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The Road To Collaborative Negotiation

by Tim Cummins

Some call it ‘win-win’, some call it collaboration. Alternatives to traditional, price-based, risk averse contract negotiations are the holy grail for many companies. Yet for most organizations, reaching this goal is proving elusive.

There are certainly examples of success, yet replication seems rare. For example, consultants from Booz Allen Hamilton wrote these observations about ‘win-win sourcing’ at Honda:

“It’s an intriguing way to produce a contract. At Honda Motor Company, during meetings with suppliers, the executives write their proposed actions and agreements on a whiteboard. When all the items have been discussed, the meeting is over. The contents of the whiteboard are then typed up and two copies are printed, the supplier and the automaker sign them, and the contract is complete. Thereafter, both sides focus on executing the plan. Honda and its suppliers thus avoid the drawn-out, querulous negotiation process that is common at other automakers, a process that can last months and even then sometimes blow up without reaching a resolution.”[i]

IACCM recently featured the ‘Pathclearer’ approach, pioneered by UK brewing company Scottish & Newcastle. This has similarities to the Honda approach in that it seeks to focus discussions and the relationship on the areas of performance that will lead to success. Contentious terms are generally left to underlying legal standards, resulting in contracts that are typically in the form of short letter agreements. Like Honda, they have found this approach results in far greater commitment and cooperation.

What Are The Inhibitors?

So if it is so simple, why isn’t collaboration or ‘win-win’ more widespread? In part it seems to be down to simple issues of culture. Japanese approaches to business, for example, tend to be more trusting than those in the US. In part that is because it typically takes longer to reach decisions and to earn trust. There is then an assumption of shared goals and ‘fidelity’. The greater impatience and urgency of the US business mentality, together with a desire for solid frameworks and ‘rules’, leads to a greater need for lengthy contracts, covering all eventualities. This is reinforced by a greater inclination not to trust the other side – to assume ‘infidelity’.

So does this mean we need fundamental genetic or cultural reengineering before we can do things differently? Clearly the answer is no. The evidence suggests that the real problem here relates to power and the willingness to invest in relationships.

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July 2007