ADVICE & OPINION
THE YES FACTOR
FMJ AIMS TO SUPPORT TECHNICAL EXPERTISE IN THE FM MARKET
Want strong contract deals and supplier relationships? Here’s why collaboration is key.
By Julian Fris, Director of FM consultancy Neller Davies, and Kate Vitasek, an American
author, educator and lead researcher at the University of Tennessee
Once upon a time, negotiation
meant ‘getting to a yes’. But times
have changed. Today, the key to a
successful supplier agreement isn’t
just about scoring the one-time-deal
– it’s about a continuing conversation
in which day-to-day interactions play
just as big a part.
With collaboration a vital factor in
the business world, the traditional
‘getting to yes’ mentality finds itself
at a crossroads. Where conventional
negotiation is concerned, the other party
is on the opposite side of the table. But
to mitigate risk and reduce the total cost
of ownership across the supply chain, it
is essential that today’s trading partners
share the same side – and purpose. This
new approach to negotiation is known as
‘getting to we’.
What makes this di erent?
In simple terms, negotiating the
foundation of a long-lasting contract
relationship takes precedence over
getting to a deal. Embracing a ‘what’s
in it for we?’ mindset creates a
negotiation atmosphere that encourages
cooperation. The details of the deal –
including the scope of the work, pricing,
and terms and conditions – are no longer
the core focus. Instead, the parties start
by establishing the mechanisms they will
use as they negotiate those details.
GET READY
For both parties to understand to what
extent they can build the foundation
for their relationship, they need to first
discuss the three core elements for
successful collaboration. These are trust,
transparency and compatibility. Not
only will maintaining these three factors
encourage both buyer and supplier to
make investments in the relationship – it
will also pave the way for innovations and
continuous improvement opportunities
that benefit everyone.
Having a ‘kick-o ’ workshop is a
great start to the negotiation process
16 FEBRUARY 2021
and allows exploration around how
each organisation can improve their
relationship across each of the three core
elements. So, in the case of transparency,
what are the benefits of being
transparent? How transparent is each
party willing to be? And what are each
party willing and reluctant to share?
Tools, including the Speed of Trust
survey further gauge the trust in
the buyer-supplier relationship. The
Compatibility and Trust Assessment
is another tool that measures five
dimensions proven to be linked to buyersupplier
success. These are as follows:
Trust (in terms of company performance,
reliability, and behaviours)
Innovation (in terms of the company’s
willingness to take risks, and the level of
support and encouragement received)
Communication (in terms of its
flow, consistency, availability, and
e ectiveness)
Team orientation (in terms of respect,
value, and how both parties work
together)
Focus (in terms of a common purpose
and direction, as well as clarity of roles)
AGREE ON A SHARED VISION
Collaborative buyer-supplier
relationships will only work when both
parties recognise that each has its
own perspective. In a joint-workshop
environment, both parties should work
together to combine their separate
visions into a shared vision. Not only
will this give the partnership a purpose
beyond a series of transactions – it will
also help to guide the partners during the
negotiation process and beyond. This
is something that should be included in
formal terms in the contract.
NEGOTIATE GUIDING PRINCIPLES
Guiding principles (or ‘social norms’)
provide the foundation of a highly
collaborative relationship. Formally
placing these into the negotiation
process helps partners to guide
behaviours while building a trusting
relationship. For it to work, the
following principles need to be
adopted:
» Honesty: This guiding principle
obliges both parties to tell the truth
by acknowledging business realities
and sharing their intentions and
experiences. Without it, the partnership
won’t survive as a collaborative
enterprise.
» Reciprocity: This value obligates
both parties to make balanced
exchanges and rather than adopting
the traditional ‘us versus them’
adversarial approach, allows the
buyer and supplier to decide what is
fair through a more transparent and
trusting negotiation process.
» Autonomy: Neither party should use
power to promote its self-interest at the
expense of the other. Both should be
free to make their own decisions, while
also working as equals.
» Loyalty: A ‘relationship-first’ stance
means each party’s interests are equally
important. In buyer-seller terms, if the
buyer demands a 60-day terms policy,
for example, this may damage the
supplier’s relationship and increase
costs if the supplier’s cost of capital is
substantially higher than the buyers.
» Equity: As with loyalty, both parties
should be equal when it comes to
equity. Having said that, a 50-50 split
isn’t always the fairest approach. There
are two important parts of equity, and
these are proportionality and remedies.
If one party takes greater risks or makes
larger investments, proportionality
means it may also get a larger
proportion of the rewards. An equitable
remedy, on the other hand, allows each
party to come to a compromise when
the contract itself limits the result or
does not address the matter.
» Integrity: This last value means
maintaining consistency when it comes
to decision making and actions. By
looking at previous decisions, both
parties can better predict the future,
therefore reducing complexity. Again,
this promotes trust and strengthens
the foundation of the buyer-seller
relationship.
NEGOTIATE AS ‘WE’
Time for negotiation. But first – what
strategies and tactics will and won’t
be used when working out agreement
details? A good starting point is for both
parties to make a list of negotiating
tactics it considers acceptable, and which
it considers o -limits. By agreeing these
details beforehand, they reach a less
painful approach to negotiating contract
details. Details including the scope,
metrics, pricing approach, and terms and
conditions should be discussed during
this stage.
LIVE AS WE
The last – and possibly most important
step of the process is to negotiate how
the relationship will be maintained
long-term. In other words, how will both
parties ‘live as we’ once the contract is
signed? Because complex and long-term
relationships are dynamic, a strong
governance framework should be
formally embedded in the agreement.
This enables relationship management
to remain the focus when ‘business
happens’. Companies sustain their
relationships over time by abiding by six
governance mechanisms.
1) Creating a tiered governance
structure
2) Establishing clearly defined roles
3) Establishing peer-to-peer
communications protocols
4) Developing a rhythm when it comes
to communications
5) Making sure performance
management is transparent to
encourage feedback
6) Developing a process to maintain
relationship continuity
MAKING THE SHIFT
The bottom line? Getting to ‘we’ takes
business negotiations far beyond simply
signing on the dotted line. If you need to
get the deal done, sometimes getting to a
yes is good enough. But to build a strong,
healthy, and long-term relationship
between buyer and supplier, the
relationship itself needs to be the focus
of the deal from start to finish.
FAST FACTS