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Is empathy a key commercial instinct?

March 22, 2015

You don’t have to search far to discover all that is being written about increased complexity in today’s business world. At the top of the list come issues such as managing interconnections and interdependencies – many of which cross traditional boundaries of language, culture and commercial norms. Networked technologies and social media mean that we cannot any longer ignore diverse stakeholder opinions. Old assumptions that power will prevail are no longer true – so is empathy the new source of strength?

Last week I attended a conference run by the Wharton School in Philadelphia. Its focus was on megaprojects – and this name alone conjures up an image of complexity. Time and again, presenters emphasized the importance of stakeholder management and engagement. We discussed the many challenges of understanding and reconciling diverse perspectives, especially since most megaprojects  are focused on infrastructure development, which is often contentious. Developing mines or oilfields, building rail networks, roads, power stations … these are the types of initiatives that seem good in concept, but may meet violent opposition from local communities, environmentalists, religious groups or political opposition.

If we fail to address those stakeholders, our project is at risk. Modern media means that no voice goes unheard. Campaigns can arise from the smallest beginnings.

While it may not be possible to address every stakeholder’s wishes, we can – and must – bring them to a point of reconciliation and acceptance. And I would argue that this goes to the heart of good commercial and contract management. The job of a commercial / contract manager should be to avoid disputes – and to do this, they have to understand diverse perspectives and anticipate likely reactions, both within and outside their organization. Such considerations are already having major impact on contract and negotiation practices. For example, the growth of local content or offset arrangements are no longer simply about keeping Governments happy, they are increasingly focused on bringing direct benefits to affected communities. In addition, there is growing need to consider not just the impact of the construction itself, but also the entire aftermath of commissioning or decommissioning – people want to know these things in advance. And even when it comes to negotiating or contracting with local communities, there are many lessons to be learned. One speaker explained how they provided a community with negotiation training so they would be equipped to have effective discussions on the issues to be resolved. Another spoke about the need to have highly adaptive approaches to contract content, wording and terms – for many markets, large corporate contracts appear very threatening and undermine trust. They also contain many terms or assumptions that simply cannot work – such as the need to link to an ERP system or to take substantial insurance.

Good contracts and commercial relationships have always depended on a readiness to listen and understand the perspectives of others. I think this used to be a skill that many contracts, commercial and legal staff possessed. Unfortunately, the imposition of rules, standards and compliance have transformed the discipline to one of imposition, rather than understanding. And this regularly undermines the value we can offer. It is time for commercial staff to develop their skills in empathy. And then we would be welcome members of every project team.

One Comment
  1. Tony Yu permalink

    I quite agree with the conception of empathy in contract and commercial management.The relationship between key stakeholders are more like marriage than dating.It is quite necessary to design any solution from different perspective. The contracting is the process of buiding the bridge between stakeholders.In order to keep healthy and sustainable relationship with business parterner in today’s business environment,we can say,the empathy attitude is a must.

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