##### The Cost of Cultural Misunderstanding

Let’s estimate what the failure of this first workshop cost the company. For the sake of simplicity, all numbers are in U.S. dollars or Euros.

##### Failed First Attempt

*Workshop Preparation*

They gave themselves six weeks for preparation. Each of the twelve participants invested 120 hours (20 hrs. per week). The hourly rate for Karl and Roger 150. The hourly rate for the department heads 100.

Karl and Roger: 36,000. Their department heads: 120,000. Total: 156,000

*Workshop*

Five full days in the workshop: 40 hours each. Karl and Roger: 12,000. Their department heads: 40,000. Total: 52,000

*Expenses*

Six participants fly business class across the Atlantic: 24,000 (6 x 4,000). Offsite-workshop in a hotel for twelve people: 12,000 (12 x 5 x 200). An administrative assistant supports the workshop: 3,000. Total: 39,000

*Total Costs*

Preparation: 156,000. Workshop: 52,000. Expenses: 39,000. Total: 247,000

##### Second Attempt or New Approach

The first workshop did not produce a draft integration roadmap. They will need to either meet for a second time or to rethink their overall approach.

*Second Attempt*

The costs of the first first workshop was 247,000. Would the costs for a second workshop be the same as the first, less or more? Let’s assume that the second workshop succeeds without any need for preparation. The expenses alone would be 91,000.

*New Approach*

What if Karl and Roger decide that they need to come up with an alternative approach. What would be the cost of that internal decision making process? What would the execution of the new approach cost? What are the chances that it will succeed? What will be the costs if the new approach fails?

*Roadmap Implementation*

We assume that all participants are both capable and willing to integrate their organizations. Yet, they “departed in an atmosphere of apprehension, tension, even mistrust.”

The cultural factors which led to the failure of this first workshop will also be at play when the integration roadmap is passed down to the individual cross-Atlantic teams for implementation.

In other words, whatever approach leads to an integration roadmap, the cultural factors involved will also be at play when German and American colleagues at the lower levels are asked to implement that roadmap. For it will be their job to work out the details of integration at their working level.

At a minimum each of the five key departments will have to formulate and then implement their own integration roadmaps. What additional costs will be incurred if those five teams struggle with cultural differences? 5 Teams x 50,000 per team = 250,000.

*Post-Integration Productivity*

We assume that, one way or another, the two organizations will be integrated. But, what impact will cultural differences have on productivity? In other words, will these engineers work just as effectively across cultures as they do within their respective native culture?

Integration on paper is one thing. Collaborating day in and day out is a wholly different thing. It’s the difference between a wedding and a honeymoon, and then actually living together. Month in, month out. Year in, year out.

Let’s assume that post-integration productivity decreases by 5%. What will that cost the company?

5% decrease in productivity x 250 (assuming only 25% of the engineers collaborate cross-Atlantic) x 150,000 average yearly salary per engineer = 1,875,000.

*Design Engineering Work Results*

If cultural differences influence how the two organizations work together, what will be the impact of these differences on work results, on the engineering designs they produce? In other words, if their work is often over budget, or over schedule, or of suboptimal quality.

Let’s assume a negative impact of 5%. What would that cost the company? 5% decrease in quality of work results x $1,000,000,000 annual budget = 50,000,000

*Question*

Did we miss anything?