This may seem a rather provocative headline - but it is apparently a question frequently asked by business people in Asia, based on their experiences with counterparts from the Western world.
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.
Jan 21, 2020 1:20:52 AM
This may seem a rather provocative headline - but it is apparently a question frequently asked by business people in Asia, based on their experiences with counterparts from the Western world.
Topics: negotiation, contract /commercial management, procurement, relationship management, IACCM, Asia
Dec 4, 2019 3:10:06 AM
Topics: negotiation, contract /commercial management, procurement, relationship management, communication, IACCM, technology and contracts
Oct 30, 2019 8:27:51 PM
Topics: contract /commercial management, relationship management, commercial management, technology, communication, IACCM, RRP, commercial analysis
Jun 27, 2019 10:45:03 PM
Topics: contract /commercial management, procurement, relationship management, supply chain management, communication, IACCM
May 11, 2019 6:25:23 AM
Topics: procurement, relationship management, commercial management, communication
Apr 26, 2019 4:02:12 AM
Topics: contract /commercial management, relationship management, IACCM Webinar, strongertogether
Sep 28, 2016 3:41:05 AM
In the Financial Times (September 7th), Martin Wolf commented that globalization ‘has stalled … and it might reverse’. He cited the unexpected consequences that have flowed from the globalization of markets, such as mass migration and growing inequality, which are reducing public and political support. This is reflected in ‘stagnation of world trade’, even when the world economy is growing, and a reduction in cross-border financial assets and foreign direct investment.
Sep 7, 2016 3:33:28 AM
Yesterday I received an invitation from HR.com to attend a webinar entitled ‘Disagree agreeably to boost productivity’. The theme of the session is that disagreement is sometimes inevitable, but it does not have to create disharmony or argument. When we operate with openness and respect, disagreement can be a learning experience that boosts value. On the other hand, handled the wrong way, disagreement creates chasms, it undermines cooperation and respect.
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
Apr 11, 2016 7:33:00 AM
Economist John Kay has highlighted the importance of 'distinctive capabilities' in establishing competitive advantage. The correlation to contracting and commercial terms is immediately evident – not least because he sees these capabilities being delivered in the context of external relationships.
"Distinctive capabilities are a relevant factor of an organization's resources. Companies with distinctive capabilities have attributes, which others don't have and cannot replicate. There are three distinctive capabilities which a company can possess to achieve competitive advantage through relationships:
There is, of course, a counter-side to this position – which is that contracts and the contracting process can distinguish an organization for its negative capabilities. In other words, if contract terms and approaches to negotiation are risk averse and seeking to limit commitment, they damage architecture, reputation and innovation.
So distinctive capabilities are created through contracting and commercial skills – but require a real shift in attitudes to risk.
Increasingly, the winners in the marketplace are those who consciously endeavor to meet – rather than resist – market aspirations. Often that means a need to consider how to embrace levels of risk that were previously unthinkable. For example, in industries such as telecoms or oil and gas, clients are demanding ever more onerous terms from their suppliers. Rather than resist, there will be some who start to 'think the opposite' – in other words, how can we accept these risks? The answer will often be to take on greater responsibility and control, to reduce the extent of dependency on the customer's capabilities or actions.
This was the revolution that happened to much of the IT industry, when it moved from supplying products to undertaking long-term outsourced services. Initially reluctant to accept increased liabilities, the industry has steadily realized that many perceived risks are actually a phantom and that many others can be effectively controlled through appropriate forms of governance. The best suppliers have focused on improving their capabilities – including their contract management skills – so that they can offer distinctive commitments.
This thinking is just one more illustration of why contracting and commercial skills have become so important – and why, as practitioners, our attitudes must shift from a focus on protection and avoidance to instead being a force for creativity and enabling.
Topics: negotiation, contract /commercial management, relationship management, risk management
Tim Cummins