During a recent industry event, a corporate buyer-supplier pair proudly showcased their happy partnership, emphasising the high levels of trust and a great workplace environment. However, they fell short of delving into the specifics; relationship qualities, strengths, weaknesses, and areas for improvement. Furthermore, they did not outline any concrete benefits, apart from highlighting that the engagement between the parties was more collaborative, pleasant, and streamlined compared to most other commercial relationships. While the positive nature of their collaboration is enviable, it’s important to note that their assessment of the relationship quality was primarily based on intuition, lacking both quantitative and qualitative data. They were unable to quantify or assign a numerical value to the strength of the relationship.

Their experience is not unique, as this pattern appears to resonate with many organisations and their commercial relationships. It highlights a broader tendency within the business landscape where the warm and fuzzy aspects of relationships, acts as a litmus test to confirm relationship strength. This emphasis on the subjective or emotional aspect of relationships, while valuable, can lead to a lack of precision in understanding the intricacies of the partnership.

In an interconnected business environment, where collaborations extend across industries and borders, there is a growing need for organisations to complement their intuitive understanding of relationships with a more structured and data-driven approach. Quantifiable metrics and qualitative assessments can provide a comprehensive view, allowing businesses to not only celebrate the positive aspects of their partnerships but also identify areas for enhancement and improvement.

By embracing a more holistic measurement framework, organisations can move beyond the anecdotal and subjective evaluations of relationship quality. This shift toward a nuanced analysis enables them to navigate the complexities of commercial partnerships more effectively, fostering continuous improvement and ensuring that the benefits of collaboration are not only felt but also understood and optimised.

Profiling commercial relationships

Over the past 50 years, academic research has an accumulated total of 14 relational norms within the domain of relational contracting to characterise contracts. Adapting this research to describe commercial relationships, we can consolidate these into six fundamental relational norms. These norms align with contemporary contract and supplier relationship management practices that offer a more focused and practical approach to evaluating commercial relationships.

The purpose of streamlining these norms is two-fold: to minimise domain overlap, ensuring each relational norm serves a distinct purpose, and to maximise their management application in real-world commercial settings.

The six fundamental relational norms

Integrity

Being honest and displaying consistent and uncompromised adherence to principles and values. Team members do what they say! It’s about ensuring that interactions line up with stated intentions or at the least, reducing the difference between what the communicated intentions are, and the actions. Perceived as performing with uprightness to the terms and spirit of the commercial agreement.

Solidarity

United with common shared goals and objectives to strive for. The parties are one, therefore a party’s success benefits the other. Organisations share risk and rewards, as well as share the pains and gains. Standing side by side as one unit in the face of adversity. Parties act in good faith, with mutual trust and goodwill, understanding that success is tied to each other. Loyalty, cooperation. Talk first, look at contract last. The quality of solidarity and reciprocity is a powerful motivator for driving, developing, and maintaining a sustainable commercial partnership.

Equality

Each party’s interests and requirements are valued and met to a practical level as opposed to just one party’s needs overshadowing the relationship. Fairness. Balance of power between parties or at least, where one party has more power whether it be economic, political, or legal, they restrain its use. Organisations see each other at the same level, where any issues or problems are resolved jointly with a collaborative, transparent, respectful approach.

Commitment

Appropriate efforts for required outcomes are committed to the deal. Party’s conduct themselves and their interactions with professionalism, and with care and consideration. Contribution of appropriate quality and quantity of resources to the agreement including skills, maturity, capability, experience, personnel, processes, and systems.

Agility

Having a fluid agreement that is easily revisable to adapt to dynamic requirements of the partnership. The parties display qualities of flexibility to accommodate changing market, business, or counterparty requirements. Embracing a philosophy and approach of continuous improvement with regular reviews and adjustments, regular alignment of contract objectives with: KPIs, scope, deliverables. governing contract schedules, resources, personnel, etc.

Harmony

Relational Harmony helps synchronise the key elements for a good commercial relationship. It helps overcome friction caused by misalignment of goals and approaches used by the parties to an agreement. Personnel get along well and work as a cohesive, collaborative group. With similarly aligned values and beliefs, not only individually, but also as an organisational unit. The composition and quality of team chemistry is complimentary and supportive of a unified goal. Effective communication is embraced and practiced for both operational and strategic.

What is a Relational Profile? 

Relational profiles involve a comparison of the relational attributes between buyer and supplier teams involved in contract management. This process utilises a blend of crucial contract data, industry benchmarks, and evaluations of the interpersonal dynamics by contract management personnel from both the buyer and supplier sides. The result is an infographic representation that encapsulates the relationship.

What does it look like?

The Relational profile serves as a dashboard of the attributes characterising a commercial relationship, allowing organisations to quickly understand and analyse assessment results. It displays the intensity of relational norms for each party involved in a contract, spotlighting both alignments and gaps in team profiles. This facilitates organisations in pinpointing areas within the relationship that warrant improvement, fostering increased trust, and ultimately boosting contract performance.

The benefits of adopting relational practices

In the pursuit of maximising success through robust relationships between contracted partners, engaging in profiling and embracing relational contract practices can yield several benefits:

Cultivate High-Performing Cultures

• Unify personnel under a shared vision and common goals.
• Enhance trust and team chemistry for a resilient working environment.

Enhance Efficiency

• Reduce contract management costs, minimising friction in operations.
• Achieve faster and more cost-effective processes, allowing organisations to accomplish more with fewer resources.

Elevate Performance

• Consistently meet and surpass expectations in business deals.
• Eliminate impediments and enhance sustainability for continuous improvement.

Summary

High-performing organisations consistently innovate to enhance the effectiveness of their commercial relationships. Departing from traditional power-based transactional contracts, these organisations are increasingly adopting relational contracting strategies to complement their current management approaches. The focus is on cultivating strong, healthy relationships between the involved parties in a deal, fostering robust connections and elevating levels of trust. This shift reflects a recognition of the importance of collaborative and trust-based frameworks in achieving sustained success and mutually beneficial outcomes in the dynamic landscape of business interactions.