An effective result is for parties to share the responsibility of collecting and analyzing data before reporting out one set of data. In a relationship that is economically interdependent, it is unwise for one company to be responsible for collecting data while another company analyzes data to score performance. In that scenario, no one trusts the data or the analysis. When Microsoft outsourced their facilities management to Grubb & Ellis, both companies agreed to jointly collect data for the balanced score card. Over the course of two years, the gap in expectations and performance closed by 91.5 percent. As the gap closed, employees for both companies grew to trust one another, resulting in tight alignment.
Power with-Collaborative Style: Economics has much to do with negotiating. Dr. Oliver Williamson’s work studying transaction cost economics showed that there are costs associated with a “muscular” approach to negotiating. According to Williamson’s findings, using the power play and beating up on your suppliers will actually cost you money. Unfortunately, his teachings are all too often ignored by most negotiators. Most negotiators assume that the only way one can get his needs met is by taking a muscular stance (classic economic theory).
The muscular thinking is so entrenched business people feel the need to always be on guard to better protect themselves from their opponents. This line of reasoning sounds very circular and leads to justification of using hardball negotiation tactics such as bluffing; puffery; good cop vs. bad cop; and other techniques meant to manipulate your partner.
Some suppliers even withhold known efficiencies to protect net revenue. In one case, a packaging supplier was paid by the “touch,” resulting in no incentive to create a more efficient system. In fact, when a line supervisor told his boss that the number of touches could be reduced almost in half, his boss cited that his company would reduce their own revenue. The boss reasoned that his company had fought hard to get paid fairly for the number of touches and it was not going to damage its financial well-being by reducing the number of touches. The result? A lost opportunity for both parties.
Co-creating value is the name of the game when entering strategic partnerships. Both companies have to take a more collaborative stance. This is not a group hug. It is a balance of advocacy and inquiry. It means asking tough questions, uncovering hidden assumptions and articulating a sound course of action. It also means standing up for the shared vision for the partnership, knowing that when the partnership wins, you will also win.
Are we on the same page? Alignment: Classical negotiation theory suggests that each person approaches negotiation from their own self-interest. While hundreds of books support the need to seek common ground, negotiators are looking for common ground through their self-interest. All too often the common ground is achieved by a series of tradeoffs and concessions—taking an existing pie and trying to divide it.
A better approach is to gain alignment about common goals, objectives or a business problem that needs a solution. But aligning around a set of desired outcomes that are bilateral in financial outcomes and have a measureable upside for the end-user means much more than seeking common ground. Alignment demands a commitment to one vision, one path and one set of actions to achieve that vision. This is a very radical position for negotiation teams who are about to enter into some form of contract negotiation.
Another important aspect of alignment is compatibility. Are both companies a cultural fit? Or does one company have a lower set of standards than the other? If you don’t like your business partner, don’t kid yourself into thinking they’d make a good strategic relationship.
Jaguar’s successful deal with Unipart demonstrated the power of alignment. Both companies admitted they needed to drastically improve their performance because Jaguar customers were waiting too long for replacements parts. Consequentially, the CEOs of both companies created a shared vision for their partnership via internal and external alignment. Thus, Jaguar and Unipart were aligned to ensure that Jaguar’s service parts logistics were best in class and the luxury car manufacturer went from ninth to first in JD Power and Associates survey of Customer Satisfaction. As a result, Jaguar sold more cars because of increased service and Unipart earned more money—alignment at its best.