PRINT THIS STORY:

CHANGE TEXT SIZE:

AT HOME ABROAD

Overseas posts force executives to master new cultural skills

By Curt Hazlett

The past,” observed L.P. Hartley in his novel, The Go-Between, “is a foreign country; they do things differently there.” For increasing numbers of retail real estate executives, the present is equally foreign.

Brian Castle had handled lots of assignments in his career with Montréal-based Ivanhoe Cambridge, and he was ready for a new challenge. So when the chance to move to Shanghai came along a year ago, he took it. Castle, now the development firm’s senior vice president for China, has immersed himself in the mysterious ways of Chinese business. He has learned that patience is invaluable in a land where shopping center development is brand new, that trust is as hard to develop as properties, and that among his biggest jobs are to listen and to teach.

It has indeed been a completely new experience, Castle says. “I’ve gotten great insights into the country and its social issues,” he said. “I’m amazed every day.”

Emerging markets are a powerful lure for Western retail these days. China’s retail sales are growing at a double-digit rate — monthly, not yearly. In India an estimated 1.6 million households spend some $9,000 a year each on luxury goods. Bulgaria, which got its first mall in May, had three open by the time September rolled around.

As more retailers and developers seek opportunities in those markets and others, growing numbers of executives like Castle are finding themselves wrestling with the complexities of doing business in places where the culture, language and laws are unfamiliar to them. If globalization is a day-to-day challenge for these executives, it is an even greater one for their companies as they chart long-range strategies. “The number one issue in the globalization of the real estate world is talent,” said Jack Van Berkel, senior vice president of human resources at brokerage firm CB Richard Ellis. “How do we attain it, and how do we train for it going forward?”

This is an issue for all industries, not just those related to retail. A Conference Board survey of 81 companies completed last year found that roughly three-quarters of them were trying to improve their global talent development in a race for international business.

The cultural challenges of entering unfamiliar territory anywhere can be great. Consider the experience of Ikea, whose opening of a $250 million mall in Moscow last year was delayed when local officials complained about last-minute “permit problems.” The retailer called it a shakedown for bribes, which foreign companies are finding to be a common practice in Russia.

These days much of the world’s attention is on Asia, where fast growth offers the promise of strong returns for companies that can successfully launch and manage projects. For many Western companies, that means putting senior executives on the ground so they can conduct business face-to-face.

“That’s a big challenge,” said Bob Fuller, managing partner of Global Rainmaker, a business development company based in Raleigh, N.C., that has helped medical-equipment manufacturers and construction companies start operations in China. “Companies sometimes send people with little or no international experience overseas because they are good at what they do here, and generally they are fish out of water there,” Fuller said. “They look at things with American eyes and expect immediate results, and in Asia it just doesn’t work that way.”

With nine years of experience in Asia, Morgan Parker qualifies as an experienced hand there. An Australian who is a lawyer by training, Parker ran Morgan Stanley’s retail investments in Asia before becoming president of Taubman Centers’ Asian subsidiary, Taubman Asia, last year. He says he still finds the cultural differences difficult. Language issues mean longer meetings, for one thing, “and in most instances the parties you are negotiating with are coming at things from a very different perspective. A lot of times the local partner’s business agenda is short-term-orientated.”

Castle says he has had much the same experience. He went to China to help launch C2 Group, a joint venture between Ivanhoe Cambridge and Thai conglomerate Charoen Pokphand Group that will eventually provide retail development, leasing and management services in China. “You work longer hours because you have to explain so much more,” said Castle. “You have to communicate with North America, and you do that on both ends of the clock. Of course, you have to do your job here, so if you’re in a translation meeting, that will take one and a half or two times as long. You have to learn the market. And you have to teach your employees.” Besides that, establishing trust is paramount, he says.

“You can build relationships in terms of getting people comfortable with you, but ultimately the trust issue comes into play,” he said. “You can sign a confidentiality agreement, for instance, but then find that getting the information is very difficult. They may be embarrassed that they have under-rented their center or that they’ve done deals they shouldn’t have. They wonder, ‘Will this be used against me?’ ”

If Western developers are just beginning to enter the global marketplace, commercial brokerage firms have a longer history of involvement. But they, too, are changing along with the market. “The real estate business has been pretty decentralized, but we are now starting to look more at one platform as we move toward more globalization and a common infrastructure,” said Van Berkel. That means common hiring and development standards, he says.

Indeed, the rise of new markets is changing the way Van Berkel approaches hiring. He says he met recently with the dean of the business school at the University of California at Los Angeles “to talk about leveraging UCLA for talent, not just in the United States but in Asia. When you’re talking about Asia you’re talking about a significant shortage of talent. How we’re going to attract that talent and train it is the biggest issue.

“We’re trying to become more of a global platform, because that’s obviously where our customers want us to go. We have to think about how we service Citibank not only in New York but in Hong Kong and in London.”

Central to all of this is culture: understanding the practices and traditions of other people and learning how to work with them. To Global Rainmaker’s Fuller, cultural misunderstanding is the greatest stumbling block. People in other markets “have to get to know you and understand the business model you are working with, and they don’t always understand business models,” he said. “So the frustration is high on both sides, because the press for results conflicts with a lack of understanding.”

Fuller recommends that companies trying to enter a new market find a strong local partner to help provide the cultural awareness. This is especially helpful in Asia, he said, because “an attempt to go it alone puts an Asian client in a very cautious mode. They wonder, ‘Are these people here to stay? Do they understand me? Will I embarrass myself if I put in a lot of effort and they aren’t here to stay?’ ”

Of all the things to look for when filling a foreign post, “cultural awareness is always the most difficult,” said Van Berkel. “I don’t think most companies do a very good job in that area, even the most sophisticated companies,” he said. “When you talk about cultural awareness, it’s not just about Europe versus Asia; it’s the Czech Republic versus Poland versus Moscow. Even in the same geographic centers you have different cultural issues.”

Ivanhoe Cambridge’s Castle will be in Shanghai three more years. By then, he says, parties on both sides of the table will probably find each other less mysterious.

“It will get easier,” he said. “We have to make an adjustment to the Asia mind and to an immature industry, so we’re making a double adjustment, but I think that might modify over time. Ten years down the road, it will be a whole new thing.”