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Resolving Joint Venture Conflicts
By Tom
Coyner
Korea Times
Feb. 14, 2007
Conflicts are inevitable and we must find ways to
resolve them. Since the circumstances surrounding partner conflict
can vary greatly and since the personalities of the involved parties play
a major role in the confrontation, there may not be any ready-made
prescription for the solution. There are however, some general ideas that
may help in resolving conflicts in the local business environment.
Personal Considerations
Western logic alone is not usually sufficient
to influence a Korean counterpart. Re-opening or referring to the exact
stipulations of a contract is not desirable; it has been said "don't confuse
me with facts." Such a factual confrontation will only raise the
defenses of the local partner and even block any attempt at resolution.
Once again, the matter of "kibun" plays a subconscious role in
the resolution of conflict. Try to appeal to his emotional common
denominator.
Control Emotions
Showing one's emotions in a demonstration of
anger can only exacerbate the situation; the foreign partner must always
keep his own emotions under complete control, while appealing to the local
partner's emotions.
Just as wise parents go to great lengths not
to bicker in front of the children, it is even more important that the top
executives representing the two companies keep a positive façade for the
benefit of the other employees. They can still – and should
– let their hair down off site or behind closed doors to get
conflicting matters, while still small, out on to the table for resolution.
Compromise Diplomacy
In difficult confrontations, the use of some
diplomatic procedures such as the give-and-take of a trade-off may prove
productive in resolving conflicts. It may require some innovation to
generate alternative ideas to try in the resolving process.
A Korean joint venture partner agreed to
concede the majority share in the company to the foreign partner on
condition that he be granted the right to veto the first executive
vice-president appointed by the foreign partner. Though not ideal perhaps,
it may be an example of tradeoff.
The "tit-for-tat" procedure may
never create a win/lose situation. One wins only the battle and not the
war. If a deadlock arises, however, a valid alternative may be to consider
areas of possible tradeoff in order to reach a compromise.
Home
Office Support
A very important requirement for expatriates
representing a foreign company is to secure the full support of the head
office for what one intends to propose vis-à-vis the local partner. If such
support is not firm, it will be more difficult to resolve the differences.
Such consultation and approval from the head
office has several benefits. First, it offers the opportunity for counsel
concerning the proposal. It also takes the foreign partner off-the-hook so
that the proposal is not just his or her own idea that might not work.
Finally, it adds backing to the foreign partner in presenting his case to
the local partner. The wider the support, the better in dealing with knotty
problems in an unresolved conflict situation. Such backing adds confidence
that can influence the outcome of the consultation.
Confidential
Negotiations
Not an easy discipline in resolving conflicts,
but a crucial one, is to keep quiet about the matter. Korea is a relatively small
community. Word spreads fast, especially if it is undesirable, unfortunate
news. In this case the problem of "blab" is not confined to any
one segment of society. So it is important to keep one's mouth shut when
partners are trying to resolve a conflict. During World War II we were told
that "a slip of the lip can sink a ship." If this is true in war,
it is also true that loose lips can sink a business partnership as well.
Neutral
Moderator
A mediator or go-between has no emotional
connection to the situation and can help to reduce tensions and defuse the
volatile atmosphere between the partners. Third parties can be used to great
advantage. When one is confronted with an uncompromising deadlock, replacing
the negotiating party with another may lead to a solution.
Exceptional
Conflicts
Sometimes the conflict goes beyond
personalities. Fundamental differences in the priorities between the
two mother companies can and does take place. When the conflict of
interests becomes so obvious that most middle managers and above recognize
the problem, it may be a good strategy not to try to futilely hide the
matter but to amplify the matter so that ultimately the issue, in an
extreme case, may go beyond even the board of directors and over to the
next shareholders' meeting. Obviously, this is an extreme case. But
sometimes this magnitude of conflict can occur beyond the control of the
current representative directors – regardless how adroit they may be
in handling the issue locally.
Top 10 Pointers from an Experienced Foreign
JV Director:
1.
Whenever possible, make sure your firm has
the CFO position. Try to avoid giving up control of the position. In the
end, no matter how tempting the current situation may be to negotiate away
that position, you will regret it.
2.
The Korean CEO is likely to be a god in
the eyes of the Korean employees. Never underestimate your counterpart's
power and be extremely careful not to cause him to lose face. It is not
easy but you must determine how to walk the line between not being
belligerent and being a push over.
3.
The wrong motivation to enter into a JV in
Korea
includes forming a partnership simply out of necessity or ease in entering
the market. There needs to be a genuine, ongoing and mutual reason for
maintaining the JV with the Korean partner.
4.
The expatriate director must have a clear
cut mission and genuine backing from his head office to be successful. Too
often the overseas head office looses interest in the Korean operations and
the local expat director takes on an attitude of resignation from not
making a real contribution. This sort of matter often appears in JVs
created out of convenience rather than of shared purpose with the Korean
firm. When that attitude sets in, it is often the beginning of the end of
any chance of a successful joint venture.
5.
It takes at least 18 months even for a
fairly experienced and competent foreign director to become truly effective
since it so difficult to understand the game.
6.
As soon as a new guy comes in as the new
foreign JV representative, almost certainly the Korean partner will try to
revise the relationship with the disappearance of a number of regular
meetings, reports and information procedures. It's therefore important that
the new representative director arrive with a clear agenda as to his role
and what information he is to received plus clear delegation of authority
such as spending authority, investment authorization, etc.
7.
Most Westerners want about a month to ease
into a job before putting their foot down. In Korea, one is not normally
given that luxury. Rather it is much better to approach the job as
representative director with even a dogmatic sense of authority.
Otherwise, the Korean organization will likely marginalize the new director
and he or she will be endlessly trying to chase down critical information.
8.
It is critical in Korea to immediately establish
your authority to be included on important – particularly negative
– information. By culture, Koreans are loath to speak up –
particularly if there is bad news. One really needs from the beginning to
make it clear that you need and welcome bad news rather than waiting until
a bad situation festers into becoming a crisis.
9.
Networks of relationships are critical.
Often the real communication and secrets are shared over beers after work.
10.
Hire a bilingual Korean or even a gyopo (Korean returnee) who
is totally on your payroll but works within the JV. This person can do much
more than be an interpreter. For example, hire a bilingual Korean who has a
relevant degree or experience and preferably with an MBA. This person can
serve beyond his or her official responsibilities by offering invaluable
reports as to what is happening in the company below the surface, offering
insights on cultural issues, and suggesting advice on how to rebuild
damaged bridges.
Tom Coyner, a long-term resident in Korea, runs consulting
firm, Soft Landing Korea.
Coyner can be reached on softlandingkorea.com.
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