The essential first step in establishing Vested’s What’s in it for We (WIIFWe) mindset through the Getting to We Five Step process is to lay a solid foundation of trust, transparency and compatibility.
Together, these three components form the building blocks for a win-win business relationship: they must be present in some measure in order to have the WIIFWe mindset present as organizations and individuals craft their business relationship.
Let’s look at each of these three components in more detail.
Trust is the sine qua non. The Nobel laureate economist Kenneth Arrow notes:
“Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.”
Without a fair degree of trust, companies simply will not continue on the Vested journey. The absence of trust is a hurdle too high to jump.
Unfortunately, far too many business relationships lack a trusting foundation. In fact, research from the International Association for Contract and Commercial Management (IACCM) strongly indicates that most companies are not very trusting. Its research over the years has revealed that most contracts remain dominated by self-interested, protectionist terms rather than provisions that promote collaboration between business partners. A key finding is that companies spend the most amount of time negotiating limitations of liability and shifting risk, a telling indicator that companies simply don’t trust their partners.
Trust enables collaboration in two ways. First, a trusting relationship will unleash the power of innovation and creativity. And as trust levels increase, parties don’t need to look constantly over their shoulders. Once partners are less cautious about each other, they can spend their time and energy more wisely in the pursuit of more creative and productive endeavors. Trust allows a company to invest in the future with the trust that its counterpart will continue to support the partnership’s strategic objectives.
Second, trust decreases transaction costs. Transaction costs entail the costs associated with using the “market” to produce something for your company and can come in the form of deciding where to buy a good or service instead of making or performing the service yourself. Trust makes sure the benefits of cooperation exceed the benefits of going to the market to get a better deal. By lowering transaction costs, companies are free to focus energy on their cooperative potential.
In other words, trust fosters credibility, and the parties won’t worry about leaving money on the table, because they are trustworthy.
Many organizations lack trust because they don’t have full visibility to the perceived “truth.” For this reason, a highly collaborative relationship needs to foster a high degree of transparency between the parties, because it provides them with the information needed to reach the relationship’s full potential. By the same token, transparency fosters trust. Transparency requires the parties share relevant information to ensure they will make good decisions for themselves and for the relationship. It also encompasses an important aspect: personal openness. Personal openness is the degree of comfort people have about sharing more personal concerns, motivations, wants, and needs within the relationship.
Transparency and trust go hand in hand – feeding on each other. The more transparent we are, the more we tend to trust. The more we tend to trust – the more transparency we are comfortable about. Not everyone can just jump into a fully transparent relationship and in that case it is important for organizations to lay the strong foundation that will enable the parties to build trust and increase transparency over time.
Collaboration requires organizations and individuals to work together. Of course it is much easier to work with people where there is some degree of compatibility. It’s not essential that the parties be bosom buddies, but they should be on the same page in most areas of mutual interest concerning the business, and they should at least have a fair and transparent communication process to deal with issues and problems.
Many organization refer to compatibility as “cultural fit.” For example, compatibility and cultural fit was major factor for P&G when it searched for a facilities management service provider to become a partner in a groundbreaking and transformative outsourcing deal. Jones Lange LaSalle became P&G’s partner, and cultural compatibility was an important element that sealed the deal: William Reeves who led P&G’s facilities management outsourcing effort, said, “JLL was a good fit. Both companies had impressive histories and records of performance excellence, but P&G and JLL shared something even more important—similar corporate ethics and commitments.” (For more on P&G/JLL, see Vested: How P&G, McDonald’s and Microsoft are Redefining Winning Business Relationships.)
Compatibility comprises two elements, behaviors and culture. Compatibility fosters an atmosphere of trust because the partners’ behaviors and culture are somewhat aligned, and their level of awareness about each other increases. Compatibility and trust make possible the openness necessary to solve problems.
Not sure where you stand?
Vested’s Compatibility and Trust Assessment® (CaT) was developed by professors Gerald Ledlow and Karl Manrodt to measure the strength of business relationships across five dimensions: trust, innovation, communication, team orientation and focus.
The CaT reveals how each organization aligns its behaviors along each of the five dimensions, and how those dynamics can strengthen—or weaken—the health of a relationship. Parties in a healthy relationship are aware how well their organizations align, and actively strive to close gaps in order to mitigate opportunism and promote collaboration. (See the Supply Chain Brain video, Shelly on CaT, on the Vested Media page.)
Read much more about Step 1 in chapters 2 and 3 of Getting to We: Negotiating Agreements for Highly Collaborative Relationships (Jeanette Nyden, Kate Vitasek and David Frydlinger). The book provides a simple-to-follow five step process that will help any company – regardless of size – establish a solid foundation designed to foster a more collaborative environment by shifting from a What’s in it for Me (WIIFMe) mindset to a What’s in it for We (WIIFWe) mindset.