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Are you connected? I’m not referring to your digital applications that help you perform your work or telecommunicate with others. I’m asking, are you really connecting meaningfully with all parties to the contract – before it is signed and after?

Working in the modern society each day, we are spending much time latching to our devices, churning out reports, analyzing data -- with all at the convenience of automation at our fingertips. In split seconds we can send messages and gather responses. It’s terrific when it comes to getting things done quickly.

But fast and faster can become a stumbling block pushing against real human interaction. That’s why this article analyzes the critical importance of making strong connections with all your business relationships from the start and knowing what could cause disconnection, how to avoid it or correct it if it happens and reconnect effectively.

Listening to the “other guy” and knowing how you benefit when you plug into a key relationship with all parties – that’s the key. For example, what happens when connecting and collaborating effectively is ignored before and after the contract is signed?

The following case study tells how a progression of events led to successive losses falling like dominoes on both the customer and supplier. Here’s what happened:

After months of negotiation, the supplier and the customer finally signed a contract, but a huge issue broke out later when the supplier was unable to deliver the service on time, and the customer (buyer) terminated the contract then sued the supplier for non-delivery.

The supplier countersued the customer for not paying the setup cost1 to cover the supplier’s cost for purchasing new equipment and hiring additional personnel to work on the customer’s project. Because the supplier had failed in his obligation to deliver, the customer refused to pay anything.

The standoff worsened from continued, unending arguments and counter arguments, leading to huge litigation costs and legal battles. Eventually the court ruled that the customer had the right to terminate the contract, and ordered the supplier to pay the customer for losses due to delivery failure. But the supplier was unable to pay and filed for bankruptcy.

In this scenario, who do you think won the case? Neither. Both the supplier and the customer suffered huge losses. The buyer needed to fulfil his delivery to his to the buyer’s customer and to avoid being sued switched to a high-end supplier for quick turnaround. But that incurred another high cost which left the customer (the buyer) with a negative profit margin. Not surprisingly, the relationship between the supplier and the customer was ruined.

Analysis of case study

Misunderstanding and miscommunication and some hidden facts triggered an outcome no one wanted. The customer had initially decided to award the contract to the supplier, because the supplier was being flexible enough to customize the product based on customer’s requirement. Plus, the supplier had offered a competitive pricing bid and had the technical knowhow to do the job.

So the supplier won the bid; however, the supplier’s cost was higher than anticipated for the new equipment and needed additional skilled labor to do the customized work that the customer had requested. The supplier had informed the customer about the setup cost and had included that cost in the contract’s price sheet, but, as stated above, the dispute arose when the supplier had assumed the customer would pay the setup cost and the cost of the product during the delivery.

Then, when the supplier realized the need to hire additional personnel to finish the job and would need 10 more days to complete it, another dispute resulted, because, to complete the job, the supplier demanded that the customer grant a delivery extension and make a partial early payment of the setup cost.

The customer refused and told the supplier that he would not pay if delivery would not occur on the promised scheduled date. It didn’t happen, and the customer took the supplier to court.  

Lost trust costs the deal

Even though a legally binding contract was in place between the customer and the supplier -- with all requirements, expectations and onerous terms in writing agreed to – trust was still missing from the start. But no one raised the issue when it should have been discussed, specifically…

  • the supplier was reluctant to tell the customer about his cash flow issue and that more money would be needed to fulfil the delivery; and
  • the customer lost trust and refused to brainstorm with the supplier on the possible solutions to solve the problem.

Throughout the process both parties refused to listen or make connection or develop trust without which a relationship could not exist. Everything was reduced to terms and conditions of the contract, and they used ‘stick and carrot’ (punishment and reward) approaches as situations arose. 

How to connect and build trust

I believe the case study shows that connecting and building trust are the most important efforts of any contracting process, before and after the contract is signed. Trust can help surface and resolve unexpected problems like what to do in the event of time delays and cost increases due to unforeseen equipment and personnel needs.  

Listen to the other party

During the contracting process parties must learn to listen. Set aside your own position, your own story (or experiences) and all preconceived thoughts -- and be present to focus on what the other party is saying.

Always give others the benefit of doubt and ask questions so you can better understand each other’s interests, needs, perspectives and concerns. Occasionally you may want the other party to rephrase to what he or she has said to ensure accuracy and to demonstrate empathy. Empathy is the speediest way to gain trust.

Regarding any issue faced, eliminate all blames and do not discredit the other party but brainstorm in an honest, objective, and sensitive way – key solutions to move forward and avoid the push to win. Think collaboratively by focusing on the larger objective. Resolve any doubts about the project – like costs or time needed to complete the job – before signing the agreement.

In the case study, the customer could have made trade-offs like paying the setup cost in advance in exchange for special discounts on the final pricing; working on a concessionary loan to supplier, or deploying some of the customer’s staff to the supplier to help speed up production. The supplier needed to make a more careful and honest cost analysis too.

Either way, making that connection might have caused the failed effort to turn out very differently. By showing good faith, the customer would have the opportunity to elevate the relationship with the supplier to enhance the supplier’s competitive edge in the market and in turn strengthen his own position and avoid all losses.

At the end of the day, the depth of your ability to connect determines your influence. I like how leadership guru, John C. Maxwell put it, “people don’t care how much you know until they know how much you care.”2 When people feel understood, they are more likely to trust you, be more confident in you, and to listen to you.

When there is a connection between parties, the connection goes beyond the head to the heart, and the heart is where we trigger our feelings of trust, empathy, confidence and rapport. 

Good connection leads to good relationship, and good relationship leads to partnership, whether it is between a vendor and customer, inter-organization, inter-department, or just between you and the person sitting next to you – you always have opportunity for a coalition to bring project to fruition when the relationship is established transparently from the start.

Being connected means you think of cooperation instead of competition, a ‘win-win’ instead of a ‘win-lose’. It means you focus on each other’s interest and not the position, then work together to find solutions that fulfil both parties’ needs, such as that coined by Harvard Law School2 and popularized as great approach to a collective win.

And finally, be vulnerable and transparent!

The partnership becomes highly effective when it is built under common values and beliefs between parties and instituted in an environment of trust (as a result of deep connection) where relationship takes precedent in the event things go awry. The parties are therefore more willing to be vulnerable and transparent with each other, admitting to issues quickly and working out an agreed turnaround with concerted effort.

Connecting is a two-way collaboration generating a feedback loop between parties to hear and respond to each other accordingly. At a deeper level, connection seeks to understand, empathize, and build trust between parties. It boosts confidence so that you can relate to another – even someone with whom you might disagree -- in a way that that leads to cooperation and support. Your ability to communicate effectively directly ties to your ability to connect with others. 

END NOTES

  1. Setup costs are defined as costs for redesigning or preparing equipment for producing a new type of product or service deliver. Normally setup cost is considered a non-value-added costthat should be minimized.
  2. Article titled 8 Ways Leaders Delegate Successfully – John C. Maxwell and others, Harvard.     See also related workshops.

 

ABOUT THE AUTHOR

Yvonne Sophia Low is a professional in strategic sourcing procurement and vendor partnership for 15 years, during which she has value-added significantly to various international MNCs working on IT transformative projects focusing on cost and contract optimization, drive of excellence and effectiveness, processes and risk mitigation. Recently she has dedicated her time to humanitarian initiatives where she has written 2 books for the underprivileged community. She can be contacted via https://www.linkedin.com/in/yvonne-sophia-low

 


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Yvonne Sophia Low, Business Partner, Negotiator, Certified Procurement, LLM


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