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Disclaimer

This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.

 

Building winning business relationships

A major study of Australian business leaders disclosed that the most successful companies – big and small – believe that an integral part of success is their relationships with other businesses.

The study, ‘Forming and maintaining winning business relationships’, was undertaken by professional services firm Deloitte for the Victorian Small Business Commissioner. It highlighted that a vital ingredient to success was how business leaders dealt with their business customers and suppliers, and how they perceived each other. For example do they regard their business partners as trustworthy, ethical, loyal and dependable? Are they achieving their promises and do they stand by their word?

The business leaders interviewed for the study believed that successful business to business (B2B) relationships are critical to the ongoing success of a business. They said business relationships must be:

• Sustainable over the long term
• Mutually beneficial to all parties
• Committed to its success; and
• Contain quick and cost effective resolution dispute mechanisms , which cause minimum disruption to the continued functioning of the relationship.

The research also disclosed that the reputation of many businesses is increasingly linked with the reputation and business practices of their external partners. If a business customer, supplier or sub contractor makes a mistake, then it can have dramatic ramifications and impact on an innocent partner.

The report summarises the feedback from these prominent Australian business leaders who were unanimous in their belief that successful B2B relationships improve the commercial outcomes for all the parties involved by decreasing costs and increasing competitive advantage.

Forming successful relationships

It was a clear consensus that there are seven main characteristics of successful business relationships. It was also clear there are some specific actions that business should take when they are forming a relationship, and when they are maintaining a relationship. Each of these characteristics and actions is integral to long-term, mutually beneficial and sustainable relationships.

These seven characteristics are:

1. The alignment of the values and ethics of a business internally with the day-to-day behavior of its employees, and externally with its chosen business partners.
2. A commitment wherever possible to a long-term relationship rather than a one off transaction.
3. The recognition that working towards a common goal based on mutual interests is the best way to achieve a profitable and sustainable outcome for all parties.
4. Clear, transparent and frequent communication to ensure that all parties fully understand the other’s position, that obligations are met, and that any issues or problems are raised early.
5. All parties recognising that they are accountable and responsible to the other for the success of the relationship.
6. Professional conduct in all interactions between all parties.
7. Rapid and satisfactory resolution of disputes/issues through pre-agreed dispute resolution procedures.

An analysis of these seven essential habits will assist businesses become even more educated about the main characteristics of successful B2B relationships.

Alignment

Alignment of a business values and ethics with both the internal behavior of the employees and externally with its business partners.

It is critical that a business enters and maintains relationships with other businesses that demonstrate a commitment to a similar set of values to its own.

When forming a relationship:

• Make sure that business values are tabled for discussion
• Ensure that all staff are committed to these values and not just senior management
• Check business references with mutual contacts
• Meet with prospective business partners at equivalent levels of seniority, and
• Walk away if things don’t “feel right”

When maintaining a relationship:

• Adopt goals to guide behavior and build them into employee performance reviews
• Assign an employee to monitor performance against the goals, and
• Report back to senior management on a regular basis.

Commitment

Commitment is necessary to build long-term relationships as it provides a solid basis for trust between the parties.

When forming a relationship:

• Approach every business interaction as a potential long-term relationship rather than just a one off transaction
• Communicate intentions openly and honestly to all parties
• Confirm that all parties have similar intentions.

When maintaining a relationship:

• Base business decisions on a long-term philosophy rather than short-term financial goals
• Keep promises and deliver on what has been promised, and
• Understand and align the expectations of all parties.

Mutual interests

Mutual interests means that business partners can work towards a common goal of achieving a profitable and sustainable outcome for all parties. Successful relationships recognise and support the mutual interests of the partners involved.

When forming a relationship:

• Understand each partner’s business model, how they make money and how they can be affected by external factors
• Ensure everyone understands the expectations and needs of all parties involved

When maintaining a relationship:

• Adopt a collaborative approach to problem solving
• Make every effort to understand a partner’s point of view should dispute arise
• Offer advice and feedback on how parties can improve their business performance, and
• Treat all parties as you would like to be treated yourself – in particular with respect.

Communication

Communication must be clear, transparent and frequent to ensure that all parties fully understand the others’ position, obligations are met and any issues or problems are raised early.

Poor communication was one of the most regularly cited reasons for a breakdown in relationships. It is critical that businesses communicate with all parties in a way that is relevant, adequate and timely.

When forming a relationship:

• Define the relationship including obligations, responsibilities and expectations clearly and openly from the start
• Clearly confirm goals that will be used to measure performance, and
• Confirm with business partners how they wish to be communicated with including frequency, format, level of detail and seniority.

When maintaining a relationship:

• Adopt a candid, clear, transparent and honest approach in all communication
• Communicate face to face on a regular basis
• Ensure that communication occurs between individuals at equivalent levels of seniority at all organisations
• Reduce dependence on one key contact by having relationships with more than one individual
• Seek regular feedback on your performance, and
• Don’t jump to conclusions without checking all the facts first.

Accountable and responsible

Accountable and Responsible are essential factors in the success of a relationship. All parties need to agree to their obligations and responsibilities and be accountable to them at all times.

When forming a relationship, ensure:

• There is a written, clear and mutually binding contract
• That all communication is documented
• All parties fully understand their ongoing obligations and responsibilities.

When maintaining a relationship:

• Immediately inform all parties if there is a mistake or a problem, and
• Identify how mistakes can be avoided in the future.

Professional conduct

Professional conduct is vital in all interactions between the parties. Professional conduct should be a prerequisite for any B2B interaction. It was cited as a particular problem when small business was dealing with large corporations as they may lack the knowledge, experience, resources and training to form and correctly maintain a relationship with a much larger and better resourced partner.

When forming a relationship:

• Have a robust business plan approved by a professional adviser
• Try not to become too financially dependent on one business or customer, and
• Don’t promise something that cannot be delivered

When maintaining a relationship:

• Be objective at all times and do not allow emotions to cloud judgment
• Seek professional advice if in doubt
• Avoid real or perceived conflicts of interest
• Keep up to date on best practice as well as industry research and developments, and
• Become a member of a relevant industry body or association.

Pre-agreed dispute resolution

Pre-agreed dispute resolution procedures ensure that there is rapid and satisfactory resolution of any issues. All relationships will have disputes at one time or another. It is essential that all parties agree on resolution procedures at the start of the relationship so that any disputes can be dealt with quickly and cost effectively and enable the relationship to continue with minimum disruption.

When forming a relationship:

• Agree that litigation is the last resort
• Insert a dispute resolution clause in contracts
• Have a recourse to a third party or mediator should resolution not occur

When maintaining a relationship:

• Identify the common interests to solve the dispute
• Take the time to understand all parties’ positions, and
• Monitor complaints/disputes to identify common themes and appropriate solutions.

Mark Allsop
My Business July 2009

 


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