Compared to other world regions, Australians sees less purpose in contracts – and those expectations are mirrored in the results they perceive themselves achieving.
If you are a professional in Contract & Commercial Management, committed to achieving the best possible outcomes from negotiations with all your trading relationships, then ‘Commitment Matters’ is the perfect source of regular articles and posts dedicated to helping you achieve that goal.
Sep 21, 2017 5:56:42 AM
Compared to other world regions, Australians sees less purpose in contracts – and those expectations are mirrored in the results they perceive themselves achieving.
Topics: international, contracting excellence, contract management
Apr 20, 2016 12:57:00 AM
"Why is it called contract failure? It's failure of a relationship."
That was the reaction of a group of law professors in Tokyo this week, when I showed them a set of newspaper headlines highlighting 'failed contracts'.
In a culture where relationships have traditionally dominated and contracts have been deemed of little importance, such a reaction is understandable. The contract is not seen as a specific commitment vehicle or a significant management tool. Therefore, it cannot 'fail' and those headlines are more likely to lead to a questioning of the relationship.
For cultures that make substantial use of contracts, it is often the case that an individual agreement can fail without inflicting lasting damage on the overall relationship.
These differences of approach and perception are important to understand because they may reflect quite fundamental variations in the way that agreements are established, viewed and managed. In Japan – and some other parts of Asia – the relationship may precede the contract; a contract is created only when a relationship has shown its value. In the United States – and most other common law jurisdictions – the contract comes first and a relationship may follow.
Similarly, relationship cultures tend to rely on personal contact or connections to review performance or address problems, without reference to a contract (which may or may not exist).
These apparently simple differences can have significant implications. For example, when one side wants to push for a contract and the other wants first to develop a relationship, there is real potential for misunderstanding. One side may feel the other is not to be trusted because it is avoiding commitment. The other may feel that it is being pushed into a rigid structure before it is ready. Similarly, attitudes to how performance will be managed, or changes agreed, will inevitably differ in their level of formality.
The differences go deeper. For those in a relationship-based business culture, 'relational contracting' implies a reduction in the role of the contract. For those who come from a contract-based culture, relational contracting implies an expansion of the contract's role, to include increased clarity over approaches to governance and performance.
Given the uncertainties and underlying risks and complexities of global business, it seems more likely that contracting discipline will increase to ensure that there is shared understanding and agreed methods of management. Of course relationships are important, but the challenge of increasingly virtual business, operating across language, law and business culture, demands mechanisms that increase clarity, not those that entirely depend on human memory and goodwill.
Topics: negotiation, contract /commercial management, procurement, relationship management, international, legal
Mar 16, 2016 9:08:00 AM
Once we start to erect tribal boundaries, where does it stop? Advanced economies depend on being open, on working to establish accord rather than discord. By working together we create an environment of potential harmony. By excluding others, we create an environment of likely conflict.
Many of us know this – and sadly experience the consequences of 'tribal protectionism' – in our work as contract and commercial experts. Whether the boundaries are internal, between functions or profit centers, or external, between customers and suppliers, they create inefficiencies, they detract from value, and they make our daily work less pleasant. Since our activities focus on trading relationships, current debates about world trade are certainly relevant to us.
Trade lies at the heart of human development. It has enabled progress, yet it has also been the source of imperial expansion and wars. Economic and technical progress cause massive fluctuations in the relevance and importance of different geographic regions and the need for specific skills. At any point in time, this is good news for some, bad news for others.
Given this environment, it is not surprising that the issue of trade lies at the heart of political debate. There will always be a desire by some to expand and by others to protect. Each has valid arguments. But ultimately, I think it is important to reflect on the fact that human development has been driven by our unique capability to trade with each other. It lies at the heart of our economic and social well-being.
Therefore we must be cautious about political leaders who offer protection, but in reality have no sense of the consequences of such protection. It is essential to remember that for every action, there is an equal and opposite reaction. The thing we must always ask is "if your policies are implemented, what will the reaction be – and is that something we will welcome?"
And indeed, it is the same question we should always be asking within the context of our own organization or company – are we protecting or are we enabling and which policies will actually have beneficial results?
Topics: contract /commercial management, relationship management, commercial management, international
Oct 16, 2015 12:29:52 PM
The collapse of the U.S. / EU safe harbor provisions covering transfers of personal data is a reminder of how fragile key trading principles can be. It is especially pertinent at a time when major cross-regional trade agreements are being negotiated and signed.
Topics: sourcing, relationship management, international, risk management
Aug 25, 2015 3:40:23 PM
Continuing revelations about corrupt contracting practices at Brazilian oil giant Petrobras continue to hit the headlines. It is interesting that they are one of the few major oil and gas producers which does not have active membership in IACCM. Might there be a connection between these two facts?
Topics: contract /commercial management, procurement, international, legal
Aug 10, 2015 4:01:58 AM
Increasing activity in international markets and increasing use of outsourced or contract labor are two of the current trends in business. So what happens when these two trends converge?
Topics: contract /commercial management, international, risk management, legal, organization & people
Aug 2, 2015 11:57:08 PM
The UK government's announcement of a new 'Commissioner for Small Business' is just the latest in a series of initiatives by administrations around the world to encourage economic growth.
Topics: contract /commercial management, international, legal, supply chain management
Jul 22, 2015 11:39:00 PM
My blog earlier this week drew an interesting response from Ken Adams and his co-author in a recent article offering "Top Ten Tips in Drafting & Negotiating International Contracts". The ensuing debate seems to me to encapsulate the dilemma facing the legal community today. Essentially, are they narrow (but important) specialists in law, or should they be applying their knowledge of law within a much broader remit of 'business advisor'?
Topics: negotiation, contract /commercial management, international, risk management, legal
Jul 21, 2015 2:59:33 AM
In a recent article, the Association of Corporate Counsel offers its 'Top Ten Tips In Drafting & Negotiating International Contracts'.
Topics: negotiation, contract /commercial management, international, risk management
Jul 8, 2015 12:40:04 AM
It's not only companies that impact the 'ease of doing business' - it is entire countries.
Topics: negotiation, contract /commercial management, international, risk management, legal
Tim Cummins