Contractual arrangements may commit an organisation to its contractors, consultants or service providers for some time and to varying degrees of dependency. It is therefore important to make the relationship work in an effective manner by developing mutual trust and understanding, creating an open and constructive environment and contributing to the joint management of the contract delivery.
Relationship management is primarily through the development of mutual trust and confidence that the other elements for success are created. As the supplier gains greater understanding of the organisation’s business needs and style and develops a level of confidence and trust, it will be more willing to be proactive and innovative in bringing forward improvements and savings to mutual benefit, more willing to share problems, plans and concerns, more willing to negotiate and more confident in investing for the longer term. The organisation benefits by gaining a greater understanding of the strengths and weaknesses of the supplier, enabling it to concentrate its management and development support in those areas.
Factors that can inhibit the development of a successful relationship include:
- frequent and rapid recourse to the formal contract to overcome problems
- clashes in cultures, which are so disparate as to prevent the creation of the level of trust and confidence required
- reluctance by the supplier to cooperate in value for money or benchmarking tests conducted by the organisation
- commercial issues, for example lack of real competition resulting in uncompetitive, poor value for money terms from the contractor, or conversely that the organisation is critically dependent on one supplier leading to price rise vulnerability and/or problems of management capability, resources or financial capitalisation
- too frequent demands for submission of competitive bids – reduces trust in the relationship.
In addition to the elements mentioned above, other factors that encourage the development of a successful relationship include:
- securing senior level support in both organisations
- recognising that actions and attitudes affect the tone of the relationship
- ensuring that the governance arrangements are fair
- ensuring that relationships between the parties are peer-to-peer as far as possible
- ensuring that roles and responsibilities are clearly understood by both parties and that the necessary authority levels have been ascribed
- ensuring that escalation routes are clear and understood but that problems are resolved as early as possible and as low down the management tree as possible
- separating strategic matters from the day-to-day service delivery issues
- ensuring that appropriate attitudes and behaviour are practised and displayed to assist the promotion of a positive and constructive relationship
- communicating and sharing information at the appropriate level between the organisation and the supplier, for example strategic, business and operational levels and as openly as possible.
Reference
Elsey, R.D. (2007). Contract management guide. The chartered Institute of Purchasing & supply. CIPS_KI_Contract Management Guidev2
