Friday Rant: Chester Karrass Needs to Retire
Tags: collaboration, contract negotiation, karrass negotiation seminar, supply chain, vested outsourcing
Several decades ago, the US Supreme Court enjoyed some notoriety for describing pornography by saying something like “we can’t define it, but we know it when we see it.” Wouldn’t most of us respond in a similar fashion if we were put on the spot and asked to define collaboration?
Here’s the point: Our Supreme Court can get away with such ambiguity. Similarly, parents reserve their rights through the use of terms like “maybe.” But as business people, a failure to define what collaboration actually means, in a contractual sense, spells trouble. Indeed, if we can’t define it by breaking it down to its most active constituents and develop empirical methods for measuring our “collaborative progress,” then what’s the point?
Need some help? Several years ago, the University of Tennessee was commissioned by the US Air Force to develop a better way to outsource. Field studies of outsourcing relationships –from the most successful partnerships to the most notorious– were undertaken with a goal to create an step-wise empirical template that defines a new best practice for creating and managing performance-based relationships. Kate Vitasek, a well-known SCM thought leader and innovator in the field of outsourcing, led the research effort and now leads the charge to commercialize the results (www.vestedoutsourcing.com).
Fully distilled, here are Kate’s Five Rules of Vested Outsourcing:
- Focus on outcomes, not transactions.
- Focus on the WHAT, not the HOW.
- Agree on clearly defined and measurable outcomes.
- Optimize pricing model incentives for cost/service trade-offs.
- Governance structure provides insight, not merely oversight.
Of course, the collaborative approach to developing and managing relationships –what’s being described above—represents a fundamental departure from traditional contract negotiation strategies and tactics. And if you truly believe in the collaborative message the pundits and expert practitioners have been promoting for the last few years, then the rules cited above will forever change the nature of how you contract with your suppliers and the resulting business relationships.
Here’s another idea: If you’re really lost and learn better through negative reinforcement, have your manager send you to a Karrass Negotiation Seminar. At least you’ll know what collaboration isn’t. Not only that, but you’ll discover whether you want to get to know your shameless inner child. I was reminded of this opportunity first hand flying back from Chicago last evening. I’m sure you’ve seen the ads? Having attended one of his seminars many years ago, I can only hope what I was exposed to has been blown to bits and disposed of by hazardous content remediation experts, but I’m pretty sure that hasn’t happened. For starters, Chester Karrass’ photo hasn’t even been changed in 30 years; and his famous tagline hasn’t changed either. It still reads: “In business as in life, you don’t get what you deserve, you get what you negotiate.”
On the one hand, you now have a new breed of contract negotiators who are refusing to view the world through a zero sum lens. They’re looking for ways to get rid of traditional contract clauses that provide escape hatches and stipulate other demotivating provisions. They look for opportunities to share risk and beef up performance-based clauses that are win-win.
On the other, you still have negotiators who shamelessly start negotiations by offering suppliers half the value of what is being sold with an idea that such behavior will somehow be forgotten –if not rewarded. Keeping a straight face through a series of misrepresentations carefully orchestrated to “win” a concession is a recessive negotiation gene that needs to get eradicated.
Remarkably, the Karrass Negotiation Seminars remain well attended by the Fortune 500.