Relationship or transaction: 10 factors to consider
At this week’s IACCM workshop in Sydney, Morag Lokan (Assistant Commissioner at the Australian Taxation Office) presented her thoughts on the role of relationships in contract management.
Among her charts, she set out a list of factors to be considered when evaluating the potential nature and depth of the relationship. I have expanded these slightly, to produce a set of ten.
- What is the likely duration of the contract?
- How many organizations and stakeholders are involved?
- Does your organization speak with one voice?
- Have the suppliers on which results depend worked together before (and with what result)?
- Have the suppliers worked with your organization before?
- Are they competitors?
- How important is the contract to your organization?
- How committed is your organization to making this work?
- How committed are the suppliers to making this work?
- Is there evidence of relational capability?
Commitment Matters 
Hello Carina and thank you for the discussion topic which is very relevant. I have always held a strong belief that relationships are the foundation, glue in all supplier interactions – business and people interactions in general for that matter. May I suggest one more point to be cognisant of in building such relationships?
Relationships are fundamentally between people (individuals) this is what gives them strength and power, however sometimes misconstrued as between organisations. This can present some challenges and confusion due to a couple of points:
* people inherently change their position within organisations or even change organisations thus chaining the dynamic or even existence of the relationship which can lead an organisation to have a false belief there is still a strong relationship in place when in actuality it may have been altered or expired.
* watch out for ‘generalised thinking’ which is a misnomer that a strong relationship is on foot with an ‘organisation’ as a whole when in reality it exists only between two or a limited number of individuals. This can become problematic if anything changes in relation to point 1 but also in regard to not taking into account the complexity and multi layers of the organisations. You may forge a strong relationship with a person or persons within a supplier organisation for example however they are a complex entity with many tiers and perhaps even geographically and structurally. So caution in respect to believing there is a strong relationship between two organisations – it may well be a strong trusting relationship between two individuals rather than two organisations as party to an agreement. This can have some confusing and overly inflated expectations when the ‘relationship’ is leveraged at another level within the partnering company.
We all have experienced such situations I am sure, just another point to be aware of when building those all important relationships, Thank you again for bringing this all important topic of the role of relationships in contract management, most appreciated.