Inside and Outside the Relationship

We always get questions about business relationships and partnering. What are the dangers? Don’t they tend to favor one side or the other? When we get into one, what can we do to make sure it is working out as intended?

The problem we see is that when customer-vendor relationships are first entered into, say with a long-term agreement or a specified or de facto exclusive agreement, there are good reasons to do so. And both sides feel content and expect great things to come of it. This satisfaction leads to complacency and a “hope for the best” attitude sets in. The problem is that over time, things change. Business conditions, people, corporate needs, wants and goals change on both sides. One side starts to “take advantage” of the partnership. It could be the seller raising prices or letting service slip. It could be the buyer pressing for delivery changes, scope changes, or refusing price increases when rising raw material costs are seriously impacting their suppliers’ margins. The “hoping for the best” phase goes on a bit too long and finally the disadvantaged partner looks to get even or get out and the whole thing blows up.

When the partner relationship is inked, there is a tendency to feel that negotiation goes away. “We’re partners, we’ll look out for each other.” Both sides are “on the inside” of the relationship. Our view is that it’s actually just the start of a new kind of negotiation, the relationship negotiation, with its own set of rules, tactics and strategies. While protecting your own interest remains paramount, fairness, transparency, and evenhandedness become more important than getting the most you can at the other side’s expense. This requires us to look at the relationship as outsiders — or, on-the-edge insiders — to get an objective view of what’s going on. To get this objective, outsider’s view, we recommend replacing the “hope for the best” approach with a vigilant monitoring and assessment approach: keeping score. And use this approach to make sure things are going along as expected and working out in a way that continues to benefit both sides.

In the Eva and Howie story from the newsletter, when Eva gets the quotes from other printers, she’s getting an objective look at Howie’s pricing rather than staying on the inside of the relationship: “He’s my favorite printer…” Even though Eva is satisfied with the relationship, it looks like she’ll have to constantly negotiate with Howie for fair treatment. That doesn’t mean it can’t be a beneficial business relationship for both sides. It just points out that successful relationships require that you keep up the negotiating work to make sure you get your fair share. Negotiation doesn’t go away.