Trust is essential for business. Video conferencing fits many cross-cultural calls across continents into a single day. Understanding what creates trust across cultures is more important than ever.
A new book, Searching for Trust in the Global Economy, finds that there are cultural differences in the way managers decide to trust in developing new business, and that these differences persist despite widespread access to video conferencing. A major strength of this research-based book is its ability to offer pre- and mid-pandemic perspectives of developing trust in new business relationships. Prior to the start of the pandemic, the authors, Jeanne Brett, DeWitt W. Buchanan, Jr. Professor Emerita, Kellogg School of Management at Northwestern University, and Tyree Mitchell, Assistant Professor, School of Leadership & Human Resource Development, Louisiana State University, interviewed 82 managers from four regions of economic activity: the West, East Asia, Latin America, and the Middle East/South Asia. They asked managers, how do you decide to trust a potential new business partner? The authors also conducted follow-up interviews with 21 managers during the midst of the pandemic. In the mid-pandemic interviews, they asked managers, how has the pandemic affected business development? One of the book’s primary points is that understanding cultural differences in the process of trusting new business partners is just as important (if not more important) for success in new business development in an age in which using video conferencing technology is the “new normal.”
East Asian cultures initially weathered the pandemic better than other cultural regions with respect to health and economic outcomes. To be sure, East Asians were more prepared for Covid-19 than other regions because of their experience with SARS almost two decades earlier. Using technology, their governments initiated a swift and all-encompassing societal response and people complied. Despite restrictions on international travel, business—including new business development—continued after a break.
East Asian managers contacted mid-pandemic emphasized that their standard approach to searching for information about potential partners’ reputations and seeking recommendations from brokers (third parties), continued to be core practices.
- Introductions are core; very bread and butter. (143, Singapore)
- A lot of commercial customs (in China) are running pretty well the same as in Europe or United States, but … when you start new things … you need to call your friends or insiders to learn, who in this industry has the best-in-class reputation. Still, that is the main thing you would do. (189, China)
- Competencies. Actually, that is our first priority, of course, but it is quite difficult for us to evaluate degree of competency before (meeting with them). Now, we generally ask the trusted third-party company. (118, Japan)
In deciding to trust new business partners, mangers in this region preferred to test the partner’s competence in-person. When partners were local, they could and continued to do so despite the pandemic. When travel restrictions meant managers in this region could not evaluate competence in-person, they relied on brokering—the assurance of a trusted third party that the potential partner could be trusted.
The upshot: in East Asia, managers are not only using brokers for introductions but also for assessing competence.
Prior to COVID-19, Western culture managers tended to assume a potential partner was trustworthy, but they preferred to meet in-person to verify that assumption. Trust but verify; people are not on the watch for distrust, but don’t ignore signs either (US, 150). This general expectation of trust contributed to maintaining business development in this region during the pandemic, along with a quick pivot to online interaction. Ultimately, managers realized that the openness and transparency of potential partners that managers often seek to verify in in-person meetings could be judged online.
In the pre-Covid-19 interviews, Western culture managers reported they assessed openness by reading body language, observing eye contact, assessing strength of handshake, and so on. However, managers realized that they did not always have to be in person to gather the information they needed to judge openness successfully.
- I think the key to building trust is no different in a COVID world versus a non-COVID world. And I think that is transparency, being upfront admitting what you’re working on. People are much more understanding of an area that is not perfect for you as an organization. If you admit, hey, here’s a place where we’re not perfect and here’s what we’re doing to improve it, then if you don’t speak of it and try to act as if it’s not there. So being transparent, being upfront about who you are, where your strengths are and then what you can do and being willing to listen and get that same sort of transparent truth from any potential business partner. Those are things that will really make a difference. (123, US)
- During COVID-19, building trust still matters. It just moved online. Probably all of us thought you have to meet a person and you have to have dinner together in order to build a relationship. But we realized trust happens over what we do. It’s the way people talk. Are people honest? For me it’s always a red flag, if someone only sees the advantages and isn’t really honest about the disadvantages. (127, Germany)
A primary challenge for managers during the pandemic—including Western culture managers—was in making contacts for new business. Without the flexibility of meeting in-person, managers in Western cultures—similar to East Asian managers—were relying more on their networks for introductions. There’s no formula for this. You just have to seek out the people in your network who can be the most helpful to you and who are willing to be helpful. And I’ve identified three or four of those people. I’ll approach them and say, I need to meet with a certain person. Can you help make that introduction for me? (122, U.S.). However, culturally, the meaning of network introductions is somewhat different in the West than East Asia where the broker’s own reputation is more on the line.
The upshot: Westerners still search for openness and transparency to verify trust in online interactions, but they are using their networks for contacts that they would have made directly prior to the pandemic.
Latin American Cultures
Latin American cultures struggled to manage the harsh health effects of COVID-19 and the resulting economic downturn. Pre-pandemic, Latin American managers reported spending significant time in-person getting to know the potential partner and building rapport. Go out with them socially, need to make a connection, not a business relationship (125, Ecuador). They did not automatically assume that strangers could be trusted. Instead, their approach minimizes the risk of exploitation by building a personal relationship based on shared values and worldview.
Latin American managers held firm to their preference to meet in person, but after months online, and postponed decisions, two things happened. Some pivoted to collecting the information they needed to decide to trust from online interactions.
- So people found ways on keeping the spirit of being face-to-face, but using technology. But the principle of talking to someone (is the same). Trying to understand a little bit what this person brings to you and what kind of connection that you have with this person is still the key thing. (145, Brazil)
- Some companies are having, let’s call it after office meetings. Okay grab a coffee or glass of wine and let’s have these non business conversations in order to know a little bit more about each other. Because if we are going to be partners, I think it is a key that we can trust each other. (183, Uruguay).
Others simply scaled back on getting to know the potential partner and took greater risks.
We are evolving in the way we interact and in the way we are doing business, because we are all in a lot of need. And I think there is a deep understanding …of getting rid of having to know the other party too well before starting to do business. I think the barriers have gone down in terms of how much I need to know you personally. (144, Bolivia)
The upshot: Latin Americans will continue to seek to build rapport in online interactions but may somewhat relax their need to deeply know potential partners before engaging in business with them.
Middle Eastern and South Asian Cultures
Generating new inter-regional business in the Middle East and South Asia was already challenging in this region before COVID-19 because it required overcoming prejudices and risk. It required meeting in-person and assessing respect because differences in this region are so pronounced. A Palestinian who had done business with Israeli companies prior to the pandemic explained, Doing business with an Israeli is kind of like betraying your own group by doing business with the enemy of the people (115, Palestine). Meeting in-person provides opportunities to signal respect when gestures of hospitality are graciously offered and humbly received. The combination of a low trust cultural region and relatively little experience with online meetings prior to the pandemic made it difficult for managers in this region to pivot to building trust without that crucial in-person interaction. Managers expressed a strong desire to return to in-person meetings, You know, in terms of adopting to doing everything over the video, I think they do it to the extent where it’s a necessity, rather than a choice to change (101, Kuwait).
The common response to the disruption of normal business development due to the pandemic was to minimize risk by: holding off on initiating new projects, doubling down on projects with current business partners, and making lower risk investments.
The pandemic has not affected our appetite and our activity when it comes to dealing with our existing partners. But definitely, we have shied away from new partnerships or we have committed, I would say less amounts than we typically would like to. There was this transaction that we closed last week. It was the first time that we dealt with this partner, but we really liked the opportunity and we liked the markets and our due diligence was just positive across the board. We were willing to deploy bigger funds into this particular investment opportunity. However, because of our inability to meet the team, face to face, and see the company by our own eyes, we decided to stage our investment. We said we would like to invest a certain amount now and we would like to have the option to invest additional amounts in the future, once a face-to-face meeting happens. (136, Saudi Arabia)
The upshot: Middle Easterners/South Asians are risk averse. Expect them to move back to in-person when feasible.
Despite video conferencing, managers in all four regions anticipated a hybrid future mixing in-person and on-line meetings when deciding to trust new business partners. Therefore, it’s important to keep a few things in mind in order to successfully develop new business relationships in the future.
- Don’t take a one-size fits all approach to developing new business relationships with individuals from different cultures. Recognize that the process of how potential partners gather information about you may be different across cultures and the main criteria that potential partners may use to make their decision to trust may be different across cultures.
- Video conference meetings alone are not a shortcut to relationship building. In fact, building trust with new business partners requires even more intentionality in virtual settings.
- Although one or more meetings may take place online, potential partners will still attempt to assess you on the same criteria that they would in person if possible (i.e., competence in East Asia, openness in the West, rapport in Latin America, and rapport in the Middle East/South Asia)
- In situations in which travel is impractical or unfeasible, the start of a new business relationship could depend on reaching out to an old (familiar) contact who can serve as a trusted broker.