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Put simply, I don’t trust either of us

August 7, 2012

Last week, IACCM ran a workshop for a group of its Australian members. The topic was “Tackling project risk through improved commercial process” and the audience came exclusively from the buy side – a mix of procurement, contract management and project management professionals.

There was wide acceptance of the idea that improved management of risk depends on a more holistic and open approach by both suppliers and customers. Participants acknowledged that imbalance in risk allocation and a focus on the consequences of failure results in behaviors that undermine trust and respect between the parties, which in turn reduces the probability of a successful outcome.

We ran an exercise in which the audience identified the types of behavior needed to support a healthy and productive relationship. They listed attributes such as openness, honesty, quality of communications. When asked to rank their own organization’s performance on these attributes, there was a wide range of views, but on average these buy-side representatives felt they rated a 2.8 (on a 5 point scale, where 1 is excellent and 5 is very poor). Clearly, this indicates significant room for improvement.

We proceeded by asking the audience to evaluate average supplier performance against these same characteristics. Based on their experiences, they declared an average of 3.9 – substantially below their own performance and quite obviously nowhere near the level needed to achieve improved management of risk.

In itself, this result may not be a surprise. The exercise was designed to stimulate thinking and awareness, rather than representing a scientific study. We will repeat it with larger groups to determine the extent to which it reflects international and industry-wide sentiments. But if confirmed, we will have illustrated the urgent need to address these issues of organizational behavior in our commercial practices and evaluations. It is fairly clear that current practices fail to support trust or respect, without which any long-term relationship cannot be sustained.

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