Companies around the world are investing significant amounts of money in building global brands and organizations. The world seems to be getting smaller with advances in transportation and technology, and yet often this makes it seems all the more complicated to navigate. Leaders are tasked with bridging this divide and bringing their global teams closer together to reach their goals. Organizations wanting to achieve success across borders have no choice but to invest in developing the cultural intelligence skills of their workforce.

What is cultural intelligence?

The concept of CQ (Cultural Quotient) or as it’s more commonly known: ‘Cultural Intelligence’, has attracted worldwide research and study since its introduction by two researchers, Christopher Earley and Soon Ang in their 2003 book, Cultural Intelligence: Individual Interactions Across Cultures.

CQ can be defined as the ability to adapt and function effectively in different cultural environments and situations characterized by cultural diversity.

Risks of a lack of CQ

There are myriad organizational risks associated with a lack of cultural intelligence skills:

• Miscommunications
• Critical business errors
• Lack of team cohesion and trust
• Demotivation
• High staff turnover
• Loss of clients
• An impact to the bottom-line

The Economist Intelligence Unit rates cultural issues as a significant factor that increases the risk of successful international mergers and acquisitions.

Misunderstanding arising from miscommunication may damage cross-border relationships and incur significant losses for businesses.

It also says that, ‘…Effective cross-border communication and collaboration are becoming critical to the financial success of companies with international aspirations.’

Further reading

CQ gives you a competitive advantage

Companies that have not invested in developing cultural intelligence across their organization may find that they lose out to their competitors.

As a Mckinsey study suggests, the war for talent continues, and culturally intelligent organizations that embrace diversity are more likely to become the employer of choice.

PwC knows this – they have adopted CQ as one of their core behaviors. According to Robert Moritz, Chairman of PwC United States, ‘[the] only way you are going to have the best talent is to have the most diverse talent.’

This opinion is shared by 90% of business leaders from almost 70 countries, surveyed in another study by The Economist Intelligence Unit.

The leaders all named CQ as the key skill for the 21st century.

However, there is an obstacle – the same 90% also said that finding effective, culturally-skilled personnel is their top challenge.

Why do organizations require cultural intelligence skills?

Building cultural intelligence does more than enhance the skill sets of individual employees, it positively impacts the company bottom line.

1.  CQ = Financial security

Following the publication of McKinsey & Company’s “Diversity Matters” report, it is now widely recognized that ethnically diverse teams are 35% more likely to outperform financially compared to non-diverse teams.

Embracing different cultures and viewpoints drives innovation, improves decision-making, increases staff productivity and retention, and leads to higher profitability. 

Therefore, diverse organizations need to be culturally intelligent in order to attract and manage diverse talent.

2.  CQ = Client loyalty

A survey by the British Council found that in-house talent teams consider the ability to work effectively across cultures a key factor in retaining clients through building effective relationships. They also consider it to be a significant advantage in winning new clients.

Conversely, 25% of failed negotiations could be partially attributed to a lack of intercultural skills.

3.  CQ = Successful global mobility assignments

Despite rapidly growing global interconnectedness, employees embarking on international assignments still fail. Although the number of assignees who return home early appears to be reducing, the number of assignments that fail to meet expected productivity or performance levels remains high. 

According to the 2015 Global Mobility survey by E&Y, also seen in subsequent surveys by Santa Fe, a leading relocation services company, failure rates are as high as 40% and this was directly attributed to a lack of cultural training and assimilation

However, in separate research published in 2010, intercultural training was shown to reduce the failure rate to below 10%, proving the importance of adequate training and support.

Cross-cultural training should be deployed prior to departure so that the assignee can manage their expectations of different cultural nuances and office life from the start.

In a successful international assignment, an assignee will gain invaluable skills such as the ability to balance the miscommunications between high and low context speakers. When they return to the home office, they will have a much broader perspective leading to more creative ideas and solutions, based on observing different ideas and methods of working

4.  CQ = A must for global leaders 

Cultural Intelligence (CQ) is an obvious development from the well-established concepts of Intelligence Quotient (IQ) and Emotional Intelligence (EQ).

So, when considering requisites for effective global leadership, which quotient ratings should be considered? The answer is all three.

In CQ: The Competitive Edge for Leaders Crossing Borders (2014), interculturalist Julia Middleton makes a thought-provoking observation that organizations frequently hire leaders for their IQ. Then, years later, those leaders are sacked for their lack of EQ.

She argues that CQ will soon become the number one sought-after skill for leaders to truly succeed in leading global organizations that are made up of an increasingly diverse workforce.

Further reading

Historian R G Collingwood observed in his book, The Idea of History (1946), that, ‘the historian is a detective’.

Similarly, a global leader must occupy the role of investigator and uncover the values, attitudes, motivations and assumptions of the individuals within their team.

In summary, organizational CQ leads to:

• Better collaboration in both remote and face-to-face teams
• Increased creativity and innovation
• Better decision making and problem-solving
• Successful global assignments
• Successful global expansion (e.g. mergers and acquisitions)
• Speed and efficiency when working across borders
• Enhanced customer service
• Attracting and retaining top talent
• Being a partner/supplier of choice 
• Profitability and cost-saving
• Better leaders

How can you develop your organizational CQ?

SHRM Foundation believes that ‘leveraging the opportunities of the 21st-century world requires a strategy for assessing and developing cultural intelligence’.

Organizations must consider multiple elements when creating a roadmap to build the cultural intelligence skills of their workforce.

1.  Culture is key

Culture can be leveraged to enhance long-term success, yet many executives don’t make it a priority. Reinventing your organizational culture involves changing behaviors throughout the entire company and that may seem like an over-bearing challenge.

• Phase 1: Get buy-in from the most senior levels of leadership (assess their motivation)
• Phase 2: Build awareness and vision of why cultural intelligence matters (create a business case)
• Phase 3: Upskill those who have most direct intercultural engagements first (this may also help you to identify your key influencers and champions)
• Phase 4: Equip the entire workforce with basic skills in working effectively across cultures (drive a culture of continuous learning)
• Phase 5: Fully integrate cultural intelligence within the organizational culture (develop a culturally intelligent business strategy). By breaking the process down and leveraging the advocacy of leadership and culture champions, the organization aligns with the cultural vision and shows results at micro and macro levels (i.e. by department, by team, etc.).

2.  Invest in intercultural skills training

Investing in intercultural training will enable your organization to move towards cultural intelligence maturity, a place which:

• Builds trust among people with different value orientations
• Leverages the diversity of your teams to produce innovative results and solutions
• Promotes equal development opportunities based on unique contributions from everyone
• Identifies the non-negotiable aspects of your corporate culture and policies, yet enacts those values and policies in various cultural contexts
• Challenges unconscious bias, stereotypes and assumptions, while encouraging culturally-informed behavior and cultural curiosity
• Enhances team collaboration and problem-solving

Reflections on CQ

Although it is easy to see developing CQ as a nice to have, rather than a priority, it is an important asset to align to productivity. It also enables greater recruitment and retention of the best employees. Developing a CQ mature organization takes time, consistent work and messaging and resources. Therefore, it is important to start now to be set up for the future. While it may seem daunting at first, CQ is a skill – and as with any skill, it will take work to improve and become the best. However, it is worth the effort; equipping your workforce with cultural intelligence skills is vital for all organizations that want to compete and excel in the global market.