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Do relationships matter?

June 26, 2013

With so much written about relationship management, you might think there is little more to say or discuss. Yet the body of underlying research is relatively sparse – and that is why I support some of the surveys that are undertaken to generate greater insight. (A current example is the annual State of Flux survey on Supplier Relationship Management – see more below).

Yesterday I was at IMD, Europe’s top business school, teaching on a program with James Henderson. Our topic was ‘Strategic Partnerships for Competitive Advantage’ and the audience was a large group of executives drawn from many world-leading corporations. As the title implies, this group buys in to the idea that ‘partnering’ matters; and implicit to partnering is some sort of ‘relationship’.

The class started by looking at collective experience that compared good, high-performing partnerships and those that had failed, or delivered disappointing results. The distinguishing characteristics were clear – clarity over mutually beneficial objectives, transparency between the parties, commitment that is sustained over time, common values and common view of the future, clarity over roles and responsibilities and mechanisms for update and change, breadth of organizational understanding and buy-in ….

Underlying these factors, many felt that there must be trust. Yet on examination, they realized that trust can be a fallacy in the business world. It requires levels of relational commitment, openness and absence of control that simply don’t occur. So while a level of trust is probably important, the real driver is economic interest. Factors such as mutual dependency, mutual profitability, complementary skills, relative competitive advantage emerge as critical to maintaining the relationship.

So what does this tell us about relationship management – and in particular, about supplier relationship management? It seems to me that many SRM programs fail at the first hurdle – they lack clarity of objectives. And if they are managed and controlled by Procurement or Supply Management, they often suffer from too narrow a perspective, an absence of transparency, limited commitment to the longer term. Yet executive sponsorship can also be a dangerous route, because it easily translates to ‘favoritism’ and has no evident basis in true competitive advantage or long-term mutual interest.

As with any successful program, relationship management depends on coherence in its purpose and its methods. We probably know what needs to be done to make it work; the question is, are we willing to do those things? And that brings us back to the survey I mentioned at the beginning. We work with State of Flux because they share the IACCM interest in a balanced view and, like last year, seek to gather perspectives from both the buy-side and the supply -side. Also, their subsequent reports and discussion groups offer great value to participants. So take some time to provide your input. If you are a buyer, then your survey is at http://srm.stateofflux.co.uk/2013-srm-survey-buy-side and if you are a seller it is http://srm.stateofflux.co.uk/2013-srm-survey-sell-side.

 

 

2 Comments
  1. Thanks, Tim,

    Wise advice amidst all the flummery on partnerships

    Bill

  2. Hi Tim

    I’m not sure trust is a falicy in business. I would say rare and delicate – certainty the “goodwill trust” needed to sustain that elusive true win-win.

    Another element that is often overlooked is the need for a robust method to take advantage of the relationship. A great trusting relationship is necessary for achieving business advantage in complex projects or spend categories, but I don’t believe it is sufficient by itself. I think this is why some project “partnershhips” succeed whilst others fail.

    Ian

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