (traditional Japanese inns) and some restaurants, you will encounter a second pair of slippers, usually red, at the door of the benjo (toilet). This tells you that it is empty (or that an unin­ formed foreigner is using it). Exchange your hall­ way slippers for the red ones, leaving the former outside the door to alert others, and thus avoid a knock on the door.

Whatever you do, don't return to the inn or dining room in the red slippers, unless you wish to be the focus of great amusement for the other guests.

26 Passport KOREA

involve more than politicians and bureaucrats. Peo­ ple in the arts and professions could exchange ideas; athletes could organize competitions; aca­ demics could exchange information; businesspeo­ ple could exchange resources; and students could exchange their learning, ambitions and dreams.

Unfortunately, the North seems set on provok­ ing its capitalist neighbor. In 1996, it authorized a sabotage mission on South Korea by a submarine full of commandos. On another occasion, it arrested the crew of a South Korean aid ship. And as recently as April 1997, the North demanded that desperately needed donations of rice from South Korea not be labeled with its country of origin. "In South Korea, the government is like oxy­

gen. It's everywhere, and you can't live without it." That's a quote often heard by non-Koreans working in Seoul. (Seoul is the world's fourth-largest city after Tokyo, Mexico City and Sao Paulo.) What it means is that national interest takes precedence over the interests of private business. The govern­ ment's objective is to encourage the rational growth of the economy so that the entire nation benefits. It's careful to avoid rapid growth in one sector that might cause disruptions in another.

Byzantine Bureaucracy

The government often exercises its control through a combination of long precedent, law, and the support of most of its business community. Some of its methods are to impose import or export restrictions (called chehan), deny or delay licensing applications, arbitrarily cause customs difficulties, refuse to renew visas, stop payments for goods or services, break contracts, and use the complex bureaucratic maze to government advantage.

28 Passport KOREA

The number of documents needed for a busi­ ness approval can be ten times the number required in the West, and even when all documents are obtained, there's no guarantee that the way will be clear to proceed. Usually several ministries and government subdepartments will be drawn into a proposed foreign business operation, and these entities have very little lateral interaction.

On a hypothetical construction project, for example, a foreign company may need the approval of the Ministry of Construction and Transportation, the Ministry of Finance and Economy (for the trans­ fer of foreign exchange), the Ministry of Science and Technology (if there's a technology transfer), and the Ministry of Trade, Industry and Energy (if imports are involved). Signed contracts are open to review and to veto by one or more persons within each min­ istry. This can be compounded by the fact that indi­ vidual officials may have drastically different ideas about how Korea should work with foreign busi­ ness. Bureaucrats will try to revise draft agreements to maximize benefits for the Korean side.

But All Is Not Lost

Regardless of both the real and apparent hand­ icaps, the overall climate for foreign investment and business activity is favorable. Profitable oppor­ tunities exist for those with open minds, goodwill, a great deal of flexibility, determination and, most of all, patience.

Korea is changing course and reforming on a political platform of "clean" government and fair­ ness in business. Because of significant pressure from foreign governments (the U.S. among them), import tariffs are now being lowered, bans on some foreign goods are being dropped, and the repatria­ tion of profits is being made easier.

Government & Business 29

But be aware that government officials can't be approached on a strictly rational, practical or policy­ based basis. Everything is handled on a case-by­ case and very personal basis. Also, keep in mind that neither the ethical nor the legal system provides the kind of security and protection Western business­ people expect. Koreans have their own particular approach to contracts, patents, copyrights and other legal matters. Things can come apart when a govern­ ment official or private business executive takes the view that circumstances have changed and that an original agreement is therefore no longer binding. In such a case, renegotiation will be required.

The Military Model

Korean military education has a direct effect on the structure of both government and business. The latter are organized along military lines with clear­ cut chains of command, and subordinates learn to carry out orders without question. All Korean males must register for the draft, undergo military training, and serve in reserve units.

Insiders

In Korea, you deal with insiders. There's no alternative. To be successful, a foreigner busi­ nessperson must be in close communication with everyone remotely connected with his or her busi­ ness. That means establishing and nurturing per­ sonal relationships with company managers on several levels, as well as with officials on all the appropriate levels in the ministries and agencies concerned. Staying current on the thinking of your Korean associates (and therefore being able to anticipate their actions) requires both time and a generous entertainment expense account.

30 Passport KOREA

The importance of the personal side of busi­ ness can't be overstated. Regardless of their experi­ ence or credentials, foreign businesspeople must earn the respect and loyalty of Korean insiders if they wish to become insiders themselves.

As previously noted, the interests of the nation take precedence over profit. Foreigners proposing opportunities with obvious benefits to South Korea, such as ventures involving defense or increased export potential, will receive the highest favor.

MOFE and MTIE

The Ministry of Finance and Economy (MOFE) is Korea's most powerful ministry. It controls taxa­ tion, import and export tariffs, foreign exchange reg­ ulations and government accounting. The MOFE also controls such external organizations as the Cus­ toms Administration, national banks, the Monopoly Administration and the Office of National Tax. As of March 1997, the MOFE lifted all restrictions on the amount of foreign loans that could be obtained by Korean banks, as well as all restrictions on the over­ seas issuance of equity-linked securities by South Korean companies.

The Ministry of Trade, Industry and Energy (MTIE) is the second-most important government entity. It has jurisdiction over all manufacturing, all trading of goods and all after-sales services. It sets import controls, issues export licenses, adminis­ trates patents, controls government technical assis­ tance programs, and reviews contracts.

It's absolutely essential that foreign enterprises work with Korean businesspeople who are in good standing on a personal basis with both government officials and banks. Without these connections, expediting the necessary approvals will be extremely difficult, if not impossible.

f§j ___ T_h_e_W_ o_r _k_E_nv_ir_o _ n_m_e_nt __

The Chaebol System

Big business in Korea is in the hands of huge, highly diversified, vertically integrated conglomer­ ates known as chaebol. Many are family owned. Hyundai, Lucky-Goldstar and Daewoo are the larg­ est and most well known, but there are more than 60 of these behemoths. They're involved in every­ thing from electronics, aviation and petrochemicals to shipping, beverages and cement. Chaebols were founded by charismatic patriarchs who reclaimed control of Korea's economy from the Japanese after World War II. Politically as well as economically powerful, they have a vested interest in maintain­ ing the status quo.

During the 1970s and 1980s, chaebol growth was supported by both government tax breaks and financial incentives that emphasized industrial reconstruction and exports. In 1988, the output of the 30 largest chaebol constituted almost 95 percent of Korea's gross national product.

A typical chaebol includes suppliers of raw mate­ rials or finished parts, producers, distributors, finan-

.'ffl

32 Passport KOREA

cial institutions, and often trade schools. Subsidiaries and smaller companies (usually a minimum of 20) gather in the shadow of each chaebol for security. Quite often, suppliers and banks are locked into these alliances and work only with other members of a par­ ticular chaebol. While this system may guarantee prof­ its for smaller companies, those companies are held virtual prisoners to the demands of their flagship firm. Attempts to work with a rival chaebol invite recriminations and the loss of carefully cultivated relationships.

Daewoo: An Inside Look

One of Korea's most colorful tycoons is Kim Woo Choong. He established Daewoo (literally, great universe) in 1976, at the age of 30, with an initial investment of US$18,000, three associates and a typ­ ist. He began by exporting fabrics to Singapore and Indonesia, eventually expanding worldwide. Then came a frenzy of acquisitions. Kim quickly bought up 14 companies and took a major position in others.

When the government asked Daewoo to go into heavy industrial manufacturing, Kim took over an ailing machinery firm personally, often sleeping at the factory. His creed is that if you work hard, there's no limit to what you can achieve. He reportedly puts in 18-hour days, travels 260 days a year in search of deals, and routinely makes two dinner appointments in an evening to accommo­ date customers. Kim's wife, Hee Ja, runs Daewoo's international hotel-management unit.

Daewoo now has 125,000 employees and Kim directs his empire with an autocratic hand from Vienna, Austria. In addition to its Korean companies, Daewoo builds roads and houses, sells electronics and makes cars in Vietnam; and in France, Daewoo makes microwave ovens and color TV sets and is

The Work Environment 33

planning a US$1.2 billion semiconductor factory. In 1995, Kim bought a controlling stake in FSO,

a Polish car maker that will form part of a network of car plants that Daewoo is building in Eastern Europe, China and Uzbekistan. (Daewoo Motor plans to expand its annual capacity from 1.7 million units in 1997, to 2.5 million units by the year 2000.) Kim has textile mills in Sudan, hotels in Algeria and Morocco, and other interests in Vietnam, Western Europe and the U.S. He plans to make Daewoo an even bigger presence abroad than at home. He has some 330 overseas projects worth between US$15 and 20 billion. Many are in emerging markets and involve local joint-venture partners. Daewoo' s cur­ rent sales, worldwide, are estimated to be in the US$57 billion range, and Chairman Kim is shooting for US$177 billion by the turn of the century.

Status in the Workplace

For centuries, Koreans have been conditioned by a society that's divided from top to bottom into strictly prescribed ranks. The system has been diluted in recent years, but the basic concept remains strong. There's an upper, an upper-middle, a middle and a lower class. Those of the upper class are care­ ful to avoid contact with those of lower rank, for fear of demeaning their own status, and the lower ranks have no desire to be responsible for such a gaffe. Thus, each new employee in a firm strives to find his or her precise place in the hierarchy as quickly as possible and has little peace of mind until then. This allows them to follow the appropriate form of eti­ quette varying degrees of eminence demand. Opportunities of promotion are limited and often based on congeniality rather than on ability.

Though foreign businesspeople are usually given honorary status as members of the upper-

34 Passport KOREA

middle class, the size of their companies and their titles are important factors in determining their actual place in the pecking order.

Age = Wisdom

Age and position are believed to signify experi­ ence and wisdom. Young Korean executives and those in junior positions always accede to the wishes of their seniors, just as they would to the wishes of senior members of their own families. Workers may even stand up when a superior enters the office. This approach, one of the five previously mentioned hierarchical relationships set down by Confucius, is deeply ingrained in the national spirit. Upper management in large companies is usually comprised of elderly men.

Foreign businesspeople who are older or carry prestigious titles have an automatic advantage. They receive a more respectful hearing than would younger individuals or those in middle manage­ ment. Whatever your age, it's always wise to show respect for Korean colleagues senior in age and posi­ tion. This will be noticed by Koreans and will be interpreted as a gesture of esteem for their culture.

Working for a Boss, Not a Company

Koreans rarely display company loyalty in the same way that the Japanese do. They have no con­ cept of being loyal to a faceless corporate entity. Instead, they identify with the individual who hired them and with the immediate bosses in their particular department or division. This applies both within Korean firms and foreign ones.

In order for a foreign enterprise to achieve sub­ stantial and stable progress, it must operate in Korea on a long-term basis. If a foreign manager is

The Work Environment 35

replaced or returns to his home country, employees

will no longer feel any loyalty for the business. They may stop being effective or simply quit.

The Korean Work Ethic:

Long Hours & a "Family" Approach

South Korea has been shaped by eras of iso­

lated feudalism and torn by colonialism, civil war

and partition. This has resulted in a business cul­ ture that's highly competitive and a source of national pride.

In most large companies, managers try to instill

a spirit of "family." At Daewoo, every employee receives a present on his or her birthday. When

employees are sick, their boss and fellow workers

visit them at home, just as they would their own relatives. According to Ho-Min Yoo, a Daewoo

managing director, "When one of our general man­

agers was killed in an airplane crash, he was pro­

moted posthumously to the rank of director, his

wife was awarded 70 percent of his salary for life,

and his children received scholarships for college." South Koreans have the longest work week in

Asia - an average of 47.8 hours, with only three to

seven days annual vacation. (However, they're

excused from work for numerous family events.) Fac­ tory hands put in anywhere from 54 to 68 hours (but the high end of this must be specified in a labor con­ tract and compensated for with premium pay rates). Clerical and retail personnel average 44 hours per week. Many prefer to open their own businesses; staff

at family-run operations may put in 18-hour days and

six- or seven-day weeks. It's not surprising, then, that

South Korea's per capita GNP went from US$82 in

1961 to US$5000 in 1991 to US$10,550 in 1996.

36 Passport KOREA

However, changes are afoot. In 1994, Sam Sung Group, known for demanding the country's longest working hours, changed its hours to 7 A.M. to 4 P.M.

(most businesses open at 9 A.M.) in an effort to allow its employees more time in the afternoons for them­ selves. This was considered radical at the time, as leaving "early" was equated with a lack of company loyalty. And it took awhile for employees to learn how to take advantage of their newly found leisure.

Decision Making

P'umui, Korea's decision-making system, was designed to defuse responsibility. Consensus among all involved parties is needed before any plan is implemented. Few initiatives originate with middle management - due more to fear of punishment (in the event that a plan goes wrong) than to Confucian­ ist conformity. Attempts to impose accountability on an individual is likely to meet with resistance.

Because decisions are made on many levels within a company, foreigners must gain the confi­ dence of management from the top down and from the bottom up. This serves two purposes: it creates a feeling of unity among a firm's employees and it frees everyone of personal responsibility. Korean com­ panies often apply rewards and punishments on a group basis, a policy that results in both tighter bonds among employees and a very cautious approach.

•

•

A Few Useful Terms

Ch'ong ddae (literally, barrel of a gun): A "hired gun" or someone who does unpleasant jobs, such as firing people.

Taedulpo (literally, stone and pillar): The most important person in the firm, the one who met­ aphorically holds up the roof.

The Work Environment 37

• Ch'an pap (literally, cold food): When someone is

shunted off the promotional ladder and has lit­

tle influence, he's said to be served "cold food."

(Foreign businesspeople should make an effort

to ensure that they' re not dealing with a "cold

food eater.") • Shikku (literally, family): Company founders

who mold their enterprises to suit their own

personal management styles and philosophies.

• P'ungsu (literally, wind and water): The Korean

equivalent of Jeng shui, the geomantic art of

arranging one's workplace or living environ­

ment to be in harmony with natural elements.

• Myung t'oe (literally, honorary retirement): A

downsizing maneuver, corporations encourage

employees to retire voluntarily, within a speci­

fied period of time, by offering them double the

compensation they would otherwise receive.

• Yonbong (literally, annual salary): In the past,

employee salaries were calculated on a

monthly basis, plus an annual bonus that var­

ied from 400 to 600 percent of one's monthly

salary. Recently, more and more companies are

adopting an annual salary system. Applicants

now ask, "What's the yonbong of that posi­

tion?" rather than "What's the salary and

bonus?"

� ,,.... __ w_o_m_ e n_in_B_us_i_n_es _s __ _

Traditional Roles

In ancient Korea, even upper-class women could leave their compounds only with the permis­ sion of their husbands, and even then, they could do so only if their faces were covered with a shawl and a maid accompanied them. Upper-class men were yangban (aristocrats) who devoted themselves to academic studies, leaving the less sophisticated job of family maintenance and finances to the oppo­ site sex. (In modern Korea, husbands hand their full salaries to their wives in an envelope. It's the latter's job to apportion monies for family needs and to put aside enough to save for major pur­ chases like a car or house.) Women sat watching their husbands, fathers and brothers eat, attentive to their wishes, and only afterward did they and their children eat.

Upper-class girls were educated at home in the arts of painting, embroidery and poetry before being married off to husbands chosen for them by their parents. Men could divorce their wives for any one of seven "sins," among which were talking

Women in Business 39

too much, not pleasing their mother-in-law, and failure to produce sons.

The one role in which women had considerable influence was as mudangs (shamans). They were employed by royal families to perform kuts - cere­ monies to cure illnesses, salvage businesses, encourage the dead to cut their earthly ties, and so on. Another female enclave was the kisaeng, the Korean equivalent of a Japanese geisha house. After being trained in special schools, kisaengs sang, danced, practiced calligraphy, wrote poetry and played musical instruments, all in the service of entertaining upperclass men. One 15th-century kisaeng became a national heroine after flinging her­ self and an enemy Japanese general she was enter­ taining to their deaths from a cliff.

Mudang rituals still exist today and may include bright fans, chanting and dancing, and a mudang bal­ ancing barefoot on knives. Kisaeng houses, like their Japanese counterparts, still exist in small numbers and are extremely expensive. However, both mudangs and kisaengs belong to a class that's looked down on by the majority of Koreans.

Trends

The 1948 Constitution guaranteed equal rights for both sexes, including the right to vote, to be elected and assume public duties, and to partici­ pate in major policy-making processes.

Ewah is the most elite college for women. There's a large (and growing) pool of well-edu­ cated Korean women who can't find jobs that fit their knowledge, talents and ambition within Korean companies. More and more of them are finding employment with foreign companies (espe­ cially export-oriented ones), where their energy, skills and goodwill are welcomed. The number of

40 Passport KOREA

women engaged in business and politics is increas­ ing thanks to organizations such as The National Committee on Women's Policies and the Korean Women's Development Institute. However, an international survey conducted by the Far Eastern

Economic Review found that South Korea holds the title for the Asian country most averse to female bosses and most averse to paying women what their male counterparts are paid.

Confucianism, a basic Korean tenet, assumes a male-dominated society. Although things are changing, it's not uncommon to see a husband boyfriend or businessman neglecting to hold a doo; open for a wife, girlfriend or businesswoman (as he would be expected to in the West), and he may even go through door first. Having a family (prefer­ ably one filled with sons) is still considered a woman's primary duty and a hedge against old age (sons are responsible for the care of their elderly parents). But with the advent of birth control, many couples now opt for only one or two children.

More and more women are pursuing higher education, a broad range of careers, and personal economic security. Still, whatever power Korean women have is more likely to stem from their fam­ ily's or husband's high social standing than from their own personal, occupational or professional standing.

Strategies for Foreign Businesswomen

Korea remains a male-dominated society. Women help men put on their coats, let men go through doors first, and in general are expected to play supportive roles. Foreigners with Korean expe­ rience will tell you that Korean women are stronger than the men, more clever, more dependable and more diplomatic. "Diplomacy is necessary," explains

Women in Business 41

one foreign woman executive, "because whatever a woman does publicly has to make men look good." By extension, foreign businesswomen have a hard time being taken seriously.

Only through hard work and a great deal of time spent proving herself can a woman hope to be treated as an equal. Still, they must be on guard not to upset male egos. Foreign women executives may have to transfer credit for a job well done to their male colleagues and take a back seat in negotia­ tions, even if they' re the most responsible person in their group.

@,,..___M_ak_in _g_c_on_ n_e_ct_io_ns __ _

Who You Know

The difference between success and failure depends on who you know, and no distinction is made between business and personal relationships. Many foreign businesspeople believe that with the right product and price, they can easily sell to or buy from a Korean company. While this approach may work in New York or London, it doesn't apply here. In Seoul, friends are key.

Foreigners tell horror stories about contracts and promises broken because Koreans have few qualms about cheating someone foolish enough to enter a business relationship without first establish­ ing personal friendships. Put simply, doing busi­ ness with strangers here is dangerous. Every Korean in business and government has a network of classmates and friends who are committed to helping each other. Plugging into such a network is essential for those who wish to get ahead.

Many foreigners mistakenly believe that meet­ ing with a president of a company and getting his approval will close a deal. Often, the managers who

Making Connections 43

turn a company's wheels will resent being bypassed, and they can sabotage a proposal in subtle and inge­ nious ways. While it can be advantageous to meet with company presidents, foreigners must a_lso establish respectful relationships with operating managers within the company.

Always strive to have a third party introduce you to a potential business associate. "�old calling" rarely succeeds in Korea. Compames must be approached with proper introductions on all appro­ priate levels.

The Alma Mater Connection

Members of the student elite develop a network of relationships that sustain their success in later life. Non-Koreans wishing to make contact with a partic­ ular Korean businessperson would do well to find out his alma mater and year of graduation. It's more than likely that the Korean in question has stayed in close contact with his former schoolmates, and he'll be more receptive to foreigners if they're introduced to him by such long-standing friends.

The word inmaek refers to extended networks of schoolmates, family, friends, those born in the same village, and contacts established in the course of military or government service - in short, everyone a person knows who can provide help and cooperation.

The Go-Between

The only way to approach a Korean business associate is to have a mutual friend or a paid agent serve as an introducer and go-between. (Pal-i nolta

refers to someone who knows everyone of impor­ tance - from business leaders to government officials - and is said to be able to do almost anything

44 Passport KOREA

because of these connections. The term means "wide foot" and is similar to the Japanese term meaning "wide face.") Letters of introduction aren't commonly used. When a third party has a viable relationship with both potential partners, they alone may establish preliminary grounds for the conducting of business.

Every foreign executive in Korea needs at least one trustworthy Korean advisor (who should be

well rewarded for his services). Management skills and fluency in your language aren't the only criteria. The individual you retain must have the expertise, the experience of age and education, and the social credentials to move comfortably within many levels of business and government. Choosing the right advisor is key and requires careful consideration.

The Korea Trade Promotion Corporation, the

Korea Foreign Trade Association and Korean banks may be able to provide suggestions as to where to

contact and interview possible interpreters and go­ betweens. Local attorneys, your embassy, your

local Chamber of Commerce or local people in your industry may also be helpful.

The Korea Exhibition Center (KOEX) attracts thousands of business travelers to trade fairs. The

Korea World Trade Center (KWTC) - composed of KOEX with its 55-story "Trade Tower" and the

Korea City Air Terminal with its airport limousine

service - is a "must" for anyone interested in doing business in Korea. In addition to the trade service

associations, a number of export firms maintain offices in the building, and there is a Trade Service

Corner that provides counseling and information concerning local and foreign trade laws, taxation, and other important business matters.

Most large hotels have business service centers that are often able to provide useful information about local contacts.

Strategies for Success

Twelve Guidelines

Korea is open to new ideas, products and t��h­

nology, and it offers many profitable opportumhes

for non-Korean businesses. Adherence to the fol-

lowing will help ensure success.

• Learn about the country. , .

Read everything you can about Korea s h1st?ry

and its people . Identify publications and orgamza­

tions pertinent to your endeavor and glean as much

information as you can from them. Use the In:ernet

to find and network with experienced busmess-

people and investors.

• Make local contacts.

Contact as many people in Korea as you can

before you arrive. (Sources for initial contacts are

listed in the back of this book.) Let them know your

travel schedule and set up appointments whenever

possible. • Get a feel for the country. .

Use your time in Korea to meet a variety of peo-

ple . Travel around the country and abs_orb as much

as you can of the culture and regional differences.

46 Passport KOREA

• Have patience . Du�ing y our first several trips, you may not

accomplish more than getting to know possible

business candidates. Consider which ones show the most promise, then nurture your rapport with

them. • Decide on a Korean partner.

. 1!se your i�itial contacts to look for opportuni­ ties m y our lme of business . Many dependable

Korean companies specialize in helping to arrange

promising match-ups. • Obtain permissions and licenses.

Seek advice about what government permits

and licenses you'll need. Try to meet people at the

appropriate ministries, ask a lot of questions, and gather guidelines if possible. Apply for documenta­ tion after listening to local advice. • Proceed slowly.

It's best to start with smaller transactions and build your reputation in stages, then to move on to

more ambitious projects as your network grows. And be aware that Koreans will not be rushed

into making decisions. If you wish to hurry the

pace_ of a transaction, you'll need powerful and per­ suasive arguments. • Know that fairness can be interpreted in more

than one way. For Koreans, fairness isn't an absolute principle

but rather one that changes according to circum­ stances. For example, Koreans believe that it's

unfair for the U.S. to expect a reciprocal market, because the Korean market is much smaller, and more vulnerable, than America's.

While they welcome new technology and make

full use of foreign technicians, engineers and scien­ tists, they remain intensely protective of their

domestic markets.

Strategies for Success 47

• Learn the language.

Koreans will be pleased if y ou make an effort

to learn at least some basic words and phrases in

their language. Be aware that the use of Japanese

may give offense, as the Korean lang�age was

banned during the long Japanese occupation and a

smouldering resentment remains in some quarters.

• Budget for gifts and entertainment.

The Korean business culture demands the

exchanging of gifts, the return of favors, and a great

deal of socializing outside the workplace. (For more

on this, see Chapter 17.) • Adapt the Korean approach.

Try to keep y our Korean contacts comfortable

at all times and they'll return the courtesy. Any

open tension, confrontation or con�ict must be

avoided. And be aware that most busmess commu­

nication (other than setting up appointments and

the like) occurs face-to-face, not over the telephone.

• Keep in constant contact.

Koreans are very sensitive to even the slightest

changes. To ensure that business is going well, they

will often visit associates to ask, "Are y ou at

peace?" (In other words, "Is everything all right?").

When they do (or when they arrive for a meeting),

it's alway s appropriate to serve them refreshments

- juice, tea or coffee, preferably in an area away

from y our desk where every one can sit and talk

comfortably.

�---Time __ There are Koreans who work in busy cities(such as Seoul) who say that their approach to timeis no different than their counterpart's approach inthe West, and that their pace of life is just as fren­zied. About a third of the time that may be true. Thecountry's agricultural past isn't so very distant, andso time remains more elastic here. "Korean time," aterm for lateness coined by Westerners who aremore time-conscious than many of their Koreancounterparts, should be avoided.

Punctuality Manners dictate that gentlemen are rarely in ahurry. Koreans may be anywhere from five to thirtyminutes late for appointments. Those with longmilitary experience are the exception to this stan­dard, as they're usually compulsive about adheringto a rigid schedule (a trait known as shiganomsu.) If a Korean partner is excessively late, don'tassume that he's not coming. When he arrives, don'texpect him to apologize. In his culture, he's commit­ted no offense. He'll take it for granted that youunderstand that he got there as quickly as he could.

Time 49

Appointments

It's a good idea to schedule your appointments with plenty of extra time between them to al_low for possible delays. It's not uncommon for meet�ngs (as well as movies and public events) to begm later than their scheduled starting times.

In conversation, Westerners (Americans in par­ ticular) tend to specify time more frequently than Koreans do. Whereas an American might say, "I'll be back in ten minutes," a Korean in the same situa­ tion might say, "Please wait."

Deadlines, Korean-style

To a Korean, a deadline is a general guide, something that can always be adjusted to suit changing conditions. However, it's understoo� that other people's schedules are usually set for finan­ cial reasons. Koreans have a deep regard for com­ mitments. Shinyong (personal trust, credibility) implies that all obligations will be met.

Use diplomacy when setting deadlines. "�en can you provide the widgets?" is a better question than "Can you deliver the widgets by Friday?" The second question exerts pressure for a hard-and-fast "yes" or "no" answer - so�e��ing _Korea�s prefe� not to give. If the response is It will be difficult, that probably means "impossible." . . Due to bureaucratic red tape or to situations outside the control of your Korean partners, delays can occur. When inconvenienced, it's best to smile and bear with it. Accusations and displays of anger will only work against you.

@,,....... __ Bu_ s_ in_es_s _M_e_et_in_gs __ _ Business meetings are formal affairs and must

be set up far in advance - by mail, telephone, fax, or through a local friend or agent. Because Koreans are reluctant to flatly deny a request for a meeting, they may send a response that indicates only minor interest in your offer. If there's no interest whatso­ ever, no response will be forthcoming.

Preparing for the Meeting Try to find out as much as you can about the

operations and personnel of the companies you plan to visit. Prepare a solid presentation with an agenda and a specific proposal. Your local ad visor should be able to help you adjust your proposal to fit the particular groups you'll be addressing. And be ready for frustrating delays, as a preliminary understanding is unlikely in a first meeting.

It's best to bring your own equipment. When you first schedule the meeting, request whatever you'll be unable to provide, such as audio-visual aids, a podium, a sound system, or a laptop com­ puter. Also when scheduling, allow extra time for language translation.

Business Meetings 51

Establishing Rank Early On

Korean businessmen are so concerned about status that they'll be unsure as to how they should behave in a meeting until everyone's place on the ladder has been determined. Foreigners should establish their pedigree early in a relationship so

that business can proceed in a harmonious way. Provide your Korean counterparts with

_ a hiera�­

chical list of your team members, includ�ng their titles and roles within the group. Information dem­ onstrating the success and experience �our company has in providing the products or services you offer (and why they're superior to similar products a�d services) should also be provided. The Koreans ':ill want to discuss these things among themselves prior to the meeting .

Arriving at the Company

Shaking hands, a gesture imported from _ the

West, is generally accepted. However, overly . firm

or overly zealous shakes (which some Am�ncans believe are a sign of manliness or confidence) should be avoided. Younger Koreans may bow slightly to their seniors.

Business cards will be exchanged. Take a few moments to study any card you receive before put­ ting it away. It represents the per�on w?o gave it to

you. On their business cards and m_ their c�rrespon­ dence, Koreans spell their names m Enghsh as an aid to pronunciation for foreigners.

Presenting Your Proposal

A reliable interpreter will be able to determine who the Korean leader is, and prior to the meeting, he or she should brief you on whom to address. Let

52 Passport KOREA

your Korean hosts control the pace of a meeting. They may indulge in "small talk" for a much longer period of time than non-Koreans (Westerners in particular) are used to. Jumping right into the busi­ ness at hand is considered brusque and rather cold. Listen carefully, and direct your gaze at the speaker.

Your interpreter will tell you when to begin your presentation. Thank everyone for taking the time to see you. Humility and graciousness are expected. Begin by outlining your proposal in gen­ eral terms; then become more specific. Be prepared to repeat your proposal to numerous groups within a company, and remember that a smiling nod doesn't indicate agreement, merely comprehension. "Yes" can mean "Yes, I understand what you're saying." It doesn't necessarily mean "Yes, I agree with you."

Keep in mind that Koreans prefer the appear­ ance of unity over individual desires. Harmony and consensus are important. Your counterparts will rarely break rank - and never in the presence of foreigners. Koreans find it hard to understand why Westerners (in particular) don't readily accept and adapt to these ideas.

Concluding the Meeting

Allow your hosts to respond to your proposal and to ask questions. Though questions may be few or nonexistent, this doesn't necessarily reflect a lack of interest. Your hosts may want time to study and discuss your proposal among themselves. Let them know that your team is available for further discus­ sion, and don't be surprised if an invitation for drinks or dinner is offered. Much of Korean busi­ ness is conducted after hours.

<}_� Negotiating with Koreans cLv

Shaped by a Difficult History

South Korea has been shaped by long periods

of isolated feudalism and deprivation and torn by

colonialism, civil war and partition. Longtime

"underdogs," they learned to compete - often

fiercely - under extreme conditions. This molded

a unique Korean business culture that remains

highly competitive today.

Koreans are tough negotiators. They usually

start with an extreme position, expecting to back

down; foreigners should do the same. Koreans will

remind you that theirs is a poor country deserving

special concessions, especially from Westerners, who

are richer and have more to give. Any technique

they can apply to gain an edge will be used, includ­

ing intimidation, wild promises, and sophisticated

strategies designed to wear the other side down.

A Few Korean Negotiating Techniques

• Koreans will try any number of ways to confuse

your position and to exhaust you, and this can

be enormously frustrating. They negotiate in

54

•

•

•

•

Passport KOREA

teams and are prepared for long sessions. And they' re well aware of the fact that when you' re tired, you' re more likely to make concessions. Emotional considerations are often more important to Koreans than Western-style logic. For example, if Koreans think you're asking for too much profit, they might say, "Your price seems fair, but you're starving my children" - meaning "Let's talk about a lower cost for your goods and services." Another response might be "My abacus is unbalanced." If you're reviewing a ten-point contract and come to an agreement on the first nine points but have a problem with the last item, the Koreans may suggest that you return to the first point and start all over again. Their premise is that while you're re-discussing points one through nine, you'll have time to re­ think item ten and make adjustments - in their favor - when you return to it. Koreans may create a surprise in the negotia­ tion, or they may leave the other side no room to maneuver. This technique is known as sonsu

ch 'ida (literally, first to draw or strike). Consensus tends to be prized in Korean cul­ ture, while specifics tend to be ignored. This can cause problems and delays down the line when undiscussed issues arise.

Key Points • Never let the Korean side know when you

plan to leave the country. Koreans are notorious for delaying substantive

negotiations until the last day, thereby gaining an advantage. When they sense that you're anxious, they'll increase their demands. Foreigners should

Negotiating with Koreans 55

be willing to stay until mutual accord is reached, or

to walk away. Always keep in mind that no deal is

better than a bad one.

• Learn as much as you can about the other

side. Try to ascertain how much clout a Korean com­

pany has in government circles and how they can

exert influence that will be helpful to you.

• Never give anything away.

For every concession you make, even the

smallest ones, get something in return. Koreans

view indulgence as a sign of weakness, even when

it's offered in good faith. • Hire male interpreters.

Experienced foreign businessmen warn that

using females as interpreters or as representatives

(when dealing with government officials in particu­

lar and with businessmen in general) can cause

problems. This is because many Korean men cling

to the Confucianist hierarchal system, which sub­

scribes to the premise that "a woman's place is in

the home." And keep in mind that just because an

interpreter is fluent in your language, it doesn't

necessarily follow that he ( or she) understands

international business.

Tips on Using Interpreters

Having your own interpreter is essential, espe­

cially during high-stakes negotiations. Koreans

may provide one as a matter of courtesy, but it's not

advisable to depend on that person. Though he

may not mislead you, he's a member of their team

and won't have your best interests in mind.

Your own interpreter should be multicultural

as well as multilingual, able to decipher nuances of

intonation and feelings in both languages. If such a

56 Passport KOREA

person hasn't been recommended to you, inquire at a hotel business center.

Before your meetings take place, plan the mechanics of how you'll work together. Discuss how long you should speak before pausing for interpretation. Explain any specialized vocabulary. Brief him ( or her) on the details of your proposal and its selling points, and give him time to become familiar with your presentation style, humor and body language, so that your message can be accu­ rately conveyed.

Interpreters need to rest about every two hours. In bilingual negotiations, meetings can stretch to three times their normal length, and you may wish to employ a backup interpreter for long sessions. Always address your remarks directly to the head of the Korean delegation. Koreans value personal communication, and they may under­ stand more English than you may expect.

During breaks or after a meeting, review the main points with your interpreter and ask what he has observed about the Korean side. Try to get a feel for the direction in which the negotiations are heading, and devise a strategy for what needs to be said later on. Ask for tips on your body language, so that your spoken words and your physical movements are consistent with each other.

The Korean Approach to Contracts

Paekchi wiim means "trusting in paper," which is something Koreans rarely do. When Koreans are dealing with one another, a verbal agreement (rather than a written contract) between parties who have a close relationship is considered sufficient.

It's common for Koreans to sign a contract with non-Koreans without having any intention of honor­ ing it. A signed contract is a formal acknowledgment

Negotiating with Koreans 57

of verbal agreements, and it's only as good as the personal trust that exists between the signatories.

Know that even when you've made a deal, Koreans will maneuver for a better one. Continuing negotia­ tions are a way of life. Be prepared to make many business trips to the country.

That having been said, written contracts should anticipate all future possibilities and state how adjustments, if needed, will be made. Each contract will need to be monitored and reviewed during the life of the working relationship. This is to ensure that the situation doesn't change to such a degree that the Korean side will find the agreement untenable or financially impractical. A contract is usually workable as long as the signatories remain in close cooperation. If a signatory is relocated or quits his job, it's likely that the Koreans will con­ sider the contract null and void, in which case it will need to be renegotiated by new individuals.

The Republic of Korea's government can tear up a contract without batting a bureaucratic eye. While this is a hazard that your local advisors can lobby against, it's best to have your understandings with government agencies crystal clear before pro­ ceeding with any business arrangements.

�1� __ B_u_s _in_es_s _O_u _ts_ id_ e _ t _he_L_a_w_

The Bribery Minefield

What began with Confucius as paternalism (in the best sense) has evolved into a complicated web of obligation and opportunism that reaches into all sectors of Korean society. Gift-giving started as a courtesy, a means of showing respect, and a confir­ mation of reciprocal relationships. It evolved into a means of obtaining business and political favors, then extended into bribery and graft.

In the corporate world, it's not uncommon for businesses to bribe officials to avoid substantial taxes or for companies to bribe bankers to ease the way for loans. Sons of officials use their fathers' prestigious positions to obtain entry into the best schools and then into jobs in companies that are likely to favor them over more qualified (but less well-connected) candidates. Such favors are predi­ cated on receiving something in return. It's well known that the backing of important ministries opens business doors. The official in question may only seek an enhancement of his image, or he may hint for an indirect participation in the venture.

Business Outside the Law 59

Ttok kap (literally, the price of rice cakes) has replaced ch'on ji (money in an envelope) as the expression used to mean bribes that corporations give to government officials in return for future favors. The expression is derived from the tradi­ tional custom of companies giving employees spe­ cial bonuses to help them make holiday rice cakes. Ton se-t' ak (money laundering), the act of hiding the source of bribe money, is another recent coinage.

Some of Korea's top politicians are now being exposed as having tens of millions of won in hidden assets, leaders of business conglomerates (includ­ ing Korean Airlines, Daewoo and Hyundai Motor) have been ordered to stand trial for handing out billions of won for so-called campaign donations, and high-ranking military men have been publicly accused of selling promotions to junior officers. However, it's interesting to note that although seven chaebol tycoons are, or have been, under indictment for allegedly bribing politicians, general consensus has it that even if convicted, it's unlikely that they'll go to jail. Their impact on the economy and the nation is considered too vital.

LJ.S. Citizens and Bribery

The Foreign Corrupt Practices Act (FCPA), passed into law in the mid-1970s, makes it illegal for U.S. businesspeople to bribe officials of foreign countries, either directly or through an intermedi­ ary, without facing the possibility of felony charges. This puts them at a disadvantage. Not only are competitors from Europe and Asia permitted to bribe, but in some cases, they can declare any undercover payments as tax deductions in their home countries.

The FCPA does make allowances for what it calls "facilitation payments," which can be loosely

60 Passport KOREA

described as payments to ensure that an official does what he or she was supposed to do anyway. Because most Koreans are aware of these restric­ tions, extra charges may be attached to goods or services to cover hidden payoffs to partners or bureaucrats. Professional legal advice should always be sought and followed.

The Red Tape Trap

There's a complicated maze of regulations. Many of them are only selectively enforced, while other remain unpublished, leaving plenty of room for venality at all levels. In 1993, President Kim decreed an end to the use of fictitious or "false name" accounts and made the attack on corruption the centerpiece of his administration. The eradica­ tion of false-name accounts has made it difficult to conceal ownership, hide cash of questionable ori­ gin, and cover up other improper dealings. And as the situation is in flux, it's difficult for outsiders operating in Korea to know whether to follow the old or the new rules. (Always ask for guidance and always proceed with caution.)

The Black Market in the North

Black markets have apparently become life­ lines in North Korea, where severe food shortages have put millions at risk of starvation and disease. Though the shelves in state stores are empty, corn (among other items) can be illicitly purchased - for vastly inflated sums. According to one North Korean defector, much of what's available "under­ ground" is supplied by government officials who use their privileged positions to buy vast amounts (often from China), at a discount, that they resell for profit.

Business Outside the Law 61

Some observers postulate that the government is tolerating this blackmarket proliferation as a kind of safety valve against outright public outrage. Others speculate that as the black market teaches more and more North Koreans about the power of money and about their ability of control their own destinies despite the odds, the populace will become less and less tolerant of the North's rigid, repressive regime.

Present Changes & Future Outlook

Many Koreans feel that Westerners take a hyp­ ocritical or naive approach to a way of doing things that the Koreans view as an integral part of their culture. Still, Kim has declared corporate and polit­ ical corruption to be great evils, and he's pledged to eliminate collusive ties between the two. To those ends, he authorized the arrest of two ex-presidents, Chun Doo-hwan and Roh Tae-woo, on charges of staging a military coup, subsequently massacring civilian protestors in Kwangju in 1980, and amass­ ing huge piles of graft money in "apple cases."

Unfortunately, Kim's anticorruption platform has been made ludicrous in light of indictments against his son, Kim Hyun Chul, who was arrested in mid-1997 for influence peddling, graft (involving the Hanbo conglomerate) and tax evasion. This is creating a growing national nostalgia for Kim's pre­ decessor, Park Chung Hee, whose totalitarian tactics resulted in an enormous countrywide economic surge. (Park's 18-year presidency ended with his assassination, in 1979, by his own intelligence chief.)

®,.;-_N_am_e_s_ &G_re_et_in_gs ___ Names are considered to be very personal and

they' re not usually used in conversation. First names are used only between very close friends and under prescribed circumstances. To do otherwise is consid­ ered impolite and possibly offensive. In fact, many older Koreans are so sensitive about this that they don't like to hear their personal names said aloud. Names are also believed by some to be harbingers of good or bad fortune, which is why fortune-tellers may be consulted before a baby's name is chosen.

Within families, individuals are called by their relative position, such as oldest brother, younger sis­ ter, uncle or cousin so-and-so. Children address their parents as aboji (father) and omoni (mother) or appa

(daddy) and omma (mommy). Elderly Koreans are called halmoni or haraboji (grandmother or grandfa­ ther), regardless of whether or not one is related to them. Even in marriage, names are rarely used between spouses, who usually refer to each other in neutral terms like tangshin (you). And after a child is born, they refer to each other, or to a third person, as "so-and-so's mother" or so-and-so's father." After marriage, a woman retains her maiden name, so Mr. Kim's wife may, in fact, be Mrs. Yi. However, she's referred to as "the wife of Mr. Kim."

Names & Greetings 63

A Korean's family name (Kim, for example) is spoken or written first, followed by his or her gener­ ational name (such as Hyong), followed by a given or first name (such as Sim). (All female family mem­ bers of the same generation share a generational name, as do all male relatives. However, distinguish­ ing male generational names from female ones can be very difficult. As families branch out, these names eventually link people to their very distant ances­ tors.) Kim Hyong Sim should be addressed as Mister Kim. Kim Hyong Su is most likely a brother.

The chances are good that you'll meet someone with the family name of Kim (literally, Gold), Lee (Plum) or Pak (Gourd), as more than 44 percent of the population carries one of these names. Many of the most common names ( Choi, Chung, Shin, Im, Paek, Kang, Chang), when translated into English, may be spelled two or three different ways. And to a non-Korean ear, their pronunciation may also seem to shift. The name Lee, for example, can man­ ifest itself as Rhee, Ri, Yi, Yee or Li.

Common Korean Business Titles

Because the Korean name game is so confusing to the uninitiated, it's probably best to use titles or to call someone "Mr. So-and So." Names of positions and titles are considered very important. Professor, doctor, general, director or other titles of distinction, when known, should always be used. Titles are spo­ ken after a person's name, for example, Smith Paksa (doctor) or Clinton Taet'ongnyong (president). Son Saeng Nim is a cover-all honorific meaning "teacher" or "honored person." It's particularly useful when talking with an elder in any situation.

In a large Korean company, there may be hun­ dreds of people with the same family name, and it's very confusing when you're trying to hail a specific

64 Passport KOREA

Mr. Lee. To minimize the problem, Koreans in the workplace are referred to by their position and department. Thus, a manager in the accounting department will be called "Mr. Lee of accounting."

Korean Business Titles

English

Chairman, Board of Directors

President Vice President Managing or Principal

Director Director or Standing Director General Manager Department Chief or Manager Factory Manager Assistant or Vice-Department

Manager Section Chief or Manager Assistant Section Chief SeniorOerk Bookkeeper Secretary Messenger Driver

Korean

hoejang sajang pu-sajang

chonmu isa sangmuisa (no equivalent) pujang kongjang-jang

ch' ajang kwajang kyejang chu-im [or] samuwon kyongli sawon pis sahwan (unjon) kisa

Department Names

Accounting General Affairs Materials ( Control) Sales Production Quality Control Shipping/Receiving

hoekye pu ch'ong mu chajae (kwalli) pu yongop pu saengsan pu p'umjil kwalli pu palsong/ sunap pu

INHARMONIOUS POSTURE HARMONIOUS POSTURE

� Communication Styles UL/

Courtesy & Restraint

The Korean language encompasses a refined spoken etiquette. The three basic levels of the lan­ guage include a polite form (used when addressing superiors and elders); an intimate form (used between close friends and equals); and a "rough" form (directed at people on a lower social level).

Korean culture focuses on tacit (unspoken) understanding. In many cases expressions like "Thank you" and "Excuse me" aren't used; rather, it's taken for granted that, in a particular situation, one is grateful or apologetic. In general, Koreans are soft-spoken and courteous. Anger is considered a loss of control. Any sarcasm will probably be mis­ understood, or worse, taken literally. While talking, Koreans make eye contact, but they keep it to a minimum. Fast-talking or aggressive sales pitches will make Koreans uncomfortable and jeopardize the success of a proposal, regardless of its merits. As in many Asian cultures, "Yes" means "I under­ stand," not "I agree," and "No" is only expressed indirectly, in order to avoid offense or loss of face.

66 Passport KOREA

Privacy: An Unknown Concept

Due to a long history of collectivism and the fact that Korea is the fourth most densely popu­ lated nation on earth, privacy (in the Western sense) is unknown. When tradition and economics dictate that two or three generations live under one roof, talking about the affairs of others is common. Koreans keep few secrets from one another.

It's understood that protecting business confi­ dentiality from outsiders is important. However, Koreans will not hesitate to reveal personal matters. In turn, non-Koreans may be asked about their age, marital status, salary, or other personal items. Trying to avoid such questions will invite suspicion. The queries are intended to build a closer relationship. Those who ask similar questions in return will be seen as being interested in establishing friendships.

The Intricacies of a Smile

Most often, a smile indicates pleasure and a welcoming attitude, but it can also indicate embar­ rassment, apology, irritation, dismay, confusion or ignorance of the subject at hand. When controver­ sial topics or areas of confrontation arise, Koreans will often cover their discomfort with a smile - trying to put a pleasant face on a tense situation in an attempt to maintain harmony.

Guidelines for Non-Koreans

1. Avoid Physical Contact. Koreans aren't comfortable being touched, even

casually, as on someone's arm or shoulder. (How­ ever, young women may hold each other's hands while walking.) If you get bumped while walking on a busy street, don't expect an "Excuse me."

Communication Styles 67

2. Keep Your Distance. Westerners are generally taller than Koreans

and can therefore appear to be physically threaten­ ing. The closer you stand together, the more the height differential is emphasized.

3. Listen More - Talk Less. Listen carefully, and wait for others to finish

speaking. Koreans rarely interrupt, and they find the practice impertinent in outsiders.

4. Remember Your Status. Maintain your dignity and your manners.

Never patronize or condescend. Your overall demeanor will determine whether or not you' re invited to return. When talking, keep your hands in full view, not in your pockets. Never put your feet on a desk or chair, and try to avoid crossing your legs. (If you must, point the soles and toes of your shoes downward.)

5. Posture matters. Balance and harmony are such highly valued

principles in Korean life that they're symbolized in the country's flag - as two equal, interlocking parts, yin and yang, that represent female/ male, positive/ negative and other polar opposites. Sur­ rounding the circle are the four trigrams represent­ ing the universal elements of heaven, earth, fire and water.

Slouching and other "inharmonious" postures, even when one is tired, are scorned. Sit and stand up ramrod straight to enhance your dignity.

6. Don't Point. Never point, either at a person or an object. If

you must indicate a someone or something, do so with your whole hand, with the palm open and fac­ ing up.

._____ -- · · - �- - ---------------------........ --------------------

28 Passport MEXICO

Southern Mexico

Conservative hacendados (large landowners) with a colonial mind-set dominate Chiapas, the Yucatan Peninsula and other parts of the south. Business is based on class and paternalistic ties and is conducted at a very relaxed pace. Many of the indigenous inhabitants venture into the main­ stream economy only to sell corn and crafts in local markets and to buy household implements.

Indigenous Peoples

Pure-blooded descendants of pre-Conquest Mexico can be found throughout the land. These include the Nahau and Otomi peoples (in the cen­ tral plateau), the Tarascos (Michoacan), the Mayan peoples (Chiapas and the Yucatan Peninsula), the Tarahumaras (Chihuahua), the Zapotecs and Mix­ tees (Oaxaca) and the Yaquis (Sonora).

Though millions of these men and women have left their traditional communities to seek bet­ ter lives in the nation's cities (not to mention Los Angeles and New York), millions of others continue to live in relative isolation and speak their native tongues. The Huichols, for example, still maintain their ancient traditions, one of which is an annual trek across the Sierra Madre Occidental mountains to collect peyote (hallucinogenic cactus buds) for ceremonial purposes).

The current zapatista movement in Chiapas can be seen as an effort by indigenous peoples to acquire rights of citizenship (land, education, health care and legal protection, local autonomy) in order to preserve their traditional, agricultural way of life.

$ Government & Business

Government Role in Business

The Mexican government's role in the coun­ try's economy has changed dramatically since the early 1980s. A centrally controlled economy based on protected domestic industry and oil exports has been both diversified and opened to market forces. Federal and state governments have aggressively pursued domestic and foreign investment, while promoting non-oil exports. These efforts have brought billions of dollars in capital to Mexico and helped expand foreign trade. Between 1982 and 1994, non-oil exports rose from 25 percent to 85 per­ cent of total exports. Assembled and agricultural products have been key in the export diversifica­ tion process.

Mexico's modernization drive has included government downsizing through the privatization of over 1,000 publicly owned enterprises. The cur­ rent Zedillo administration has continued this pro­ cess by seeking private management of ports and airlines and by putting the national railroad and parts of the formerly untouchable petrochemical monopoly on the auction block.

J

30 Passport MEXICO

NAFTA

As the central strategy in opening up Mexico's economy, former President Carlos Salinas de Gor­ tari actively pursued, negotiated, and in 1993 signed the North American Free Trade Agreement (NAFTA) with the United States and Canada. Known as el Tratado de Libre Comercio (el TLC) in Mexico, this pact gradually eliminates tariffs and other restrictions on the flow of goods, services and investment between the three countries.

The NAFTA-TLC created an economic bloc consisting of over 360 million consumers. It aims to enable more efficient use of North American resources (capital, land, labor and technology) and to stimulate market forces. It institutionalizes Mex­ ico's economic reforms of the last decade and fur­ thers the country's integration into the world economy- a priority since the mid-1980s. (Mexico joined GATT, which commits Mexico to open its economy to foreign competition, in 1986, and the World Trade Organization in 1994.)

Many Old Barriers Gone

The government has opened up previously closed sectors of the economy and most products are now subject to competitive pricing. Mexico's archaic landholding system has been overhauled. Meanwhile, government policy, combined with a glut in the labor market supply, have conspired to keep labor costs down. The minimum wage is US$3.89 a day in most of Mexico, though total labor costs are usually 40 to 80 percent higher.

Import permits are no longer needed for over 90 percent of all products. The previously Byzan­ tine customs bureaucracy has been simplified. Full foreign ownership is now permitted in most sec-

Government & Business 31

tors, and approval of foreign investments of up to $100 million has become automatic. New openings have been created for foreign banking, finance, insurance companies and retailers. The liberaliza­ tion of franchising laws has sped the proliferation of domestic and foreign franchises in fast food and other services.

Another development conducive to trade is the modernization of Mexico's transportation infra­ structure. A network of fast toll roads now expedite the two-way movement of goods between the U.S. border and central Mexico and between Mexican cities. Liberalized regulations have opened truck­ ing and cargo handling to competition. Ports are being renovated. Updating of telecommunications systems and the end of Telefonos de Mexico's (Telmex) monopoly have improved service and will lower costs.

Among the remammg significant barriers to trade and competition in Mexico are the concentra­ tion of wealth in relatively few hands, the high cost of borrowing, and the all-important role of palancas (connections). Those who lack palancas are severely restricted in the economic sphere.

Politics & Business = Bedfellows

At a 1994 dinner, President Salinas requested a US$25 million contribution from each of Mexico's 30 richest men as a way to strengthen the ruling party ( the PRI). Though this appeal failed, the fact that it was even broached suggests the close alli­ ance between politics and big business.

The government has continuously rewarded Mexico's magnates with lucrative contracts, conces­ sions, subsidies, and by some accounts bargain basement prices for government-owned industries (for example, the privatization of banks, airlines

32 Passport MEXICO

and Telmex). In the mid-1990s, a group of business­ man from the northern state of Nuevo Leon donated US$22 million to Ernesto Zedillo' s presi­ dential campaign - a clear sign of big business' interest in keeping the PRI in power.

No one knows how much of the nation's wealth President Salinas appropriated during his administration, but his brother managed to accu­ mulate an empire of real estate and commercial properties and over US$100 million cash (which he deposited in foreign banks under a pseudonym). This is one high-profile example of the key role per­ sonal ties and loyalty play in the distribution and concentration of wealth and power. Nepotism is common - exemplified by politicians who lavishly reward family friends and sometimes protect them from the law.

Insiders

In terms of wealth and power, Mexico is one of the world's most polarized countries. The economy is smaller than that of the state of Florida, yet there are more billionaires in Mexico than in any country other than the U.S., Germany and Japan. Ten per­ cent of the population owns 80 percent of the nation's wealth - while over 40 percent of the pop­ ulation, about 40 million people, live below the poverty line.

The Salinas administration's opening of the econ­ omy to competitive forces, and its selling of govern­ ment enterprises to the private secto� accelerated the enrichment of the rich and the impoverishment of the middle and lower classes. Macroeconomic growth came at the expense of the average Mexican' s living standard.

Foreign companies and speculators have also become "insiders" in the Mexico of the 1990s. The

Government & Business 33

lowering of trade barriers, along with an overval­ ued peso, have led to a flood of imported consumer goods and services, often at the expense of small­ and medium-sized domestic businesses. Depen­ dence on short-term foreign investment (attracted by high interest rates), not for economic growth but to finance the balance of payments deficit, led to the peso's collapse in December 1994. The crisis that followed added billions of dollars to Mexico's already crippling foreign debt and imposed further "sacrifices" on a population already hard-hit by more than a decade of declining earnings.

A dramatic example of how policy has favored big business was the government's spending of bil­ lions of dollars (by some accounts, up to 10 percent of the GDP) to bail out the banking system in 1995. That same year, skyrocketing interest rates made it impossible for hundreds of thousands of Mexicans to make loan payments. Home foreclosures and auto repossessions were epidemic, and further bor­ rowing (at variable interest rates of 60 to 100 per­ cent) became prohibitive. El Barz6n, a nationwide resistance movement of bank debtors, was (and continues to be, as of mid-1996) flooded with appli­ cants. Members of El Barz6n ( the name refers to a farm oxen's yoke) make payments on the principal of their loans but refuse to pay interest.

An increase in the nationwide sales tax (el IVA)

from 10 to 15 percent, coupled with a 50 percent inflation rate, severely curtailed buying power and economic activity. Tens of thousands of businesses closed and nearly a million workers lost their jobs - in an economy that needs to create a million new jobs per year to keep up with population growth.

�)__T_h_e_W_or_k_E_ n_v_ir_o_n_m_e_n_t _ Today's stress on competitiveness and effi­

ciency is gradually transforming the Mexican work environment. Yet customs in hiring, management and other aspects of what goes on in Mexican workplaces are often quite different from those found elsewhere in the West.

Nepotism

It's good to have an impressive resume, but even better if someone close to the boss recom­ mends you. Company heads and managers like to surround themselves with people they know. Yet the concept of open competition is gradually catch­ ing on. In some Mexican cities, executive placement agencies now cater to the larger firms.

While hard work, productivity, educational training, merit and seniority are valued, promo­ tions may depend more on cooperation, courtesy and faithfully carrying out an assigned task over a period of time. Moreover, family status plays a cen­ tral role in many companies. Nepotism is a fact of life. Even though current economic pressures have forced austerity upon enterprises of all sizes, it is

The Work Environment 35

still common for family members to be brought aboard, whether or not they are really needed.

Job Protection

Mexico's labor force is abundant in young, unskilled labor and upper (but not middle) level managers. Some foreign investors are required to provide worker training as a precondition of invest­ ment approval. Those who do so should consider investing in worker benefit packages as well. New companies often lure these workers away with incentives that cost them considerably less than training does.

The labor laws are among the strongest in the world. A Mexican employer who wishes to dismiss someone must provide specific reasons and will suffer severe penalties if the situation is handled improperly.

Autocracy

Mexican businessmen - like technocrats, bureaucrats and male family heads - have a great respect and need for authority. Those below them in the hierarchy have been trained since childhood to defer to elders and other authority figures and to respect power and wealth.

In a traditionally organized firm, the patron

(boss) is unlikely to accept questioning from subor­ dinates or seek their opinions. Nor does he grant them important decision-making power. Instead, they are given relatively limited, well-defined tasks to carry out more or less independently.

Due to the high value placed on hierarchical relationships, the Mexican worker or manager will attempt to guard his or her limited pocket of auton­ omy. He or she is likely to be efficient within this well-defined sphere but unlikely to display initia-

36 Passport MEXICO

tive. This dynamic often impedes teamwork. It's uncommon for co-workers to openly compete in an attempt to please superiors; such behavior is seen as treating one's co-workers rudely.

Most subordinates willingly submit to this highly centralized command structure for several reasons:

• To take initiative means to risk making mis­ takes and being punished for asserting too much independence.

• It's understood that jobs are relatively secure, and advancement most likely, for those who "don't rock the boat."

• The patron has responsibilities to his employees as well as authority over them. For example, he can expect to be called upon to extend moral and material assistance to an employee's fam­ ily. It is important for outsiders doing business in Mexico to be aware of this social (and occa­ sionally financial) obligation.

A new generation of mostly U.S.-educated managers is beginning to have an influence. They believe in the decentralization of the decision-mak­ ing process, increased delegation of authority and the encouragement of teamwork. But so far, their approach has made inroads only in the bigger cities and larger enterprises.

Traditional versus Modern

Communication between superiors and subordi­ nates tends to be rigidly stylized. The superior may place more value on being in charge and being treated with deference than on initiative. The subordinate, in tum, is unlikely to share his thoughts about problem­ atic procedures that come to his attention.

The Work Environment 37

What is seen as monitoring in other countries is often seen as meddling in the Mexican work envi­ ronment. So, out of respect for the subordinate' s autonomy, the Mexican executive will leave the subordinate to carry out the task with little supervi­ sion. Likewise, the supervisor may be reluctant to provide corrective guidance, perhaps not wanting to imply that the subordinate is not performing his work adequately.

These patterns lead to a shortage of straightfor­ ward communication and lost opportunities to improve efficiency and productivity. Moreover, the lack of "meddling" and the formalized nature of communication can leave Mexican workers believ­ ing that the patron doesn't like or trust them.

Non-Mexican businesspeople often find this system frustrating. But aggressive attempts to improve channels of communications and supervi­ sion by implementing foreign procedures run the risk of destroying the loyalty and trust of Mexican employees and managers. Suspicion and hostility toward outsiders may further hamper such efforts.

A more effective approach is to train new staff, gradually retrain those already in place, and make a concerted effort to personalize relations with both employees and business partners. Success in gain­ ing respect and trust will lead to cooperation and hard work.

The Mexican Work Ethic

Working to live. In a culture where time is not reimbursed well in monetary terms, people work to live rather than live to work. Mexicans generally approach work as a necessary evil that provides the wherewithal to enjoy the more important things in life: family, friends and other earthly pleasures.

Family before work. The importance of family

38 Passport MEXICO

life often has an impact on the working environ­ ment. It may lead, for example, to absences related to illness in the family. Help wanted ads seeking secre­ taries, receptionists and shop clerks often specify that candidates be single. This reflects the belief that women who don't have children to care for are more likely to be dependable workers. By contrast, ma�­ ried males are generally considered more responsi­ ble as employees than their single counterparts.

Fatalism. The sense of fatalism and powerless­ ness so characteristic of Mexican culture can play a role in the workplace. Workers who feel that their skills and initiative are not appreciated may con­ clude that the enterprise at hand is unimportant. Foreign executives or managers are advised to be careful not to label such an attitude as laziness. A wiser approach would be to make Mexican employees feel respected and appreciated; encour­ aging and rewarding initiative will lead to employee trust, loyalty and consistent effort.

Hard workers. Aside from those employed by the government or who hold white-collar jobs, many Mexicans work six-day, 48-hour weeks. Mex­ icans' flexible attitude toward time translates into a willingness to work after hours to get a job done, particularly when issues of personal loyalty are involved. Employers assume their employees will put in extra hours to fill in for absent co-w�rkers and to carry out special assignments, often without overtime pay.

In addition, economic hardship forces much of the population to make considerable sacrifices. During the current economic crisis, for example, many employees have had to accept large wage cuts rather than be laid off. Declining buying power compels many Mexicans to work 12-hour shifts or longer and to work more than one job.

�5 ,k...-.

_W_o_m_ e_n_in _B_u_ s_in_e _ss __ _

Traditional Roles

Mexican women did not receive full suffrage until 1958. To a great extent, gender roles still follow traditional lines. In a prototypical home, the male family head is responsible for maintaining the fam­ ily. The woman is in charge of child rearing, cooking, cleaning, hiring servants and allocating family funds. Surveys show that only about one of four Mexican husbands helps with housework; some spend a great deal of time outside of the home with friends and mistresses. Their wives are expected to be sexually faithful and devoted mothers.

Cultural beliefs, difficult-to-enforce laws, and women's economic dependence perpetuate this dou­ ble standard. It's easier for a husband than a wife to be granted a divorce on the basis of infidelity. And many Mexican men get away with domestic violence and the failure to pay alimony or child support.

A notable exception to the above is the so­ called matriarchy that has traditionally prevailed in the Tehuantepec Peninsula in the state of Oaxaca. Here, Zapotec Indian women play a dominant role in both local politics and the local economy. They have a reputation for "wearing the pants in the

40 Passport MEXICO

family" (though many dress in fantastically embroidered skirts), for loving to dance, and for being open about their sexual appetites. During certain local fiestas, amidst exploding firecrackers, brass band music and tolling bells, they climb up on church roofs and town hall balconies to pelt the men and boys below with candy, cakes, toys, man­ goes, bananas (and, to add a touch of danger) pine­ apples and coconuts - a tradition known as Tirada

de Frutas (the "fruit throwing").

Women in the Workplace

In business and government, women generally hold support roles and are absent from decision­ making positions. They continue to dominate such traditionally female occupations as schoolteaching, nursing, domestic work, and clerking in stores and banks. Statistics are telling:

• Less than one in 10 business owners and man­ agers is female.

• Men earn, on average, 35 percent more than women.

• Only 40 percent of Mexican women have gone beyond primary school.

In the workplace, women are expected to dis­ play their femininity in the form of tight dresses or skirts, high-heeled shoes, careful hairdos and gen­ erous amounts of makeup. They are to be softspo­ ken and nonaggressive in the company of men.

A secretary or receptionist's duties include serv­ ing coffee to her male boss. She is likely to receive a great deal of attention from male co-workers and superiors. But she lacks legal protection and in many cases must endure what would be considered sexual harassment in some other countries.

Women in Business 41

Changing Trends

Since 1970, the percentage of Mexican women who work outside the home has risen from 20 per­ cent to over 40 percent. This is mainly due to declining family incomes and the fact that more and more women are single parents. It should also be noted that the number of women doctors, law­ yers and university professors is increasing steadily.

Generally speaking, working women are seen as a necessary evil, a way to improve the "family economy." Many woman view wage-earning as a way to assert their independence from fathers and husbands ( or at least to allow them discretionary spending money). But the concept of work as a means of "personal fulfillment" is not particularly common.

Strategies for Foreign Businesswomen

Non-Mexican businesswomen may need to adapt to certain cultural realities. It's inappropriate to criticize "inequities" in the workplace or to take a stand for women's rights. This will only create resent­ ment and possibly harm your business prospects.

On the positive side, you will be treated with great courtesy by Mexican men with their old­ school manners. They will take your calls, make time to hear what you have to say and go out of their way to be helpful.

One potential (though unlikely) drawback would involve having to interact with males who are not used to, or don't like, the idea of relating to women as equals. (This is particularly true among older men and those from working-class back­ grounds). Poise, seriousness and competence are your best weapons for overcoming such resistance.

42 Passport MEXICO

In advance communication with Mexican busi­ ness contacts, a female team leader should make it clear that she's in charge by putting her name at the top of a list of team members. Before and during face-to-face meetings, she can ensure that her Mexi­ can counterparts do not ignore her status by instructing her team members to defer all appropri­ ate questions to her.

Be aware that Mexicans tend to think of women from the U.S. and Europe as promiscuous. You may find yourself in the company of men who assume that you' re available simply because you' re in Mexico without a male escort or your family.

Mexican women use various approaches to deflect unwanted advances. Yet foreign women not used to this kind of attention may find themselves in danger of wounding a sensitive male ego and dam­ aging a business relationship. If you're in an uncom­ fortable situation, a calm, good-natured approach will best serve your interests. If it really becomes necessary, let your admirer know that you don't like his advances and would like them to stop.

Clothes that are considered innocuous in other countries may be taken as a sign of sexual advertis­ ing. To avoid misunderstandings, dress conserva­ tively, particularly while conducting business or socializing with business contacts.

And be careful not to do anything that might offend a Mexican businessman's wife, such as attending a social event with him that she hasn't been invited to or isn't expected to attend. To pro­ voke her jealousy or dislike might mean the end of your business relationship with her husband.

® --'--

_M_a_k_in_g_C_o_nn_e_c_ti _o_n _s __ Cultivate Relationships

"Friendship and contacts," says an ex-U.S. con­ sul who has lived and done business in Mexico for 40 years, "are the most valuable things in the men­ tality of the Mexicans."

Friends, relatives and colleagues help each other gain the needed information, advice and con­ tacts. Businesspeople, government officials and others in advantageous positions tend to form net­ works of personal relationships that provide the palancas essential to getting new enterprises off the ground, attracting clients, obtaining contracts and cutting through red tape. The importance of per­ sonal relationships in business cannot be overem­ phasized. Who you know and who they know may count more than anything else.

Mexicans spend time over coffee or meals or drinks in order to get to know a potential associate and his or her intentions. They put as much stock in an individual's character as in their resources and expertise. Contracts may go to a friend or colleague rather than to the lowest bidder.

Cultivating these all-important relationships can be especially difficult for those unwilling to

44 Passport MEXICO

devote a great deal of time and energy to winning the trust of people who may be in a position to ben­ efit them. This is not as cynical and manipulative as it may sound. It means developing genuine per­ sonal ties based on loyalty and reliability.

Once a foreign businessperson has been accepted into one of these old-boy interpersonal net­ works, his or her chances of establishing a successful business in Mexico will increase exponentially. Be aware that palancas are based on reciprocity - the balancing of favors received with favors given. When called on, you will be expected to go out of your way to use your own palancas to help others.

Go-Betweens

If you know someone who has done business in Mexico, consider asking them to make an intro­ duction. If not, the Trade Commission of Mexico, which has offices in many countries, may be able to help you initiate contacts. (It can also keep you apprised of upcoming trade shows, where you can display your goods or services, gauge business prospects and pursue contacts).

Chambers of commerce and industry associa­ tions in Mexico are also potentially valuable resources. The American Chamber of Commerce has offices in Mexico City, Guadalajara and Monter­ rey, and most of its members are Mexican business­ people. Another possibility would be to pay a business consultant to assist you.

Go to the Source

If none of the above works, consider taking a fact-finding trip to Mexico, where you can speak with people in your field firsthand. It's wise to call or fax first to inform specific people you want to

Making Connections 45

meet who you are, why you would like to meet, and when you are going to be in town.

Another option is to arrange to visit a foreign­ owned maquiladora (most are located near the Mex­ ico-U.S. border). Executives at these assembly plants are usually happy to share their experiences and may be willing to help you make further contacts.

Patience and Respect

Mexican executives and managers devote a good part of each day to developing and maintain­ ing business relationships, particularly when they're dealing with people they don't know. Dur­ ing your first set of meetings with your Mexican counterparts, expect to spend more time socializing than discussing substantive issues. Anticipate that working out the details of an agreement will require several trips to Mexico.

Remember that from the outset, the people with whom you are interacting will be evaluating you as a person, looking for traits valued in Mexico - dignity, respect, patience, flexibility, and serious­ ness coupled with a sense of humor. Though you may not see the point of long conversations and social events, they do. Let them set the pace at which the relationship develops.

A Mutually Beneficial Process

Learning about an associate will make commu­ nication and understanding smoother and help you decide how far to take the business relationship. Even if you end up not doing business with your contacts, you can count on them if a future need arises.

-

�,........__s_tr_at_e _gi_es_f_o_r S_u_c _ce_s _s_ A history of having been taken advantage of by

foreigners has made Mexicans suspicious of outsid­ ers' intentions. Yet Mexico wants and needs foreign technology, capital goods, investment, trade, tech­ nical know-how and marketing expertise. More­ over, deregulation has promoted international commercial links and made Mexican businesspeo­ ple eager to establish cooperative ventures.

Though potential Mexican associates may be wary, they will treat you respectfully and give you a chance to win them over. A number of strategies will aid your endeavors.

Ten Golden Rules

1. Find a matchmaker and II aim high". Because personal ties are fundamental to Mexi­

can business, it's to your advantage to have a third party put you in touch with those in positions to help you. Try to make contact with the highest lev­ els of a Mexican company, where the power and decision-making are concentrated.

2. Friendship before business. Think of yourself as going to Mexico both to do

Strategies for Success 47

business and make friends. At the outset, focus on the latter. Let phone conversations, meetings, meals and social events flow at the pace set by your hosts. Don't expect to come home from the first or second trip with a deal. In subsequent visits, continue to take time to establish and strengthen relationships. If you do, you will win friends and allies and enhance your prospects; if you don't, you' re likely to get involved in bad deals.

3. Show interest in Mexico. Mexicans are flattered and honored when for­

eigners get to know and appreciate their country. Allow yourself time to see the sites. Show interest in Mexico's history and culture, its customs and cuisine. This will counteract the idea that foreigners are only interested in exploitation. If you are profi­ cient in Spanish, so much the better.

4. Don't be an "ugly American." The fastest way to alienate your Mexican coun­

terparts is to barge into their country with a superior­ ity complex. Being loud, demanding, condescending, or inflexibly insisting on having things your way won't win you a good reception. Being polite, friendly and easygoing will. Even if you spend 20 years in Mexico, you still might not understand some aspects of the culture; fighting practices that don't make sense to you won't change anything.

Take the attitude that you've come to learn from Mexicans, not criticize them. By keeping an open mind, you will encourage Mexicans to show you their best qualities: enthusiasm, warmth, hos­ pitality and loyalty.

5. Be patient. In most situations, losing your patience will be

seen as losing your self-control. Expect delays to occur. If they don't, you will be pleasantly surprised.

Be careful not to convey impatience to your

---

48 Passport MEXICO

Mexican counterparts through words or body lan­ guage (sighs, hands on hips, looking at your watch), by interrupting or abruptly changing the subject. Such behavior will only work to your dis­ ad vantage. Relax. Exercise calmness and tact. Adopt the Mexican outlook that there is always time for humor, the unexpected, and to enjoy life.

6. Be polite. You may never have the elegant manners that

seem to come naturally to Mexicans, both young and old. And don't worry about what might be the "proper" behavior in any given situation. Rathe� concentrate on being considerate toward others.

Use proper greetings and say "please" and "thank you." Avoid being abrupt, pushy or emphatically declaring "No," "I don't like that," or "I disagree." Above all, don't criticize or embarrass anyone publicly.

7. Show and command respect. Respect is essential, particularly toward those

in high positions. Call them by their titles. Thank and praise them when appropriate, without being obsequious, and they will respond in kind.

Keep in mind that foreigners will be evaluated not only by their manners but by their status and certain outward displays. Though it's not a good idea to brag about your accomplishments, let it be known if you are the head of your company or that you've earned a graduate degree. Providing favors useful to your counterparts can help you gain their loyalty and respect.

Being well dressed and neatly groomed are very important. Inappropriately casual dress may be construed as a sign of disrespect. Staying at a top-notch hotel will impress your Mexican counter­ parts, as will offering your guests a choice of upscale restaurants. But don't be ostentatious; it

Strategies for Success 49

may be construed as flaunting your wealth, a sign of bad manners.

8. Accept social invitations. If a Mexican invites you to his home, you have

broken through formal barriers and are being hon­ ored with his trust. He is saying mi casa es su casa

(my home is your home). Refusing such an invita­ tion will be interpreted as a slap in the face. Show your thanks by bringing a gift and extending a reciprocal invitation.

9. Make "win-win" propositions. Remember, Mexican businessmen will suspect

non-Mexicans of wanting to take advantage, with­ out showing any loyalty to Mexico or its people. Whatever your business, present it as a "win-win" proposition that will benefit both sides. The best way for it to be believed as such is for it to be so.

10. Seek advice and help from people who know Mexico and Mexicans. Making contacts, finding out more about

potential associates, strengthening relationships, negotiating successfully, dealing with bureaucra­ cies, managing a business from day to day, and maintaining good relations with workers all require understanding of the differences between how things work in your country and how they work in Mexico. Each step of the way, identify and talk to experienced people who can help you understand the Mexicans and help you operate successfully. Many foreign companies have found using Mexi­ can managers, accountants and other personnel to be the best approach.

Gift Giving

In Mexican business, gift giving plays a less critical role than in some cultures. A gift given pre-

--

50 Passport MEXICO

maturely may be viewed as an inappropriate attempt to short-circuit the elaborate courtship cus­ tomary among potential associates. On the other hand, once you have forged a personal relationship, gifts can help reinforce it. If you give a personalized gift- one chosen based on your knowledge of the recipient's interests and tastes - your counterpart will recognize the thoughtfulness behind it. But be sure not to go overboard. Expensive items are fit­ ting only for senior-level associates who have been instrumental to the success of a venture. Overdoing it may be taken as gauche or even insulting. And it may make the person feel compelled to reciprocate in kind.

Imported items such as scotch, brandy, cognac, foreign wine, cigarettes, and cheeses are appropri­ ate gifts, so long as they are presented as novelties and not as superior to Mexican products. Electronic gadgets, pen and pencil sets, and lighters with your company's logo on it are other options. Toys for your counterpart's children are a welcome gesture. Likewise a scarf or perfume for secretarial person­ nel ("my wife sent this to you").

If you are invited to a Mexican home, gift giv­ ing is not strictly de rigueur, but your hosts will take kindly to a token of your appreciation. A bottle of hard liquor or wine, flowers, a plant, a cake, pastries, coffee table art books, crafts or another unusual item from your country, candy, or toys for the children are possibilities. Be aware that giving personal gifts to your associate' s spouse may be misunderstood.

Wrap gifts simply. If you are given a gift and urged to open it in front of the giver, don't tear it open greedily.

@)...___Tim_e _ Mexicans are not as likely as people north of

the border to "race against time" (their driving style notwithstanding), or to speak of "losing" or "wasting" time. They rarely cut short a social con­ versation because of an impending obligation. Peo­ ple take precedence over schedules. Mexicans are more likely to sacrifice a business opportunity than to lose a friend. And relationships are more impor­ tant than the amount of time they take to develop.

Mexico's information infrastructure, lacking by First World standards, affects the pace at which things get done. Although improving at a dramatic pace, telecommunications can be difficult. Many of the smallest businesses and some private homes don't have telephones. The railway system is slow and under constant renovation. And although the highway network is expanding, some major roads remain in poor condition.

Appointments

Appointment times are somewhat fluid. In business, arriving a few minutes or even half an hour later than scheduled is considered perfectly

52 Passport MEXICO

acceptable. High-placed Mexicans may schedule more than one meeting at the same time, counting on some people to come late or not at all. (If some­ one has to wait, it reinforces the importance of the person being waited for.)

Schedule meetings between 10 A.M. and 1 P.M. or between 4 P.M. and 6 P.M. - hours when your coun­ terpart is most likely to be in his office. Arrive promptly, but expect to wait for 30 minutes or more. Such delays are seldom intentional; bring a book or some work to keep yourself occupied.

If you are travelling by car to a destination in Mexico City, the chances are that you may not arrive on time for some appointments. You might offend someone but probably won't. Just apologize and say something came up (alga sucedi6).

Social occasions may not begin until an hour after the designated time. Don't embarrass your host (who may not be ready) and yourself by arriv­ ing early.

Deadlines

Be aware that when Mexicans promise that a job will be ready by the time or date you request, there's a good chance they' re saying so primarily to please (and not disappoint) you. Foreigners should take such an assurance as a "projection" rather than as a rigid commitment and plan accordingly.

Untimely delays are most prevalent in rural areas, public sector enterprises, and when dealing with excruciatingly slow-paced bureaucracies. For­ eigners who need government forms and approvals should consider using a local Mexican intermediary or attorney who is familiar with procedures and personalities and has the palancas necessary to expedite such tasks.

�----B_us_in_e_ss_M_e_e _tin_g_s __

Preparation

Schedule the meeting about two weeks in advance, by fax or telephone. (Avoid the postal ser­ vice. It can take three weeks for a letter to get from the U.S. to a big city in Mexico.) Let your counter­ part choose the time and place. Confirm the appointment shortly before your departure for Mexico or soon after you arrive.

In advance, fax specific information on the nature of your business, how it might benefit the Mexican company, your position in your company, perhaps something about your prior experience and education, and the names and roles of others who will accompany you. You might also send bro­ chures or other printed material on your company via a courier service.

The Meeting

Your initial meeting may occur in your coun­ terpart's place of business. It will begin with hand­ shakes and introductions; coffee and a snack may be served. Accept whatever is offered and at least make a pretense of tasting it. In some larger, big-

-- � � � _ __ __________________ ___...._ _________________________ _

--

54 Passport MEXICO

city corporations, this home-style, non-optional hospitality is disappearing.

Let your counterpart direct the course of the conversation. You will likely be asked how long you have been in Mexico and what you have done so far. This is an opportunity to show your interest in Mexi­ can culture as well as business. When you present your business, keep it general: what you are inter­ ested in doing and its potential mutual benefits. The calmer you are, the better the Mexicans will receive you. Don't speed things up by going into much ini­ tial detail. If what you are proposing seems mutually beneficial and the personalities involved are compat­ ible, the specifics will follow at a later date.

You may receive a charmingly friendly (though formal) reception. If your host seems vague and indirect, he's probably sizing you up and trying to decipher your intentions. Don't worry. Use this opportunity to observe what you can about the people and company you are dealing with, and try to determine who has the most influence and 'deci­ sion-making power.

Avoid getting impatient with small talk or annoyed by interruptions. If you are part of a team, save comments among yourselves for after you've left your counterparts' presence. Mexicans find pri­ vate asides disrespectful and rude.

Executive Meals

Many initial business contacts occur in restau­ rants and bars. These are relaxed events, more social than business-oriented, though spouses are not generally invited. Substantive business matters should not be brought up unless your Mexican host introduces the topic.

Appropriate topics of discussion include gen­ eral business and economic issues, world news,

Business Meetings 55

sports, and family and mutual acquaintances. Catty gossip is considered in bad taste, as is talk about money at this early stage. Avoid sensitive issues like politics, religion, corruption or U.S.-Mexican rela­ tions. Don't display bad taste by repeating former U.S. President Carter's infamous public comment about his bout with "Montezuma's Revenge" (dys­ entery) at a Mexican state dinner.

Breakfast meetings usually take place in a U.S.­ style coffee shop. Though considered more intimate than lunch meetings, they are sometimes reserved for matters of lesser importance.

Lunch meetings are often used to strengthen personal bonds and business ties, to finalize deals, or to celebrate an agreement. Lunch is the main meal of the day and usually begins in mid-after­ noon. Be prepared for it to last two hours or so.

Evening business meals are less common and usually connote a more personal contact. Such events seldom begin before 9 P.M. and can some­ times last until the early hours of morning.

� Negotiating with the Mexicans \__J L/

Preparation

Before the formal meeting, give your Mexican counterparts a detailed written explanation of the issues to be discussed. Include a list of who will be attending, along with their titles and responsibilities, and ask the Mexicans to respond in kind. State the format you wish to follow and ask if they have any objections.

It's crucial to clarify in advance the issue of authority. Get a clear idea of the discretionary power of those with whom you will be negotiating. Be certain that you are dealing with people who have decision-making authority. At the very least, know which Mexican team member will communi­ cate with the top and how quickly approval can be obtained.

Formulating an Approach

A positional bargaining approach is not usu­ ally the most effective method of negotiating in Mexico, for several reasons:

• Your counterparts have carefully assessed your character and interests before deciding to enter into negotiations.

Negotiating with the Mexicans 57

•

•

Using your company's superior size and finan­ cial strength to pressure the other side into accepting an agreement on your terms may backfire, causing them to withdraw from the negotiations or to not perform according to the contract's terms.

Taking an uncompromising approach without paying attention to the personal aspects of the transaction is unwise. If the Mexicans don't accept you as a person, they will feel no obliga­ tion to treat you fairly.

Formulate a "win-win" approach that satisfies both sides' interests and demonstrates your good­ will throughout the negotiating process.

Beginning the Meeting

Negotiations are likely to be held at a hotel, conference center, or meeting room near the Mexi­ can place of business. If you have a preference for a particular place, it's acceptable to ask your counter­ parts to arrange to meet there.

Mexican subordinates usually arrive early to attend to seating arrangements and other details. A higher status executive arrives later, accompanied by a personal secretary, interpreter and perhaps a bodyguard. He may have others in his entourage, though it's considered bad form to pack the room with non-essential retainers. This grand entrance makes it clear who the power broker is.

The first few minutes are devoted to pleasantries, with senior people taking the lead. Efforts to immedi­ ately tackle the business at hand will be construed as rushed, rude and suspicious. Remember that Mexi­ cans see impatience as one of the main failings of non­ Mexicans. pasing into substantive issues gives both sides time to feel comfortable with each other.

58 Passport MEXICO

The Negotiation

The head of the host side usually opens the meet­ ing with formal welcoming remarks. He then turns the floor over to the head of the guest delegation. The visitors' team leader should begin by reiterating the previously agreed-upon agenda and structure of the meeting. Distributing an outline or using an overhead transparency can clarify issues to be covered. The Mexican team will respond item by item.

From this point on, the negotiations take on a life of their own. It is up to each side to stay focused and address each issue thoroughly. But be flexible. Don't insist on sticking adamantly to the agenda if all the relevant points are being covered. Remem­ ber that decisions in Mexico are based as much or more on context and personal chemistry as on con­ tent. And expect your counterparts to bargain (regatear). Mexicans are apt to see those who don't play the give-and-take game as naive and lacking in social skills.

Don't let the interaction turn into a confronta­ tion. Keep lines of escape open. If it becomes appar­ ent that agreement cannot be reached on key issues, the talks should be permitted to fade away quietly rather than end on a note of dramatic conflict. This allows everyone to save face and preserves the pos­ sibility of future talks.

Top Six Mexican Tactics

1. Deference to principal negotiator and close team unity, making it impossible to exploit dif­ ferences among team members. Participation by other team members is often limited to nar­ row technical issues.

2. Emphasis on people skills make negotiators very experienced and persuasive.

Negotiating with the Mexicans 59

3. Attempts to play on friendship to obtain con­ cessions.

4. Pressure exerted according to assessment of how badly the other side wants the agreement.

5. Exploiting outsiders' sense of impatience, urgency.

6. Use of temper to soften counterparts up.

Tips for Foreign Negotiators

• Be thoroughly prepared. Interview other busi­ nesspeople who have dealt with your counter­ parts. Study existing contracts they have entered into and know the professional history of their personnel.

• Ask yourself, "If I were representing their team, what would I ask for? What would be a fair agreement?" Use this perspective to make a list of possible positions the other side may take and to develop alternatives before coming to the negotiating table.

• Develop a best-alternative position but don't let your counterparts know what it is. If neces­ sary, use it as a bargaining tool.

• Use objective criteria when formulating your proposal. Citing independent market studies, government price indexes and other impartial measures will make it difficult for the other side to contest your position on emotional or anecdotal grounds.

• Remain calm no matter what happens. Compo­ sure and self-control will work in your favor.

• Emphasize the shared benefits of the proposed venture. Reassure the Mexican team that you are thinking long-term and want to satisfy mutual concerns.

60 Passport MEXICO

• Play your cards one at a time, not all at once. This fits well with the Mexican viewpoint of negotiation as a social transaction. It also avoids a take-it-or-leave-it approach, which is likely to be constructed as demanding, insult­ ing, and not "playing the game."

• Listen carefully and take detailed notes. To dis­ pel confusion and misunderstanding, repeat important points and ask for clarification.

• Don't force yes-no declarations. Questions that may require a negative response clash with the Mexican cultural tendency to answer "yes," "maybe" or "we'll see" out of politeness. Phrase questions that allow your counterparts to indicate a tendency rather than a direct answer. Follow up by eliciting additional infor­ mation to help you determine how strong that tendency is.

• Be slow and methodical. Impatience is a weak­ ness the Mexicans can exploit. You might sug­ gest a willingness to postpone your return home or make a second trip if differences can­ not be settled this time.

• Saying the least can get you the most. Sitting quietly for what seems like an eternity gives the appearance of serious pondering and avoids hasty responses. Your silence may result in the other side coming out with additional information or concessions.

• Build in contingent agreements detailing pen­ alties for non-performance. If the Mexican team objects, tell them that you do not doubt their goodwill and that such addenda are mere formalities demanded by your lawyers.

• Allow yourself the freedom to walk out if you feel you aren't getting what you need. Bad

Negotiating with the Mexicans 61

business is worse than no business. One observer estimates that every one-on-one con­ tact you have influences 30 or 40 of that busi­ nessperson' s socios (associates).

Interpreters

Those who have to speak a foreign language during high-stakes negotiations are at a disadvan­ tage. The members of most large Mexican firms are proficient in English. However, unless your team includes someone who communicates fluently in Mexic�n Spanish, you may need to employ the ser­ vices of a competent interpreter. Don't depend on the person who interprets for the other side. Though that person probably won't try to mislead you, he or she may miss the nuances of your language.

Tips on Using Interpreters

1. Establish guidelines. Before a meeting, plan the mechanics of how

you will work together, such as how long you should speak before pausing for interpretation. Go over any specialized vocabulary, brief him thor­ oughly, and allow time for him to become familiar with your style, humor and body language, so that he can accurately convey your messages.

2. Address your Mexican counterpart. Speak to the head of the Mexican team, not to

the interpreter. Mexicans value personal communi­ cation. But be careful not to "talk down" or speak more loudly than necessary, and avoid using idi­ omatic expressions and slang.

3. Don't exhaust your interpreter. Stop every couple of sentences to allow for

interpretation, and try to limit each sentence to one main point. Interpreters need to rest at least every

62 Passport MEXICO

two hours. Be aware that using an interpreter can stretch a meeting to three times its normal length.

4. Emphasize important points as they arise. Abstract and complicated discussion is seldom

directly translatable. You can help ensure that important points get across by repeating or empha­ sizing them and by making certain that your verbal and non-verbal (body language) messages are con­ sistent with each other.

5. Review what's been said and anticipate what's coming. After a meeting or during breaks, review with

your interpreter the main points that both sides have made. Ask what he or she observed about the other side's position or behavior. Try to get a feel for the direction in which negotiations are headed, and anticipate what will need to be said later on.

Contracts, Mexican-style

Be aware that a difference may exist between what seems to be an honest verbal or written prom­ ise and the actual intention or ability of the con­ tracting party to perform. For example, your Mexican counterpart may consider time commit­ ments as more flexible than you do.

Mexicans tend to enjoy developing projects, but they often have less interest in the detail work needed to implement and administer them. The lack of delegated authority and the shortage of sophisticated management tools can lead to frustra­ tion, apathy and unmet goals.

When entering into a cooperative venture, for­ eign businesspeople might suggest there be built-in bilateral cooperation between mid-level managers and technicians. If the suggestion is made tactfully, foreign managers may be able to monitor progress

Negotiating with the Mexicans 63

and influence outcomes. Another strategy would be to build rigorous progress reporting into the agree­ ment.

Be aware that Mexico has only recently begun to institute the rule of law in business; many execu­ tives still view written contracts as of secondary importance to personal commitments between associates. Consult with a local attorney about the legally binding nature and enforceability of any written or verbal agreements you make. Also be aware that judicial relief is extremely time-consum­ ing, costly and uncertain - reason enough to work out potential conflicts ahead of time.

Keep in mind that, from a Mexican perspective, coming to an agreement with you makes you part of their close, personal network of business associ­ ates. It's crucial that you be comfortable with both the benefits and responsibilities of this network.

® Business Outside the Law

Evading the Tax Man

Government surveys suggest that up to 40 per­ cent of the work force may make their living through employment outside the tax system. If taken into account, this informal economy would add 25 to 40 percent to the GNP.

Perhaps the most visible of these "un-taxed" activities are los tianguis (street markets), which sell everything from fresh produce to fayuca (contra­ band). (It's estimated that in recent years, U.S. film, music and software industries have lost $485 mil­ lion annually to Mexican pirates, thus violating NAFTA's tough copyright standards.) Millions of other Mexicans work as "paid under the table" housekeepers and gardeners, sell door to door, set up taco stands each evening, convert their drive­ ways into diners, wash windshields at intersec­ tions, and sing on buses and in cantinas.

Such tactics are considered survival strategies; the government estimates that 80 percent of the about one million Mexicans who enter the job mar­ ket each year will be unable to find employment in the formal economy. Then too, legitimate busi­ nesses avoid paying taxes (and abiding by labor

Business Outside the Law 65

laws) by underreporting sales and hiring undocu­ mented workers.

Graft and Corruption

It's not uncommon for a driver to slip a few pesos to a traffic cop to avoid having his or her license confiscated; the option is to have to wait in line to pay a similar or higher fee to the local motor vehicle office. Though many Mexicans detest the mordida custom, and though the government vows to end it, it is still more the rule than the exception. Those who accept (and even request) bribes con­ sider them a necessary evil, given the generally low state of Mexican salaries.

Entrepreneurs sometimes resort to giving a bureaucrat money or a gift in order to cut through the red tape involved in opening a new business, winning a contract, or slipping past building codes, environmental regulations and tax auditors. Mexi­ can presidents, governors, mayors and others with access to public funds have long participated in large-scale graft, and many have left office rich men.

In general, Mexicans consider politicians and police to be venal and untrustworthy and los judi­ ciales ( equivalent to the FBI in the U.S.) to be partic­ ularly corrupt, if not dangerous. It's well known that many judiciales are in the employ of drug lords, and rumors about ties between high-level politi­ cians and drug traffickers are often in the news.

Songs of Drugs & Heroes

Drug smuggling in northern Mexico ( cocaine, heroin and marijuana) is so lucrative that it has inspired its own music, the narco corrido. These bal­ lads, which romanticize the exploits of men on the wrong side of the law, are sold as cassettes but can

66 Passport MEXICO

also be heard on local radio stations. Not only has drug money improved any number of local econo­ mies, but some drug lords have endowed their home­ towns with hospitals and schools. The rags-to-riches success of those in the trade is a popular narco corrido theme. One tune tells the true story of El Guero Palma, a drug honcho who was captured by the police after his Lear jet crashed. The song begins with Palma telling his pilot to be brave as the plane goes down and ends with a warning that Palma' s jail days may soon be over. "Don't feel smug, senor ... Your pil­ lows just might explode. For the king lives on."

Art Fakes

Phony pre-Hispanic ceramics - statuary, masks, bowls and the like, supposedly fashioned by ancient Aztecs, Mayans and others - have long been a source of revenue. While some pieces are crude, others are convincing enough to fool even sophisticated collectors. Brigido Lara, a contempo­ rary Mexican art forger (and now a professional fake buster) was single-handedly responsible for creating almost an entire civilization's worth of objects from the Veracruz classical period.

Present Changes and Future Outlook

Crackdowns typically come at the beginning of new administrations, with "a big fish" singled out as an exampl. But no one really believes that a sig­ nificant anti-crime campaign is under way; most see Mexico's autocratic political system and its eco­ nomic corruption as inseparable. The fact that PAN (Partido de Acci6n Nacional), an opposition party, has won four state (and numerous local) governorships in recent years represents an undeniable crack in the PRI' s 70-year monopoly of power.

�1(,......_N_am_ e_s_&_G_r_ee _ti ......: ng

::.... s __

Mexicans sometimes have two surnames and always have two given names. In the case of Juan Manuel Anaya Zamora, for example, Juan and Manuel are both given names. The surname Anaya comes from his father. Zamora is his mother's maiden name.

When a woman marries, she replaces her mother 's last name with her husband's. So when Isabel Vasquez Fernandez marries Jorge Del Valle, she becomes Isabel Vasquez de Del Valle; "de" stands for "wife of." Their children's surnames will be Del Valle Vasquez.

Forms of Address

. Mexicans introduce themselves using their

given name and either one or both surnames (and may add para servirle or d sus ordenes, meaning "at your service"). When addressing someone formally,

they use only the other party's first surname: for example, Buenos dias, Senor Anaya, or Buenas tardes, Senora V dsquez.

If you' re not sure how to pronounce someone's name, don't hesitate to ask, and don't make the

....____

68 Passport MEXICO

mistake of addressing or referring to someone by their second surname. For correspondence or on legal documents, use the person's entire name.

Spanish contains formal (usted) and familiar (tu) forms of address, and each employs different verb forms. The formal mode is appropriate when subordinates address superiors, when people speak to strangers or to their elders, and for men and women who don't know each other well. People of equal professional and social standing, as well as family members, generally address each other with familiar forms.

Common Mexican Business Titles

In both business and government, Licenciado is a catch-all title that acknowledges a person's quali­ fications. Technically, it refers to someone who holds a university degree, but there may be more licenciados in Mexico than university graduates. Other titles appropriate to a person's profession include Doctor, Ingeniero, Arquitecto and Profesor. Female forms have an "a" at the end: for example, Doctora, Arquitecta or Licenciada.

Note: Conventional practice is to address all female office personnel (other than executives), shop workers and waitresses as Senorita, regardless of their age or marital status.

Other titles include gerente (manager), subger­ ente (assistant manager), director de mercadotecnia (marketing director), jefe de ventas (sales manager), agente de ventas (salesperson), contador (accountant) and abogado (attorney).

Greetings

A normal greeting when dealing with someone of equal status in a business setting includes a

Names & Greetings 69

handshake and a friendly smile. If this is a first meeting, hand out business cards, preferably printed in both your language and Spanish. In a social event at someone's home or in a restaurant, take the time to individually greet each person, even if this means shaking 25 or 30 hands.

If a Mexican business associate greets you or says good-bye with an abrazo (hug) - by grabbing your arm or putting his arm around your shoulder and punctuating it with a couple of claps on the back - it's a signal that you've begun to gain his trust. Don't insult him by shying away from such contact.

In addition to shaking hands, women often make cheek-to-cheek contact and sometimes kiss an established acquaintance of either sex on the cheek, even in a business setting. Non-Mexican businesspeople should accept and return such a greeting.

Farewells

Mexican good-byes involve the same hand­ shakes, abrazos and/ or kisses, but they may be more drawn out. At a social event, a good-bye that begins in the living room may continue as the host or hosts accompany the guests outside and to their automobiles. Half an hour later, they may still be chatting. The farewells will be repeated before the guests get into their cars and will involve such part­ ing phrases as que te vaya bien (I hope things go well for you), hasta luego (see you later) or nos hablamos (we'll talk). Buenas noches is both a greeting and a good-bye. As a foreigner, do not gloss over these pleasantries when taking your leave.

�,....._c_o _m _ m_u_n _ic_a_tio_ n_S_ t_yl_es __

In Mexico, much interpersonal communication takes place below the surface. While words them­ selves are important, the implicit attitudes behind them are even more so. The following are common traits of the Mexican communication style: • A great deal of polite, even obsequious, formal­

ity is employed at the outset of interactions to acknowledge unequal status (such as subordi­ nate-superior or client-patron), communicate respect, and also to keep others at a distance.

• In business communication among equals, the formality is relaxed once the appropriate mutual respect has been shown and the relationship has progressed to a more personal level.

• Mexicans strive to hide negative feelings and avoid direct confrontation.

• Words are often chosen for the sake of politeness and a desire to not offend, rather than in the interest of clear communication. Generally, Mex­ icans find it preferable to say "yes," "maybe" or "we'll see," even if they mean "no."

• Mexicans tend to analyze someone else's words carefully, looking for why they were said and what was really meant.

Communication Styles 71

Ten Golden Rules

The following will help you become more aware of how your body language and emotions may be interpreted in Mexico.

1. Don't avoid body contact or eye contact. Foreign men not used to conversing in close

proximity or being touched or hugged by other men may feel uncomfortable with these customs. But once you've begun to develop a personal rela­ tionship, "keeping your distance" may be inter­ preted as unfriendliness. Learn to accept these Mexican traditions in order to avoid sending the wrong message. Likewise, shying away from eye contact, whether in a social or business context, may be construed as suspicious behavior.

2. Don't show impatience. Repeatedly glancing at your watch, putting

your hands on your hips or other physical signs of impatience may alienate your Mexican counter­ parts. They may assume that you consider it more important to keep to your schedule or get things done efficiently than to interact with them.

3. Speak softly. Keeping the volume and tone of your voice

under control are reflections of both personal dig­ nity and good manners. And they will help contra­ dict the "ugly American" stereotype (regardless of your nationality). Don't speak too softly, however; whispering in front of others is considered rude.

4. Be aware of your posture. Slouching, leaning against walls, leaning back in

your chair and other relaxed postures may be con­ strued as sloppiness or a lack of concern for how others perceive you. Be especially careful to avoid standing with your hands on your hips, which may be inter­ preted as an aggressive or challenging posture.

72

5. Let your host take the lead.

Passport MEXICO

Allow your Mexican host or hosts to set the tone, content and pace of interactions. Observe and follow what seems to be appropriate behavior in a given circumstance.

6. Listen more - talk less. Listen patiently and let people finish talking

before you speak. If you don't understand what has been said, ask for it to be clarified.

7. Be tactful. Except among family members, Mexicans rarely

directly express disagreement or negative senti­ ments. Find an indirect, diplomatic way to express disagreement or dislike. If it's necessary to convey displeasure to someone, do so gently and in private.

8. Stay calm at all costs. Mexicans are adept at displaying calm and

diplomacy under pressure. If you feel frustration or anger rising within you, suppress it. Always seek an amicable way to soften or avoid open conflict.

9. Don't insult people. Mexicans are highly sensitive to perceived dis­

respect. Don't give them reason to feel suspicious or hostile toward you. If you are unhappy about some aspect of their behavior, find a way to tact­ fully appeal to them for what you want without being demanding or sarcastic.

10. Keep your dignity. Overly informal behavior may be seen as

undignified for someone in a position to command respect. Maintain a balance between warm commu­ nication and mutual respect, between friendliness and dignity.

'i , I

' i

@,..__ __ c_u_st_om_s ___

Fairs and Festivals

Mexico is a land of colorful street markets and a wide variety of festivals. El Festival Cervantino,

named after Miguel de Cervantes (the 16th century author of the novel Don Quixote), draws an interna­ tional gathering of theater groups, musicians, art­ ists and craftspeople every autumn. Carnaval fills the streets of Veracruz, Mazatlan and other cities with parades, singing and dancing each February.

El Dia de Los Muertos (Day of the Dead) blends the indigenous tradition of honoring the dead with the Catholic All Souls Day. On November 2nd, fam­ ily members set up altars of marigolds, candles and food offerings in memory of deceased relatives, school groups build altars to honor cultural and historical figures, and cemeteries become picnic grounds for the day.

Each city, town and village has a festival dedi­ cated to the local patron saint, replete with proces­ sions, fireworks and street vendors selling everything under the sun. During the Day of the Virgin of Zapopan, over a million faithful form a four-mile procession from Guadalajara's cathedral to the basilica in Zapopan. Some pilgrims ride in

28 Passport RUSSIA

mink, fox, reindeer, squirrel), strategic metals and timber. The average Siberian worker produces 58 percent more than the average Russian on the "mainland," and his wages are higher by 30 percent.

But many consider Siberia to be a hellhole. Though much of its four million square miles remains unaffected by human activity, inhabitants of the largest industrial centers - Angarsk, Bratsk, Kemerovo, Krasnoyarsk, Novokuznetsk and Norilsk - live in an ecological nightmare. The air, the water and the soil are all heavily polluted because of 1950s technology and a dearth of pollu­ tion-control programs.

The CIS

Created in 1991 and comprised of newly inde­ pendent countries that once belonged to the Soviet Union, the 12-member Commonwealth of Indepen­ dent States (CIS) was envisaged by Moscow as a tightly woven confederation controlled by Russia. But it failed successively as a military union, a cur­ rency union and as an economic one, with all of the former Soviet republics (with the exception of Belarus) running as fast and as far away as possible.

While CIS members continue to trade heavily with Moscow (mostly for geographic reasons), all are pursuing their own interests - with the Ukraine looking more to the West and Europe than to Russia, and the Muslim republics in the south seeking allies in the Middle East and Turkey. They do get together to talk, but it's usually to do a bit of Russia-bashing. At the same time, they remain wary of Russia's expansionist bent and its capacity for military coer­ cion. In April 1997, for example, Azerbaijan discov­ ered that its neighbor, Armenia, had received an unauthorized US$1 billion worth of arms from the Russian army.

. Government & Business ic;-1�/r_>· ,.1.....-------------

The Great Russian Sell-Off

Prior to 1991, the government owned every­ thing from giant arms factories to retail stores. Today, the sale (some would say give-away) of the century is almost over; more than 120,000 formerly state-owned enterprises have been privatized, including 75 percent of the country's factories and 85 percent of its wholesale and retail trade. (It was, claims The Economist, "a ferocious, unregulated affair in which bombs, shotguns and even toxin on teacups seem to have played as big a part as bids, offers and due-diligence searches.") In the process, both new millionaires and a new poverty class were created.

Those whom the government still employs it can't pay; it's in arrears for salaries, wages and pen­ sion payments to between 65 and 75 million work­ ers. The Moscow city government was so strapped for cash that it decided to rent out advertising space to private companies on Red Square for May Day celebrations - a move that surely had Lenin turning over in his mausoleum, just across the cobblestones

30 Passport RUSSIA

from ads for fax machines and stereos. (The most important Soviet holiday after November Revolu­ tion, May Day- the international day of the worker - was really an anti-capitalist celebration.)

Old Communists, New Wealth

Russia is a prime example of the French adage, "The more things change, the more they stay the same." While Russia is full of very young, newly rich entrepreneurs, it also has a huge share of old Communists who cashed in, at rock-bottom prices, on connections and contacts during the aforemen­ tioned privatization.

Explains one American sales representative who frequents Moscow: "The new guys get all the ink, but I'll tell you the folks who made a killing are the old Commies who had at least half a brain. These guys bought the factories they were running for a few rubles and are making out like bandits."

Veksels: A Novel Approach to IOLJs

Russia is currently saddled with US$123 billion worth of unpaid, overdue bills, known here as vek­

sels. This has given birth to an unregulated and often informal $15 billion bond market. Some debts are redeemable for cash, others for commodities like tires, cement, electricity or natural gas. Accord­ ing to the New York Times, Russian banks and bro­ kerage companies are trading more than US$100 million worth of veksels every month, with prices posted on the Internet. The profits are said to be significantly higher than those earned by conven­ tional government bonds - in some cases, as high as 65 percent.

Government & Business 31

Taxing Times

Ask foreign businesspeople what their biggest headache is in the new Russia and the inevitable answer (after crime) is taxes. Though the top corpo­ rate rate is, on average, only 32 percent, it's not unknown for small businesses to be charged more than 100 percent of their profits. The tax laws are a Marx Brothers comedy (Groucho, Harpo and Zippo, not Karl); there are currently in excess of 1,000 different laws on the books. Some conflict, others seem to change daily. Many companies and individuals avoid paying taxes altogether, a poten­ tial revenue that may be equivalent to as much as 50 percent of Russia's gross domestic product.

"I could bring in two tax accountants and let them do the books, and I would get figures that wouldn't come close to matching," says one Euro­ pean business manager. "The tax you pay one month is gone, raised, lowered or superseded the next. They just don't get it yet. Even if I wanted to pay taxes, I couldn't get anyone to tell me what I owe."

Yet despite its desperate need for foreign investment, the government has increased trade bar­ riers by raising tariffs and slapping a 20 percent value-added tax on many imports. Such zigzagging is playing havoc with foreign investors eager to cash in on one of the last great untapped consumer frontiers. It's hoped that the government will ini­ tiate major tax reforms sooner rather than later.

Unofficial Taxes

While the government has dumped most of its assets (expect in the highly lucrative natural resources sector), government officials haven't quite relinquished themselves to the sidelines.

"Every time I turn around, there's a bureaucrat

32 Passport RUSSIA

at the door, saying this paper has expired or this law has changed and that I need a new permit," complains one American restaurant owner. "I can deal with the big issues, but the day-to-day reality is that these government guys have their hands out all the time - and for big money."

The biggest barrier to commerce is the lack of enforceable business laws. Deals rely on hand­ shakes and sometimes on the threat of retaliation, but there's no legal recourse. Adds the restaurant owner, "This is high risk, high reward. The people who do well here have a real gunslinger mentality."

Trouble Ahead?

Few would argue that Russia might reverse its present course toward a market economy. Among other encouraging signs: • Inflation has dropped from an astronomical

2,505 percent in 1992 to 15 percent in 1997 • The Russian stock market, while highly vola­

tile, has achieved some remarkable returns in the 1990s

• One in two Russian families own their own home (part of the privatization "give away"), and 62 percent own land (forbidden under Soviet law and still an issue). But unreformed Communists (who still hold

the largest single bloc in the Duma, the lower house of parliament) have made enough noise to worry some foreign investors. "Could they turn this thing around and stop it?" asks one American company officer. "No, not now. They could make things rougher than they are, but the train has left the sta­ tion - and it isn't coming back."

<� _____ ,\.,.-__ c\) --- s Qi )-_!he Work Environment

The Work Ethic: ls There One?

Because Russians have been living under authoritarian and autocratic rule for more than a millennium, they have no institutional memory of free markets (unlike other recently "freed" Com­ munist nations like Poland, Hungary and East Ger­ many). Communism crushed private initiative and incentive; the social contract between the Soviet state and its workers was, "I pretend to work and you pretend to pay me." The value (or, perhaps more accurately, the rewards) of hard work was rel­ atively unknown here until very recently.

Deadlines were unimportant (and mostly unenforceable) and the pace of work was uneven at best - weeks of inactivity followed by a frenzied week of meeting quotas and targets. Everyone was employed by the state or a state enterprise, and Russians would boast how they could go for days without actually putting in an appearance. They simply left their jackets draped over their chairs and teacups on their desks to make it look like they were somewhere in the building. The Russian verb

_ _.J

34 Passport RUSSIA

sidyet (to sit) was sometimes used to describe the perfect job in the Soviet bureaucracy. Those days are, of course, history.

Experience May Work Against You

So ingrained was the superior, uncaring atti­ tude in the retail and service sectors that when large foreign hotel chains began opening their doors in Moscow, those seeking employment who had had previous experience in the industry under Soviet rule were automatically disqualified.

"Soviet hotels were like a cross between a prison and a strict private school dormitory," recalls a European who travels frequently to Rus­ sia. "These scowly faced babushkas [old women] would roam the halls, putting their noses in every­ one's business. [Known as the dejurynayia, these ter­ rors of the tourist were assigned to report on every foreigner's activities.] It was like coming home to mother. Nowadays, the better hotels are like any others you'll find in Europe. The staff are helpful, pleasant and hard working. They're also young."

Not So Different, After All

With most of the economy now privatized, Russia has a basic mix of every business type, from small, family-run units and street peddlers to mid­ sized professional firms and massive "private enterprises" (formerly state-run behemoths, mostly in heavy manufacturing). In the latter case, many "old style" factory managers have shown them­ selves to be out of their depth in the new market economy. The smaller and newer the firm, the more likely that it's being run by "new" (if somewhat inexperienced) management.

The Work Environment 35

"A few years ago, Russians would tell me that this country is unique and that it would never be able to conduct business the way it's done in the rest of the world," recalls an American corporate consultant who has been working with Russian businesses for years. "They would say, 'Russia has its own pace and way of doing things.' But guess what? They're finally coming to the conclusion that if the laws of gravity apply universally, so do the basic laws of Capitalism and market economies. Business structures here are beginning to look more and more like they do anywhere else in the world."

While more and more Russians are developing work habits similar to those of their American and European counterparts, it's still rare to find Rus­ sians who start their work day before 9 A.M. or end after 6 P.M., and more often than not, lunch lasts a couple of hours.

Status in the Workplace

The rigidity of the Communist-era workplace has given way to more flexibility, though many Russians remain reluctant to seek out responsibility and contribute ideas. Nonetheless, many busi­ nesses are beginning to resemble meritocracies.

Many older Russians still associate making money in business with Soviet-era speculation and profiteering. To them, as well as to a large number of the now-dispossessed "intelligencia," business is dirty and without dignity.

More and more, status is being defined by an employee's or partner's ability to bring in new business and less and less by seniority or education (unless that education involved an overseas busi­ ness management school). Among lower level and emerging middle-class Russians, who you work for counts more than what you actually do. Employ-

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36 Passport RUSSIA

ment by a foreign company is considered highly prestigious. On a management level, the more for­ eign contacts a Russian has, the higher his or her status is likely to be.

Decision Making

Russia's old-command economy left decision making up to a small cadre of high-ranking indi­ viduals within each firm or ministry, and it was understood that decisions made in line with Party policy couldn't be wrong. Today, despite the changes, decision making remains an excruciat­ ingly slow process, as most major ones are made by committee and consensus. Responsibility has been slow to filter down to the rank and file, and besides, many employees simply don't want it.

Hamburger Flippers with M.D.s

With much goverrunent funding all but cut off and professions such as medicine and teaching of low status and pay, you're likely to find fairly high­ qualified academics, doctors and talented artists doing less-than-fulfilling work, especially in the big cities. A former engineering professor, for example, may be driving a taxi and selling imported kitchen­ ware on the side. When McDonald's opened its first restaurant here, on Pushkin Square in 1990, it received 27,000 applications for 600 hamburger­ flipper positions. Hundreds of the applications were from scientists and medical doctors.

Handling Russian Employees

Virtually every Russian who worked for a Soviet-owned enterprise was forced to be deceitful - covering up coworkers' absences and thefts.

The Work Environment 37

Today, Russian employees of foreign companies (especially lower-level clerical and blue collar workers) sometimes feel justified in "ripping off" their employers as a way of "beating the system."

Russians respect power and authority; it's important for foreign businesspeople to firmly establish their own ground rules for honesty and productivity. Don't be conned into doing things "the Russian way." Here are some tips: • Adopt a clear mission statement. Once given a

specific task or goal, many Russians will tackle it with bulldog determination. It's up to the employer to show the Russian employee how his role or task is connected to "the big picture" and the future success of the company.

• Involve employees in decision making. Be willing to delegate some authority. That way, employees will feel that they have a stake in the success of the company - something they've never had before.

• Reward initiative. If employees can see a tan­ gible reward for taking the initiative and are praised among colleagues for doing so, employers can wear down the fear of being innovative and outspoken in the workplace.

• Provide continual training. Regardless of a Russian employee's experience, provide on­ going training. It will improve productivity and help attract (and keep) the best and the brightest available.

<� Women in Business

�-- A dog is wiser than a woman. A dog never barks at

its master. - ancient Russian proverb

Second Class Citizens

Although the notion of gender equality, as guaranteed in the old Soviet constitution, was truly revolutionary, it never really manifested in daily life. Women weren't just allowed to work, they were required to, as "social parasites" faced impris­ onment. And though Russian women were given the right to vote in 1917 (three years before the 19th Amendment to the U.S. Constitution guaranteed universal suffrage in America), the value of the vote under Soviet rule was dubious.

Russia has always been, and still remains, a male­ dominated society, especially in the business world. Though well represented in certain professions ( there are more female than male doctors), women remain subservient. At home, women are expected to do it all - often working 40 hours a week in a factory or office, as well as spending an average of 40 hours on such domestic chores as shopping, cooking, house-

Women in Business 39

cleaning and laundry, not to mention the time spent caring for her children. By comparison, fathers spent five hours a week on such chores. Since the advent of Capitalism, the plight of the Russian woman has, in many cases, grown worse. For example: Under Soviet law, women were guaranteed 30 percent of the seats in local republic parliaments and city councils ( though only one woman ever sat on the Politburo). Today, female representation on local city councils is less than 10 percent.

More than 70 percent of those officially regis­ tered as unemployed are women, and according to the Women's Union of Russia (an umbrella group of some 110 women's organizations), almost half of them have university or technical institute degrees. Gone are the government-subsidized prices and childcare that once helped women (especially sin­ gle mothers) cope. In the new Russia, traditional career paths for women - access to the aforemen­ tioned degrees and to government-guaranteed employment - no longer exist. Today, even entry­ level jobs for women have strings attached.

The Secretary as Concubine

In Russia, women within the business environ­ ment are most frequently seen as lures for captur­ ing new clients or as concubines for management. Classified advertisements for secretaries openly seek women with such vital business attributes as "long legs," "under age 25," or "elegant appear­ ance" and are filled with code phrases such as "pre­ pared to do other duties related to client entertainment." But this should come as no sur­ prise in a country that once held televised vacuum cleaner races to celebrate International Women's Day - a day meant to honor the contribution of women to world culture.

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40 Passport RUSSIA

"Women over 40 have been thrown out of the workforce," observes one counselor at Moscow's Gender Center. "These new businessmen don't care about job performance. They're looking for orna­ ments."

The rule of thumb is fairly simple: if a manage­ ment job opens up, it's reserved for a man. First, because a man is by tradition the family breadwin­ ner and second because a woman's true place is believed to be in the home. As a general rule, when the employment situation becomes tight, female employees are let go, regardless of their qualifica­ tions or performance records.

Historical Conspiracy

It was war, rather than any philosophy of gen­ der equality, that brought Russian women into the workplace to begin with. In the early 1920s, women made up about 25 percent of the labor force, but by 1945, following devastating losses by the Red Army in World War II, Russian women comprised 56 per­ cent. However, the constitutionally mandated "equal pay for equal work" was a myth. The vast majority of women simply couldn't find "equal work." They were concentrated in three low-status, low-paying professions - teaching, medicine, and the light manufacturing sector (the latter a low pri­ ority in a system that virtually ignored consumer goods).

In the new Russia, male chauvinism continues to shut women out of any meaningful roles in busi­ ness. While several female entrepreneurs have cracked the male business fraternity, they're very much the exception to the rule. Most women with lower- to middle-level management positions work for foreign-owned companies .

Women in Business 41

Strategies For Foreign Businesswomen

Although Russian women in the business world aren't taken seriously, the same isn't true for foreign businesswomen. Russian males prefer doing business with other men, but they're worldly enough to appreciate that not all cultures concur.

Don't make the mistake of interpreting what Russian males view as common European courte­ sies - opening doors for women, complimenting their appearance, even paying their tab - as con­ descension. Like pubescent school boys, Russian males (especially those over the age of 40) will be on their best behavior when a lady is present. Those under the age of 35 are much more comfortable with the prospect of gender equality in the work­ place than their older counterparts.

A little harmless flirtation (if there is such a thing) can go a long way. Trying to be asexual will not get you very far very fast, nor will it earn you respect or help your business prospects.

One word of warning: Russians (both young and old) make lousy drunks. After a night of wel­ coming toasts, the level of sexual innuendo is likely to increase. Take any ensuing remarks in stride. If someone oversteps the mark, offer a stern but brief rebuff, but avoid a lecture on political correctness or U.S.-style feminism (it could be a deal killer). If worse comes to worse, make a polite excuse about being overly tired and leave the party. You won't be penalized the next day.

Relationships First

Business can be anything but impersonal in Russia. Russians are reluctant to deal with anyone they haven't met face-to-face, regardless of how many telephone calls you may have made or faxes and e-mails you've sent. The relatively slow pace of meetings, the mountains of small talk and the post­ meeting "booze-a-thons," while seeming unproduc­ tive on the surface, are all part of relationship build­ ing. Without a strong personal relationship, it's unlikely that a deal will stand the test of time or sur­ vive a better offer from another foreigner partner.

Russian businesspeople view contracts as dec­ larations of intent that may change as the situation changes, rather than as binding agreements. Since Russian business law contains few contract enforce­ ment mechanisms, most business is conducted on the strength of personal relationships. Your best defense - and strongest suit - is a solid personal friendship with your Russian counterpart.

Making Connections 43

A Local Partner Is Essential

It's virtually impossible to do business without a local Russian partner. Choose wisely; the wrong partner can doom an enterprise before it starts. Even if you have no plans to immediately manufac­ ture or distribute products in Russia, you'll still need a local partner/ facilitator to make introduc­ tions and set up contacts (and possibly to fend off mafia racketeers and protection scammers down the road). Be aware that a formal partnership agree­ ment may not be needed, since the quality of your informal personal relationship with your primary Russian contact is viewed as being more important than anything put in writing. You'll probably be faced with a choice between two types of Russian partners - the "old," people of more mature stat­ ure who earned their stripes under Communism and may have managed a small factory or govern­ ment ministry department; and the "new," younger entrepreneurs eager to make a few bucksi (Russian slang for money), no matter what it takes. Get refer­ ences and, if possible, do a background check on any potential partner.

Beware of Russians who promise that they can do anything or who claim to have high-level con­ tacts. As the Russian mafia continues to grow, crim­ inal elements are getting more and more involved in businesses, and they're hungry for "legitimate" foreign contacts. Also, beware the Russian partner who boasts of having a large cash reserve and is prepared to finance a deal or a business. The origin of the cash hoard should be thoroughly investi­ gated, for obvious reasons.

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44 Passport RUSSIA

Consulting: Big Business

Those with only a rudimentary knowledge of the Russian market shouldn't rely on local Russian consultants alone. Consider hiring both a local con­ sultant and one from your home country who has a track record of successful dealings with Russians (or a quality foreign firm that has a record of being able to deliver the goods). While the locals may "walk the walk and talk the talk," they probably don't have a full grasp of what a Western business person's needs are.

Written Introductions

Russians love official-looking paper. It gives a business deal an air of legitimacy in their minds. All correspondence should be in both your native tongue and in Russian. Don't expect any timely action to a written introduction that hasn't been accompanied by a face-to-face contact. In any writ­ ten introduction, try and give as much detail about your company and its key players as possible. Rus­ sians are impressed by brand names and firms that have dealings with global powerhouses. They're also impressed by education. Mention any higher degrees that company officers have earned, espe­ cially if they're from a prestigious business school or university.

Strategies for Success

New To The Game

The Russians desperately need outside invest­ ment, as well as help in adapting to a market econ­ omy, but keep in mind that they have an enormous amount of national pride and less than a decade's worth of business experience. Tread lightly and show respect. A know-it-all attitude with stern lec­ tures about doing things "the American way" or the "German way" will breed animosity and kill the cooperative spirit.

Russia has already moved beyond the infant start-up stage of Capitalism. The economy has matured and Russian businesspeople realize that it takes more than just a good idea and a little venture capital to succeed. Many are realizing that Western­ style management practices and organizations are now necessary if they're to build on their initial suc­ cesses. If presented with the proper sensibilities (minus a patronizing attitude), Russians will lap up the knowledge - though putting it into practice will still require breaking down some cultural barriers.

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•

•

•

•

Passport RUSSIA

Ten Golden Rules

Build relationships. Cold calls won't work. Do�g �usiness here requires entertaining and getting involved in the personal lives of your counterparts. Without the right local partner, you may be heading for a disaster; attempting to master the tangled web of the new Capitalism on your own is a mistake.

Do your homework. Though they may be pessi­ nustic by nature, Russians will likely prove overly optimistic in their assessment of the mar­ ket or the prospects for a deal. Often, they'll prormse more than they can deliver. Do your homework; be wary if a deal sounds too good or a partner promotes his or her self as flawless. Nothing in Russia goes as smoothly as promised. Avoid dangerous involvements. The Russian mafia dominates many businesses. It's best to avoid getting involved with such controversial and highly competitive commodities as alcohol and cigarettes. In most retail-level businesses it's almost impossible to avoid some contac; w�th organized crime, either as protector or sup­ plier. Safer businesses include advertising, law and consulting. Start simply. Russians prepare for meetings and you should too. However, being prepared doesn't mean that you should overwhelm Rus­ sians with facts and figures, at least initially. Keep it simple. Explain concepts and broad goals. Russians put little stock in hard figures (a hangover from the Soviet days, when national economic statistics were meaningless). The time will come to talk nuts and bolts at a later date. Be patient but persistent. The Russians were brought up in a command economy, wherein

Strategies for Success 47

•

•

the government or the top boss made major decisions. Individual initiative was rarely rewarded - and in most cases, punished. Don't expect miracles or even minor decisions to hap­ pen overnight. McDonald's Corporation spent 12 years in nego­ tiation before opening its first restaurant here, on Pushkin Square. Though several more have since opened in Moscow, the Pushkin Square restau­ rant remains one of the most profitable McDonald's in the world; on any Saturday night, its waiting lines are longer than those in front of Lenin's Red Square tomb. (Also central to McDonald's success is its policy of hiring locals - rather than expatriates - to fill decision-mak­ ing positions, of developing local suppliers, and of adapting their products to suit local tastes.) Russians will take advantage of a foreigner who seems too eager to conclude an agreement. It may take months and mountains of follow-up letters and faxes to overcome the inertia, but persistence does pay off. Just say "no." Russians will probably pester you to sign some sort of informal protocol or agreement at the very start of your relationship. Just say no. Though your potential Russian part­ ner may insist that such a protocol carries no legal weight (he's probably right, considering the state of business law in the country), avoid such agreements like the plague - they may bind you under law to sign a more detailed agreement later. Instead, try to work informally with your partner for several months to make sure the relationship works. Build a strong team of local managers. A real deal sweetener (and an insurance policy of sorts) is for the foreign partner to include comprehen-

48 Passport RUSSIA

sive management training for locals. The largest business success stories in the country - McDonalds and Britain's Allied Domecq PLC (which includes Baskin-Robbins ice cream, Dunkin' Donuts, and John Bull pubs) - owe much of their good fortune to a strong manage­ ment trainee program. These programs go beyond just schooling to include newly minted managers in decision-making and planning.

• Maintain solid business ethics. Bribery and payoffs may provide initial shortcuts through the maze, but once word gets out that you're willing to travel this route, the cost of business will escalate. Your initial shortcut may evolve into a long-term nightmare.

Be aware that many Russians believe that their country is used as a dumping ground for shoddy and/ or obsolete Western goods. Avoid any business dealings that might encourage this belief.

• Know your legal options. Before beginning talks have some idea of which corporate struc­ ture will work best for your business (the tax advantages or penalties can be enormous), and seek out partners who suit that structure. Regu­ latory business law in Russia is rather poorly developed at present, and legalities can literally change on a daily basis. Seek out a good attor­ ney with local experience and a solid reputation.

• Keep your sense of humor - and get every­ thing in writing. Cultural shock is inevitable (even for frequent travelers), so it's important to maintain a sense of humor. Don't sweat the

small things and try to have fun. Paranoia can ruin a good business deal. Also, because of the inherent dangers of relying on translators (espe­ cially with a language as imprecise as Russian),

Strategies for Success 49

it's important to follow up presentations or meetings with written correspondence (in both Russian and your native language) to prevent misunderstandings.

A Note on Gift-Giving

Russians are very fond of gifts. A small, thoughtful gift for business associates or their fami­ lies will not only be greatly appreciated, it will be more or less expected. Ideally, it should be personal­ ized somehow; a pen or a cigarette lighter with your company's logo on it would be considered by many to be the perfect gesture, or perhaps a solar-powered calculator. You can be sure it will be well used, if only to allow your Russian business partner to brag to fellow Russians about his foreign connections every time he uses it in public. And expect to receive something in return. Even in these highly commer­ cialized times, it's more the thought than the value of the gift that counts.

Deadlines: A Foreign Concept

Russians don't equate time with money, though "New Russian" businessmen seem to have a slightly better appreciation of its value than their older countrymen. Meeting& are almost always late ( under the Soviet system, no one could be fired for tardiness) and often run much longer than origi­ nally planned. Patience, rather than punctuality, is the virtue here.

Part of the Russian attitude toward time stems from the country's agrarian background - histori­ cally, time was measured in terms of seasons (plant­ ing, growing and harvesting) rather than in days, hours or minutes. Also, the vastness of Russia spans 11 time zones (but all trains run on Moscow time), and the relative backwardness of its internal communications network meant that meeting deadlines was a less critical element in commerce than it was in the West. (Keep in mind that only a few years ago, a citizen would have to wait more than five years for the delivery of a new car after it was purchased and ten to twelve years to obtain a private telephone line.)

Time 51

"Every business meeting in Russia seems to take forever," laments one Moscow-based Ameri­ can executive. "They really are social occasions. No one seems to care much if an hour's meeting tu.ms into a two-hour affair. I always wonder about the poor guy waiting for his turn in the next office. I can't tell you on how many occasions that has been me - sitting there cooling my heels while the meet­ ing before mine goes into triple overtime. If I want to see two customers in the same day, I schedule one meeting in the early morning and one in the late afternoon. It's the only way of having any chance of making the connection."

Because of this casual approach, Russians aren't particularly appreciative of having strict time deadlines stipulated in business contracts. So when framing them, expect delays and leave yourself plenty of "wiggle" room.

Social Functions

Theater performances, cinema screenings and sports events do start on time, but it's rare indeed when a Russian is on time for a social occasion, especially at a public venue like a restaurant. And once they do arrive, don't expect them to leave early. Dinner can often drag on into the wee hours of the morning.

Being late isn't considered rude or boorish behavior. However, if you're invited to a Russian's home for dinner, do try and get there within a half hour of the requested arrival time.

(t·>.)_;·jl l ·�L_ -----({-.. /L Business Meetings

The Fax Of Life

Trying to arrange a business meeting in Russia can rapidly age even the most patient of entrepre­ neurs. Telecommunications, even in the largest Russian cities, can be somewhat spotty, and as you'll learn, Russian secretaries simply don't take phone messages. (They say they will, but they almost never write anything down. One good defense: Ask them to read the message back to you. However, if there's not a common language, there's no point in telephoning.)

While the telephone and e-mail are acceptable modes of communication here, faxes are probably the best and most reliable method. And they allow you to use company letterheads - an important point for Russians, who value paperwork and offi­ cial looking documents. All faxes should be sent in both your native language and in Russian. Don't simply rely on a telephone confirmation of a meet­ ing - get it in writing. Patience is essential; even with a fixer or Russian agent on the ground, actu­ ally getting a fixed time when all the officials of a

Business Meetings 53

particular company you wish to see will be avail­ able will take some doing. Don't expect to throw together a trip in a matter of days or even weeks.

One word of warning: Meetings often get can­ celed with little notice, and on occasion the wrong people have been known to show up. Losing your temper won't help, but a modest show of indigna­ tion and refusing to take Nyet for an answer will lead to a rescheduling, hopefully one that suits you.

Be Prepared

Don't underestimate Russian knowledge or their business instinct. A poorly conceived or poorly explained proposal (one that hasn't been properly researched in the Russian marketplace) can ruin your credibility, even before the first round of drinks. Also, a rudimentary knowledge of the country's history and geography is essential, as these topics are certain to come up in conversation sooner or later.

It's best to agree on an agenda beforehand. And in order to frame the discussion and maintain some control, it's wise to be the first to propose a draft (in writing). By all means ask your Russian counterparts for their input.

Let the Russians know the names and titles of those who'll be attending the meeting. Russians don't like surprises. Make a point of sending an official who is at the same level as the most senior Russians you expect to meet. And don't send too many people, as this will overwhelm your hosts.

It used to be that first meetings had a precise sequence - such as an introductory session, a tour of the facilities or offices if appropriate, an official lunch and a wrap-up discussion. Today, this hap­ pens much less often, as the comings and goings of foreign business visitors are everyday occurrences.

54 Passport RUSSIA

The Arrival

Only the very brave rent a self-drive vehicle in major cities. Consider hiring a local driver with his or her own car. Don't rely on taxis or public trans­ portation. If the company you're meeting with is large or prosperous enough, they'll probably send a driver to your hotel. Russians have a casual approach to time, but they hold foreigners to a higher standard and will expect you to be on time, even if they can't see you immediately.

The security at many offices resembles that of banks - or prisons. You may be asked to pass through a metal detector or if you would mind being frisked. Some meetings take place behind bullet-proof glass. To deter crime and harassment from protection rackets, many Moscow businesses have moved to small, nondescript buildings.

While your hosts will be eager to shake your hand, it's considered bad luck to extend your hand before crossing the threshold of a room. Also, if for some reason you're met in the building lobby, don't attempt to shake hands with your gloves on. It's considered an insult.

The Business Card Ritual

Russians put great stock in the exchange of business cards. One reason for this is that compre­ hensive, up-to-date telephone directories (espe­ cially in the burgeoning major cities) aren't always available. Your cards should be in both your native language and in Russian, and it's essential that they include your title. Study any card you've been handed before putting it away, and always have plenty of cards yourself. Everyone present at the meeting will expect to receive one.

Business Meetings 55

Meeting Protocol

It should be clear with the introductions (and the advance exchange of faxes and letters) just who's in charge. That person will be seated at the head of the table and will generally have a few underlings (looking too eager to serve) standing by.

While your hosts may ramble on somewhat and wander from the meeting's set agenda, it's offensive to interrupt a presentation. Wait until after the speaker has finished before raising any questions or objections. Your own presentation should be crisp and not too overburdened with sta­ tistics. Speak of overall visions and generalities, avoid unnecessary jargon (it won't be understood), and be prepared to address questions specific to the Russian marketplace.

If you can't tolerate cigarette smoke, you're in trouble. Though imported brands are popular, many still smoke such local stinkos as Cosmos and Sputnik. Russians considered it extremely rude and offensive to ask anyone to stop smoking. Your only hope would be to have a woman in your party. Rus­ sian males will usually refrain if a woman politely makes it known that she's allergic to the smoke.

Concessions Over Dessert

Leave it to your hosts to decide when a meet­ ing has concluded. Even if the atmosphere has been rather formal and stuffy, it's possible to leave in a flurry of warm, bone-crushing handgrips and back­ slaps that could knock out your dentures - signs that your presentation was well received. If you're invited to a private home or restaurant on a spur of the moment, by all means accept. To refuse is to insult, and besides, social occasions allow for the personal relationship building that business here

56 Passport RUSSIA

depends on. And it's possible that the Russian who "stonewalled" you during the meeting will happily concede any number of points over dessert.

Interpreters: The Key

To Success Or Failure

The study of foreign languages in Russia was once the domain of the privileged Communist elite. Today, most of those who speak English (or any other foreign language) well enough to act as an interpreter probably learned and developed their skills courtesy of the Communist Party, with the aim of keeping an eye on visiting foreigners. Some of the best are former military intelligence officers. Many consider themselves to be underemployed and/ or smarter than the two principles for whom they're negotiating.

You'll be expected to supply your own inter­ preter; ask a trusted colleague for references. Make clear what your interpreter's role is and that you need to know everything that's said. Editing by an interpreter can make or break negotiations. It's essential to hire someone who has the technical expertise to translate in your field. (Be aware that many Russian words used in commerce, even such Western adaptations as kontract, have different shades of meaning to different Russians.) There are Russian agencies that specialize in supplying inter­ preters in such highly technical areas as oil and gas exploration, computer hardware and software, and machine building. The value of a good and trusted interpreter can't be overemphasized.

<E'1?.' __ _ ct� Negotiating with Russians

When it comes to business dealings, there is a perception that Russians are very secretive and not to be trusted. The lack of a business tradition and any semblance of an enforceable business law con­ tributes to this perception. Russians do tend to play their cards close to the chest and business loyalty is for sale to the highest bidder.

Chess Anyone?

Russians are quick to size up the strengths and weaknesses of adversaries and to take ruthless advantage of any opportunities that present them­ selves. Time is always on their side, and they believe they'll eventually get the best of anyone who's in a hurry.

Probably the single-most-important thing to remember about the Russians is that they are zero­ sum thinkers - that is, they believe that they can win only if the other side loses. Trying to convince them of the merits of a "win-win" strategy is a waste of time and energy, and compromise is seen as weak­ ness. Their habit of circumventing established rules and seeking out loopholes are remnants of the

58 Passport RUSSIA

Communist system (and before that, of feudalism). Keep in mind that Russians are among the greatest chess players in the world; they have a talent for thinking several moves in advance.

"We had been talking with a scientific research company for months and the negotiations seemed to be on course, when suddenly the Russians just stopped talking to us and we couldn't figure out why," recalls a Moscow-based American business­ man. "We spent months pursuing them to resume the talks and just as suddenly as they'd stopped, they started again, right where they left off. It took us a while to figure out what they were playing at. Then we realized the idea was to try and wear us out. They were purposely avoiding contact, count­ ing on our frustration and exhaustion from pursu­ ing them to give them an advantage and wring more concessions from us."

"We learned," he continued, "that while you may not understand their behavior or think it's rational, it's all part of a long-term strategy to win. What may look like a crazy turn of events is really part of the chess game."

To succeed, you need to be thick-skinned, determined, patient, and armed with a sense of humor. And it's essential that your team present a united front.

Expect The Unexpected

One thing you can probably count on is being asked to present your side first. Russians prefer to know the other person's position in full before revealing their own. From the opening gambit on, remember: Expect the unexpected - including having the Russians make dire proclamations that the deal' s off as they walk out of the room. Other negotiation ploys you may encounter include:

Negotiating with Russians 59

• The off-the-wall opening gambit. Often, Rus­ sians will assume what amounts to a ludicrous initial position. One French businessman recalls the Russian side proposing a deal that would have had the French company assume virtually all of the risk and provide all of the start-up capital, only to earn about 10 percent of potential profits. "It took everything within my power to convince Paris that this was just an opening ploy and that the Russians weren't serious. It took months and scores of revisions but we eventually got what we considered to be a fair deal, one that bore no resemblance to what the Russians had initially proposed."

Don't be tempted to give in or simply to demand minor changes. If you do, you can expect even more outrageous demands down the road; the Russians will assume that you don't have the stomach for tough talks or that you value the deal' s completion too highly to seek the best terms. Consider throwing out your own wildly outrageous starting point and talk down from there.

• You (or people like you) have cheated us. Rus­ sians will tell you that your company or a simi­ lar one has cheated them in the past, missed deadlines, and misled them on contract terms. They may go so far as to condemn foreign busi­ nesspeople in general as conniving and less than fair. The idea here is to stir up feelings of guilt or remorse and to get you to soften your position. Don't fall for it. Counter with your own laundry list of broken Russian promises and deceit (all with a relatively matter of fact tone). But avoid personal recriminations; they'll kill the deal. If worse comes to worse, apologize for past (alleged) behavior and say you're ready to move on with a fresh start.

60 Passport RUSSIA

• Business as social work. Be prepared to hear tales of woe - about everything from sickly babies to hundreds (if not thousands) of work­ ers potentially losing their jobs if the deal fails. You may be an entire village's last hope! Your adversary is trying to transform your business agenda into social work and philanthropy. Lis­ ten sympathetically, but don't allow your heart strings to be tugged too severely. The simple response - that a good deal will help to "float everyone's boat," poor villagers included - is an effective counter.

• Stall ball. Russians have patience and they'll use your eagerness against you, by delaying talks in the hope of extracting further conces­ sions. You may spend months negotiating with someone you thought had decision-making power, only to be told, "I don't have the authority." Take a deep breath and recognize this for what it is - a stall tactic aimed at breaking down your resistance.

• Secrecy. Even before the Soviet era, Russians had a great penchant for secrecy; the Commu­ nist-era information blackout only reinforced it. Russians won't reveal everything about their company, finances, staff, competitors or other suitors, so don't feel obliged to tell them every­ thing. Do as much homework on a company as you can (it may be difficult, because of the lack of proper disclosure laws), but don't expect to get an honest assessment of the company or the industry from the Russians you're negotiating with - even if such a disclosure might be in their favor.

Negotiating with Russians 61

The End Game

Russians have a good sense of just how far they can push an adversary without killing a deal. Don't be afraid to call their bluff. Announcing that you're not prepared to make any more concessions and that no agreement is better than a poor one can pro­ duce a surprising amount of flexibility, especially if the Russians sense that you're serious. Even in the absence of a detailed transaction, the Russians may want you to sign an "agreement in principle," a summation and interpretation of what was dis­ cussed. Proceed with caution. Regardless of how harmless this sounds, it may obligate you to a more structured deal down the road or tie your hands when seeking other in-country deals.

Always look for problems in written docu­ ments. Translation can be imprecise and the whole sense or structure of a deal can be altered by the use or substitution of a single word. (And be aware that intellectual property rights agreements are a new concept here.) Documents and contracts are usually provided in both Russian and your own native tongue; both versions are considered valid. How­ ever, it's essential that you have a fluent Russian speaker compare the translations to ensure that there's no ambiguity.

Still, even if you have a signed contract, it may not be worth much. As previously noted, Russians see contracts more as statements of intent than for­ mally binding obligations with penalties. Though it's improving, Russian business law still isn't sophisticated enough (or stable enough) to deal with suits stemming from broken contracts. In the case of joint ventures, consider including a clause requiring all partners to submit to arbitration in a neutral third country (such as Sweden) in case of disagreement.

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The Mafia

Many Russians claim that the Russian mafia virtually runs the country. Criminal gangs are involved in everything from running protection rackets, prostitution rings and sports clubs to con­ trolling commodity trading and stealing weapons­ grade uranium. They're also running "legitimate" enterprises; the Interior Ministry claims that gangs (the mafia consists of several competing organiza­ tions) control at least 40,000 businesses in Russia, including 500 banks. Russian authorities estimate that of the US$43 billion that the country invested abroad in 1995, at least $18 billion of it had been earned by the Russian mafia.

According to Forbes Magazine, "assassination is a tool of business competition" here; contract kill­ ings are another mafia specialty. In 1995, for exam­ ple, some 40,000 Russians were murdered and another 70,000 disappeared. Among the former were banker Ivan Kivelidi, founder of the Russian Business Roundtable (an obscure nerve toxin had been applied to the rim of his coffee cup) and Vladislav Listiev, the country's most popular talk

Business Outside the Law 63

show host and most successful TV producer. Two weeks after Listiev announced his intention to clean up corruption within his industry, he was gunned down, by professionals, at the entrance to his apartment. Despite public outrage, such crimes are unlikely to be resolved.

No longer content to reap profits from the cha­ otic transition from Communism to Capitalism, the mafia has gone international. The U.S. Congress has held hearings on the workings of the Russian mob in the U.S., and several European nations (Britain and France included) have been cooperat­ ing with Russia's government to stem the influence of Russian crooks in their own countries.

These gangs didn't spring up following the demise of Communism like daisies in the desert after a rainfall. They were always there to some extent, running the "black" (illegal) and "gray" (unethical but not illegal) markets. With the break­ down of law and order, they simply took advantage of their experience in the unsavory, reaping the financial rewards of a nascent, free market economy.

The Krysha

Krysha (literally, roof) is what Russians call "protectors" who shelter businesses from criminal elements. Sometimes, the krysha is the criminal gang itself, other times it's a legitimate security firm. If necessary, one krysha will strike a deal with another krysha. Some seek out official rulings to end disputes; others resort to violence. A "roof" can mean the difference between success and bank­ ruptcy, especially for a business that handles a lot of cash. According to the Russian Chamber of Com­ merce, upward of 70 percent of all local businesses say they pay money to organized crime - 10 to 25 percent of their profits, on average.

64 Passport RUSSIA

"Within days of opening up, we'd had 'offers' of protection from three or four different hoodlum gangs," recalls a foreign manager of a Moscow res­ taurant. "We checked around and picked the most feared of the hoods as our krysha. It takes a whack out of profits, right off the top, but we haven't been bothered by anyone since. It's a legitimate business expense."

About 20 to 30 percent of foreign corporations in Russia (usually those dealing on a retail level) have faced extortion demands. For the most part, foreigners remain off the target list of professional Russian hitmen. However, threats of kidnapping and physical violence have caused at least some companies to rethink the number of Russia-based foreigners they wish to employ.

The Rising Price of Payoffs

Gone are the days when you could bribe your way through Customs or make friends in govern­ ment circles with the gift of a pocket calculator or radio. Today, the asking price is cash (usually equivalent to thousands of U.S. dollars) for such things as permits and customs clearances. Many Communist Party officials have evolved into busi­ nessmen and, in the spirit of the new Russia, they demand kickbacks for contracts - using the pocket calculators they acquired in the old days to add up their new fortunes. Police have the right to stop anyone on the street for a random document check, and there's evidence that such checks include emp­ tying out the wallets of foreign visitors. Traffic police (the GAi) also have a racket going - arrest­ ing foreigners for jaywalking and then demanding a fine of US$100 in lieu of a night in jail. During the good old days of the Soviet regime, a mere US$5 would diffuse an encounter with the GA!.

Business Outside the Law 65

Street Crime: Gypsies & Thieves

Russia has the world's highest rate of impris­ onment, with 558 inmates per 100,000 population. (The U.S. ranks second with 519 per 100,000, while Indonesia is last with just 22 inmates per 100,000.) Still, between 1995 and 1997, the number of crimes against foreigners in Moscow dropped 14 percent, and in St. Petersburg, overall street crime dropped 18 percent. St. Petersburg has launched a special tourist police force. Known as the gorodoviye, these English-speaking officers who wear red hats have been instrumental in curbing crime against visitors.

A few safety tips: • Beware of so-called gypsies, homeless people

and/ or professional con artists who approach pedestrians, begging. On occasion, dozens of little waifs will swarm the unwary. Don't be afraid to scream, yell and swear, but resist striking out. Their aim is to get your hand off your wallet and they're very good at it.

• Use only official taxis and never get into a taxi that already has a passenger inside. This is a common mugging scam.

• Never ride in empty subway cars at night, and stick to the cars in the middle of the train.

Moonshine & Drugs

In one nine-month period between 1996 and 1997, Russian police confiscated 80,000 tons of ille­ gal alcohol. They estimate that about 40 percent of all the vodka sold here is produced from illegally imported spirits, and not all of it up to quality stan­ dards. It's no surprise that the number of alcohol poisoning deaths has climbed 227 percent in recent years. (If unsure of the origin of your alcohol, abstain. It could give you more than a hangover.)

66 Passport RUSSIA

Illegal drugs, virtually unheard of in the Com­ munist era, have become a serious threat to law and order (though the number of addicts is still small compared to many Western countries). With Rus­ sia's once tightly sealed borders now relatively porous, marijuana and opium make their way into the large cities quite easily; the ancient Silk Road, which traverses several ex-Soviet republics, has

become one of the world's primary "heroin high­ ways," a key transit route for drugs headed West from Asia. Also, the Russian Mafia does a good job in laundering cash; Interpol has traced Russian involvement in drug cartels as far afield as Japan and South America.

Sex and the Single (or Married) Russian

The Russians have belatedly discovered the sex­ ual revolution and sex has become a national obses­ sion, second only to alcohol. Though technically illegal, prostitution is rampant. Russian hookers run the gamut from weary streetwalkers to high-class call girls who charge three to four hundred U.S. dol­ lars a night. Many will lower their rates for men they're physically attracted to, or they may refuse to accommodate a nonwhite male or insist on charging him double or triple the going rate.

2�_....\ __ Nam_e_s_&_Gr_ e_et_in_g_s __

Russians are still somewhat unsure about how they should address each other in a post-Commu­ nist world. The one-size-fits-all greeting of tovarich

(comrade) has given way to foreign imports and pre-revolutionary greetings (such as "ladies and gentlemen") that have been in linguistic mothballs for decades.

Formality Rules

Russians may appear warm, friendly and physi­ cal (rather rigorous handshakes, backslaps, bear hugs or kisses) in their greetings, but don't underestimate their need for formality when it comes to dealing with foreign businesspeople. Often in initial encounters, Russians will address you using your business title, such as "Company Director Smith" or "Company Treasurer Jones." You should do likewise. Though it may sound awkward, the use of titles (Director-Gen­ eral Koslov) is the accepted norm. If in doubt, refer to the business card you've been given.

Generally speaking, addressing a Russian solely by his or her first name is an insult. (However, this is becoming more popular among younger Russians,

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68 Passport RUSSIA

especially those dealing with Americans.) When addressing foreigners, Russians often use such cour­ tesy titles as Gospodin (Mr.) and Gospozha (Mrs.). If you're speaking Russian, be sure to use the more for­ mal vy form, rather than the informal ty.

Honor Thy Father

Russian names are listed in same order as in the West: first name (imya), middle name (otchestvo) and last name (familiya). The quirk is that the Russian middle name is a patronymic - a name derived from the first name of one's father. Take the name Mikhail Sergievich Gorbachev. Sergievich literally means "son of Sergie."

Russian women add the letter "a" to the end of their family name, to their husband's last name (which they adopt upon marriage), and to their pat­ ronymic. For example: Raisa Gorbachev (Mikhail's wife) is known in Russian as Raisa Maximovna Gor­ bacheva, her patronymic meaning "daughter of Maxim." The Western media often drop the feminine "a", a practice that Russians find very annoying.

Beyond the Formal Stage

Once Russians move beyond the initial formal stage of a relationship, they use the first name and patronymic only. This doesn't necessarily signify a close friendship, but it's a clear indication that the relationship is moving ahead.

Your Russian counterpart will eventually invite you to address him or her by their patronymic. To not do so after having been invited to is an insult. This is the time to suggest that your Russian host address you by your first name. Once this barrier is broken, use the patronymic for all communications, including written ones.

Names & Greetings 69

Big Kolya: Diminutives & Nicknames

Among friends, Russians use nicknames and a rather confusing array of diminutives (cute little forms of first names) that often bare no resemblance whatsoever to the name from which they were derived. For example: Shasha and Shura are diminu­ tive forms of Alexander; Vanya is the diminutive of Ivan; and Kolya is short for Nickolai. For women, there seems to be a little more logic, with Luda short for Ludmilya and Tanya for Tatiana. Compared to many cultures, there isn't a wide variation of first names available; pedigrees like Ivan Ivanovich Ivanov aren't uncommon. In the workplace, you'll often have several people with the same first name and the same patronymic. As surnames are almost n�ver used in informal situations, Russians rely on rucknames. If, for example, there are two Nickolai Nickoliavichs, the older of the two will be call Big Kolya and the younger one, Young Kolya.

On an historical note: In Communism's heyday, many Russians gave children such inspirational names as Tractor, Melor (an acronym for Marx, Engles, Lenin, October Revolution) or even Nine! (a girl's name that's actually Lenin spelled backwards). This practice was more popular in the countryside and has, of course, ceased since the demise of Com­ munism. Many of these unfortunately named off­ spring have since adopted more common first names.

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Privacy?

Communication here is a contact sport. There's no word for privacy in the Russian language, and the Russians you encounter will have no regard for personal space. In conversation, they'll edge ever closer until they're literally in your face. On the subway or in crowded public venues, Russians wedge their way through throngs with nary a word of apology.

Don't Take Neyt For An Answer

Ask a question and you'll invariably receive nyet (no) for an answer. Sometimes it will be gruff, other times more civil. This is because, historically, innova­ tion was discouraged and no one wanted to be held responsible for a project or request that might fail. This habitual response is also a hangover from the era of shortages and backroom deals on the retail level, when store clerks always seemed to have extra stock hidden away. The first response to a question about something's availability would always be nyet, a signal for the negotiations to begin.

Communication Styles 71

Russians routinely refuse to accept neyt for an answer, and so should you. It may simply mean that the person who's replying needs some incen­ tive to produce the goods or time to think through your proposition.

"You learn this lesson fairly quickly," explains a British consultant based in St. Petersburg. "It hap­ pens for theater tickets, airline tickets, train tickets, at restaurants, virtually everywhere. Their first response is 'No, that's impossible. We don't have what you want.' Usually within ten minutes, I've negotiated two of the best seats in the house, with the help of a little under-the-table 'commission'. It's the only way."

Long Winded

Even the simplest question is likely to elicit a long-winded answer that may leave you baffled or actually knowing less than when you asked the question. Be patient. Russians like to be very thor­ ough when answering queries.

If caught in a debate or argument, you can avoid an escalation by letting Russian long-windedness act in your favor. Don't interrupt the diatribe; let them exhaust themselves in emotion, historical explana­ tion and rationale. Once they've spoken their piece, you'll find that they're likely to feel a lot less strongly than they did when the disagreement started, and they may even be willing to compromise (or at least see some value in your position).

Normalno

When there's a crisis, Russians aren't likely to acknowledge it - at least not to foreigners. This is an aspect of Russian stoicism. The expression nonnalno - everything is normal or status quo - is a favorite

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72 Passport RUSSIA

one used to deny the extraordinary. Russians will reply normalno if you ask how they're feeling, even if they've just come out of triple by-pass heart surgery.

During the 1986 Chernobyl power plant disaster in the Ukraine, senior Soviet officials insisted on referring to the situation as normalno, even after hav­ ing admitted that there had been a nuclear radiation leak. An American journalist based in Moscow recalls that back in the late 1980s, when a young Ger­ man pilot named Matthius Rust evaded Soviet radar on a flight from Finland and managed to land his small Cessna aircraft just a few yards from the Krem­ lin, the militia guarding the aircraft refused to admit that anything unusual had occurred.

"The plane was in the middle of Red Square, 200 feet from where we were standing. When I asked the militiaman what was going on, he said, "Normalno."

So I asked him to turnaround and look at the plane. He stared at it for a few minutes and then replied again, straight faced, "Oh that, it's normalno."

Communication Tips

• Saving Face Although they may appear to be thick-skinned

and stoic, Russians are very sensitive when it comes to issues of personal pride. Criticism of a proposal or an idea is a sure way to kill a relation­ ship. Never say things like "That doesn't make sense" or "You're wrong and we have the figures to prove it." Such unconstructive criticism will cause a Russian to "lose face," and like the proverbial ele­ phant, Russians have long memories.

Be constructive; instead of openly criticizing an idea or proposal, make a counterproposal. And leave the Russian with some "wiggle room," so that he or she doesn't have to admit to an error, at least publicly.

Communication Styles 73

• Profanity Whether in business or in social conversations,

avoid using foul language. Russians are very con­ servative when it comes to curse words, especially when a female is present. Great stock is placed in one's deportment and credibility can be lost. No one wants to be labeled a "hooligan" - the type of urban lowlife Russian who uses such language.

• Hand Signals Avoid the "peace sign" (second and third fin­

ger extended in a V shape) delivered with the palm facing inward. It's the equivalent of "giving some­ one the finger" (middle finger extended) in the West. "Thumbs up" indicates approval.

• Be Positive Avoid broaching negative aspects of Soviet and

Russian history. The Russians are extremely proud of their heritage but they can be extremely sensitive about eras that they believe are best forgotten.

• Jokes

Russians appreciate a good sense of humor but jokes shouldn't be at their country's expense. Only Russians can make fun of Russia. And keep in mind that jokes don't translate well between cultures.

X \'

�\ - Government & Business

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A Helping Hand

Business in Singapore has a running start, com­ pliments of the Economic Development Board, whose job it is to support new technology and pro­ mote foreign investment. This added push works, since the city-state is virtually devoid of natural resources. Built-in business incentives include no quotas, minimal tariffs on most imports, the omis­ sion of a capital gains tax, and no restrictions on capital transfers. Multinational corporations, high­ tech companies, international banks and financial institutions, and a diversity of government-owned businesses predominate. However, the government has been known to award contracts to nongovem­ ment sanctioned firms if those firms prove them­ selves the most capable for the tasks at hand.

The government has invested in many large companies - including banks, hotels, shipyards, insurance companies, steelmills and oil refineries,

and Singapore Airlines - without necessarily involving itself in their daily operations. In some cases, it has offered stock options to the public in a

Government & Business 29

move toward privatization. It also decides which businesses will be favored with loans and tax breaks.

Another economic spur has been TradeNet, an electronic trade documentation system that cuts the processing time on cargo shipments from one day to under half an hour. Singapore's Trade Develop­ ment Board was the first in the world to go total! y electronic, and its efficiency is such that the TradeNet system is being sold to other countries.

Expanding Investments

Phenomenal economic growth has left little room for more industry here. Recognizing the limitations of a domestically supported economy (scarce local labor, expensive land, relatively high wages), Singapore has been aggressively seeking out development opportu­ nities beyond its borders - what the government calls "regionalization." Today, Singapore is the lead­ ing foreign investor in Burma and the third largest in Vietnam (with at least 29 projects worth more than US$598 million). And since the late 1980s, links have been established with Japan, China, Thailand, Indo­ nesia, the Philippines and South Korea, as well as with India, Russia, Hungary and Belgium. In some cases, the government sweetens the pie with tax incentives, capital infusions, investment guarantees and Singapore-based training programs. After losing money on several U.S. ventures, the emphasis shifted more strongly to emerging Asian economies. In 1994, Singapore's overseas operations accounted for about 11 percent of the GNP, and by early 1995, they had reached S$37.3 billion, with more than half of it poured into financial services projects.

As for manufacturing, investments abroad out­ weigh monies being invested locally. Take Tran­ stech Electronics, established in 1988, as an example. It assembled everything from hi-fis to

30 Passport SINGAPORE

remote-controlled toys for such electronics giants as Panasonic, Phillips and Sony, with S$100 million (US$71 million) in sales in 1995. (Singapore's elec­ tronic industry, overall, is currently raking in more than US$41 billion annually.) But none of that labor took place in Singapore, where Transtech is based. The company's 5,000 workers are all based in Malaysia (where factory wages tend to be less than half those required by Singaporean law).

"Mini-Singapores" Overseas

Foreign investment is also being achieved though the development of overseas industrial parks, sometimes referred to as "mini-Singapores." In the Singapore-Suzhou Township in China, for example, companies are taking advantage of the local population's traditional embroidery skills by parlaying their high-level hand-eye coordination aptitude into a top-notch manufacturing workforce - for the creation of semiconductors, among other products. Tenants in Singapore-Suzhou Township include Siemens (the German electronics giant), Nabisco, Advanced Micro- Devices, Inc., and Bec­ ton Dickinson & Company.

In 1994, Singapore's Prime Minister Goh Chok Tong visited Vietnam's rural province of Song Be. Within two years, the Vietnam-Singapore Industrial Park was under way, with Singapore holding the controlling interest of 51 percent.

Lack of Corruption: A Catch-22

Singapore is as free of corruption as any place on earth. (Even small-scale bribery attempts lead to immediate arrest.) Ironically, this has surfaced as a disadvantage for Singaporeans conducting business in other countries - where contacts aren't always

Government & Business 31

considered binding, bureaucratic inefficiency can make a mockery of time tables, infrastructures can be unreliable, "quality" may be seen as a relative term and "tea money" (known as "coffee money" during Singapore's British colonial days) is a prereq­ uisite to getting anything done.

Another problem (and a reflection of Lee's suc­ cessful transformation of his island state) is that many Singaporean professionals are reluctant to relocate to a developing country, thus giving up many of the comforts and services they've come to enjoy. Often, when multinationals wish to take their employees abroad, they pay them special compen­ sation packages in order to "sweeten" the deal.

Censorship

Singapore is home to several bodies of official censors, among them the Undesirable Propaganda Unit, or UPU. Publications deemed "sexually explicit" are illegal here; American magazines like Playboy and even Cosmopolitan and Harper's Bazaar have been known to be confiscated at Customs. More surprisingly, though, in this business-driven culture are the magazines that have been "gazet­ ted" - that is, only a handful of copies can be dis­ tributed under government control. These include Time, The Economist, the Far Eastern Economic Review and the Asian Wall Street Journal, all of which have "interfered" in "domestic affairs" (that is, criticized the government in one form or another).

In 1995, for example, Singapore's Supreme Court ordered the International Herald Tribune to pay libel damages to three top city-state leaders in the amount of US$678,000. The offending article referred to Singapore's "dynastic politics" and to a "battle between the corporatist needs of the state and the interests of the families who operate it."

32 Passport SINGAPORE

Even writers and publications that don't specifi­ cally name Singapore as their subject have been slapped with stiff criminal contempt fines. The rationale is that such allegations are designed to undermine public confidence and the authority of the courts, and that a small, volatile country like Singapore could be easily inflamed. (Tensions run particularly high between Malay Muslims and Chi­ nese, partly because the former don't embrace the latter's zeal for pursuing money.)

All newspapers are published by a govern­ ment-owned agency. And although Singapore is southern Asia's communications hub, privately owned satellite dishes are illegal and CNN (Cable News Network) - available in Beijing or Saigon - can't be gotten here.

Advertisers have also run into trouble here. U.S.-based Citibank was ordered to withdraw a radio spot that offered "hassle-free personal loans," and Australia's Qantas Airlines was told to remove the phrase "last of the big spenders" from their ad. The rationale? Such sentiments undermine thrift

and filial obedience. As B.G. Lee explained in an interview with

American journalists in The Four Little Dragons (1989), "We wish to set our own destiny, and we don't wish to have that determined by foreign influences, whether malevolent or benevolent." As for freedom of the press, Lee noted that the American press never seems to take issue with the fact that Pravda and Ren­ min Ribao are also banned in Singapore.

All movies, recorded video cassettes and video CDs entering Singapore must clear the Board of Film Censors. Certain words are taboo, as are bare breasts

seen from the front (side views are okay) and any reference to Allah. Expansive shoot-' em-up scenes or sequences of passionate embraces are likely to be

Government & Business 33

shortened. In the case of videocassette rentals, all such alterations are methodically listed and enclosed with the tape in question, allowing renters to know just what they're missing. Music is also scrutinized, and songs with references to drugs (the Beatles' "Yel­ low Submarine," some albums by Elton John, the Rolling Stones, Eric Clapton) are banned.

Internet Interdicts

Singapore is reportedly home to at least 100,000 Internet users, and nearly every govern­ ment ministry here has its own World Wide Web site. But at present, only limited access is permitted. Singapore's three providers (Pacific Internet, Sing­ Net, and CyberWay) must submit their services to proxy servers, a requirement described by Informa­ tion and Arts Minister George Yeo as "a kind of anti-pollution measure in cyberspace," a way of "keeping our back yard and front yard clean by sweeping them everyday." These proxy servers are special computers that act as censors, blocking access to topics that could "undermine public mor­ als, political stability or religious harmony" - such as sexual or pornographic material, hate mail, crim­ inal activities of any kind, or the Socratic Circle (an informal on-line site that was a forum for animated political discussions). Reportedly, anyone caught bypassing the servers can be cited for "sedition," which is punishable by caning (see Chapter 13: The Caning Controversy) and a five-year prison term.

There is, however, a local website for ordering various types of durian (a popular fruit with a dirty­ socks aroma so strong that it's banned from Sin­ gapore's subways) and a local e-mail address that offers interactive counseling and advice from a priest (he doesn't accept electronic confessions, however).

1 @ The Work Environment

The business week is approximately 44 hours long, with time-and-a-half or double time paid for overtime and paid sick leave of at least ten days annually. (In 1993, all of Singapore's civil servants received an end-of-year bonus of 3 1 /2 months' pay, a reward for the country's exceptional eco­ nomic growth.)

Though there's no such thing as unemploy­ ment benefits or state retirement pensions here, the government works to instill self-reliance in the pop­ ulace. The Central Provident Fund (CPF) puts aside 20 percent of workers' salaries for their retirement, for buying a house or apartment, or for purchasing certain stocks. Part of this percentage is also put aside for health care (which has become less heavily subsidized during the past decade).

Nepotism

Expect your Singaporean business contact to be well-educated and appropriately positioned in the company. In this corruption-free society, nepotism is about the only exception.

In family-run businesses, the eldest male fam-

The Work Environment 35

ily member is traditionally - though not necessar­ ily - at the helm. That doesn't mean that when employees (whether family members or not) are brought up through the ranks, their positions aren't earned. There are, however, situations in which a nonfamily member proves better qualified and can attain status as managing director of a family firm.

Foreigners make up at least 20 percent of the labor force.

Hesitant Innovation

Singapore's government, educational system and culture all emphasize obedience. As a result, innovation and risk-taking are discouraged. Senior­ ity, patriarchy and hierarchies are respected and charged with making key decisions.

However, Hewlett-Packard is one of a handful of foreign companies helping to change that profile. California-based Hewlett-Packard has a history of encouraging its employees to explore their potential, and a number of former Hewlett-Packard employees have formed entrepreneurial companies here. One of them, Netband Technology, is computerizing a local theater group's ticketing network as well as Sin­ gapore Power's check-paying system. Other local multinationals are taking advantage of the creative and technical skills of former Apple Computer, Phil­ ips Electronics and IBM professionals.

Feng Shui: In the Spirit

Feng shui is the study of wind and water. No office building, shop, home or house of worship is built or occupied by a Singaporean Chinese with­ out an initial consultation with a Jeng shui man.

According to tradition, every structure in China rests on some part of the Earth Dragon, over

36 Passport SINGAPORE

which flows Heaven-Earth-Air currents. These are ascertained in order to determine on which part of the Dragon a building rests. To rest on the Dragon's back is ideal. Being on its neck or head is trouble­ some, and being on its eyeball means that a new site must be located.

Even in the best position, a building's interior must be aligned to prevent bad spirits or negative energy (chi) from gaining access. The strategic posi­ tioning of a mirror can deflect or divert these unwanted spirits, and doors must never be in a straight line (spirits aren't good at managing curves).

Singapore Chinese take the art of Jeng shui seri­ ously. Foreigners who plan to set up even tempo­ rary offices here are advised to hire the services of a Jeng shui professional. To locate a good one, ask your Singaporean counterparts. They'll feel more at ease conducting business in an environment that's been predisposed for prosperity.

<·P Women in Business �_s ,,,.__\ ---

Social Engineering? Or Just a Helping

Hand?

During the 1970s, the government limited fami­ lies to two children. But by the mid-1980s, it became apparent that the birthrate was dropping, at least among the educated citizenry, and that twice as many Singaporean women as men were in graduate school - and unlike their forbears, many of them were unwilling to eschew careers and financial inde­ pendence for motherhood. Another troublesome fac­ tor, from the government's standpoint, was that educated men were marrying less-educated women but the reverse scenario was virtually nonexistent.

Prime minister Lee Yuan Yew (who, at one point, suggested a return to the ancient Chinese custom of polygamy) was quick to establish a government matchmaking service, open to college graduates only - the Social Development Unit. SOU uses computers to find potential matches, and sponsors dances, cruises and lectures on how to date women to facili­ tate the process. Another incentive is that the govern­ ment offers US$50,000 grants to young couples who

38 Passport SINGAPORE

wish to buy flats near their parents' homes (to encour­ age the continuance of family ties) but offers no such subsidies for single people (who qualify only for small apartments located in less popular areas) or to unwed mothers. (Meanwhile, low income families in which neither parent finished high school could receive US$5,000 toward the purchase of an apart­ ment if the wife agreed to be sterilized.) By 1990, Lee was offering US$20,000 income tax rebates to edu­ cated married women under the age of 28 who gave birth to a second child (but none to women 31 or older), plus additional US$20,000 rebates for every child after that. To add to the bounty, working moth­ ers could deduct a percentage of their annual earned income for each child, 5 percent for the first, 10 per­ cent for the second, and so on up to a fourth.

The Pros and Cons of Dual-Income

Families

The general manager of the Raffles Hotel is a Singaporean woman, as is the chairman of the Sin­ gaporean Money Exchange. Harassment is rare. And unlike in America and elsewhere in the West, private men-only clubs don't exist.

However, while the government speaks of equal opportunities for women, it's also true that it's hesi­ tant to grant benefits to the family members of female Civil Service officers. The rationale is that the balance of responsibility between men and women would alter. Explained Prime Minister Goh during a rally in 1994, "The Singapore man" would "become a nones­ sential extra, as in Britain" and the number of single­ mother households would "skyrocket out of control." Marriage, he added, is now like "an optional extra when buying a car. As the Pope observed, two lesbi­ ans, a dog and a cat now form a family."

Women in Business 39

With so many career-driven dual-income fami­ lies, Singaporean parents are spending less and less time with their children - who are also under a lot of pressure to achieve entry into the best schools. No surprise, then, that juvenile (under the age of six­ teen) crime is on the rise; the number of arrests has more than doubled since 1990. The divorce rate is rising too; there were 1,721 registered divorces in 1980, but 3,772 in 1994. In March, 1996, a Sin­ gaporean woman was fined S$1000 (US$710) for neglect after her 15-year-old daughter committed a robbery and an assault in the same day.

Strategies for Foreign Businesswomen

Though women are accepted in many business settings, traditional attitudes still hold sway. For­ eign businesswomen may wish to consider some of the following suggestions. • Dress conservatively. Eastern philosophy sees

attention-getting attire as a working against, group effort. That shocking pink Chanel suit may be considered "power dressing" on Madison Avenue, but in Singapore it's best to blend in.

While red is usually reserved for brides and white is worn at funerals, both colors have become fashionable within the business com­ munity.

• Keep make-up to a minimum. A brightly painted face connotes cheapness and can dis­ tract from the business at hand.

• Handshake protocol. At a first meeting, a woman may initiate a handshake with a male counterpart, since if a man presents his hand first, his colleagues may think he's making a pass. Nodding with a subtle smile is also acceptable.

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@ __ M_ak_in_g_Co_n_n_ec_t_io_n _s __

Plan Ahead

It's absolutely essential to arrange your meet­ ings in advance. Do so weeks, even months, prior to your trip to Singapore.

Exceptions are made in the export and trade­ related industries, where transactions don't always require as much foresight; it may be possible for a meeting with a Singaporean colleague to be set up on only a few day's notice. But don't depend on such hasty arrangements. It's a long trip from the U.S. or Europe to Singapore, and it would be very unsatisfying to leave the city-state without gaining at least a counterpart's attention - if not a promise to do business.

During your initial correspondence, you should probably include as much as you can about yourself, including a resume, business card, and a dossier or press kit. That way, your Singaporean contact will know more than surface information about you prior to your physical meeting on Asian turf.

Making Connections 41

The Go-Between

While foreigners are free to contact local firms directly, introductions and referrals always help. Guanxi (connections) are particularly important within the Chinese business community. Having a third party set up meetings (or social situations) will allow your Singaporean contacts to remain m a more comfortable position. As they don't have to directly respond, they're never put on the spot.

Once a commitment has been made to do busi­ ness here, it will be important to establish a local partner or representative who can look after your interests. Embassies, chambers of commerce, and the Singapore Registry of Companies and Busi­ nesses can all be of assistance in this regard.

Business Cards

When Singaporeans first meet with foreign businesspeople, business cards will be exchanged. These should feature your name, title and company logo, and it's a good idea to have a Mandarin (or at the very least, English) translation on the reverse side; have any translations checked by a native speaker to avoid embarrassing misnomers. Con­ sider having the Chinese side printed or embossed in gold ink, as it suggests prestige. Note that m Chi­ nese surnames always precede given names.

When a member of this Asian community hands over his or her card, it's held by the top cor­ ners with the thumb and index finger of both hands. The printed name will face the receiver, making it easy to read. Treat this time as a formal ceremony that sets a positive tone for _the meeti�g to follow. Never write on the card, put 11 casually m your back pocket, or haphazardly stash it in a folder, as any of these actions will be construed as

42 Passport SINGAPORE

disrespect. A business card is considered an exten­ sion of the giver. If you fail to treat it with the proper respect, you won't be taken seriously as a potential business prospect.

When handing out your card, give one to

�veryone present as if it were a winning lottery ticket and you'll make a lasting first impression.

Family Ties

Nepotism runs deep in Singapore. In business as in the home, a blood relative can be trusted no matter what. Therefore, to gain an "in" for work purposes, your best ally is the mother, cousin, son, granddaughter or even the distant aunt of a top executive of the company with which you want to work.

Do all you can to discern who the "right" con­ tact is by quizzing anyone and everyone who deals with the company in question. Try to befriend that person without being too aggressive or obvious about it.

\

9� Strategies for Success

��---------- Foreign Businesses Welcome

An open market and a free port (by some mea­ sures, the world's largest), Singapore offers more than 700 shipping lines that connect to more than 300 other ports, and some 50 airlines that link Changi Airport (ranked 13th in the world in cargo handling) to more than 100 cities in 54 countries. Above all, Singapore is the gateway to the markets of Southeast Asia.

Foreign businesses are encouraged, especially those involved in the manufacture of high-tech products (peripherals and software, telecommuni­ cations equipment, and electronic components). More than 80 percent of its industrial base was built

with foreign capital. The business climate is as inviting as Singapore's tropical climate, especially when compared with the often cold (or even hos­ tile) business climates that prevail in certain other East Asian nations.

Other big business includes ship building, phar­ maceuticals and medical equipment. Singapore is also a major Asian banking center, the world's second-

_ _J

44 Passport SINGAPORE

largest port and third-largest oil refiner. (As of 1995, Mobil Oil had invested about US$2.5 billion here, with a capacity of some 250 million barrels per day. Other U.S. businesses with a presence here include Exxon, Bank of America, Starbucks and Levi Strauss.) More than 60 percent of the world's computer disc drives are manufactured here, and software revenues

grow at a rate of about 30 percent annually.

Relationships Before Business

Never underestimate the importance of patience. It pays off. Strong business relationships may require numerous meetings to develop, but that groundwork can result in a profitable - and life long - rapport. (Be aware that while giving weight to gut feelings or instincts is often consid­ ered unreliable or even foolish in the West, here, instincts are sometimes considered as viable as sta­ tistics when it comes to taking measure of potential deals, colleagues or friends.)

All that work will pay off in other ways as well. You'll become invaluable to your employers, who would be foolish to replace you once you've achieved secure footing with specific Singaporeans. Should your company choose to send a proxy in your place, that colleague will need to nurture his or her own rap­ port - in effect, start all over again to try to earn the respect and trust needed to seal a deal.

1 0 Golden Rules

1. Be patient. Business negotiations proceed at a relatively slow pace. When working out the details of a complicated deal, expect to make several trips to Singapore before all the intrica­ cies can be ironed out.

Strategies for Success 45

2. Refrain from telling jokes. Humor doesn't translate well between cultures, and even if you do manage to make your meanings clear, you're liable to be categorized as a prankster.

3. Avoid jargon and idioms. The Queen's English (as opposed to American English) is the lan­ guage of record for business. Avoid slang and colloquialisms in your speech, correspondence and other written materials.

4. Chose casual subjects with care. Don't discuss religion, bureaucracy, politics or sex. Safe sub­ jects include tourism, travel, plans for the future, organizational success and food.

s. Remain calm. Whatever happens, never lose your temper. If you need to vent, save the pas­ sion and the details for your colleagues back home. If you lose control (regardless of the provocation), your Asian counterparts will see you as undisciplined and therefore a very bad business risk

6. Keep your promises. Dishonest behavior and broken promises inevitably lead to the loss of "face." When doing business with Singaporean Chinese, relate to them as if they're their com­ pany's ambassador. That way, you're likely to gain respect from their entire firm.

7. Practice diplomacy. Creating a personal rap­ port with the Singaporean company's execu­ tives will go a long way toward cementing a successful business relationship. So mind your manners.

8. Maintain formality. It may take more than a dozen trips to Singapore before you'll feel at ease enough to loosen your tie with a col­ league, both literally and figuratively. It's best to maintain an air of grace and formality.

46 Passport SINGAPORE

9. Be modest. Even if you've done a perfect job on an immensely difficult task, be sure to play down your achievement when a Singaporean sings your praises. He or she will be all the more in awe of you if you don't exhibit too much pride.

10. Avoid overt criticism. Never ever correct any­ one in the presence of your Singaporean col­ leagues. If a blatant mistake has been made, approach the responsible person privately. To behave otherwise will cause everyone, includ­ ing you, to lose face.

Seven Ways to Enter Singapore's Market

1. Establish a representative office. This is the preferred approach for products requiring heavy after-sales service and the cultivation of close rela­ tionships with clients - e.g., computers, software, appliances, and sophisticated or large-scale equip­ ment. A representative office allows you to maintain a competitive edge in terms of prompt service and customer commitment; provides an image of stabil­ ity and long-term availability; enables use of Sin­ gapore as a regional marketing and sales support base; and takes advantage of local tax incentives.

2. Exhibit at trade fairs. This approach is best for the promotion of products appropriate to trade fairs, which are typically well attended here. It allows you access to both major and smaller buy­ ers, as well as to both foreign and local representa­ tives. And hands-on demonstrations help to increase product awareness.

3. Get a trading firm to act as distributor or agent. This is the usual route for imports, at least at first. Agents often act as distributors (and vice versa) and are usually responsible for advertising and pro­ motion. A trading firm will already be aware of local

Strategies for Success 47

needs and customs, it may be privy to opportunities even before bids are announced, and it can market to both wholesalers and retailers. This approach is especially suited to consumer products with well­ established competitors, nonconsumer products (e.g., industrial machinery) aimed at government or commercial institutions, and products requiring before-and-after-sales service.

4. Do direct marketing. This approach is best for consumer parts such as auto parts and small appliances, but it's also used by industries and fac­ tories that wish to avoid the cost of dealing with middlemen. It allows direct access to a large con­ sumer market.

5. Open your own retail stores or distributor­ ship. This is the preferred approach for companies with a broad array of products (e.g., auto accesso­ ries). It provides direct market access. And it allows you to keep prices low and competitive, to control the sales environment, and to improve both quality and service.

6. Negotiate a joint venture. This works best for consumer products and foodstuffs. It's also appropriate for high-tech products that require modification for sale in a local market, that are in growing demand internationally, or that are pro­ tected by copyright, patent or other intellectual property laws (e.g., software). A joint venture will allow its partners to create specialized products aimed at particular consumer needs in the domestic market and to make use of the local company's con­ tacts (marketing and otherwise).

7. Enter a bid of projects. This approach is pri­ marily slated toward sales to public organizations. Best done through a joint venture or local represen­ tative, entering a successful bid can further promote your product's reputation within domestic markets.

2[�,..__ __ Tim_e __

Singapore is eight hours ahead of London, two hours behind Sydney, thirteen hours ahead of New York City and sixteen hours ahead of Los Angeles.

Punctuality?

Though Singaporeans tend to arrive fashion­ ably late for social events (as getting there on the dot suggests greed, impatience, or a less-than-busy schedule), being late for business appointments is paramount to an insult.

Deadlines, Singapore Style

Be practical about setting deadlines. Decide what you can and can't accomplish during a spe­ cific time period. That way, you won't have to ask for extensions, a request that will suggest to your super-efficient Singaporean counterparts that you're a lot less organized than they are.

Don't be specific as to when you'll complete a project until you get to the contractual stage of negotiations. You may come up against anything from obstinance and power plays to a typhoon's arrival or a change in venue.

Time 49

Getting Around

Singapore's public transportation is both effi­ cient and user-friendly. At rush hour, the MRI (Mass Rapid Transit subway) and the buses are probably better choices than taxis, which frequently get stuck in traffic. Between 7 and 9 A.M., and between 5 and 8 P.M., the MTR makes stops every four to six minutes. During those same hours, buses travel quickly as they're relegated to desig­ nated lanes. In general, their routes consume a large matrix of destinations. One caveat: Be aware that not all buses are air-conditioned. If you're wearing a pristinely pressed linen suit, you might not arrive at your meeting in as crisp a fashion as you'd hoped.

However, when it isn't rush hour, consider tak­ ing a taxi cab. Although you'll pay more than you will for mass transit, you'll be taken directly to your destination. Another plus: Unlike in much of the rest of Asia, meter cheaters are practically unheard of here. If you're thinking of renting a car, be aware that despite Singapore's small size, its road systems are among the world's most convoluted. (The rea­ son? They were designed by two Brits who were paid according to the complexity of the job.)

In the 1930s, trishaws (bicycle-powered con­ veyances) replaced the more inhumane rickshaws (the result of buses and cars becoming common­ place). Both vehicles have the advantage of maneu­ verability through narrow streets. Like Singapore's Chinatown, trishaws have been allowed to remain as tourist attractions. However, the idea of corpu­ lent Westerners being pedaled through the tropical heat and humidity by a lean, elderly Chinese man is discomfiting to some.

@� __ \ __ B_u_s_in_e_ssM_ee_t_in_g_s __ _

Preliminary Tactics

Even before arriving in Singapore, supply your Singaporean counterparts with a list of your team members and their expertise, noted in the proper pecking order. Job titles should match Singaporean equivalents; "special assistant" and "information manager" have little meaning in international ven­ ues. Also indicate gender (names may give little indication) or risk having the Singaporeans assume that female team members are secretaries or spouses.

For expediency, you may fax this pertinent information, but be sure to follow-up with a mailed hard copy. Due to unforeseen circumstances, mem­ bers of your group may change as you get closer to your visit. If this happens, be sure to send a revised

list on ahead. Your gesture will save embarrass­ ment on both sides.

Arriving at the Meeting

When entering the meeting environment, let your senior member lead, followed by the next senior member, and so on. This follows local cus-

Business Meetings 51

tom and allows your hosts to keep tabs on who's who. Hierarchy reigns; there are no "horizontal" companies here. The Singaporean team will sit fac­ ing the visiting firm, with persons of equal rank opposite each other.

Don't waste time exchanging pleasantries - unless, of course, your host seems to want to. More often than not, business is addressed immediately.

All meeting materials should be of top quality; streaky photocopies are unacceptable. Full-scale translation of such materials into Mandarin can be expensive and should be reserved for extensive, government-involved projects.

If your group is hosting the meeting, include company pencils and writing pads for the counter­ part's team, as well as small business-related gifts (e.g., logo pens, mouse pads) if the budget allows.

Ending the Meeting

As talk winds down, look to the Singaporean lead player for your next move. He or she will probably wait for a lull in the conversation. Then, after a minute or two, that person will probably stand up, a good indication that the meeting is about to come to a close. All of the players will be thanked for their participation, after which they'll be expected to file out of the room.

Don't congregate outside the meeting room door in hopes of discovering more than you've been able to glean. Instead, ask your colleagues to meet you for a drink at a local pub or at your hotel.

S:' � _. Zf_N_e_g_o_ti_at_in--=g=--w_i_th_C_hi_n_es_e __

The Taming of the Shrewd

Following are some generalizations about the ways in which the typical Singaporean (usually of Chmese decent) thinks during business negotiations. • Just because you've taken the time and spent

the money to present yourself on Singaporean soil doesn't mean that you automatically have the upper hand. When you're on someone else's turf, they have the strategic advantage.

• Singaporeans believe in the Golden Rule of Business: The person with the gold makes the rules! If they're buying, they'll press to have everything their way. If they're selling, they'll expect - and respect - a foreign company that drives a hard bargain.

• Your Singaporean contact may tell you that there are other potential clients vying for the same business you are. This may be true, or it may be a way of "feeling you out." Maintain a poker face and hear out this information with patience.

• If you sense anger or frustration on the part of the Singaporean sitting across the table from

Negotiating with Chinese 53

you, don't give this behavior much credence. This kind of dramatic emotional response is often a ploy designed to gain or maintain the upper hand.

• Keep the importance of the contract you're seek­ ing to yourself. Even if you're working toward a career-making (or career-breaking) deal, never

ever let that be known to your Singaporean coun­ terparts, even unwittingly. If you do, they' re very likely to apply pressure for more concessions than you're willing or able to give.

• Be consistent at all costs. The Singaporeans will be taking notes. If you slip up and contradict yourself, you'll be called on that mistake.

Similarly, internal team disputes should never be allowed to surface at the negotiating table. Always present a united front. Strategies and contingency plans should have been thor­ oughly worked out ahead of time. Under no circumstances should a subordinate argue with or contradict the team leader.

• Hard figures at the negotiating table tend to soften as the discussion proceeds. It's common practice for Singaporeans to offer a bid for ser­ vices that's much more lucrative to them than the figure that ultimately ends up in the final contract.

• Don't allow yourself to be coerced into an agree­ ment that's not to your liking. As your trip winds down or when you're at the final negotia­ tion meeting, the pressure will be on, and the rules are apt to change when your counterparts realize that you're anxious to finalize things.

Toward this end, plan several departure times and don't disclose which one you're hoping to take advantage of.

54

•

Passport SINGAPORE

Be aware of envelopment - a common tactic here. This involves a Singaporean company going out of its way to tend to every need of the visiting foreign team - from social events and cocktail parties to late-night banquets and sight-seeing tours. These serve to lull (and/ or exhaust) the opposition into defeat. Some socializing will be necessary, but keep it to a minimum and tend to your jet-lag.

Myth of the Asian Miracle

Singapore's leaders have always been major pro­ ponents of the primacy of Asian values and the con­ comitant market style. However, economic events of late 1997have shown that much of the so-called Asian Miracle and the rise of its "tigers" was more myth than reality. There's a growing sentiment that much of Asia's failure was engineered by the West in an effort to keep the Orient subservient. This sentiment may surface at the negotiating table if Western foreigners give the appearance that they' re taking advantage of the downswing in Asia's economic growth.

While Singapore hasn't yet been hit with the same scale of difficulties as Indonesia or Malaysia, it may still suffer. Negotiators will find little value in taking the stance of "saving" Singapore or "showing them how it's done" in the West. The Sin­ gaporeans are very aware of the tenuousness of their current position. Much of the anti-Western sentiment is just face-saving for its officialdom - don't take it personally.

Foreigners should avoid being drawn into lengthy discussions of the problem, as this will only inflame the situation. If pressed, the most suitable and diplomatic response is that "Asia will surely overcome this temporary problem, as it's done so many times in the past."

Negotiating with Chinese 55

Tips For Foreign Negotiators

To gain a competitive edge, consider the fol­ lowing tips. • Be prepared. Learn everything you can about

the background, acumen and potential down­ falls of your Singaporean counterparts. Assign your team members different areas to study, then review your findings together.

• Have an organized agenda. Arrive with a clear-cut one. If you leave it to your host, they'll organize things to their own advantage. Once both sides agree, stick to it. Express immediate displeasure if you think delays or postponements are being staged.

• Hold your ground. If you're facing cut-throat tactics, don't be afraid to fight. Let the other side know that you have other options, should this plan fail to work out. Consider compro­ mise only when it will lead to a result you can live with.

• Be prepared to 11jump ship." If you can't come to a mutually agreeable conclusion, be ready to abandon the project, regardless of how high the stakes are. No deal is better than a bad deal.

• Pay close attention to details. No matter how comprehensive a plan is on the table, be sure to scrutinize every aspect of it. Don't skip the fine print; you may end up losing in the overall scheme.

• Take copious notes. Write down everything that the other side says. Be sure to seek any needed clarifications before entering into final negotiations.

• Aim high. Begin on the high end when first presenting prices. While you may not get what you ask for initially, you'll have room to barter.

5 6

Passp ort SINGAPORE

If you begin with what you conside r to be a fair price, you'll have nowhere to go.

• Put friendshi p asid e. Even if you feel that

you've made great strides toward friendshi

p with your Singaporean counterpar t,

this as pe c t

of your relationshi p should be lef t outside of the boardroom. Be assured that the Singpo

re­ ans w ill act in a like manner.

• Don't allow yourself to be bullied. Maintain a

pace tha t you feel comfortable with, even i f your counterparts are pressuring you to mov

e more quickly.

• Maintain a cool demeanor. Westerners (espe­ cially Americans

) are often viewe

d as "ho

t­ heads," prone to impatience and outbursts. Stay calm under tr ying circumstances. If you're displeased, indicate it in a wa

y that makes

clear that the opposition is at fault and that you find their tactics offensive.

The Meaning o f

"Yes," the Absence o f

"No"

Be aware that "yes" usually means " I

unde r­

stand your proposal," "I hear you," or "I'll think

about i t ," not "We have a deal." Because a direct,

unembroidered "no" is thought impolite and disre ­

spectful, Singaporeans ma y

express the negative by evading an answer, by following "yes" with a di

s­ claimer ("f d love to have lunch with you, but it might be difficult"), or by pretending tha

t the q ues

­tion had never been asked. If Singaporeans follow

their verbal affirmatives by sucking in air, be assured that they have reservations.

In addition to offering less- than -definit ive

answers, Singaporeans will often tell you what they

think you want to hear instead of the truth. To avoid

this situation (and its ramifications), tell your Sin-

Negotiating with Chinese 57

ga pore an a ss ociate th at yo u wish to know the d et ails

an d that

y ou w ill not

be u pset i

f th e news i s

b ad.

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In sit u a

ti

ons wh e r

e a l ack

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ar d

curr ency pre­

vents a de al, a co unter trade arra n ge me nt may pro­ v id e a solu

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d e can manif es t as bar

t e r (2,00 0 w idg

ets in exchange for x number o

f c o

m pu t

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as e (goods ar e b rought to a thir d pa rty fo

r re sa

l e to g

e t for

eign excha n ge for

p a yme nt

); o ff se

t s (payme nts to m ake up for pro­du ction, inc ome o r job losses); or b u

y backs ( w hen

a manu fac

tur ing or m i ning inv es tme nt is repaid

w ith p roce

sse d goo

ds or min era

ls p

roduc ed b

y the inv estment

) .

Tho u g h this a

ppro a c h

m a

y se e m hig hly u nor­ tho

dox or cumber s ome t o s o me, perhaps as mu ch as one-quar

t er of all world tra d

e ope rates in thi s fashi

on. Co u n t er

t ra d

e of f

ers a wealth of o ppor tuni­ties (e .g., m ang oes in exch ange for t ra c tors, cam e ras

i n exch ang e fo

r a irp

l a

nes) that might no t be avail­ a

ble other w ise, and Sin gapore offers spe cial tax

i nc en ti ves fo r th ose w

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t h

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m a gination to pro­

cee d in this fas hion.

To Be Inte r p re te d

Th e s t

u dy of

En g

li s

h is mandator y in scho o ls

(a s is a se co ndary la ngu age, be it Mandarin, Malay

or Ta m

il) an d, a s prev

i ous

ly m e ntion e d, English is the langu age of business he re. Still, not e ver yone is fluen

t. Al though there's lit tl

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at an i nter­ p r

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n ten

ti onally try to mislead yo u, chances

are goo d

tha t h e or s h

e will no t un d

erstand all the nuances an

d i n

fe re nces o

f Engli s

h .

58 Passport SINGAPORE

Using an interpreter supplied by the opposition is rife with potential problems. Hiring your own can be expensive, but it's essential, especially for sensi­ tive, high-stakes negotiations. He or she should be multicultural as well as multilingual. Your transla­ tor's knowledge of Singapore's business and social cultures will allow him to assist with such amenities as seating arrangements, banquet details, gift exchanges, and even forms of address. Such knowl­ edge can make the difference between success and failure at the negotiating table. Ideally, you'll have located an interpreter in advance, but your hotel business center can probably refer you to companies that provide competent ones (as well as translators).

Be sure to pay your interpreter well. If you don't, the opposition may make up the difference. An underpaid interpreter isn't likely to do a good job. His (or her) salary should reflect the impor­ tance of his role in the negotiations. Also, treat your interpreter like a member of your team if you wish him to look out for your best interests and to get used to the rhythms and nuances of the team mem­ ber's various speech patterns.

Tips on Using Interpreters

1. Establish Guidelines. Before a meeting, plan the mechanics of how you will work together. For example, how long should you speak before pausing for interpretation? Go over any specialized vocabulary, brief him thoroughly in advance of negotiations, and provide him with as much written material as possible.

2. Don't Exhaust Your Interpreter. During a meeting or negotiating session, stop every cou­ ple of sentences to allow for interpretation, and try to limit each sentence to one main point.

Negotiating with Chinese 59

Interpreters need to rest at least every two hours. If negotiations continue for more than a day, you may need two interpreters. Using an interpreter can stretch a meeting to three times its normal length, so prepare to be patient.

3. Address Your Counterpart. Look toward the head of the team, not at the interpreter. Per­ sonal communication is valued and even non­ English speakers may understand more of your language than they let on. Speak slowly and clearly, avoiding idiomatics and slang.

4. Review What's Been Said and Anticipate What's Coming. After a meeting or during breaks, review with your interpreter the main points that both sides have made. Ask your interpreter what he observed or noticed about the other side's position or behavior. Try to get a feel for the direction in which negotiations are headed. This will help your interpreter to present your case to the Singaporeans in the most favorable way possible.

5. Emphasize Important Points As They Arise. Abstract and complicated discussion is seldom translatable. An experienced interpreter tailors his translations to reflect your style, level of formality, tone and subtleties.

You can help ensure that important points get across by repeating or emphasizing them and by making certain that your verbal and nonverbal (body language) messages are consistent.

The Singaporean Approach to Contracts

Contracts are sacrosanct here. They're not entered into with the idea of breaking them, should that prove expedient. Usually, they resemble those used by the British contingency. There may be occa-

60 Passport SINGAPORE

sions in which you'll make a conditional accep­ tance of the contract as it's presented. If and when that happens, don't expect to see a final contract until any requisite additional negotiations have taken place.

[S)J?" >

Business Outside the Law ,... _______________ _

Graft & Corruption

Corruption isn't tolerated here. Since Indepen­ dence in 1965, the city-state has never suffered a high­ level corruption scandal - a unique record for Asia or, in fact, for just about any country worldwide. From white-collar corporate players to blue-collar workers of every type, the citizenry seems to embrace fairness. However, it's difficult to say how much of that fairness stems from a ubiquitous personal moral­ ity, and how much from fear of an official and severely imposed one.

The Caning Controversy

Car theft, breaking and entering someone's home, rape and vandalism are all punishable by can­ ing - a prescribed number of lashes with a four-foot rattan cane across bared buttocks, implemented by a martial arts official; it often induces shock and can cause permanent scarring. This particular form of punishment came to international attention in 1994, when an American teenager was sentenced to six strokes (reduced to four after an appeal for clemency

62 Passport SINGAPORE

by U.S. President Clinton), followed by four months in jail (in addition to a fine of 05$2,230), for spray­ painting cars (deemed "vandalism") and other acts of mischief. "It's the only punishment that works," explained former Prime Minister Lee, "but unfortu­ nately, not as effectively as whipping would." It didn't go unnoticed that the U.S., Singapore's largest foreign investor, has never objected to the caning of Singaporeans. According to the Home Affairs Minis­ try, an average of 1,000 people are caned each year.

Prostitution, Drugs & Gambling

Prostitution is legal as long as the women in question acquire licenses issued by the govern­ ment; such licenses require twice-monthly testing for venereal disease, HIV testing every three months, and limit the districts in which prostitutes can operate. Homosexuality, however, is illegal and carries a maximum sentence of life imprisonment.

Anyone found guilty of trafficking more than a half-ounce of heroin, an ounce of morphine, or a pound of marijuana may be sentenced to death by hanging. Still, the number of addicts (ascertained by arrests and clinics) in 1994 was 8,856, more than double the number recorded during the previous year. (Glue sniffing isn't uncommon among discon­ tented youth.) Though the government believes in rehabilitation, it takes a "zero tolerance" stance on repeat offenders, who may soon be receiving man­ datory prison terms of seven to thirteen years plus caning. First-offense users of the drug Ecstasy can expect to spend twelve to eighteen months in jail.

There are no casinos in Singapore, and it's ille­ gal for any private gathering to involve gambling. However, official gambling is provided in the form of horse racing and a lottery.

2�'-' __ N_am_-_e_s_&_G_;_e_ti_ng_ s __ _ Singaporeans are rarely so bold as to introduce

themselves, but they have no problem introducing each other. Along with an individual's name, the introductory greeting will usually include some sort of biographical tagline. For example, "This is my colleague Mr. Tan. He is responsible for writing the contracts." or "This is Vice President Wong. Did you know that she's a Yale graduate?"

When more than one person is introduced, the most important person is named first. Introduc­ tions are made from the top down: the higher rank­ ing to the lower ("Minister Chan, this is my assistant Greg Smith"), the elder to the younger (Mr. Curtis, meet my son Jason Lee"), and the woman to the man ("Mrs. Hassan, please meet my colleague James Schwartz"). (It's best to refrain from using personal names or nicknames unless you've been asked to do so.) Muslims, particularly Malay men, may, after a handshake, touch their hands to their chests, symbolizing a heartfelt greet­ ing. Feel free to return the gesture. Introductions among equals don't require a specific order.

64 Passport SINGAPORE

Common Titles

Professional titles are combined with last names, as in President Lee or Dr. Wang. If a title isn't involved or if it isn't known, precede the sur­ name with Mr., Mrs., Miss or Madam. ("Hello, Miss Wong. It's a pleasure to meet you.") Western influ­ ences have made it perfectly acceptable to address a married woman as "Mrs." followed by her hus­ band's last name.

First Name Last?

Traditionally, Chinese place their surname first (Chinese surnames are almost always monosyl­ labic), generally followed by a personal name (fre­ quently two words). For example, Tan Boon Lee would formally be called Mr. Tan, though his first name may not necessarily be Boon Lee. More and more Chinese are adopting Western first names, as in the case of Taiwan's prime minister, Michael Chaing.

Malay's put their given names first, then add the word bin (son of) or binta (daughter of), fol­ lowed by their father's given name. Take the name Ali bin Osman for example. In a business setting, you would drop the father's name (Osman) and call him Mr. Ali. Traditionally, married Malaysian women keep their maiden names rather than adopting their husband's, much like many contem­ porary American women. However, in a business setting, Mr. Ali's wife - Zaitun bin ti Abdullah - may choose to be called Mrs. Zaitun Ali.

Traditionally, Indians aren't assigned a sur­ name. Instead, they use their father's first initial before their given name, as in G.Vidayatha. Because many Indian names are lengthy and difficult to pro­ nounce, these socially sensitive people have begun

Names & Greetings 65

to abbreviate tongue-twisters when associating with the Western world. Therefore, in a business setting, Mr. Vidayatha might call himself Mr. Vida or Mr. Yatha. Indian women adhere to the same naming structure, and when they marry, they adopt their husband's last name.

If you're unsure about how to proceed, simply ask the person what he or she wished to be called.

Chops

A tradition dating back to the early Chin Dynasty, signature seals known as "chops" were commonly used by well-positioned Chinese on for­ mal documents (as well as to access bank accounts and to authenticate works of art). They remain sta­ tus symbols for Chinese Singaporeans and range in size from imperial blocks weighing several pounds to discreet, pocket-sized seals. However, chops are no longer commonly used in business.

Made of jade, marble or soapstone, they often feature the carving of an animal from the Chinese zodiac at the top. The bottom is carved with one's calligraphic name, which is pressed into a thick red paste and then printed.

Handshake Etiquette

Handshakes are the most common business greeting in Singapore. However, leave that manly Texas grip back at the ranch and give a gentle squeeze for ten to twelve seconds (about eight sec­ onds more than the standard Western shake). Addi­ tionally, Singaporeans will often use both hands. While Westerners tend to read a lot into a hand­ shake, in Singapore, "pressing the flesh" is merely a friendly greeting. There are no subtle messages encoded in a handshake's firmness or duration.

66 Passport SINGAPORE

If your Singaporean counterparts lack Western­ ization, you may want to wait for them to initiate the handshake before you extend your hand. In both the traditional Malay and Indian cultures, religion dic­ tates a more reserved greeting - a nod. While it is mostly a rare case when this will occur, when it does, simply offer a smile with a nod of the head.

It's acceptable for women to shake hands with both sexes, but they're are responsible for initiating the gesture. Alternately, they may simply nod politely when introduced. <-i�, \�L..___, ---

ct-:,..li.--Communication Styles

Singaporean Chinese are reserved by nature. Trying to read their body language and verbal cues is much like trying to interpret a shrouded canvas. They never criticize or disagree in public (this will cause a loss of face).

In one sense, you may find a Singaporean coun­ terpart's comments extremely blunt. As previously noted, it's perfectly acceptable to ask someone how much money they make. But at the other extreme, they never say "no" directly but instead, "That would be difficult" or "I'd like to, but ... " "Yes" often means "I understand" rather than "I agree."

Eye Catching

In Western environments, looking a person straight in the eye implies "You have my full atten­ tion." In Singapore (as well as in most Far Eastern countries), the direct-look approach may be inter­ preted as disrespect, or worse - as aggression. Catch your counterpart's eyes for a second, then immediately lower your head and look down. Your body language expresses that you're honoring the person in your presence.

68 Passport SINGAPORE

Behavioral Taboos

Many gestures that are innocent in Western countries are fraught with negative meaning in this part of the world. The following should help you avoid body language that might be misinterpreted. • As a general rule, avoid touching anyone, espe­

cially those of the opposite sex. While in West­ ern cultures, a pat on the back or a hand on the shoulder is a friendly gesture, in Singapore it may be seen as aggression or flirtation; in either case, it will create awkwardness and ten­ sion. Once familiarity sets in, it's okay to lightly touch the arm of a Singaporean of the same sex.

• Pointing with a finger is considered rude. Use your entire hand, with the palm up, to bring attention to a person or an object. Another acceptable way to gesture is to loosely fold the fingers under with the thumb out, palm facing up. If you want someone to come over to view documents at close range, avoid using the Western crooked finger pull (which is reserved for animals). Instead, keep your palm facing down with fingers together, then move your hand as though you're lightly scratching.

• Displaying the sole of your foot or the bottom of your shoes is considered disrespectful and rude to some Singaporeans. So try to avoid crossing your legs unless your seated behind a table or desk.

• When dealing with Indians or Malays, always hand items over with the right hand. In the Muslim faith, the left hand is used only for per­ sonal hygiene and is therefore thought "unclean."

Communication Styles 69

•

•

•

•

•

•

While it's always tempting to pat an adorable child on the head, in the Muslim or Hindu reli­ gions the head is the most sacred part of the body and should not be touched.

In a business setting, Singaporeans generally feel most comfortable at arm's length from the other person (slightly more than a meter). So if you see your Singaporean counterpart backing up or moving toward a wall, simply take a step back.

Always defer to your Singaporean host, regardless of the situation. This shows respect and will help to create a positive rapport.

Always speak in a gentle, calm manner. Anger will only result in a loss of face. When asked a question, it's polite to maintain a brief silence before answering. This pause shows that the respondent is giving the question proper and considerate thought.

Out of politeness, Singaporeans will present both the positive and negative sides of nearly all decisions. For example, if a German firm is planning to export 1,500 widgets to Singapore via Federal Express, the Singaporean counter­ part might present a more cost-effective means of shipping, even if this wouldn't save his firm any money.

While holding hands on a date may seem harmless to Westerners, handshakes are about as good as it gets between men and women in public. However, same-sex friends (especially young girls) can be seen holding hands or walking arm-in-arm along the street.

32 Passport SOUTH AFRICA

The rugged mountains and stormy waters off the Cape of Good Hope have given birth to scores of seafaring legends. The ancient Arab seamen of Sin­ bad' s day claimed that Table Mountain, which over-, looks the city, was a giant magnet that drew ships to the rock. The disappearance of Portuguese explorer Bartholomeu Dias near the Cape in 1490 is the basis of the legend of the The Flying Dutchman, a ghost ship that roams the world's oceans. Some of the most credible sightings of the Flying Dutchman date back to World War II, when two German U-boat commanders, hunting merchant traffic off the Cape, reported seeing an old sailing ship plowing the high seas not far from where Dias is said to have perished in a shipwreck some five centuries earlier.

Mysticism aside, Capetonians have always been more racially tolerant than other South Afri­ cans. The culture of the colored (mixed-race) com­ munity, concentrated in the Western Cape, is felt in both the region's distinct patois and in its cuisine, which has a strong Malaysian bent.

Eastern Cape

This is the cradle of the country's ''black con­ sciousness movement." However, the East Cape's political importance has faded with the emergence of black rule and Nelson Mandela's government of national unity. The area around the city of Port Eliza­ beth, home to several large automotive plants, is known as "the Detroit of South Africa." Enough said.

$-_G_o_�_er_n_m_e_n_t_&_B_u_ s_in_e_s _s _

Privatization & the Redistribution of

Wealth

Considering that Communism and Socialism were anathema to the old white minority govern­ ment, that government did a remarkable job of accu­ mulating assets and controlling the economy. (However, ANC inherited an economy suffering from 20 years of double-digit inflation.) More than 50 percent of the country's fixed assets were in gov­ ernment hands, and most still are. As recently as 1990, the ANC was vowing to further nationalize industry, but it dumped its neo-Marxist philosophy for the pragmatism of the real world. Though it has pledged to "restructure" its asset holdings in the near future by offering them to foreign investors, the government is still having trouble saying the "p" word - privatization - with heartfelt sincerity.

The challenge facing the government is how to redistribute the wealth without discouraging whites, who are the true wealth creators. A good indicator of the new-found intention to let market forces determine outcomes was the 1993 abolition

34 Passport SOUTH AFRICA

of mandated price controls for all goods and ser­ vices, except for deposits on soft drink bottles.

"Black Economic Empowerment"

While the idea of black control of the economy isn't new in Africa, the Mandela government's approach is. It believes that encouraging black pri­ vate investment and using the market to create black wealth will work far better than expropria­ tion and nationalization - two policies that have left a trail of bankruptcy, corruption and gun shy international investors across the continent. Whether ordinary black citizens will become risk­ taking, share-owning capitalists remains to be seen.

The ANC's new macroeconomic plan is decid­ edly pro-free market, calling for increased union flexibility, a lowering of remaining tariffs on imports, and an end to currency control regula­ tions. But the government is caught between a rock and a hard place. It's beholding to the black unions for support yet has come to the realization that the relatively high union wages have proven a hin­ drance to luring overseas investment.

White Corporations See the Light

Sensing that cooperation beats expropriation or legislation any day, several of the country's major white-owned corporations are now helping to cre­ ate black wealth through the private sector. Anglo American, the mining and manufacturing giant, has sold off a 48 percent stake in its Johnnies Indus­ trial Corporation (manufacturing, media and retail) to a black-owned consortium at a huge discount. Others are following suit.

Cynics claim that "black empowerment" merely means large, white-owned conglomerates are trying

Government & Business 35

to buy off black aspirations by creating a black elite who would serve as a buffer between continued white privilege and the aspirations of the black poor. There's some credence to this. (While per capita income among blacks grew 10 percent on average between 1985 and 1995, it was a small, well-edu­ cated middle class who benefited, while the vast majority remain an underclass.) Still, getting some of the nation's wealth into black hands will ward off future government action that could be even more painful financially. It's a wise and farsighted strat­ egy, a matter of survival rather than benevolence.

Heroes Of the Day

Thabo Mbeki, Mandela' s heir apparent and the architect of the country's macroeconomic plan, has emerged as the darling of both industry and the overseas investment community, having lured more than 160 foreign companies into the country in just two years. Discussing what he envisions for South Africa by the early 21st century with the New

York Times, Mbeki listed a great lessening of segre­ gation and poverty, higher literacy levels, and a jumpstart on the information superhighway. "We don't have a huge communications infrastructure ... to dig up," he explained.

Another new titan is Dr. Nthato Motlana, Man­ dela's physician. He controls New Africa Invest­ ments Ltd., which grew, in a few short years, from a storefront operation into a giant venture capital firm controlling US$1.9 billion in assets. He and his dep­ uty, Cyril Ramaphosa, former secretary general of the ANC, are two of the most sought after black businessmen in the country, in demand as much for their abilities as for their political connections.

�

36 Passport SOLJTH AFRICA

... And Some Critics

In 1994, the ANC campaigned with the prom­ ise of providing a million new homes (as well as creating jobs and lowering crime) within five yea�s. Though they've fallen short, it's also true that mil­ lions of South Africans have been provided with electricity and clean water for the first time .

Playing Hardball

Foreign businesspeople should be prepared to deal with the reams of red tape that will be thrown at them both by the central government and by pro­ vincial authorities. The latter now have a much stronger say in what business gets done on their turf than in the past; don't underestimate the diffi­ culties they can create.

In addition, South African companies are used to having the local playing field all to themselves and they jealously guard their territory. Several for­ eign companies who've attempted to set up shop here say that the biggest obstacles are some rather unethical practices from local competitors - from threatening suppliers to leaning on local govern­ ment officials to create roadblocks to market entry.

@�_T_h_e_W_o_ r_k_E_nv_i_ro_ n_m_e_n_t_

Security Over Advancement

Though South Africans love money, they see no virtue in "workaholism ." In many ways, the national approach of balancing work, play and family is rather European. South Africans will work hard, but they're reluctant to put in overtime or to work weekends. Four- to six-week annual vaca­ tions are common. Labor laws make it difficult to fire a worker, and most who sign on with a corpora­ tion early in their career expect a job for life. As in America, however, lifetime corporate positions are becoming less and less likely.

Corporate Pyramids

"Cross ownership" is the watchphrase, with just four major corporations - Anglo American, Sanlam, Rembrandt and SA Mutual - controlling more than 70 percent of the market capitalization of the Johan­ nesburg Stock Exchange. This approach can make it difficult for foreign competitors to enter the market.

Emerging black venture capital firms, which in the past had condemned cross ownership as an

38 Passport SOUTH AFRICA

impediment to black entry into business, tend to copy their white counterparts when structuring their own companies.

Seniority Counts

Big business is elitist, and decisions are made at the top. Innovation from the lower ranks is rare. South Africans are big on "dues paying," working up slowly through the ranks and using school and family connections to advance. Rarely will you see someone under the age of 40 in a position of power in larger corporations. Entrepreneurial skills are highly valued, especially in the black community, where experience in big-time business circles was made virtually impossible by apartheid.

On average, executive pay is 23 times that of a manufacturing employee, putting the country on a par with the U.S. (24 times) but d�cidedly higher than Britain (19 times), Germany (11 times) and Japan (9 times).

Middle Management: Linder the Gun

As blacks begin to move into the corporate world through government-supported affirmative action programs, white middle managers see them­ selves as being under siege. While virtually every business and corporation, regardless of size, has instituted a program of equal opportunity and affir­ mative action for blacks, the reception in mostly white middle management circles has been nothing short of icy. While handing over political power to the black majority cost whites little in terms of eco­ nomic power, the movement of blacks into business is viewed as a threat to white livelihoods, resulting in an enormous amount of racial tension and angst. One study on affirmative action programs found

The Work Environment 39

that 71 percent of companies that have instituted such programs encountered serious resistance from white managers.

There's a remarkable lack of guilt on behalf of whites about the depravations of apartheid. A black executive in charge of affirmative action pro­ grams at a large U.S. computer company says the first question that's usually asked by white middle managers is, "Why do we have to have equal opportunity programs?" She says whites are in an absolute state of denial about apartheid. This is where the great divide comes in post-apartheid South Africa. An example of this attitude: Whites often half jokingly refer to the government's policy of providing housing, jobs and better education for South African blacks, a scheme formally known as the Rehabilitation and Development Program or RDP, as the Revenge of the Dark People.

With the great uneasiness about what lies ahead for white South Africans, especially those with technical skills, they' re always keen to know their odds of "gapping it" to another country. The usual targets are Canada, Australia and the U.S. After enduring days of lectures about the great prospects in the new South Africa by senior officials at computer and mining companies, one visiting American financial journalist was asked privately, by no less than six different people of varying exec­ utive status, about their chances of success should they "gap it" to North America.

In the Factory, Unions Rule

South Africa has one of the strongest labor union movements in the world. During the apart­ heid years, labor unions, whose members are over­ whelmingly black, were at the forefront of local anti-apartheid protests. With the transition to

. ..I

40 Passport SOUTH AFRICA

majority rule, their power has become a problem for the black government. Though productivity is relatively low by world standards, wages are high - a turnoff to international investors. Political mili­ tancy is still rampant. The number of manpower days lost to strikes in 1994, Mandela's first year in office, reached 4 million, and in 1995 the number was still at a remarkably high 1.5 million. The gov­ ernment and private sector solution? Tap union pensions and draw the unions in as corporate investors, giving them a stake in profitability and competitiveness. In this way, it's hoped that the unions will become less militant and more willing to work with management to generate profits.

LJbuntu: Finding the Middle Ground

Ubuntu is a Zulu word meaning "sensitivity toward the human condition," the importance of relations between people at all levels. It's an exten­ sion of the stakeholder concept, which it predates. Ubuntu has become a management/ academic buzz word as the country begins a transition from being

- overtly European to becoming a blend of European and African orientations. The ubuntu approach stresses that there should be a middle ground, a balance between "bottom line" performance and the welfare of employees, and that businesses have a social responsibility not only to their employees and stockholders but also to the country and soci­ ety as a whole. It tries to recreate the corporation as a family unit, with each member expected to pull their own weight in exchange for fair reward and individual respect.

� ,.... __ w_o_m_e n_in _B_us_i_ne_ s _s __ _

An Uphill Battle

Women are conspicuously absent as hero fig­ ures in the country's history, mainly because much of that history is based on armed struggles, from the pioneering days of the Voortrekkers to the guer­ rillas wars of the anti-apartheid movement - all, the province of men.

Traditionally, women were, and continue to be, responsible for home and family and absent from the power structure. (An interesting exception are the Lobedu, who elect a female ruler based, in part, on her ability to make rain.) Most South African men are unwilling to participate in any domestic chores, be they cooking, shopping, cleaning or childcare. In rural areas, polygamy is common and female education often an afterthought.

Because of the country's British heritage, women have always had the vote, and under civil law, they can initiate divorce (except in rural areas governed by tribal law) and own property and credit cards. Still, it's only since 1995 that married women have been permitted to make charitable

42 Passport SOUTH AFRICA

donations in their own names for tax purposes. Pre­ viously, all donations were regarded as having been made by the husband.

The term "businesswoman" is largely an oxy­ moron within both the black and the white commu­ nities. South Africa remains an "Old Boys' Network," and it lags far behind other industrial­ ized nations when it comes to hiring women for senior management positions. As the notion of black economic empowerment takes hold, it's black men who are assuming the influential roles.

It's not uncommon for women employees to be referred to as "girls" (or chickies or Sheilas) and to be excluded from decision-making discussions. How­ ever, they do receive maternity benefits, have access to their husbands' pension funds ( even after divorce), and don't automatically gain custody of the children.

Some Gains

A recent poll by Johannesburg's Business Day newspaper found that 53 percent of women believe that gender prejudice in the private sector remains unchecked. Statistical and anecdotal evidence of this bias abounds. As for the notion of sexual harassment in the workplace - one female sales representative says she's propositioned on about one in ten sales calls and receives no sympathy from her boss who, in fact, has hinted that sleeping with select custom­ ers would be good for business. When asked why she just doesn't leave the company, her reply is that it wouldn't be any better elsewhere.

In 1997, women comprised 2 percent of board members within South Africa's top 1,000 compa­ nies. While this pales in comparison to the U.S. (83 percent of Fortune 500 companies have female rep­ resentation on their boards), it's still an improve-

Women in Business 43

ment over 1995, when just 0.5 percent of South Africa's top 1,000 firms had a woman in the board­ room. (It's important to consider, however, that few South African women between the ages of thirty and fifty have had the benefit of a university educa­ tion.) Women now make up 41 percent of the coun­ try's workforce, yet they receive, on average, just 50 percent of their male counterparts' pay.

Nelson Mandela's government has formally introduced a series of gender equality laws meant to redress discrimination, but legislating away a national mind-set and centuries of tradition is eas­ ier said than done. The presence of multinational companies, complete with their imported view of gender equality and equal pay for equal work, has so far been the biggest contributing factor to shat­ tering the "glass ceiling" for females.

Women, especially white females, must take some of the blame for the relatively slow pace of change. Many still believe that creating a tradi­ tional family is the chief goal of womanhood. Work fills the time until Prince Charming comes along. Having a career never occurs to them.

Dealing with Macho Men

Foreign businesswomen can expect to run into a condescending attitude at virtually every level in both the black and white cultures. Rank or title don't automatically gain women respect, as they often do for men. Expect to be tested. Remarks, including sex­ ual innuendo, may be aimed at provoking a reaction or simply uttered for shock value. A thick skin is required, at least in the initial phase. Take the remarks, including compliments about appearance, in stride and move onto the next point. South Afri­ cans admire toughness, confidence and competence, but like sharks circling a kill, they'll pounce if they

44 Passport SOLJTH AFRICA

perceive weakness. Regardless of the provocation, refrain from giving a lecture on political correctness. It may put an end to any deals in progress.

"The first few days of negotiations were bru­ tal," recalls a female American attorney who was in Johannesburg to close a multimillion dollar manu­ facturing deal. "The South Africans involved just kept talking right past me to the male members of my team. It was distracting for me. I couldn't focus, I was so enraged." Finally, she says, she earned their respect by demonstrating her legal expertise and being a tough, unflustered negotiator. "When I said 'no,' it meant no and they seemed to under­ stand that. Suddenly, they started talking to me like, if you'll excuse the expression, like I was one of the guys. I think if I had 'lost my cool' early on, we would have blown the deal." She says one key to her success was the support of the males on her negotiating {earn, who reinforced her authority as team leader. "Without that," she says, "it would have taken me so much longer to get them to listen to and respect me."

If it comes naturally a little harmless flirtation (if there is such a thing) can go a long way. South African males have such large egos that "playing up to them" can be an instant ice breaker. Trying to be asexual will not get you very far very fast, nor will it help your business or win you respect.

@,..._ __ M_ak_in _g_co_n_n_ec_ti _on_s __

An Elitist Road

South Africa's white, English-speaking busi­ ness elite generally share similar backgrounds - private schools and one of the top three local uni­ versities or varsities, as they're known, with a dash of overseas experience and military service (no longer compulsory) thrown in. The Afrikaans busi­ ness elite have traveled the same route, but through Afrikaner schools.

The current black business elite have traveled yet a third road, more akin to "the college of hard knocks." Many were involved either internally or in exile with the liberation movement (the ANC) and many, such as Deputy President Thabo Mbeki, have earned post-graduate degrees overseas. Often, the leading African businessmen have much more for­ eign living experiences (forced into exile by the white minority government) than their white counterparts.

Still, this is a relatively small community. English and Afrikaners have known and competed against each other on the sports fields and in the executive suite for decades. It's the quintessential

46 Passport SOUTH AFRICA

Old Boys' Network and a tough nut to crack for outsiders. South Africans appreciate "good breed­ ing" and tend to be snobs about education. An advanced degree from Harvard or the Sorbonne will impress the hell out of them.

Introduct ions & Middlemen

Preliminary telephone calls and faxes will take you only so far when it comes to building a busi­ ness relationship. (Cellular phone service was introduced in 1994.) Letters of introduction, if com­ ing from someone well known to the person you intend to do business with, will carry more weight here than in most other countries.

Because the business community is so incestu­ ous (and to some extent, elitist), using a middleman to handle introductions isn't a particularly useful approach, at least in the white community. There's no real history of appreciating the role of middle­ men in business here. Less than 50 percent of total merchandise sales pass through a wholesaler. Most business is conducted directly between the manu­ facturer and the retailer.

Foreigners should consider contacting chambers of commerce, consulate commercial services, trade commissions or embassies in their native countries in order to establish initial contacts. When schedul­ ing appointments from abroad, do so a month or two in advance, if possible, and avoid summer (everything shuts down between mid-December through mid-January), the week before Easter, and, to a lesser extent, major Jewish holidays Gohannes­ burg has a sizable Jewish community).

®--St_ ra_t _eg_i_es _fi_o_r _Su_ c_c _es_s __ Do They Need You?

South Africans have an enormous amount of national pride. While the Holy Grail for many small­ and medium-sized businesses is an overseas partner, don't expect them to prostitute themselves to get one. Many feel that the domestic market is indeed large enough to make a comfortable living in, that entry into the southern African regional exporting market is all they need to make it big, and that they can do so without outside help. Decades of interna­ tional sanctions have taught South African busi­ nesses to be self-reliant. While overseas investors may represent access to capital, it's not a given that local businesses want foreign advice.

•

Ten Keys to Business Success

Build relationships. You can telephone and fax and e-mail all you want but South Africans are reluctant to deal with anyone they haven't met face-to-face. Business is about friends and col­ leagues; "the bottom line" comes second. A South African would rather do so-so business

48 Passport SOlJTH AFRICA

with a friend than good business with a stranger. Establishing a strong personal relation­ ship means trust, and trust will move a deal along much more quickly than sweetening the pot with extra cash.

• Think big. Since the end of apartheid, the most successful deals in South Africa have been export-oriented. Any deal should include some provision for the export of goods at least to neighboring African states. Think big. The fact that the world has recently opened itself to South African commerce is a great lure to local businesses. They want partners who can lead them to the promised land of global exports.

• Be patient. It really isn't in the nature of South Africans to drive hard bargains or quibble over price and detail. Time moves relatively slowly here. Cracking down or being overly aggressive about deadlines or the pace of decisionmaking will probably not hasten the process along. Instead, such tactics will poison your personal relationship.

• Stick to your deal. Many deals are still sealed with a handshake (though it's becoming increasingly important to get things in writing). Those who renege on a bargain are unlikely to get a second chance. The business community is incestuous and fairly small. Once a foreign firm earns a reputation as a deal breaker, reviving its image will be an arduous and timeconsuming task.

• Exchange controls. In an era of government cur­ rency exchange control regulations, doing busi­ ness overseas is rife with difficulties. Deals that help foreign exchange issues and are creative in their funding will be most interesting to South Africans. Coming into talks with a good under-

Strategies for Success 49

standing and strategy on how to handle the bane of South African commerce can make all the difference. As of July 1997, such restrictions on individual investment have been relaxed, but they remain in place for corporate structures.

• Embrace affirmative action. Black participation in the economy is a national obsession at present, encouraged by both the private and government sectors. Be prepared to discuss ways of managing affirmative action (South Africans prefer the term "equal opportunity issues") and have practical tips on handling racial integration in the workplace. Providing practical guidelines to compliance without hurt­ ing company performance and morale are highly valued here. But please, no lectures on the morality of affirmative action.

A strong affirmative action program can set you apart from most competitors. Training and edu­ cation are two other buzz words that many South African businesses (especially black­ owned ones) listen for in contract talks.

• Be aware of your own prejudices. Yes, there are differences between South Africa's black and white cultures, but don't be fooled into thinking that they' re vast within the business community. African businessmen get frustrated when black stereotypes are applied to them. Any uneasiness about race (however subtle) or a patronizing attitude will kill a deal before it starts.

• Understand the political climate. When oper­ ating within the black business community, try to understand the mind-set of an excluded majority. They got most of their support in the liberation struggle from the USSR, China and other communist countries, while for an extended period, the white-minority govern-

50 Passport SOUTH AFRICA

ment they were fighting enjoyed support from Western nations. Showing understanding and sensitivity toward this issue will demonstrate a sincerity of purpose on your part. Don't expect them to fawn all over you because you' re from the West. You were, after all, closely associated with the enemy at one time.

• Choose a local partner with care. In many ways, a black partner is vital, but don't be seduced into a relationship with a nonperform­ ing person who claims to have the right connec­ tions. Look for a partner who can bring together all the necessary elements for your business, regardless of his or her cultural or ethnic group.

• Know the law. South African corporate law, like its tax system, is an unforgiving maze of corpo­ rate structures, each of which has distinct advan­ tages and disadvantages. Before seeking out a partner or beginning talks, have some idea of which legal structure will work best for your business.

Business Gifts

Though not mandatory, a small thoughtful gift for business associates or their families will be greatly appreciated - after developing a relation­ ship. Your gift should be personalized, somehow. A high-quality pen or a dozen golf balls with an indi­ vidual's name and company logo printed on them would be considered by many to be perfect gestures.

$J,...._ __ Tim_e __

Time: It Depends

There are definite differences in the approach to time between white and black cultures in South Africa. Whites, while not exactly slaves to the clock, are less casual than their black counterparts. Still, compared to the rest of Africa and owing to the high degree of international contact that South Africans businesses have, the concept of time is decidedly Western.

Expect to be kept waiting five out of ten times for formal appointments at any level (you'll inevita­ bly be served a cup of tea or coffee.) Last-minute cancellations are routine, especially with the advent of the mobile telephone. Visitors can often judge their importance by the amount of time they're kept waiting before a scheduled meeting. The longer the wait, the lower they are on the food chain.

The bigger the company and the more formal the structure, the more likely it is that meetings will begin and end on time. A visiting American jour­ nalist was amazed when his series of interviews with senior executives at Anglo American (the

52 Passport SOUTH AFRICA

giant mmmg and manufacturing conglomerate based in Johannesburg) went off with military pre­ cision, seemingly timed to the minute.

The conundrum facing visiting businesspeople is that while they can expect most meetings to begin late, it can be fatal to fail to show up at the appointed time. Expect no quarter. A British businessman reports being ten minutes late for a planned one hour meeting at Anglo American. The executive refused to see him even though the time had already been allocated. His secretary apologized but explained that her boss had certain standards.

At s�aller companies, especially black-owned ones, the approach to time is highly casual. Showing impatience or snapping at the receptionist or secre­ tary is counterproductive. There's little they can do to speed things along. It's wise to ask if it would be better to reschedule for another day; it could save you hours of waiting time. An executive may be unable to show up for a noon appointment until 4 P.M., but you won't be told this unless you ask.

Avoid scheduling your appointments too closely together. And it's important to leave a local contact number with those you're planning to see, so that you can be contacted in the event of time changes or cancellations. Always call a day in advance or even the same day to reconfirm. It will spare you having to spend sunny afternoons wait­ ing in empty offices while your contact is enjoying one of those fabled multiple-martini lunches (see Chapter 20) in which time seems to stand still.

Appointments

Because of the inordinate amount of domestic and international travel done by many South Afri­ can executives, appointments should be scheduled as far in advance as possible. A month is an ade-

Time 53

quate cushion, and even then, you'll probably not garner anywhere near a 100 percent success rate. Getting all the ducks lined up in a row is difficult. The odds of getting an appointment with a senior executive with only a week's notice are extremely slim. However, mentioning that you'll be coming from overseas and have only a limited time to spend in the country will help somewhat.

Deadlines

The approach to deadlines is rather casual, even in a country as relatively efficient as South Africa. "I told one small manufacturer I was working with that we had an absolute 'drop dead' deadline for his materials in two weeks. His reply was he wanted to know where the funeral was going to be," says an American exporter working in South Africa.

If you must impose strict deadlines, spell them out clearly and write them into the contract. The best advice? Allow a couple of weeks as a cushion. When you ask a South African to do something, you're likely to hear one of two responses which, though similar in sound, are as different as night and day. One is, "I will do it now-now." The other is, "I will do it just now." Now-now carries a sense of immedi­ acy; it means a task has been given top priority. Just

now is the South African equivalent of manana. It means that a task has low priority and will get done some time in the unspecified future - maybe.

@ ____ B_u_si_ne_s_s _M_ee_tin_g_s __

Arranging the Meeting: Half the Battle

Since apartheid ended, businesses have flocked here in the hope of turning a buck or yen with little knowledge of how business works, and South Afri­ can senior executives have grown somewhat leery of this approach. Big business is more sophisticated here than many think. Don't expect to arrange meet­ ings without an amount of long-distance telephone and fax contact beforehand - much of it one way. South Africans believe that they have much to offer and that they should be pursued.

Any initial request for a face-to-face meeting should include as many specifics as possible about your company, your own qualifications (and those of colleagues who'll be attending the meeting) and an outline of what you're proposing. Experience in dealing in the developing world is considered a plus, as are any references from other companies you've dealt with or press clips that help legitimize your firm's international or domestic standing.

Enough advance time should be allotted to ensure that the person you want to see will be avail-

Business Meetings 55

able. Not wishing to disappoint the overseas busi­ nessman, secretaries and personnel assistants will often suggest someone else to meet with in the cor­ poration if their boss isn't available. This can lead to a wasted trip. If you've firmly identified who you should be meeting, stick to your guns. Any substi­ tute will probably have no decision-making respon­ sibilities or ownership of the proposed project or venture. Alter your schedule, if necessary.

Preparing for the Meeting

Any hint of ignorance about the domestic or regional political scene will almost immediately dis­ qualify you from doing business in this country. Generic ideas don't work here, especially when it comes to financing and foreign exchange. Foreigners are expected to know the obstacles going in; South Africans don't want to spend time explaining them. Rather, it's the foreign businessperson who should be offering solutions. There's no substitute for doing your homework in advance of any meeting, espe­ cially when it comes to exchange controls and profit repatriation.

Arriving at the Company

Often, larger companies will offer to send a driver to your hotel to pick you up, or to take you back afterward. When possible, sit in the back seat. Tipping isn't required, but a gift (like a company pen) would be a nice gesture and it will probably win you a friend. If driving to a meeting yourself, allow plenty of time. The address system, especially in the suburbs, seems to follow no known logical pattern, and many times the addresses are impossi­ ble to see from the street. In the city, finding secure parking may be next to impossible.

56 Passport SOUTH AFRICA

At most large corporations, you'll be asked on arrival to sign a visitor's book and will be given an identity badge that must be surrendered when you leave the building. You'll almost never be sent up to an office unattended. The person at the front recep­ tion desk will telephone upstairs to a secretary or personal assistant, who fetches you in the lobby and escorts you to the meeting. He or she will also escort you out of the building when your meeting is over.

Once you arrive on the proper floor, you'll be asked if you want coffee or tea. This seems to be an ice breaker and often leads to interesting conversa­ tion, which you can use to learn the latest about the company you're dealing with while waiting for your meeting. Also, developing a personal relationship with a secretary can be a key for obtaining a second meeting. Secretaries have enormous power over their bosses' meeting schedules.

The Meeting Begins

Introductions are usually done in order of seniority. Exchanging business cards is normally done at the start of a meeting. It's okay to glance at a card you've been given. Always wait to be asked to sit down; once seated, expect to be asked yet again if you want coffee or tea. It's a good idea to except, as this provides a break in the formality and allows for the start of personal conversation.

South Africans aren't big on slide presentations or overhead projectors. The first meeting is about establishing a personal rapport and determining if you' re a person they can trust. Once this judgment is made, the nitty gritty details can be dealt with. Don't expect any snap judgments or instant deals. Everything will be taken under advisement.

Business Meetings 57

Guidelines for Conducting a Meeting

• Keep it short, crisp and loaded with specific ideas that deal with the special circumstances of doing business in South Africa. Sometimes, the logistics and financing of the deal are more important to South Africans than the actual product or service you're selling.

• Personalize whenever possible. Deals are built on trust, and striking a personal chord will enhance your chances. Casually mentioning that you'd love to see a cricket match or rugby game might just get you an invitation to one (South Africans love to explain the intricacies of their national sports) and offer a great opportu­ nity to cultivate a business relationship.

• Don't hard sell. Nothing is more off-putting to a South African executive than someone who's too pushy. Business isn't done that way.

Concluding the Meeting

Since it's considered rude to interrupt a speaker, you need to ask at the conclusion of your meeting if there are questions about your presentation or your company. Don't leave the follow-up in the hands of the South Africans. Rather, tell them when you intend to make the next contact, even if they offer to get back to you first. If the person you' re meeting with should decide to escort you personally down to the outer lobby, take advantage of this time to broach such non-business subjects as sports, food, family or entertainment. This is truly a prime relationship­ building opportunity. Business deals can be won or lost during the time it takes to ride an elevator down twelve stories.

� Negotiating with South Africans \_J

Avoid Pressure Tactics

Negotiations generally begin with a round of handshakes and small talk during which foreign businesspeople will be sized up as to their local knowledge, their sense of humor and their eagerness to complete a deal. Negotiations are conducted here as they are in the West, with a few subtle differences. South Africans will not allow anyone to con them, bully them or pressure them into making a less-than­ thoroughly-thought-out business decision. A British colleague tells how, frustrated by the slow pace of the decision-making process, he requested a meeting and then informed his South African counterparts that he needed a decision on his proposal within 24 hours. The reply was simply, "That's impossible."

"I backed myself into a corner out of frustra­ tion and I paid for it. We eventually got the order, but it probably took a few weeks longer because I tried to force the issue. They saw right through me." Knowing that Westerners, particularly Ameri­ cans, seem to work under tough but artificial time constraints, South Africans will often use a deliber­ ately slow pace to win additional concessions.

Negotiating with South Africans 59

Turn Down the Volume

Discussions should be conducted in a friendly manner and in quiet voices. Leave the shouting for the rugby match, it doesn't impress anyone. A raised voice is actually counterproductive, it will be taken as a personal insult. Plus, it runs the risk of getting you branded as an obsessive foreigner more concerned about "the bottom line" than the rela­ tionships of business.

Basically, it's safe to get down to business and be firm, but without being gratuitously aggressive. An ultimatum should be used only as a last resort. If it fails to draw an immediate and sincere reac­ tion, walk away. The deal is over.

Personalize the Talks

The ability to relate to the person you're nego­ tiating with is vitally important. Deals are made on a personal level, not on a corporate one, and for a deal to be successfully concluded, the negotiators must end up as friends. Sport chat is a great ice breaker. Bone up on the country's accomplishments in golf, rugby and cricket. Don't initiate or be drawn into racist or sexist conversations. Save such topics for after-hours, once you get to know your South African contact better. And even then, listen rather than lecture.

Win-Win

South Africans aren't cut-throat negotiators. Rather, they seek to build consensus and would prefer to see all sides gain something. For the most part, they're ruled by a sense of fair play, and it's contrary to their nature to haggle over price or quibble over details. Try to present a win-win situa-

'----

60 Passport SOUTH AFRICA

tion in talks, rather than offering choices that limit the proceedings to a win-lose format.

Often, South Africans believe that foreigners need them more than they need foreign business. It's worth mentioning, without making a grand point of it, that you've explored other options and approached other companies about the business at hand. But don't bluff. The Old Boys' Network pro­ vides good feedback, and getting caught out in a lie or a half truth will poison the atmosphere, possibly for good.

One mention about note taking: It's rare at negotiating sessions. When notes are taken, a secre­ tary will do it. For the principals to do so would demean their status.

Inexperience

Many of South Africa's smaller or mid-sized firms, both black and white, lack experience dealing internationally, and they may overestimate their capability to meet your requirements. Don't leave things vague. Clearly enumerate the expected per­ formance standards and time requirements, and the penalties for failing to meet them. For many South Africans, the details are a bore. It's up to the foreign counterpart to spell out responsibilities if future problems and disappointments are to be avoided.

Contracts

South Africa isn't a litigious society. Business contracts tend to follow the pattern of those drawn up in Britain and continental Europe. They're not overly complicated, but they're sometimes worded in a vague manner intentionally to give the local party some "wiggle room," should things not work out. The South African legal system is fair and

Negotiating with South Africans 61

mostly devoid of corruption, but it does seem to favor the local side over the foreign side in cases of corporate and business law.

Interpreters

As one English-speaking European business­ man put it, "If you need to use an interpreter in South Africa, you' re either trying to negotiate for a herd of cattle or you're in the wrong country." English is spoken in business circles, though on occasion, some Afrikaans businessmen may sug­ gest the use of an interpreter as protection during sensitive contract talks with foreigners .

The quality of non-European language skills among locals remains dubious. If you speak Dutch, you'll be able to converse in Afrikaans. If you intend to use an interpreter, notify your host in advance as a courtesy. Finding a skilled local lin­ guist who speaks Spanish, Italian, German, Japa­ nese, Chinese or even French may take considerable time. Consider paying the expense of bringing your own.

Having to use an interpreter is a considerable disadvantage in South Africa because of the emphasis on personal contact, relationship build­ ing and after-hours flings.

Business Outside the Lawg3( \__J v,,.... _____________ _

Though the country's official unemployment rate is in excess of 35 percent, many economists believe it to be substantially lower due to a prolifer­ ating underground economy. Because blacks were restricted in commerce under apartheid (for exam­ ple, there are no supermarkets in black townships because apartheid laws limited the size of retail space an African was allowed to own or operate), many took to opening businesses "off the books," escaping taxes and government regulation. Though apartheid ended, the tradition did not.

Smuggling hit its stride during the 1870s and 1880s; diamonds were hidden in cigarettes and hol­ low shoe-heels, and even wrapped in meat and fed to hungry dogs. Today, with the opening of the country's borders to neighboring African states, the smuggling of goods (textiles, shoes, sports equip­ ment, radios) to avoid the 14 percent VAT has exploded, while attracting some rather unsavory but experienced black marketeers from West Africa. Still, compared with most other African nations, South Africa is a land of plenty with every type of con­ sumer good readily available. Counterfeit goods and knockoffs are prevalent in hawker stalls.

Business Outside the Law 63

Car Theft

Incidents of carjacking have exploded in recent years ( they jumped more than 12 percent in 1996 to 8,524 in Johannesburg alone), with sophisticated international rings responsible for much of the rise. Some drivers are stopped at red lights and ordered out at gunpoint. Those vehicles that aren't victims of the efficient "chop shops" that hack up vehicles for parts usually end up in neighboring African coun­ tries. Prime landing areas are the "killer Zs" - Zam­ bia and Zimbabwe. As a result, auto insurance rates, especially for rental vehicles, are prohibitive. For security reasons, consider hiring a car with a driver. Taxis can be hired by the hour or by the day and half day, but negotiate a rate beforehand. Though many have meters, they rarely seem to be turned on.

Crime: Rampant & Increasingly Organized

South Africa is home to one of the highest per capita murder rates in the world, about six times that of the U.S., or what amounts to some 70 mur­ ders every day. Several studies have estimated the economic cost of street and white-collar crime to be in excess of 41 billion rand (US$10 billion) annually,

the equivalent of the GNP of some smaller African states. Eighty percent of all South Africa house­ holds reported having experienced a crime against person or property within a two-year period. Pre­ dictably, no less than 71 percent of the populace wants to reinstate the death penalty, which was only abolished in 1995.

Crime is also becoming increasingly organized. Police estimate that there are more than 450 orga­ nized crime syndicates operating within South Africa, including arms of the Russian Mafia and of South American drug cartels.

64 Passport SOUTH AFRICA

Under apartheid, the country was considered "safer," but few benefited and economic growth slowed to a standstill. Increased political freedom brought with it IBM, Ford, General Motors, and hope 'for a better future. True, freedom also brought an increase in crime in white areas, but relative to the rest of the continent, South Africa is no worse off than Nairobi and probably a lot safer than Lagos.

Baksheshis & Petty Bribery

By the standards of a continent that has suf­ fered under the weight of official corruption, South Africa is remarkably corruption free. President Mandela's African National Congress remains remarkably untainted by major scandal, though there are signs that kickbacks for government ten­ ders, especially from local contractors and compa­ nies, are becoming more common.

Small-scale bribery is growing among police and some local-level officials when it comes to cir­ cumventing minor infractions of the law. To many South Africans, this is a worrisome trend. Kick­

backs (baksheshis) among locals are rampant. The previous white government set the tone.

Prime Minister John Vorster was brought down by a corruption and influence-peddling scandal that included attempts to purchase the now-defunct Washington Star newspaper with a secret, govern­ ment propaganda slush fund. Petty bribery was as rife in the white-run civil service as it's now in the increasingly black-run civil service. In fact, white collar crime is soaring, and much of it is being com­ mitted by white managers. Up to 60 percent of all fraud cases in the country are orchestrated by the management of legitimate companies.

All that having been said, few international businesspeople have reported encountering blatant

Business Outside the Law 65

demands for bribes or a piece of the action (not uncommon in other African nations). Don't act hastily if approached. A firm but polite "We don't do business that way" may suffice.

Drugs & Money Laundering

The smoking of dagga (marijuana) has long been a national pastime in both black and white circles, despite the extremely harsh penalties for possession and dealing that existed under conservative, white government rule. The coastal region of Natal pr�­ vided prime growing areas of dagga. "Durban Pm­ son" (as one cultivar was known) was famous throughout Africa for its near-mystical highs. But as the country's borders have opened up and the job­ less have migrated from black townships into the city, harder drugs (particularly cocaine and even crack) have become more prevalent.

Johannesburg's once-fashionable cafe district and Hillbrow' s pleasant residential hotels have turned into drug markets and crack houses run mostly by immigrants from West Africa. With its excellent international airline and maritime connec­ tions, South Africa has become a major transit point for cocaine and heroin bound from Asia and North Africa for Europe and North America.

Dealing on the streets has become blatant. One American journalist says he witnessed the sale of cocaine on a Hillbrow street corner in broad day­ light, while a half block away a traffic cop was busy writing parking tickets, occasionally looking up to take in the drug transaction a few yards away but taking no action.

So at a loss is the police force that it called in an American business consulting group to reorganize its stations. Another reason for the booming drug trade is the country's highly sophisticated and

66 Passport SOUTH AFRICA

almost-no-questions-asked banking system, which has become a popular money-laundering station for world drug cartels from South America and West Africa.

Prostitution: The Calvinist Backlash

South Africa's prudishness under white Afri­ kanerdom has given way to a booming sex indus­ try, complete with classy bordellos, a large contingent of eastern European madams, and street-walking prostitutes of all colors and national­ ities. Though prostitution is illegal, newspapers are rife with advertisements for sex services of every description. The country that once banned lingerie catalogu�s as smut and routinely confiscated Sports Illustrated' s annual swimsuit issue at airport cus­ toms on the grounds that it was pornographic now boasts its own soft porn magazines, including one published in Afrikaans entitled Loslyf (Loose Life).

What began as an almost quaint loss of national innocence has evolved into something decidedly ugly. South Africa now rivals Thailand and the Phil­ ippines as a center for child prostitution and pedo­ philia. So-called township taxi queens - black pre­ teen prostitutes - thrive in the major cities. Not coincidentally, statistics sight children and teenagers as being seven times more likely to be the victims of rape than adult females. The AIDS epidemic that's hitting South Africa hard seems to be of little deter­ rence to the sex industry here.

®-_N_am_ e_s_&_G_re _et_in_gs __ And So, How is Your Family Today?

The English, the Afrikaners and the black Afri­ cans all have distinct forms of greeting, and each tends to mirror their collective personality. Expect what sounds like a rather clipped Mora, meneer (liter­ ally, Morning, mister) from the Afrikaners. While it sounds less than warm, it's about as informal as it gets until you develop a personal relationship.

English-speaking white South Africans follow the British style of a formal exchange of pleasantries, not overly sincere but polite. Everybody, but every­ body shakes hands.

Black South Africans are far less structured in their greetings (a function of a less manic outlook on time). Expect to be asked how your trip was and how your family is doing. The tradition of long greetings stems from a time when Africans walked miles to visit neighboring villages on social calls. A gushing greeting was considered the least a villager could do for the traveler. Don't be impatient with such long drawn-out exchanges. Rather, get into the spirit and appreciate that the person you came to see

68 Passport SOUTH AFRICA

is prepared to take the time to sincerely inquire about your welfare.

Names & Titles

English-speaking white South Africans seem big on double-barreled hyphenated last names like Brown-Smyth. In formal correspondence, they'll often use initials followed by their surname, as in P. J. Brown-Smyth. Afrikaans family names are slightly more complicated and frequently include a lower­ case prefix, e.g., Jan van der Merwe.

It's often easy to identify an African's ethnic or tribal origin by his or her surname. Most Africans will have several given names, which may include an English or Afrikaans name, a biblical name, plus another from his or her ethnic group. However, for business purposes, they' re usually shortened to a given name and a surname. Be aware that because African names tend to be mellifluous, they can grate when a foreigner mispronounces them.

Generally speaking, titles such as Doctor aren't used in business or academic circles, though some businessmen with honorary doctorates will insist on being addressed in this manner. On occasion, Afri­ can businesspeople will, in conversation, use one's surname only ("Tell me, Smyth, what do you think of ... "). This isn't meant to be rude or challenging, rather it's a sign of a personal warming and the start of a relationship.

Avoid using the term Miss or the Afrikaans equivalent mejuffrou in business conversations. They've developed a pejorative connotation, some­ thing more akin to missy. When in doubt as to a female's marital status, leave it out.

Names & Greetings 69

Company Names: An Alphabet Soup

Corporations like to refer to themselves with an alphabet soup of initials that identify their structure and legal standing. Ltd. (an abbreviation for Limited) or in Afrikaans Bpk. are roughly the equivalent of Incorporated in U.S. terms, and they generally signify a publicly traded company. Smaller companies will refer to themselves as PTY LTD (in Afrikaans, Edms. Bpk). This generally refers to a privately held com­ pany, though it can also indicate a wholly owned subsidiary of a public company.

The Employer/Employee Relationship

This is probably the hardest relationship for a foreigner to adapt to in South Africa. Yes, it's okay to address drivers, cleaners, tea ladies, housemaids, cooks and lift operators by their first name, as long as it's done respectfully. However, expect to be called by your last name with a title such as Mr., Mrs. or Miss by people employed in the service industry.

"I could tell there was something bothering Margaret, my housemaid, for weeks, but I couldn't put my finger on it," recalls an American lawyer who was residing in South Africa. "She seemed eager to avoid me and rarely spoke. I just couldn't figure it." After cornering Margaret in the kitchen one afternoon, the lawyer discovered the source of her maid's unhappiness. Weeks before, the lawyer had instructed Margaret to call her by her first name, Catherine. "It seems Margaret couldn't handle it. She was so uncomfortable with it, she just avoided talk­ ing to me." The solution: Margaret reverted to addressing her employer by her last name and title.

It may take some getting used to, but when in Rome - or Pretoria, for that matter - do what the locals do.

rt�(__.__c_o_m_m_u_n_ic_at_io_n_S_ty_le_s __

Let's Get Physical

South Africans are warm and friendly people by nature, and conversation can get very personnel very quickly. There's a genuine interest in how for­ eigners live and how they view South Africa. Small talk reigns.

South Africans like to be physical when talking. There's a lot of handshaking and backslapping (and in the case of black Africans, handholding is a sign of friendship). This is a macho world and a firm hand­ shake is an important first line of communication for any person, male or female, wishing to make an impression. (The "African handshake," a handshake augmented by slipping a free hand around the other person's thumb, is used between blacks and whites and between blacks, but not between whites.) Eye contact is essential. Also, be prepared for the inevita­ ble sports analogies. In this sports-mad country, it seems that every business situation can be compared to a game of cricket, soccer or rugby. When passing through a doorway, it's customary for African men to precede women.

Communication Styles 71

Not the Queen's English

English is, by and large, politically neutral and the language of commerce. Because of its associa­ tion with U.S. pop culture, it's especially fashion­ able among black youth. But South African English, like American English, has peculiarities that make it unrecognizable to someone who speaks the Queen's version.

When a business colleague offers to give you a tinkle, he's talking about a telephone call. The expression ag shame can mean "How cute" (as when one compliments the parents of a young baby); it can also be used to express sympathy (as in "What a shame"). Jawellnofine; a combination of the words yes, well, no and fine, means something akin to, "What do you want me to do about it?" Whole dic­ tionaries have been written about fractured South African English, a language in which no sometimes means yes or nothing at all. Ask a South African how he is and you'll likely get the response "No, I'm fine."

One practice visitors may find annoying is hearing a lengthy joke told in English, only to have the punch line delivered in Afrikaans, simply because it sounds funnier.

Many Afrikaans expressions have been adapted into the everyday English vocabulary of South Africans, such as lekker (good or nice) and bakkie (pick-up truck). No one is quite sure about the origin of babbelas (pronounced bob-el-ass), which is roughly the equivalent of a hangover.

Some other everyday South Africanisms: • Cafe (pronounced Kaf). A cafe or a corner gro­

cery store. • Bell. Used either as a noun or a verb. "Give me

a bell in the morning" means "Telephone me"; "I'll bell you" means "I'll call you."

72

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•

•

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Passport SOUTH AFRICA

Strusbob. This is a form of punctuation used when a speaker expects a listener to be skepti­ cal. For example: "I went to the casino last week and won 1,000 rand, strusbob." The word seems to be bastardization of "True as God."

Dop. A cocktail or drink. "Let's go for a dop later."

Platteland. Refers to unsophisticated, conser­ vative rural areas. "Will this play in the Platte­ land?" is the equivalent of "Will it play in Peoria?"

Donner. Literally "thunder" in Afrikaans, it's used as slang to mean a severe beating, as in "I'm going to donner you" or "My team got donnered in the last game."

Age = Wisdom

In African cultures, there's great respect for ancestors as well as elders, who are seen as reposi­ tories of experience and the wisdom that comes with it. To not show the proper respect to someone who is your elder is highly offensive to most Afri­ cans. While urbanization appears to be leading to a breakdown of these traditions, they remain strong in rural areas.

A Desire To Not Disappoint

Black South Africans initially tend to be more reserved in their business communication style than their white counterparts, that is, until a rela­ tionship develops and the physical side takes over. Then, Africans are even bigger huggers and back­ slappers than whites. Many will speak English with a heavy accent, as well as in a rapid cadence. Pay attention. Asking for constant repeats will eventu-

Communication Styles 73

ally be deemed insulting. And avoid replying in anything but your normal tone, volume and pace. Speaking more slowly, along the lines of the Voice of America's Special English News broadcast, will also insult your listener. South Africans may speak with an accent, but they don't listen with one.

And they don't like to admit that they don't know an answer. It ties in with the tradition of hospi­ tality and the desire to not disappoint. If you ask a question that can't be answered, expect an answer anyway. The correct information will be forwarded to you, one way or another, during subsequent contacts.

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Guidelines for Foreigners

Maintain your sense of humor. Humor, often self-deprecating, is as common as gazelles are in the Kruger National Park. South Africans expect you to laugh with them, and even some­ times at them, as long as they too are laughing.

Be physical. Shying away from physical con­ tact may be interpreted as aloofness, unfriend­ liness, or a lack of trust.

Don't interrupt. Interrupting a speaker in mid­ sentence to make a point will draw, if not an "Excuse me, now let me continue" rebuke, then at least an admonishing stare.

Positive reinforcement. This seems to put South Africans at ease. If you're listening, it's to your advantage to nod in agreement and to occasionally agree verbally as well.

�f Government & Business

Business occupies a position of privilege in Spanish society. In the 22 years since Franco's death, the government has shown a strong commit­ ment to social and economic modernization, which was a prerequisite for Spain's entry into the Euro­ pean Union (EU). In order to meet Maastricht Treaty criteria for admission into the EU's single currency European Monetary Union, however, it still has much to do about instituting welfare reform, privatization, deregulation and deficit reduction.

A critical factor in the country's success to date has been the encouragement of foreign investment. The 1991 Budget Act ensured EU enterprises the same treatment as local companies in strategic sec­ tors such as TV and radio broadcasting, air trans­ portation and gambling. In 1992, all existing foreign exchange and capital controls were abolished, giv­ ing residents and nonresidents complete freedom in financial transactions - including payments, receipts or transfers generated by foreign invest­ ments in Spain. That same year, the number of for­ eign investments previously requiring government authorization was decreased.

Government & Business 31

Barriers to Trade and Competition

Thanks to the center-right government of Jose Maria Aznar and the Popular Party, elected in March 1996 to replaced the Socialist leadership, trade barriers are falling rapidly. Prime Minister Aznar is committed to sweeping through economic reform packages designed to improve conditions for businesses.

In June, 1996, the government introduced four "decree" laws designed to dramatically reduce the tax burden on businesses in the short term (an esti­ mated US$1.5 billion) and encourage economic growth and market confidence in the long run; lib­ eralize key sectors of the economy (namely the land, energy, and telecommunications markets); eliminate price controls for some fuels; remove building restrictions (which could triple the amount of land on the market); encourage job cre­ ation; and restrict Spain's mighty professional guilds. The June laws also eliminated double taxa­ tion for many foreign companies doing business in Spain. (However, it should be noted that overly optimistic growth forecasts led to a deficit shortfall at the end of 1996, in response to which the govern­ ment increased indirect taxes on alcohol and tobacco.)

This reform package sent a strong message that Spain has turned its back on the European welfare culture and embraced American-style competition. It's hoped that some of the corporations that bypassed Spain for Eastern Europe, Latin America, and Asia in the late 1980s and early 1990s will give Spain a second look.

While the Aznar government has opened the door to reform, it still needs to address the country's rigid labor legislation. There are, for example, severe restrictions on firing employees (and thus hiring new

32 Passport SPAIN

ones) and Spain has extremely high severance pay­ ments. This is tricky business, as the government doesn't want to strain relations with trade unions. ?ther issues that need attention are revamping the mcome tax system, cutting back on the high Social Secunty and redundancy rates that companies are reqwred

_ to pay (both of which are supported by the

trade uruons), and removing limits on competition in several sectors.

Seniority = Status

Spanish businesses are run like autocracies or empires, wherein all the power is concentrated in the hands of one or a few. Workers are organized into highly compartmentalized ranks, each subor­ dinate to the one above it. Status - in corporate environments, as well as elsewhere in society - is derived from an individual's position within the hierarchy, not from high performance or compe­ tence. Seniority counts for everything. It's the most critical factor in determining promotions, which in turn confer greater status and a better title. Some historians and cultural anthropologists attribute this hierarchical structure to the era when one's

prestige was derived from being a hidalgo (literally, the son of).

Ambition, in the American sense, isn't a Span­ ish trait . While a U.S. businessperson might be impressed by someone's salary and professional accomplishments, a Spaniard would look to that person's title; he would be unlikely to give up a high-ranking position because the work wasn't challenging or the salary was inadequate. Thus, Spaniards are inclined to stay with a company and

34 Passport SPAIN

wait for the promotion they're bound to get, rather than to start over at another job - even if it's more interesting - and risk the loss of all the status they've accrued.

The Meaning of Success

Pride and honor take precedence over "the bot­ tom line." A business with a centuries-old history and a traditional way of doing things is considered just as impressive as a new business with state-of­ the-art management techniques and spectacular sales.

As many Spanish companies are both small and family-run, next year's goals are assumed to be the same as those of previous years. Change (big­ ger, better, faster) isn't necessarily aspired to when things have worked well enough in the past - an attitude summed up by the American colloquial­ ism, "If it ain't broke, don't fix it."

Enchufe = Nepotism

Nepotism is commonplace, as Spaniards like to hire those they know they can trust. They depend on a whole network of personal relationships and are apt to hire una persona de confianza (a family member, friend or individual whose family's reputation they know) over a stranger - even if the stranger has more impressive credentials or business acumen. However, this system of networking, called enchufe (literally, an electric socket), is gradually giving way to a system of promotion by merit. If you don't have the benefit of such a network, it's much harder to become an insider and to get ahead.

The Work Environment 35

Teamwork: Often a Problem

Employees in small- and medium-sized enter­ prises (about 88 percent of private-sector Jobs) usu­ ally Jack a formal business education. Instead, _they hold college degrees in areas such as law, pohl!cal science, economics or philosophy or have learned their skills on the job.

One result of this is that teamwork (from an American or Japanese perspective) is often lacking. On the other side of the equation, individuality (often a virtue in the U.S. workplace) and "healthy" competition (elsewhere believed to spur people on to do their best work) are viewed as potenllally destructive.

The Spanish Work Ethic

Most Spaniards seek a balance between work

and leisure. Employment is viewed as a �ay to make a living, not as a definition of who one 1s� and "workaholism" is rarely encountered. Sparu�rds find it a great waste for individuals to be so d:1:'en that they sacrifice fun, family and other fulfilling aspects of life.

Spaniards enjoy a much more relaxed pace at work than those in many other cultures. A few hours in the morning are taken up with reading the news­ paper, chatting with colleagues, and possibly a half­ hour breakfast break. Between 1:30 P.M. and 4 P.M. is siesta time for a leisurely midday meal (it's unheard of to 'work through lunch or to eat hurriedly at on�'s desk), with the workday ending at 7 P.M. (except m summer, when many businesses shut down about 3 P.M.). Attempts to impose strict adherence to rules and schedules may be reminiscent to s�me workers of the Franco era. That having been said, the work ethic is more intense in the large cities and in the northern parts of the country.

36 Passport SPAIN

Part of the reason the pace is more relaxed is that goal setting and personal achievement reap lit­ tle reward in the workplace. Spaniards don't think that the way to better oneself is to work harder or longer. And Spain has such strong job protection laws that the chances of being fired are minimal. Trade unions are large, active and powerful. How­ ever, the Estatuto de/ Trabajor (Workers' Code) dic­ tates employee job requirements and breaches can lead to docked pay or suspension.

In June and December, salaries are doubled. And if a company has reaped particularly high prof­ its, those salaries may even triple. Other job benefits include an annual 30-day paid vacation (usually in August) and paid time-off for some 15 national holi­ days, as well as important local fiestas. There's a compulsory retirement age of 65. Employers aren't required to provide pensions.

Decision Making

The autocratic management style dictates that decisions rest in the hands of the top echelon and are never based on consensus. (Some historians have traced this back to the era of Queen Isabella and King Ferdinand, when power was concentrated at the top.) The highest-ranking individuals in the com­ pany review the reports of many different depart­ ments, but they don't depend on those lower in the chain of command for guidance. To do so would be a show of weakness and ineffectiveness.

. . . S�bordinates are discouraged from showing

m1hative or publicly expressing their opinions (as in a meeting). There are a number of reasons of this - out of respect for authority, for fear of looking foolish (hacer el rid(culo ), or out of cynicism about wh

_ at may or may not be accomplished by their

actions. Also, salary increases are often negotiated

The Work Environment 37

on a national basis once a year, and again, they're tied to one's status within the organization, not based on individual moxie. Added to this is the fact that in a tight job market (as of November, 1996, 22 percent of the labor force was without work), employers don't feel pressured to offer financial incentives. All this makes it difficult for talented and motivated individuals to excel.

If a decision impacting the internal affairs of an enterprise doesn't meet with widespread approval, employee protests will sometimes erupt. In such a case, the decision makers may give in to the pressure and go back to the table to modify their plan or policy.

The Mid-Level Manager

Since many businesses are family owned and operated, the hierarchy may not be readily appar­ ent. Non-Spaniards may be under the impression that they' re dealing with a decision maker, only to find out later that they're not. Though middle-level managers have no power to render a decision, non­ Spaniards are advised to establish good relations with them, as they're the ones who'll prepare the reports on which decisions will be based.

The Internet

To date, Spain hasn't taken much advantage of the Internet as an international business tool.

In June 1996, Madrid was the site of the Fifth International Conference on Cyberspace - the first time the event was held in Europe. But the fact is that less than one percent of the populace uses the Internet, exorbitant rates being a primary factor. According to Telef6nica de Espana' s statistics, daily use averages 9.5 minutes for every 24 hours of capacity.

� Women in Business c\5�-____.:__:_:____

Traditional Roles

"What is most Spanish? The modesty of our women, not contaminated by feminism.,,

-- Jacinto Benavente y Martinez (1866-1954)

. Queen Isabella l's reign (1474-1504) is credited with moving Spain into el siglo de oro (the golden century), an era of power and leadership in world affairs that would never be repeated. But four cen­ turies later, after the death of King Ferdinand VII Ferdinand's brother contested the right of Isabell; II, the king's daughter, to succeed to the throne based on the fact that she was female - a stanc� that set off the Carlis! Wars. Isabella II did eventu­ ally get her crown, though the country was ruled by the army and her "insupportable" behavior (Isa­ bella was allegedly a nymphomanic) led to her dethronement and exile in 1868.

As recently as the mid-19th century, 85 percent of Spanish women were illiterate. Even the well-to­ do hved within cultural confines not dissimilar to purdah; what little education they received was via pnvate tutors or the convent, both designed to turn out perfect, pious ladies but not well-rounded or

Women in Business 39

intellectually curious ones. All (including queens) were expected to be obedient wives and mothers; most marriages were "arranged," with girls wed­ ded early to men twice their age or older. For the unprivileged majority, there were few employment opportunities beyond agriculture, domestic service or grueling (and very unsafe) factory work. Though Primo de Rivera awarded his countrywomen municipal suffrage in 1924, it was of little use under his dictatorship.

"The Spanish mother," wrote one traveler of the era, "has no sympathy with the women in politics and very little with the bobbed-haired bathing girls with their cigarettes ... They are still content to play in a domestic drama of the Middle Ages ... living for the most part in a veiled world." A few managed to rise above such circumstances. One was Emilia Pardo Bazan, a novelist, essayist and critic who wrote graphically about the lives of cigarillo girls in the tobacco factories of her native Galicia. Another was Caroline "La Belle" Otero (1868-1965), a flam­ boyant dancer who rose from poverty to become one of Europe's most famous "grand horizontals," the consort of international royalty, and a multimillion­ aire. A number of women fought with the Loyalist militia during the Spanish Civil War in the 1930s, and communist Dolores Ibarruri, a.k.a. La Pasionaria

(The Passionate One), was known for her stirring Civil War speeches, which she continued to give in exile in Russia.

It wasn't until 1926 that women's rights groups, like the Lyceum Club, were formed. Women's status improved with the 1931 Constitution, but many gains (like the right to initiate a divorce) were subse­ quently erased by Franco - who also forbade women to work outside their homes or to use con­ traceptives. (Until the mid-1970s, families of eight

40 Passport SPAIN

wer�n't uncommon.) Franco also instituted severe purushment for female (but not male) adultery.

. In the wake of Franco's death, the 1978 Consti­ tution was �atified, and it specifically prohibited gender d1scr1mmation, in the workplace and else­ where. In the 1980s, contraception, abortion and divorce were legalized and the Women's Institute a national equality commission, was created.

Trends

More and more Spanish women are pursuing careers, espeaally m the large cities like Madrid and Barcelona. They' re well represented in business law medicine, science and education. In the co�orat� world, they've succeeded in establishing themselves in nuddle management but are generally still shut out of the lop echelon. In certain regions (Catalonia, for exam­ ple), _women_ hold more prestigious jobs than in Madnd: As 1t IS with men, class, educational status and connections are determining factors for success.

Still, the inequities remain readily apparent. "In theory, we have equal rights," explained Maria Pilar Marmol, secretary general of the Federation of Pro­ gressive Women, a leading feminist group in 1993 "In reality, it's not 100 percent." In 1994, studie; revealed that while women were entering virtually every profession, they were the most hurt by Spain's high unemployment. Men held two out of every three Jobs, women's wages were 30 percent lower than men's, and women had to work harder than their male counterparts to get ahead. According to Cristina Sanchez (the most celebrated woman in Spanish bullfighting, an almost exclusively male domain), "You have to prove yourself or people will say it's because you're a woman that you failed." This seems to hold true for most women, regardless of their profession.

Women in Business 41

In the mid-1990s, Cristina Alberdi Alonso (Spain's Minister of Social Affairs) helped set in motion what's being called "a second feminist movement." Alonso is calling for greater job oppor­ tunities for women in middle management and above, an end to the typical portrayal of women as housewives in advertising, and the abolition of the term senorita to describe an unmarried woman. (All women should be called sefiora, Alonso believes, so that their marital status will be as private as it is for men.)

Machismo: Still Alive & Well

Spanish men tend to be very vocal, and often loud, when it comes to women, as the phrase tor­

tura de la galanteria (the torture of compliments) suggests. However, galanteria, when taken too far, becomes harassment.

In a typical scenario, younger women walking alone on the street are bombarded with unwanted gestures, catcalls, comments and uncivilized advances. Such behavior was once common on every urban and rural corner of Spain, but now it seems confined to the more remote areas. T he best way for women to cope is to remain alert and silent and to avoid eye contact. If the behavior persists or you're being pursued, seek out a policeman if pos­ sible, or any respectable-looking person on the street, and the problem will probably go away.

In 1996, the whole country - men and women alike - went into an uproar when, at ceremonies marking the 18th anniversary of the 1978 Constitu­ tion, Miguel Angel Rodriguez (the Number Two man in the Spanish goverrunent) compared that doc­ ument to a person reaching maturity by saying, "If it were a girl, it would put on a long dress." When the matter was discussed in Parliament a few weeks

42 Passport SPAIN

later, female legislators stormed out of the chamber in protest, denouncing Rodriguez's machismo as being out of step with the times.

Strategies for Businesswomen

Foreign businesswomen should encounter little if any resistance in pursuing their objectives, and they should expect to be included in all aspects of negotiations, including evening business activities.

A female team leader can make it abundantly clear that she's in charge by putting her name at the top of a team list and by emphasizing her creden­ tials. She can be certain that Spaniards will show her the respect accorded men in high positions. Nonetheless, she may wish to instruct her team to: • defer to her when questions are directed to oth­

ers that would normally be put to the team leader

• refrain from disagreeing with her or amongst themselves, and

• refrain from engaging in ''brainstorming" ses­ sions in front of Spanish counterparts.

Making Connections

Relationships are Key

The success of most business ventures rests on developing good personal relationships. Spaniards don't like to conduct business with strangers. They need to know first and foremost that they're deal­ ing with trustworthy individuals, and this some­ times takes precedence over the quality of products, services or their price (especially in large account sales). When reaching a decision, Span­ iards weigh every aspect of a deal carefully, and they trust their intuitions about the company and the individuals with whom they're dealing as much as, if not more than, facts and statistics.

And be aware that Spain doesn't have as much of a "telephone culture" as the rest of Europe. Ini­ tial contact via phones - or faxes or mail cam­ paigns - won't be particularly effective. Spaniards generally prefer face-to-face meetings, not only with executives but with suppliers as well.

The best way to reassure the Spanish that you' re worthy of consideration is to proceed slowly. Lay aside any expectations of a major transaction or con­ tract at the onset of a relationship. Pay a few visits to the company, then initiate a small transaction. Your

44 PasspoM SPAIN

business dealings will develop commensurately with the growth of your rapport.

The Go-Between

An effective business strategy is to have a mutual friend or connection who can vouch for your reputation and/ or personally introduce you to the executives in a company you've targeted. If such an introduction isn't feasible, you can reach your goals alone - by establishing ties based on respect and trust, rather than on monetary gain.

Most foreign enterprises market their products or services in Spain through proficient, trustworthy agents and distributors, most of whom have head offices in Madrid or Barcelona and sub-offices across the country. Another method is to establish a competent subsidiary. Select those who'll represent your company with utmost care, for once you have an association with them, it will be difficult to make a switch. Keep in mind that time devoted to culti­ vating a good relationship with your agent or dis­ tributor is time well spent, as they'll work harder for you. Also, consider hiring legal counsel if you plan to carry out business transactions or set up a subsidiary or branch.

Written Introductions

Written introductions aren't mandatory, but they're helpful. One obtained from a high-level executive in a corporation that conducts business with the one you're interested in or from a close friend of the person you wish to contact will carry a lot of weight. Your reference should write directly to the individual you wish to reach, requesting that he or she give you special consideration.

�t\)... _s_tr_a_te_g_ie_s_fo_r_S_�_cc_e_ss __ _ Be Patient

Spaniards tend to regard impatience as a char­ acter flaw. In meetings, don't try to charge ahead. Allow the host to set the pace. Expect that the first half hour of a meeting will be taken up with chit­ chat. Don't try to steer the conversation to business matters in an effort to save time. In decision mak­ ing, as in negotiations, Spaniards don't rush and they don't like to be rushed. Decisions are made at the highest level, so if the key executive isn't present or needs more time to mull things over, a decision won't be handed down.

Be Relaxed /\bout Schedules and Agendas

Spaniards approach schedules, agendas and deadlines in a relaxed manner. Expect delays, last­ minute changes in plans, meetings that run over into the next appointment, and conversations that focus on the present, rather than the future. Fre­ quent interruptions during meetings (phone calls, discussions of personal matters) are commonplace.

46 Passport SPAIN

Avoid Avarice

Refrain from speaking openly about profit making. Spaniard businesspeople are highly com­ petitive and strive for financial reward as much as anyone, but they're discreet about it. And they'll try to reach a fair deal, so that all parties will benefit.

Don't Boast

Though Spaniards are great conversationalists, they hold modesty and understatement in high regard. Little respect is afforded to those who brag about their abilities and accomplishments or about their company's products and services. Let the company's track record speak for itself. On the flip side, never admit to shortcomings or errors as a strategy to win respect. Self-condemnation is viewed as a weakness.

Be a Good Listener & a Good Speaker

Spaniards like to voice their ideas, sometimes repeatedly, loudly and with emotion, and they expect others to listen carefully. They allow others ample opportunity to present their ideas - but have no qualms about interrupting ( though they dislike being interrupted themselves). Spaniards admire lin­ guistic sophistication, so try to speak as eloquently as possible. In formal settings (such as meetings and negotiations), refrain from making jokes; they often don't translate well across cultures.

Avoid Direct Confrontation

Spaniards have very strong opinions, and they'll usually hold their ground no matter how convincing an opposing argument may seem. They expect oth­ ers to do the same. Thus, confrontations are bound

Strategies for Success 47

to crop up. However, they're loathe to engage in direct confrontation (such as contradicting or criticiz­ ing someone or accusing them of making a mistake), as this shows disrespect and is an assault on the other party's honor. Humiliation caused by direct confrontation may escalate into resentment or anger. Rather than disagreeing or cornering someone ver­ bally, Spaniards will either repeat their own views or offer advice as a means of correcting what they con­ sider to be errors in judgment.

[fW_.....___ __ Tim_e __

Deadlines, Spanish Style

To the Spaniard time is fluid, like the watches in Salvador Dali's famous painting-it can't really be measured, divided or rationed. Spaniards also believe that time exists in great abundance, and so there's enough of it for everything. Time limits, therefore, are seen as artificial and constricting. Deadlines and delivery dates aren't shown the same respect they receive in other cultures.

It's also believed that time works its magic - in business as in wine - and that for ideas to come

to their full fruition, they must evolve at their own pace. It's not unusual for the delivery of goods and services to fall behind the schedule previously agreed upon by both parties (though this is less likely to apply to implementation schedules). Qual­ ity checks and deadlines that involve many details are apt to be looked on with disdain.

Appointments

Spaniards are adept at juggling several matters at once, and they like to cram many appointments into a day or week. But invariably, they fall behind

Time 49

schedule, as they believe in enjoying what they're doing and so tend to focus intently on the issue at hand. The Spanish don't find this apparent contra­ diction a cause for despair. As King Juan Carlos I once said, Yo voy a mi aire (I go at my own pace).

Perennially Tardy

Since they' re often behind schedule, Spaniards are frequently late. Thus, it's commonplace to wait 15 to 30 minutes, or even longer, for a scheduled appointment. (This also applies to social events.) In fact, being on time is more the exception than the rule. That having been said, foreigners should nev­ ertheless arrive at the appointed time in order to convey the seriousness of their intent.

Sometimes Spaniards will stand up the other party with no excuse given. But if a meeting is of vital interest, they'll invariably be punctual. Subor­ dinates don't keep their superiors waiting; to do so would show a lack of respect.

@ __ B_u_ s_in_e_ss_M_ee_t_in-=g_s __ _

Arranging the Meeting

Business meetings should be scheduled a few weeks in advance, especially if they're with large companies. Don't schedule meetings during siesta

hours (12:30 to 4:30 P.M.) or during major fiestas. As meetings are formal affairs in Spain, allow yourself enough time to prepare for them thoroughly. And be aware that your Spanish counterparts may choose to conduct the meeting in a restaurant or cafe, rather than in an office. Such informal meet­ ings tend to be impromptu (with participants expected to drop everything to attend) and rather noisy (with everyone talking at once).

It should be noted that the Spanish, who are known for their spontaneity, will sometimes accommodate individuals who call asking for an appointment that same day (because they happen to be in town) or who even just show up at the door. Often, the person who had an appointment months in advance will get "bumped" in order to make a time slot available.

When setting up an initial meeting, try to make contact with the decision makers or with those indi­ viduals who have access to them. Oftentimes,

Business Meetings 51

senior directors and junior executives are the ones who initiate their company's business relation­ ships, with the top executives being called in later.

If your delegation includes a high-level execu­ tive, arrange for him or her to meet the senior per­ sons in the Spanish company, even if it's inconvenient to do so and means changing your itinerary. If you don't, you risk injuring the per­ sonal honor of those at the top, and this, in turn, may jeopardize your future business prospects.

Preparing the Spanish for the Meeting

High-level executives in Spain prefer to take control of their calendars rather than to rely on administrative assistants. Thus, assistants may not be able to pinpoint their whereabouts at any given time or remind them of an upcoming meeting. And often, plans and schedules aren't communicated to the lower ranks. In order to alert people to your impending visit (which may minimize delays), it's crucial to confirm your appointment by letter or fax just before your arrival.

Arriving at the Company

Don't be surprised if your meeting is cancelled at the last minute. Either the Spanish have forgot­ ten your appointment, business is backed up, you've been "bumped" in favor of another appoint­ ment, or they're not interested in your proposal. Under such circumstances, try not to express disap­ pointment or impatience. Instead, be flexible and willing to meet at a later time, if that seems appro­ priate.

52 Passport SPAIN

Small Talk First

Formal greetings and an exchange of hand­ shakes (usually warm and friendly) with everyone in the room are customary at the beginning of a meeting. Then comes about 30 minutes of small talk, which may touch on soccer, travel, world politics, the weather, Spanish cuisine, your trip, and so forth. This is the first step toward establishing a rapport, sizing up your character, and determining whether you're someone worth doing business with.

This social exchange is fundamental to any future business prospects. Those who view such an approach with impatience (in the name of effi­ ciency and "getting to the point") risk being seen as ill-mannered, impudent or even boorish. It's best to allow your host to steer the conversation and set the pace.

Even once the "serious" part of the conversa­ tion is under way, digressions may occur. Let them. And be prepared to "read between the lines."

Telling Who's Who

The head of the Spanish team usually guides the conversation, but he'll remain the most reserved and allow his or her subordinates to do the talking. The senior executive will have a greater air of authority and will usually be older than the rest . Subordinates present will show him or her great respect and will wait for direction. They will be careful about what they say and will always defer, so as not to under­ mine the team leader's authority.

Presenting Your Business

How you state the nature of your business is just as important as what you say. Try to speak with as much finesse as possible.

Business Meetings 53

Your presentation should be well-prepared, clear, low-key, and filled with product demonstra­ tions, samples, pamphlets, visuals and thorough explanations. These will stand you in better stead than persuasive arguments. Also, provide detailed information about the price and quality of your products. If the senior executive isn't present, those who are will pass this information on to him in their reports.

Keep in mind that Spaniards aren't concerned with concise, sequential formats. They prefer to dis­ cuss each point at length, and they have no qualms about repeating themselves. Once all the details have been covered, conclusions will begin to be drawn. In other words, Spaniards look at the whole picture.

The meeting should end as it began - with handshakes - and, if appropriate, with the exchange of business cards, preferably printed with a Spanish translation on one side and offered with the Spanish side up.

Additional Meeting Guidelines

1. Always gear your presentation to the level of expertise of your audience and their position within the company. Don't inundate them with technical language that they may not under­ stand.

2. Establish team protocol in advance to ensure that questions mistakenly addressed to other team members are deferred to your team leader.

3. Don't show displeasure or impatience toward anyone present. Don't contradict or criticize members of your team in the presence of the Spanish team. Save heated discussions, dis­ agreements and brainstorming for private meetings.

54 Passport SPAIN

4. If one of your counterparts digresses, don't try to steer them back to the issues at hand.

5. Don't pressure the Spanish to work out all the details on the spot. They like to mull over the facts and figures.

6. Allow the Spaniards to decide when the meet­ ing is over. At the conclusion, your team leader should express thanks for the opportunity to meet. If appropriate, stress your desire to estab­ lish a long-term relationship. But keep in mind that this isn't the time to dwell on details and deadlines.

The Language Issue

Since English is the primary foreign language taught in schools and English language proficiency is now critical for professional advancement, many Spanish businesspeople, especially junior-level managers, have a solid knowledge of it. However, be aware that prior to the 1970s, most Spaniards learned French in school. Many do attend English language schools in an effort to keep in step with the times.

Don't praise your Spanish counterparts for their command of a non-Spanish language; such com­ ments will be deemed condescending. (For informa­ tion on using interpreters, see the next chapter.) You'll have a distinct advantage over your competi­ tors if you translate your presentation materials into Spanish. And any attempt you make to speak Span­ ish will be met with enthusiasm.

Negotiating with the Spanish

In negotiations, several face-to-face meetings are required before the actual decision making even begins. And if you're dealing with middle-level per­ sonnel who have limited access to high-level execu­ tives, or if the decision maker is unavailable to render a decision, the negotiations will stretch on even longer.

The number of negotiation team members depends on the nature of the business venture and can vary widely. Keep your attorneys out of the negotiating process, as their presence on your team will send a strong message of distrust.

Opening Protocol

After handshakes and casual conversation, a member of the Spanish team will usually introduce each member of the guest delegation to the Spanish senior executive. In most cases, the senior executive will deliver a brief welcoming speech, then tum the floor over to the guest delegation. Spaniards prefer the other side to make their presentation first (thus giving themselves the advantage), though they'll probably have a pretty good idea of their guests' position beforehand.

56 Passport SPAIN

Your team's main spokesperson should outline your basic points clearly and succinctly. Your team should present a unified front; conflicting statements will be viewed as a weakness. After the guest team has presented its position, the Spanish senior execu­ tive will allow his subordinates to respond to spe­ cific points, and he will step in to clarify his company's position from lime to lime.

"Inner Guidance"

Spaniards like to impose their op1mons. They're animated, use skillful rhetoric, and have no qualms about resorting to exaggeration and emo­ tion to try to get the opposing team to accept their views. They may interrupt the visiting team (no offense intended), and in disagreement they may raise their voices (a sign of passionate engagement, rather than anger). They don't change their minds easily - in part because that's considered a sign of weakness. Faced with opposing views, they may restate their original position more emphatically. Most information is processed subjectively (what the Spanish refer to as duende or "inner guidance"), and the "hard facts" won't have much impact once an opinion has been formed.

Spanish negotiators are quite conservative. On the whole, they'll choose the path of least risk or the one that promises fewer financial rewards but has a high probability of success. This is because both their power and their public image are on the line. Span­ ish businesspeople enjoy the negotiating process and they'll take their time resolving any problems that arise. They're quite concerned with negotiating a fair price, and once that price has been determined, they don't take kindly to bargaining.

Negotiating with the Spanish 57

Ending the Negotiating Session

Don't try to rush the meeting to a close, as this will be interpreted as bullying or impatience. Allow the senior executive on the Spanish side to give his (or her) closing remarks and to field questions. Once he stands up, the session is over. Spaniards demand a formal conclusion, so refrain from last­ minute questions or reiterations. The senior execu­ tive will shake hands with each member of the vis­ iting team and then leave the room. However, his subordinates will remain behind to chat. Be aware that when a decision is finally made (but prior to the contract being drawn up), specific details will often be lacking.

Interpreters

C�nducting business in a language you aren't fluent in puts you at a distinct disadvantage. While hiring an interpreter may be a big expense, it's essential, especially in high-stakes negotiations. Expect the Spaniards to have one as well, unless both sides are fluent in English, Spanish or possibly French. It's not advisable to depend on a member of the Spanish team, since that person, even if he or she has near-native proficiency, will probably not understand all the nuances of your language, and he or she 1s, after all, on the other side.

Tips on Using Interpreters

1. Find the Right Interpreter

Try to find an interpreter who has spent time in your country so that he or she has a complete grasp of subtle nuances and body language. Ideally, you sh�uld locat� an interpreter in advance of your arrival or bnng one with you from your home

--

58 Passport SPAIN

country. If not, your hotel's busines� cente� :an

refer you to a service that specializes m prov1d1ng

interpreters and translators.

2. The Briefing Brief your interpreter thoroughly. Provide sam­

ple written material for review and explam any

specialized vocabulary.

3. Set Up a System If the other team will rely on your interpreter,

and thus he or she will be interpreting both ways

(not just from Spanish into your native tongue),

you must give the interpreter adequate time to get

acquainted with your style of discourse, sense of

humor, and body language. Also, it's critical to

work out a system that takes into account how long

you'll speak before pausing for the interpretation.

4. Don't Exhaust Your Interpreter Speak in short sentences, make your poi��s

crystal clear, and limit each segment to one specific

point. Interpreting requires intense concentration,

50 allow your interpreter to take a rest every two

hours. If negotiations continue for long�r than_ a

day or if there's a lot at stake, it may be wise to hire

two interpreters who work on alternate days or

hours.Using an interpreter will stretch a meeting to

about three times its normal length, so be patient

with the tempo of the discussion.

4. Address the Spanish Team The Spanish always desire a sense of rapport,

so direct your gaze at members of the Sparush tea� both when you're listening and speaking. Don t

look at the interpreter. Some Spaniards are quite

proficient in English, and many have at least a

foundation in the language, so speak slowly and

clearly and avoid idioms and slang.

------------ - ------

Negotiating with the Spanish 59

5. Take Stock of What's Been Said - Anticipate the Future At the close of a meeting or during breaks,

review with your interpreter the major points cov­ ered. Ask about his or her impression of the other side's position or attitude. Try to determine together the direction the negotiations are taking, and to anticipate points that will have to be introduced or reiterated. This will help your interpreter to convey your desires and intentions effectively. 6. Drive Home Important Points

Consider repeating important points, especially in highly abstract and complicated discussions. Make certain that your message and your nonverbal cues are in synch. For example, earnestness should be reflected in the tone of your voice, your facial expressions, and your deportment.

The Spanish Approach to Contracts

Once a verbal agreement has been reached, the next step is to formulate a contract. A Spaniard's word and his handshake were once regarded as sufficient to bind a deal, but no more. While they may not be detail oriented during the initial stages of negotiations, Spaniards prefer contracts that cover every facet of the agreement.

If possible, allow your attomey(s) to handle the minutia of the contract and to interact with the Span­ ish company's attorneys. But always be present when contracts are actually being drawn up, in case the other side wishes to discuss certain points. Make it clear that while you leave the law to lawyers, you're an interested and active participant in the

agreement process, conversant with all of its aspects - in other words, you're not merely a "delegator."

[� Business Outside the Law

The "Black" Economy

After Italy and Greece, Spain has the largest underground or "black'' economy in all of Europe. Analysts estimate that at any given time, it ei:icom­ passes one-fifth of the country's total product10n of goods and services. High taxes, double-digit unem­ ployment (a whopping 23 percent in 1996, on a par

with America at the peak of its Depression Era), and restrictive labor laws (which severely restrict the fir­ ing of employees) have been targeted as key causes.

Some analysts assert that Spain's underground economy actually contributed to the 1980s boom - by keeping extra cash in consumers' pockets and allowing entrepreneurs to expand their businesses (that is, put more money back into them). They also claim that the underground economy provides many jobs, as well as off-the-record second jobs for those who have trouble making ends meet - thus forestalling political instability and possibly even chaos. Thus, they argue, the black economy has softened the impact of job cuts resulting from the

government's implementation of market-oriented economic policies. Still others add that a good per­ centage of the country's unemployed at any given

Business Outside the Law 61

time are young, first-time job seekers who have the

luxury of parental support. The trafficking of hard drugs escalated after

Franco's death. It's estimated that more than half of all South American cocaine passes through Spain, destined for both local consumption and markets throughout Europe. Possession of small amounts of marijuana for "personal use" isn't considered a punishable offense.

Tax Evasion

Historically; tax evasion has been a problem of gigantic proportions. Instances abound of Spanish companies paying part of their employees' salaries in cash so that they don't have to pay as much social security tax. Some companies have declared bank­ ruptcy only to set up operations again without regis­ tenng - another way of circumventing social security payments. (All companies, including foreign ones, must register to acquire the status of a legal entity.)

Manufacturers sometimes avoid paying taxes by maintaining "flexible" payrolls for people who work in their homes, whom they don't report. Such hidden business operations have accounted for as much as 30 percent of the regional economy of Valencia. Professionals avoid paying taxes by not declaring all of their income, and a good number of Spaniards are engaged in moonlighting (holding a second job in addition to a regular one).

Scandals, Financial & Otherwise

Historically, politics and corruption have gone hand in hand, with the populace tending to look the other way. But occasionally, an invisible line is crossed.

62 Passport SPi\lN

In 1994, a huge scandal rocked the country. Itwas revealed that the Spanish bank, Banesto, wasgiving bad loans and making bad investments - asituation made possible by cozy relationships between politicians and financiers, weak bank and stock market regulations, and the insufficient moni­toring of bank executives. Another 1994 scandalinvolved Germany's Volkswagen AG, whichalleged that its car-manufacturing subsidiary in Spain had deliberately under-reported losses. In 1995, when allegations surfaced of govern­ment involvement in successful plots to kill Basqueterrorists, the bugging of telephones of top-ranking members of society, and other corrupt activities, Spaniards were outraged. Such scandals, aug­ mented by widespread discontent over certainbudgetary and reform measures, brought an end to13 years of PSOE (Spanish Socialist Workers' Party)rule and the presidency of Felipe Gonzalez (whohad been re-elected four consecutive times). At thepolls, the people cast their votes for the center-rightPopular Party led by Jose Maria Aznar.

Present Changes - Future Outlook

Prime Minister Aznar asserts that the most effective way to deal with corruption is to improve economic conditions to the point where citizens won't deem it necessary to skirt the law. To thatend, his government is laying the groundwork for future tax reforms and for addressing the highunemployment problem. However, it's still to soonto forecast what significant inroads will be made.

<i�_ ---....:..:.:.:.::__

�--:V. Names & Greetings

The Intricacies of a Name ?n business cards and in correspondence,Sparuards usually list their full name, which con­sists of a given name followed by a surname (whi hcombines the father's surname and the mothei surname)._ Thus, if a Spaniard calls himself.Fran�c�sco Badilla Sanchez, his first name is Francisco �1s father's name is Bad�lla and his mother's nam�

IS Sanchez. Married women don't adopt their husband'ssurname._ Some Spaniards may have double givennames, hke Spain's Prime Minister Jose MarfaAznar, Aznar being his father's surname. They mayuse both their given names or choose to go by thefirst one only. In business, the Spanish are quite formal. The usu_ally don't address each other on a first-nan{basis, even if they're longtime colleagues. Insteade they use each other's professional titles (such a;Profesor) or Senor, Senora or Senorita, followed by thepaternal surname only. Thus, Francisco BadillaSanc�ez would be addressed Senor Badilla. IsabelRodr'.guez . Casco would be called SenoritaRodnguez (1f she wasn't married). If Isabel married

--

64 Passport SPAIN

Francisco, her official name would be Isabel Rodriguez Casco de Sanchez, but she would still be addressed with her father's surname - as Seiiora Rodriguez.

In correspondence, it's respectful to add the title Don after Senor and Dona after Senora and Senorita and to use the full surname. Thus in a let­ ter, Francisco Badilla Sanchez would be addressed Senor Don Badilla Sanchez and his wife, Isabel Rodriguez Casco de Sanchez would be addressed as Senora Dona Rodriguez Casco.

Hola, Digame

When Spaniards enter a public space occupied by other people, even strangers (as in an elevator or waiting room), they're expected to extend a general greeting by saying Hola (Hello), Buenos d(as or Bue­ nas tardes (Good morning or Good afternoon), or Buenas for short. Whoever is in earshot is expected to respond in kind, even if they just murmur a reply. Upon leaving occupied public spaces, Span­ iards always say Adi6s (Good-bye). Encantado (Pleased to meet you) is somewhat more formal.

If they run into an acquaintance on the street and stop to have a conversation, Spaniards greet each other with Hola. However, if they walk past each other without bothering to stop, they say Adi6s, which in this instance takes on its literal meaning of "Go with God." Hasta la vista means "So long, see you soon."

When it comes to telephone protocol, Span­ iards often say Digame! (Tell me!) in lieu of Hola, to which the caller will respond Diga! (Listen) before proceeding with what he or she has to say.

Names & Greetings 65

Handshakes, Hugs & Kisses

Spaniards engage in handshaking with far greater frequency than many other cultures. It's common for colleagues within a firm to begin each workday on a handshake and to shake hands when entering an? leaving a meeting room - even if they already know the person(s), the conversation is brief, and no agreements were reached. To refrain from shaking hands sends the message that you lack trust.

When eliciting information within the service sector (such as at a bank), conversations between strangers don't commence with a handshake, but they usually end on one. But once a relationship has been established, future meetings will follow the handshake protocol just described.

When it comes to family and friends, Spaniards greet each other with hugs and kisses. Close male friends usually hug or pat each other on the back, and male family members exchange kisses on the cheek. Family and friends greet women and girls with a kiss on each cheek and a slight embrace. Children are taught to offer their cheek for a kiss when greeted by elders, and they adhere to this practice until they' re well into their teens.

---

RAJSEDVOICE Sil.ENCE AVOIDING NO

SJ�? \ Communication Styles ,.__ _____________

Spaniards are extremely courteous and formal. Rather than stating a point or opinion directly, they may just offer a few telltale clues, leaving it up to the other parties to deduce their meaning. In many cases, it's difficult for non-Spaniards to ascertain exactly what's meant. It may be helpful to consult privately with one of the Spanish team members (in a business situation) or with a Spanish friend (in a social situation) to find out what message is really being conveyed.

Avoiding "No"

Spaniards abhor direct confrontation (a trait they share with several Asian cultures). They see such behavior as an affront to one's dignity. So they refrain from contradicting or criticizing all but their subordinates, from expressing disagreement overtly, and from saying "No." Instead, they might say, "We'll let you know" or "Mafzana" Oiterally, tomorrow, it can mean anything from "later" to "not today" to "sometime in the indeterminate future").

Communication Styles 67

Silence

In some cultures, silence can connote consent, neutrality or even open-mindedness. In Spain, peo­ ple often remain silent for fear that expressions of their discontent or dissent may be interpreted as criticism, which would then create embarrassment for the other party. And they worry that if they choose an inopportune moment to voice their opin­ ions, they may make themselves or their colleagues look foolish.

Emotionally Volatile

Spaniards aren't fond of contingency plans - alternative modes of action thought out ahead of time in the event that things don't go as originally planned. Too much planning, they believe, leads to a loss of spontaneity. So, when things do go awry, Spaniards tend to react emotionally - and that sometimes leads to explosive outbursts. However, they rarely lose their tempers in a business setting, and they expect others to exercise the same control.

30 Passport Switzerland

large, the Swiss population tends to consider its counterparts from other cantons nice neighbors and have very little to say about how they live or what they think. Of course, you can hear people making fun of Swiss German, which sounds like a "throat cancer," or of the people in Lucerne who "will not let a pedestrian cross a road at a red light even if there's no traffic in sight," but there's neither hate nor resentment on any sizable scale. Pity then that the press blows poll results up out of proportion when the different parts of the country have divided opinions on various topics. This is exactly why the deeply federalist Swiss political institu­ tions have been put in place-to respect regional opinions. And this system has been acclaimed the world over as the solution to minorities' prob­ lems-even in former Yugoslavia. To boot, most Swiss are proud of their system even if they don't like it when their canton looses in federal polls.

Let's be clear here: most multicultural coun­ tries in the world would be happy to see their respective communities get along as the various makes of Swiss do.

$ Government & Business

Government: Pervasive but Efficient

Travelers sometimes tell Kafkaesque stories about Swiss government administration. It is indeed true that you often need authorizations from many offices, which implies a lot of paper­ work. But don't be misled. This is Switzerland and administration is efficient. If you do it the right way, you get what you need reasonably quickly.

Tips for dealing with the Swiss government: • Speak the local language or ask somebody who

does to act for you . •

•

•

•

•

•

Never be rude or impatient on the phone .

Give your name when calling .

Prepare a one-phrase summary of your prob­ lem and call. You will be directed to a chain of people until you reach the one you need.

Take down the name of the person you talked to and his/her direct phone number.

Don't call before 9 A.M. or after 4 P.M .

If you need to fill in a form, ask them to send it and then call the person in charge of processing for any

.,,,.I

32 Passport Switzerland

questions on how to fill it in appropriately. • If you need to pay a fee, do it in the way they sug­

gest (usually cash or through the Swiss Post). • Don't even think about bribing an official: peo­

ple are well paid, honest and corruption is almost unheard of in Switzerland.

Guilds and Cartels

Switzerland is the land of oligopolies. Many professionals, including plumbers, electricians, and medical doctors are protected by a complex set of licenses, professional rules, compulsory apprentice­ ships, exams and a guild. Take the driving instructor: in most countries, this is a occupation any reason­ ably able man or women can have. In Switzerland, driving instructors unite in "professional organiza­ tions" to "foster quality in their service and thus enhance road safety." No matter how noble the for­ mal purpose of such associations, the most visible result is financial: these organizations impose a fixed hourly price for lessons (the association's recom­ mended price). After a few months, the fee buys you only 50 minutes. Then, the guild tries to close the doors behind itself by raising the standards of driv­ ing instructor exams, imposing a minimum age and schooling level for applicants, and trying to exclude people who are not members from working.

Migros, Thoroughly Lincapitalist

Most European countries have witnessed the great battle between small grocers and supermar­ kets during the past twenty years. Switzerland is no exception, and the latter have prevailed with the biggest chains being Manor, Coop and Migros. The biggest chain, Migros, is virtually a non-profit orga­ nization. It has 38 shopping centers and 499 super-

Government & Business 33

markets in Switzerland, offering normal supermarket goods at bargain prices (that is, for Switzerland) as well as many services (travel, bank­ ing, gas, fitness and language schools). As a cooper­ ative, the Swiss own Migros and no one can hold more than one share worth 10 francs.

Self-rule

Swiss government is very business-friendly and usually only interferes in business issues in extreme cases or upon request of the parties con­ cerned. Regulations of specific trades and indus­ tries are usually placed in the capable hands of professional organizations, which manage them responsibly, although of course in the interest of their members.

Take banking, for example. There are banking laws in the Swiss Civil Code, as well as a special law called "laws on banks." Howeve� many important rules are left to the Swiss Bankers Association, a pri­ vate professional association. In the case of anti­ money laundering measures, members of the associ­ ation have signed the "Convention de diligence," which describes the behavior member banks should adopt regarding their depositors and the economic origin of deposits. In the event of infraction, the asso­ ciation can levy fines or exclude members.

This system of partly autonomous rule is clearly in favor of business, but generally works quite well. When new issues arise (for instance, money launder­ ing scandals and the subsequent pressure to change rules and practice), Parliament passes the minimum laws needed to satisfy public opinion and interna­ tional policy needs, and the rest is left to the private professional association to sort out. Sensitive as they are to the threat of new, less flexible laws, the associ­ ations enforce stricter regulations on their members

_J

34 Passport Switzerland

so that they can avoid new scandals while maintain­ ing control over part of the regulatory process. The umbrella organization of all these professional asso­ ciations is called the Vorort.

Swiss Bankers

For many international businessmen, doing business in Switzerland begins with opening a bank account. This is not a bad place to begin, as Swiss banks are probably the most powerful insti­ tution in the country, after the government. And, if you deposit large amounts (half a million Swiss francs is large enough for most banks), your banker will go to any length to keep you satisfied. Need a business connection? The banker will be glad to oblige. Looking to buy a Swiss watch? He will know what to buy and where. But nowadays, bank­ ers can give the cold shoulder to people who just drop by their office. Most new clients in private banks come from third party introductions, as bankers prefer to be able to connect a new client to somebody they already trust. You get the point­ friends and clients of our friends are always wel­ come. The problem is finding the right banker.

Swiss Money

The recent introduction of new banknotes in Switzerland is a telltale sign that entry into the European Monetary Union (EMU) is neither for tomorrow nor for the day after. The Swiss love their money and so do many other people. And indeed, Swiss bank notes are quite something: they bear so many paper and ink tricks to fool counterfeiters that the Swiss National Bank printed an explana­ tory brochure for each monetary unit.

$,....... __ T_h_e_W_ o_r _k_E_nv_ir_o _ n_m_e_nt __

Law Abiding

The Swiss respect their laws so thoroughly that sometimes it verges on the absurd. You need authorization to put a TV antenna on the roof, you cannot mow the lawn on Sundays or take a bath after 10 P .M.

Schwytzerti.itsch: the Swiss Yiddish

If you must speak Yiddish to trade diamonds in Antwerp, Swiss German is the language to mas­ ter in Switzerland. Not that the Swiss do not speak German or English. They do, and usually very well. But the Swiss Germans are so fond of their lan­ guage that if another Swiss addresses them in High German, they are likely either to switch to another language or answer in Swiss German. Of course, like all Swiss, they also enjoy showing off their English to foreigners and if you begin in English, asking if they speak it, they will probably be glad to oblige.

To truly belong, however, you really ought to speak Swiss German. If you only speak English and

36 Passport Switzerland

it is apparent that you are a foreigner, the story is different, as people will be proud to show off their language skills.

Swiss Army and the Swiss Elite

If you were a Swiss man, you would be a soldier as well. Every able-bodied Swiss man must go to the army in Switzerland for 90 days (Rekrutenschule­ Ecole de recrue) and then every 2 years until the age of 42, he must return for practice for 19 days. This allows the government to raise an army of 400,000 men, fully armed, within 24 hours, as every soldier has an assault gun in his house, complete with ammunition. But there is more to this than a pictur­ esque democratic institution. Many CEOs of big Swiss companies are officers in the Swiss army, and this is so common that when a normal soldier is pro­ moted to such a position, the newspapers will men­ tion the fact. If they have spent the long weeks necessary to reach the rank (900 days to become a Captain), it is not just for the love of guns. Officers usually address each other by the familiar form tu or du and their old boy network spreads among the most powerful industries of the country, particularly in banking. Some factories are run by teams of man­ agers who all belong to the same army Division. When the time of the biannual "rehearsal courses" comes, the CEO just exchanges his suit for assault dress and the troops follow.

But times are changing. In the past, a successful career in a Swiss bank may have implied the need to be an high-ranking officer in the Swiss army. However, over the past 15 years banks have com­ plained that their managers were always out of the office, and the merits of advanced military training for managers is being increasingly called into ques­ tion.

The Work Environment 37

The Swiss Work Ethic

Switzerland was a nation of poor mountain peasan�s, s� �oor in�eed that for years they had to sell their m1htary skills to European kings waging wars. Switzerland is not poor anymore, but the eco­ nomic necessity of working hard is still alive today as a moral imperative. People forced by circum­ sta1:ces to remain idle for a few days often com­ plain that they "have to saw wood" or do something productive lest they go crazy.

The Swiss work long hours (1,844 hours a year), much longer than their neighbors (the Ger­ mans . work a miserly 1,573 hours a year). The Americans take the cake with 1,904 hours a year.

One would think that this strong work ethic is bred by Calvinism, a very demanding brand of �rotestantism that makes people very hard work­ mg (�ax_ We?er's The Protestant Ethic and the Spirit of Capitalism 1s the classic reference here). However, the Catholic cantons work every bit as hard and feel no religious pressure at all.

Good Labor Relations

In June 1999, the Swiss Post Office introduced a bra�d new computerized parcel sorting system, for which they paid SwFrlS0 million. A problem with the software led to such a total dysfunction that for days thousands of parcels piled up in the sorting center- the computers were useless. What did the postal employees and their unions do? Instead of �omplaining and making Luddite speeches, they J�st rolled up their sleeves and worked day and mght to ensure that the mail was delivered.

. With the possible exception of Geneva, most Swiss would be ashamed to strike and the idea would not even occur to them. And indeed there

38 Passport Switzerland

would be grounds for embarrassment. But even if there were reasons, several factors make strikes unlikely. First, the Swiss do not get their hands dirty and you can hardly find a Swiss among the lower paid workers (waiters, unskilled construc­ tion workers, cleaners, etc.). Most of them are first­ generation immigrants who either work without a valid residence permit or are just too happy to be able to live and work in the country. Striking would not cross their mind, and indeed most union and far-left activists are second-generation immigrants.

Since 1937 there has been the so-called "Work Peace Agreement" by which unions and bosses agree not to resort to strikes or lockouts in the event of labor conflicts.

Not the Land of Competition

With such a small, fragmented market, compe­ tition is not the driving force of commerce in Swit­ zerland. Rather, it is price fixing agreements and cartels that rule, and the consumer who pays the price. Importers commonly double the price of the goods and retailers double it again. But they have allies to help maintain this system. Take a simple water faucet imported from Germany or Italy. The consumer will pay four times the factory price and the plumber who installs it will often receive a com­ mission of 15 to 20%, to ensure that the specialist will not try to rock the boat.

No surprise that The Economist's "Big Mac Index" tends to give the top prize for the most expensive burger in the world to Switzerland.

Of course the vast number of oligopolies in Switzerland has been the target of federal regula­ tions, but it seems that the Federal Cartel Commis­ sion has so few resources and such little power that it limits its efforts to the counting of cartels.

The Work Environment 39

Apprenticeships

For years many top managers whose educa­ t�on �as limited to an apprenticeship could simply rise m the ranks of the company to which they �evoted their life. At the end of compulsory educa­ tion (usually at 16), the apprentice starts work in a �ompa�y four days a week and theoretical teaching 1s provided on the remaining working day. This system used to be one of the foundations of the highly skilled Swiss workforce and the industrial strength of t�e country; people could definitely be successfu� with an apprenticeship. They still can, bu_t there 1s � growing prejudice against apprentice­ s�1ps and without a university degree it is now dif­ ficult to get a position as a senior executive. A recent advertising campaign tried to enhance the image of apprenticeships, but the battle will not be easy to win.

Seniority

A?e and time spent in a company count, and you. will 1:ot find many senior managers under 40 m big Swiss companies. Big banks are the paragon of corporate conservatism with, until recently, com­ pulsory military service for managers.

j

R?J,._ __ W_o_m_e_n_in_B_u_si_n_es_s __ _

A Conservative Country

Switzerland is not at the cutting edge of

women's progress and by and large this is not an

issue in Swiss politics and society. Women have had

the right to vote at the federal level only since 1971,

and the last canton to include women for regional

election was Appenzell in 1991. The first female

Federal Councilor was elected in 1984, but resigned

(see Chapter 13). But there are quite a number of

women in politics now. Ruth Dreifuss, elected in 1993 as Federal Coun­

cilor, became the first female President of Switzerland

in 1999. In 1999, a second woman-the young,

dynamic and attractive Ruth Metzler-was elected to

the Federal Council. But it was more her age than her

gender that made the news. Elected at 34, she also is the

youngest person to fill this position in over a century.

The situation at the parliamentary level is com­

parable to that of many other developed countries.

There are 24% women in the lower house and only

15% in the upper house. An initiative to impose a

compulsory 50% quota in the Federal Council and

in the Swiss Parliament was rejected by 82% of the

Swiss people in 2000. But the conservative view

Women in Business 41

that Swiss women have of themselves is even deeper. According to a 1999 Economist poll, only 39% of the 3,000 Swiss women interviewed said they thought that "women should have all the same rights as men," the second lowest proportion of the 11 countries polled (after Japan).

The Glass Ceiling

While women account for 42% of the active pop­ ulation, only 18% have made it to middle ranking executive, and a meager 1 to 3% have successfully integrated into top management. Margit Osterloh, a teacher of managerial economics in Switzerland, argues: "Women who want to reach the top come up against a glass ceiling. They can see the top through the ceiling, but it stops them painfully every time." Barbara Kux, executive director of Ford Europe, doesn't agree, "The one who wants to see a glass ceiling will see it ... I have never seen it."

More than half of the students at Swiss univer­ sities are women, but only 5.7% of all professors, lecturers and researchers, highly respected jobs in Switzerland, are women. There is certain gender segregation at the level of career choice. Real diffi­ culties crop up when the time comes to have a child. Some decide to put it off until later, others retire in the risky hope they can come back later.

Prejudices have not yet disappeared. In many companies, there are people who think that a mother cannot take on responsibilities, because she might have to leave at anytime to care for her child. When a young woman is hired, it is not unusual for her con­ tract to stipulate that she must "work full time" dur­ ing a specified time, meaning that she must refrain from having children during that period. Women who work part time are almost automatically excluded from positions with executive responsibili-

42 Passport Switzerland

ties. The few female managing directors of banks in Geneva are Americans, not Swiss.

Understandably, many women prefer to work freelance and to create their own businesses. Since 1991, the number of women working freelance rose constantly, especially in the fields of business con­ sulting, human resources and career development.

Women Associations and Promotion

Many civic organizations, such as the Rotary or Lion's clubs, are closed to women. In their place Swiss women have built up networks such as BPW (Swiss federation of business & professional women), WIN (women innovation network) and NEFU (network of start-ups builder).

Strategies for Foreign Businesswomen

Swiss business meetings are usually formal and task-oriented, which can be an advantage to businesswomen. What matters most is expertise and professionalism. A woman who displays a high level of competence will usually be rated higher than a man with equivalent capacities.

The title Ms. has no equivalent in German or in French, and a businesswoman can expect to be addressed as Frau (Madame in French) or Mrs., whether she's married or not. Fraulein (Mademoiselle) or Miss is used only to address those under the age of 18 nowadays. So if a woman insists on being addressed as Miss, she should make that clear when she's first introduced or when she introduces herself ("This is Miss Such-and-Such"). If, despite all effort, the Swiss side addresses her as Mrs., a correction­ even a tactful one-could prove awkward.

Many Swiss will shake hands with the males present but will wait until a woman offers her hand to be shaken, so be sure to do so.

@,....._M_ak_in _g_c_on_ n_e_ct_io_ns __ _

Cold Calling is Useless

Switzerland's business community is a small world where everybody knows everybody else, either directly or through common acquaintances. Thus, Swiss executives are used to meeting new business partners through somebody else. Third party introductions are vital and cold calling is frowned upon.

Old Soldiers' Network

As explained in the preceding chapter, for years the Swiss army has played the role of both a school for leaders and a men-only social club, offer­ ing young up-and-coming executives the chance to meet important people during army exercises. Although this way of making contacts probably will not be available to you, you should be aware of it to understand what your Swiss acquaintance means if he tells you he is a captain of the Mountain Grenadiers (an elite unit).

44 Passport Switzerland

Board Cronies and All That

People sitting on the board of big Swiss compa­ nies usually sit on several. A big Swiss bank that makes loans to a major firm often tries to impose one of their employees on the firm's board, to have a privileged inside view and be able to voice the bank's interests. Thus, if you are lucky enough to know a board member of some of the most presti­ gious Swiss companies, you have potential access to most of the others: Tirez le fil et toute la pelotte suivra. (Pull the thread and the whole ball will follow.) Peo­ ple like financier Martin Ebner, who take stakes in big Swiss companies to make the board maximize shareholder value, are not common. Swiss corporate life is much more laid-back and cooperative, and deals are usually done very smoothly.

Tips for Finding a Swiss Partner

• Find a go-between. For example your banker or a trusted Swiss businessperson will be able to help you meet the right people.

• If you know who you have to meet, try to locate somebody who is easy to approach and who knows the target person.

• Give them a way to easily "pigeon hole" you. If you have dealt with famous companies, that can enhance your credit, as will telling them whom you already know in Switzerland, espe­ cially if they are in the same industry.

• Never brag about money or big deals you made in the past, although you can hint at them.

• Always be well prepared and accurate on the facts and figures you quote.

Strategies for Success

Local Languages

Most meetings with international business peo­ ple are conducted in English. In Latin Switzerland, people will be glad to speak in Italian or French if you speak either well. In the Swiss German-speak­ ing part you should avoid speaking High German unless your host offers to, especially if you are from Germany. Saying hello in the local language is always polite, but please do not expect the locals to cheer just because you learned to say hello.

Swiss Humor

Jokes are optional in Latin Switzerland (Italian­ and French-speaking parts), but they are better avoided in the Swiss German-speaking areas unless you are familiar with both culture and language.

Ten Golden Rules

1. Be Polite The Swiss are as obsessed with politeness as the Japanese, and your being very rich will not be seen as a substitute for good

46 Passport Switzerland

manners. However, unlike Japan, politeness has few formal rules. If you pay respect to your host or business partner, remember to shake hands and never shout. He or she will not ask for more.

2. Be Punctual Why not repeat it? Be on time. Being a few minutes late is just impolite, but if you are 15 minutes or more behind schedule, chances are your Swiss interlocutor will be very angry. If it happens during the first meeting, it can compro­ mise the whole business relationship.

3. Be Prepared Prepare everything you will need for meetings before you arrive. Once there, give your counterparts documents about you and your company. Be prepared to quote fig­ ures and prices and to answer in detail any question they may ask about your products or services.

4. Be Precise If you quote a figure, it must be exact. When you describe a project or product, you should fully grasp all its details.

5. Don't Show Off Your Money With so many oil princes, sport and music star millionaires from all over the world coming to stay in Switzer­ land, the Swiss are used to seeing luxury every­

where. Thus people will not be impressed by a Ferrari or an expensive watch.

6. Don't Name Drop Famous people are common in Switzerland. You will not surprise a Swiss if you have once spoken with billionaires or political leaders. Only mention it if you have some exclusive knowledge that is relevant to the topic at hand.

7. Don't Speak Loudly The Swiss are discreet and reserved people. They usually speak slowly, choosing their words carefully. Speak-

Strategies for Success 47

ing loudly and quickly will be interpreted as being over-emotional.

8. Don't Criticize Switzerland Who likes to hear one's country criticized? The Swiss often criti­ cize their own country and especially to strang­ ers, but that is not an invitation for you to do the same. Even if they will not show it, people are often very patriotic and they will never for­ give you for putting them to shame.

9. Exporting to Switzerland If you are a middle­ man, some buyers will be reluctant to do busi­ ness with you. An Indian exporter recounts that as soon as he said he had several nut factories in India, he had no problem meeting the buyers of the biggest Swiss supermarket. Howeve:� another Indian who sold cotton goods indepen­ dently could not get a single appointment with the same people. Swiss buyers' first concern is quality. Come with your best products and be prepared to give sensible arguments to under­ score their quality. Manufactured goods should come with very good after-sales support.

10. Business Gifts During your first meeting you can bring business gifts bearing the logo of your organization. However, gifts intended for a spe­ cific person should not bear any logo, unless the gift is of very high quality and the logo very dis­ creet. If you want to do your host a favor, choose a restaurant in a gastronomic guide such as the Gault-Millau and invite him or her for a meal. Wine, chocolates and cigars are recommended but can be tricky if you cannot tell ganache from Yquem. Offering foreign chocolates to a Swiss is a cultural faux pas, even if the Swiss are more and more aware of the excellent products made in neighboring countries.

(1}}b Time

�J-b�-- In Switzerland, Time is Money

The Swiss are known to like punctuality, to the point of obsession. So, if you have an appointment with a Swiss company at 2:30 P.M., come some time in advance and tour the building to be sure you will get in at 2:30 P.M. sharp. This is especially important for the first meeting, as your Swiss partners/ clients will assess how serios (reliable) you are.

Deadlines are Deadlines

If your Swiss suppliers set a deadline, you can be confident they will go to every length to hold it. Conversely, if you agree on a deadline with a Swiss client, you have to comply or be rated as unserious, which means your Swiss contact will try to find somebody else.

Notes on Punctuality

The Swiss have a reputation for being as punc­ tual and precise as their best watches. The rule is: Avant l'heure, c'est pas l'heure, apres l'heure, c'est plus

Time 49

l 'heure (Before the hour is not yet the hour, after the hour is no longer the hour), with the only exception being the Quart d'heure Vaudois where, in the canton of Vaud, people generally arrive fifteen minutes late for an appointment. It is their way of thumbing their nose at the national on-the-dot-timing.

But secretly the Swiss are very proud of their punctuality. This precision is the expression of something stronger and more profound: their national feeling towards social and political order. Une place pour chaque chose, et chaque chose a sa place could be the motto of this Confederation. (A place for everything and everything at its place.) A lin­ guistic particularity, typically Swiss, is the transla­ tion of "OK" into German as alles ist in Ordnung (everything is in order) or to translate "tip-top" into French as propre en ordre (clean and in order). Even some administrative forms have an en ordre box to check as opposed to a simple "yes" box.

It can happen, although very rarely, if you have a meeting concerning a job, a contract, some advice or some support with a person in a powerful posi­ tion, that this person arrives late on purpose to demonstrate their power. In such a case, you will wait, and wait, and wait until the person arrives in a whirlwind, hardly taking the time to apologize and, without spelling it out, makes it clear that he, being the very important person that he is, has just come out of a meeting and grumbles that he only has a couple minutes to listen to you.

As for you, always try to be punctual. The Swiss should feel obliged to be as punctual as a for­ eigner as a matter of honor. It would be seen as very impolite to arrive late intentionally.

�p ______ Bu_s_in_es_s _M_ e e_ti_ng_s __ _

Early Bird Special

Swiss business people are famous for meeting very early. Meetings at 7 A.M. are not unheard of, and that is not for a power breakfast. People in managerial positions often arrive one hour before their employees (who arrive between 7:30 and 9 A.M.), so if you need to speak with them and know their direct extension, do the time zone math and try an early call.

Be Prepared

At your first meeting, you should come pre­ pared with all the relevant information about your organization, why you are there and what your plans are. If you are vague or lack the proper docu­ mentation, people will rate you as unprofessional. And in Switzerland, as everywhere, first impres­ sions may be misleading, but they last.

Arrive on Time

If you come late to a Swiss meeting, even by 5

Business Meetings 51

minutes, this is a bad beginning. Of course, Swiss business people know that other countries have a less rigid conception of time but this is neverthe­ less considered rude. If, for example, you are 10 minutes late, some Swiss will make you sit a fur­ ther 10 minutes in the waiting room, so take some­ thing to read.

Swiss German Style

In the Swiss German-speaking part of Switzer­ land, people tend to make business meetings as short as possible. You arrive, tell them what you want, they answer and after the business discus­ sion is over, they will close the meeting. A central European businessman reports that only after the fifth meeting and having bought millions from his Swiss supplier was he invited for lunch.

The senior manager ( Chef) will speak first and lead the show. His lower-ranking colleagues will usually speak only when told to do so, and you should not address them directly during the first meeting.

Latin Style

In French- and Italian-speaking Switzerland the custom is to take business acquaintances out to lunch (some say that is because the food is better in this part of the country). Discussions are never restricted to business topics and conversations often touch on cultural tastes, cuisine, travel, the European Community and so on. Personal and family issues are only raised by the persons con­ cerned.

@ �_N_ e_go_t_ia_tin_ g_s_t_yl_es __ _

That's the Price

Swiss sellers do not have a soft approach to prices, at least not when it comes to their prices. Of course there is always some room for negotiation, but it should be done with tact and moderation.

You have to understand that the Swiss people never discuss retail prices. Either they buy it at the full price or they go away (which usually means they do not buy at all because prices are the same in every shop). And most of the time they buy, which makes it a retailer's dream. If in the morning the Swiss retailer asks: "Mirror, Mirror on the wall, tell me what is the price of a cup of coffee today?" and the mirror answers "Five francs," the consumer will take it and say "That's the Price."

Let's say you received offers for the same prod­ uct or service from two different companies, and the price difference was 50%. If you were to call the more expensive company's salesman and ask him if he could lower his price in the face of the other offer, chances are that you would hear, "I can't lower my prices because competitors are cheaper,

Negotiating Styles 53

voyons (go away)!" In many cases, businesses have such a captive

market that buys their goods at whatever price they care to name that your deal has to be really big if you want them to change their practices. Fat cats do not need to bargain.

Apart from prices, the Swiss can be remarkably flexible when it comes to commercial deals. People do not like direct confrontation and are usually ready to compromise. As in politics, they will try to find a juste milieu, a solution that is acceptable to everybody. Not being able to find an agreement will be considered a failure.

Quality has its Price

Although you won't find prices for Swiss export goods cheap, they will almost always reflect the highest quality available anywhere in the world and may be a bargain after all. For example, many radio journalists across the world use Kudelski Nagra (Swiss) recorders. Although expensive, the investment generally pays off many times over in service after many decades of continuous use.

Another example is the Swiss P210 handgun made by SIG, which is literally carved out of a metal block to ensure maximum durability. The result was an expensive but extremely reliable gun. Discontinued, it is now a prized collector's item but other SIG guns are so reliable, that they are used by police forces all over the world, including many US police departments.

If you want to approach the Swiss export mar­ ket correctly, your motto should be "We are not rich enough for cheap goods" (since buying cheap goods will mean that you'll have to buy them again every time they break down.)

With the strength of their currency and the

54 Passport Switzerland

high labor costs, Swiss entrepreneurs have long understood that they cannot be competitive on the low end of the market. They have chosen to concen­ trate on products and services of high quality and to offer the best in class.

They Won't Tell You What They Think

Do not expect the Swiss to tell you abruptly that they do not agree at all with your opinion. They will hear you out, just saying yes, yes. If they do not answer frankly to a question-or even do not answer at all-that does not mean that they do not have a perfectly clear opinion. The Swiss hate the feeling of losing time, so if they are not inter­ ested at all, they will not comment on the matter. If a Swiss takes time with you, it means that he or she thinks there are good opportunities.

®,....._B_u_s _in_es_s _O_u_ts_ id_ e _ t _he_L_a_w_

Underground Economy

You are not likely to see any of the minuscule Swiss underground economy while traveling in Switzerland on business. Taxes being low and gov­ ernment reasonably small, most people see no need to hide what they do unless they deal in things ille­ gal. The worst you will see is foreigners who work in restaurants or on construction sites without the proper work permit.

Drugs, Illegal or Otherwise

Most drugs are illegal in Switzerland, but atti­ tudes toward non-addictive drugs are changing. The Federal Surgeon's office recently declared that they found ecstasy to be rather innocuous, some­ what of a scandal for older Swiss who cannot tell lysergic acid from methamphetamine.

Marijuana and its derivatives are enjoying a boom nowadays in Switzerland, due to unclear laws that permit the culture of this robust plant for oil or medical purposes, and tolerate some shops that sell its hemp by-products. From time to time,

56 Passport Switzerland

police will raid growers and shops to remind peo­ ple that Zurich has no intention of becoming Amsterdam-although marijuana may be soon legalized for Swiss residents.

More disturbing is the heroin consumption that had found its center at the Spitzplatz just behind Zurich's central station. For years an open market for drugs was tolerated there until a crackdown in 1992.

Current issues include the big competition between traditional dealers and the new Kosovo Albanian Mafia that now dominates 95% of the market in some areas. This has driven prices down and consequently reduced the traditional crimes (burglary and mugging) associated with the search for money to finance drug addict needs.

Some cantonal governments have tried metha­ done and needle distribution programs to reduce AIDS and to better monitor addicts. A federal vote in 1999 approved this stance.

Crime in Switzerland

Violent crime is almost unknown, and when murders are committed it is usually between asy­ lum seekers. Like it or not, 44% of the persons con­ victed of criminal offences are foreigners, half of whom do not even officially live in Switzerland.

Graft and Corruption

Corruption is almost unheard of in Switzer­ land, and when scandals happen, they are only on scale of the country itself. Judge for yourself: one of the biggest recent scandals caused the resignation of a Federal Councilor (halfway between a Minister and the President), and the first woman to reach that level to boot. So what terrible crime did Ms.

Business Outside the Law 57

Kopp commit? Did she receive comm1ss10ns for arms deals? Or maybe she helped herself to the State's treasury? Eh bien non. While she was the head of the Justice Department, she learned that her husband, a wealthy Zurich businessman, was going to be investigated by the police for alleged money laundering. She called him up saying, "they are on their way" from her office. When this phone call was discovered, she immediately resigned in January 1989 (how it was discovered is another story). Incidentally, Mr. Kopp was later cleared of all charges.

Sex and Prostitution

Prostitution is legal and there are full pages of advertisements for "massages" in Swiss tabloids. Pimping, however, is illegal and uncommon. Most of the prostitutes operate independently from small studios with their cellular phones.

Swiss prostitutes pay VAT (Value Added Tax) on their services and some take credit cards. If they have a problem with a client, they will call the police to help them out. But this is as Swiss as they get. The majority of them are foreigners from Latin America, France, Eastern Europe or the Far East. Price charged include all Swiss taxes.

�% ,.;__N_am_es_&_G_r_ee_tin_g_s __ The Swiss have names that often describe one

of their ancestor's occupations or physical attributes. Muller (miller), Zimmerman (carpenter). When a woman marries, she can take her hus­ band's name, join her married and maiden name together or even keep her maiden name on its own. Thus Ingrid Stauffacher marrying Jean Ducret can become either Ingrid Ducret, Ingrid Ducret-Stauf­ Jacher or remain Ingrid Stauffacher. Children will be called Reta Ducret.

Forms of Address & Titles

All three main languages of Switzerland have two sets of personal pronouns. The most useful for business usage is the formal form (Sie, Vous and Lei), but you may encounter the informal forms, du, tu and tu used within families and close friends. If an acquaintance offers to switch to the informal form, that is a sure sign of a personal relationship beginning. However, you should not expect it before much time has passed and in any case you should never propose it yourself.

In German-speaking Switzerland, you should

Names & Greetings 59

address men as Herr Bucher, or Frau Bucher for women. People who hold a doctorate should always be called Herr Dr. Schmidt, and if you meet a University Professor (this commands much pres­ tige in Switzerland) you are expected to use Herr Dr. Professor Zaehringen.

In the French-speaking part, people are usually addressed as Monsieur or Madame. Attorneys of both sexes will be offended if you do not call them MaUre (literally: Master), and those who spent years writing a thesis will be grateful for a Dr. Supersaxo.

Finally, people in Ticino have taken the taste of their Italian cousins for exaggeration, and people who hold any degree should be referred to as Dottore Casanova. For the rest, Signore or Signora will do.

The Game of the Name

Swiss Germans always try to remember your name when speaking on the phone. Even if you cold call and briefly mention your name, they will write it down and at the end of the conversation you will hear a nice "Goodbye, Mr. Wilkinso�." This custom is not common in other parts of Swit­ zerland and as a foreigner you are not expected to play the same memory game.

Greetings

People shake hands a considerable number of times in Switzerland, and if you meet a small party you are expected to shake each person's hand while looking him or her in the eye.

In German-speaking Switzerland, to say hello you can use guten morgen (good morning) before noon, and guten tag (good day) or griietzi (hello) all day long. To say goodbye you will use Auf Wieder-

60 Passport Switzerland

sehen ( to the seeing again) when leaving a meeting, but Auf Wiederhoren (to the hearing again) when closing a phone conversation. Aren't the Swiss a precise lot? The use of the local word for hello (Gru­ etzi, Guetzach, etc.) will sound strange unless you can speak at least some German.

In the French part, use bonjour (good day) all day long to say hello, but switch to bonsoir (good evening) in the evening. When saying goodbye, use au revoir (to the seeing again). On non-business occasions it is common for men and women to kiss each other on the cheek ( or just in the air) 3 to 4 times. Observe the local custom.

In the Italian part, people greet each other in the morning with Buongiorno (good day) and with Buonasera (good evening) in the afternoon. When leaving, they use Arrivederci (to the seeing again).

A Word of Advice

English has no formal and informal forms, and thus the degree of formality when addressing somebody is often conveyed by the use of the first name. As the line between Mr. Smith and William is not clear-cut as in French, German or Italian, people are often more relaxed in using first names. Do not try to call a Swiss by his or her first name unless you are invited to or know this person very well. Although the person you are talking to might understand that your intention is to be friendly but not impolite, it will probably cause some discom­ fort nonetheless.

[f � Communication Styles

\_J L/

Nonverbal communication

Basic nonverbal communication rules are not very different in Switzerland than in other North­ western European countries. Leaning forward means agreement, whereas leaning backward indi­ cates suspicion. Crossing the arms is a sign of clo­ sure, meaning that the person disagrees or is bored. People nod their head vertically to mean yes and sideways to mean no.

When talking, the Swiss won't become excited and will never do big gestures. If they keep quiet, that doesn't mean a lack of enthusiasm. The Swiss will never reveal right away what they are really thinking. They are too scared to say something that you may not be ready to hear or that might make you uneasy. They will first try to gain your trust. Then they will beat around the bush a little to determine the best way to tell you what is really on their mind. When they explain something to you, they will try to judge by the reaction of your face if you approve, asking for an answer by smiling. You should definitely participate in this little game if

62 Passport Switzerland

you want to have a more in-depth conversation with whomever you are speaking.

Joking With the Swiss

The educated Swiss are very witty and often deliberately say things that have many meanings. Their humor is very intellectual and should at least make you smile. It is a sort of rite of initiation. If you are able to understand it and answer intelli­ gently, the Swiss will consider you one of their own.

You should certainly not be offended by these battles of wit or pretend not to have understood. It is in your best interest to respond with a humorous line of the same genre. This tit-for-tat response will not only flatter the person with whom you are talk­ ing, but will also show that you appreciate their sort of subtleties and demonstrate that you have a good understanding of things and do not need to have them explained to you. The Swiss appreciate being able to say things without explaining them.

If the Swiss feel that you are on the same wave length they will not hesitate to imply certain more serious information that they would not have been able, out of modesty, to tell you directly. Discreetly continue to show that you follow their train of thought and they will open themselves up will­ ingly.

On the other hand, outbursts of laughter are not recommended. In fact, over-emotionalism is considered a sign of weakness. Try to avoid being too publicly affectionate. Never shout or speak loudly. The Swiss will always wait to be near you to greet you. Only the young or the impolite wave or shout at each other from far away.

Communication Styles 63

Small Talk

In certain cultures it is considered taboo to talk about the weather as it is seen as conversation piece of last resort or a lack of willingness to talk about other things. In Switzerland, however, you should not be shocked if this topic comes up time and again, especially at the beginning of conversations. This makes for a light beginning to a discussion and avoids jumping into the heart of any given topic that might make either person uncomfortable. The country's landscape makes for dramatic cli­ matic variations, even over short distances. The weather forecast is obviously one of the most fre­ quently watched programs as the Swiss love dis­ cussing the climatic differences between the regions of the Alps, the Jura (mountains between France and Switzerland), and the plains.

The Art of Consensus

One of the most prominent aspects of Swiss culture is its incessant attempts to achieve consen­ sus. This modus vivendi is determined by the extremely heterogeneous population: 26 cantons, 4 national languages, 2 major religions, a clear divi­ sion between urban and rural areas-all doubled by the distinction between the Alps and the plains. So many differences which miraculously do not become destabilizing factors! On the contrary, everyone is aware of the respect due to others as well as their opinions.

At the political level, the decision-making pro­ cess revolves around the need to consider all of the concerns of the respective groups. The people most affected by a decision are always consulted before­ hand. The numerous associations and televised Sunday morning debates, which invite representa-

64 Passport Switzerland

tives from all walks of life, are considered funda­ mental institutions as they contribute to the political decision-making process. Rather than let­ ting ideas take their own course, an attempt is made to find a common position that could accom­ modate the masses. Everyone is, therefore, forced to make certain compromises.

These negotiations take time, often a lot of time. After all, it is said that the Swiss are slow. But when the decision has been taken, it encounters no obstacles once it has been set in motion. In fact, these discussions allow for a solution perfectly adapted to the reality of the problem to be reached. As the groups who would be mainly affected by the decision participate in the negotiations, they are convinced that the solution arrived at is the most reasonable. And the minority whose rights may have been infringed, is, in most cases, awarded compensation.

The consecration of this culture of consensus can be found in the collegial form of executive and federal power and in most of the cantonal govern­ ments. A group of 7 "counselors" make up the fed­ eral government. Each member of the "college" defends his or her point of view behind closed doors. Then discussions are held to determine a common or at least a majority opinion. Once a deci­ sion has been made all the members of the college are required to defend it publicly regardless of their initial opinion. They become little more than spokespeople for the government as a whole. Politi­ cians who wish to distance themselves from the col­ lective decision taken with their colleagues will immediately become pariahs, a fact that goes to show just how important this process is to the peace of this very heterogeneous country.

Therefore, do not be surprised if it takes a long

Communication Styles 65

time to decide on business matters. The Swiss will first try to find out the opinions of those concerned. They will then try to rally the interest of the major­ ity around a common project, as this has proven to be the only viable long-term solution. It would be very surprising if a decision were made based on a brainstorming session or against the will of the majority.

Direct confrontations are completely counter­ productive, not to mention socially unacceptable in Switzerland. If you want your ideas to be incorpo­ rated into the final product, it is better to ensure a dominating position by taking an active role in the project development by contributing constructively in the discussions. Trying to use blackmail or pres­ sure after the fact will have no effect at all. As the decision reached is the fruit of a collective work, everyone involved will unite to save their laborious equilibrium.

Cleanliness

The Swiss have always considered themselves to be like a Sonderfall (an exception). They smile indulgently about their French neighbors with their unwashed houses, unorganized cities, massive strikes, unstable politics and badly run businesses. Until recently Italy and Spain were judged even more severely, that is to say, almost as if they were third world countries. But the Swiss do not con­ sider themselves to be overly fanatic in any way. Only the Germans are fanatics. The Swiss are disci­ plined.

Manners and Politeness

The Swiss are extremely polite. Expressions like "thank you very much" or "my pleasure" are

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used all the time. Car drivers are very courteous with pedestrians. If they notice that someone wants to cross the street, they will stop and give a hand signal to the pedestrian indicating that he or she can cross safely. The pedestrian, out of gratitude, should respond by a hand signal or a quick glance accompanied by a nod of the head.

In small cities, villages, and on mountain trails, it is customary to greet people you pass (even if you do not know them) with a cordial Gruezi (hello) or Bonjour (good day). In cities, this gesture is still used when entering stores or small cafes. It is considered equally civil to give your seat to senior citizens and pregnant women on public transportation.

Even if it is true that women appreciate good manners, you should not try too hard to impress them. It is up to you to judge how much chivalry a woman expects. But be careful not to make her feel childish or relegate her to a position of inferiority. Swiss women also enjoy their independence and many of them no longer appreciate the paternalistic aspect of courtesy.

If a woman insists on sharing the bill or treat­ ing you to dinner, you can protest politely but go along with it. She will feel as though you see her as an equal and will feel satisfied that she does not owe you anything.

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Celebrations and Religion

Catholicism (43.6% of the population) and Protestantism (50.4%) have left their mark on Swiss society and continue to do so today.

Even if Christian values are turning less and less to ecclesiastic institutions as a means of expres­ sion, Churches and the Christian perspective remain a stabilizing factor of the society. At the same time, there is a more pronounced tendency towards individual interpretation of religion, and the interest in new forms of religion and spirituality is growing.

Many see in the Swiss work ethic, their reserved nature and realist outlook, an influence of Protestant values with the stamp of Calvinism. If economic thought has its foundations in Protestant­ ism, then it is perhaps the Catholic tradition that gave the Swiss character its strong ties to the land and its love for rural traditions and ritual festivities.

The year passes by to the rhythm of the holi­ days. Here are some examples of Switzerland's most famous.

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National Day

If it's true that you can judge a country's image of itself by its National Day, then Switzerland defi­ nitely offers a relaxing sight. No military parades and no grandiose speeches on Lebensraum (living space).

On August the first, the whole country gathers in public places around bonfires and listens to speeches about the independence of the country from the Austrian rulers, which started with the Griitli Pact of 1291.

The first of August is celebrated solely in the municipalities. Only one radio and television broadcast of a speech by the President of the Con­ federation currently in office reminds the Swiss that their cities are united in cantons, which in turn makes the Helvetic Confederation. Thought-pro­ voking words from an eminent cultural or political speaker, songs and music, gymnastic shows and group performances of the Swiss national anthem are the traditional elements of the holiday.

Many municipalities set off fireworks, and these spectacular light shows are often ignited from the mountains and hills. They serve as a reminder of the expulsion of the foreign bailiffs in the 14th century, for the great news was announced in this very way. The children march through the streets at dusk with candle-lit Chinese lanterns. Flags with the arms of the Confederation, the canton and the municipality fly proudly above public and private buildings alike. Even the bakers get involved, deco­ rating their rolls of bread with little Swiss flags.

The holiday takes on a whole new dimension at Neuhausen am Rheinfall in the Canton of Schaff­ house, with the illumination of the 25-meter high Rhine waterfalls. This extravaganza is completed by a great fireworks display that draws throngs of spec-

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tators. And, like everywhere else, speeches, songs, music and the national anthem animate the evening.

The Carnival of Basie

The Carnival of Basie is the largest popular fes­ tival in Switzerland, gathering between 10,000 and 20,000 costume-clad participants each year.

The famous opening call, known as the Mor­

genstreich, is sounded the Monday after Ash Wednesday at four o'clock in the morning. Fife players and drummers, bedecked and masked, set off swaying to the heart of the city that awaits their arrival in the darkness. The bands of bugles and drums carry lanterns that can reach up to 3 meters in height, creations of wood and fabric that are lit from within and parody the events of the past year.

For four days, the Guggenmuusige (masked street orchestras) liven up the city with their inces­ sant parade. The merry-making will last until Thursday at four in the morning-and then it's another year of patience until the long-awaited sounding of the Morgenstreich.

The Neuchatel Wine Festival

Vines have been cultivated on the Neuchatel hillsides for over ten centuries now, so it comes as no surprise that the people of Neuchatel celebrate its harvest with a colorful wine festival.

And celebration it is! From Friday to Sunday, day and night, stands and refreshment booths jam­ pack the squares and streets of the city center, serv­ ing food and drink for the thousands of spectators who come to unwind and admire the parades and decorations. The children's procession takes place on Saturday afternoon, followed by a parade of local or guest marching bands in the evening.