Healthcare Matters

Click here for Part I and Part II of this series.

All week we’ve been talking about Vested Outsourcing’s report on “Getting to We.” So far, we’ve covered the need for buyers and sellers to be transparent and authentic. Frankly, and in a supply chain context, “transparency” is better known to us as “visibility. ” It’s what our suppliers constantly ask for, so as buyers, we recognize it as information that we like to withhold. Brilliant. I think this attitude has a lot to do with how the “mushroom theory” came into vogue. “Keep ‘em in the dark and throw manure at them.” Actually, transparency is a better term to use. In a business context, it not only means the removal of barriers to useful information, but facilitation of the same.

Next we covered “authenticity.” A perfectly logical follow-on for a simple reason: if you’re going to be transparent, then lying to your partner seems a little bit out of sequence. Kate and Jeanette provide a useful reminder here.

Today, it’s about learning to still wield your power, but doing it with a collaborative flair. Before we provide the explanation of what it is, let’s cover a great example of what it isn’t:

AT Kearney’s paper on “The Purchasing Chessboard”provides great insight into how to behave when you’ve got a clear advantage in a negotiation –when one side holds the market power. The advice? When you don’t have any market power –or you’re at a stalemate– learn to collaborate. When you’ve got the upper hand, here’s how best to kick ‘em in the teeth. If you’ve been following this series, you probably know that that isn’t exactly the vested idea. If you haven’t, yet possess common sense, then you undoubtedly know that this isn’t a sustainable strategy.

How about this instead? “Suppliers and buyers working together to generate ideas for optimizing costs and then agree to share in the respective benefits.”

 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. This line of reasoning 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. And, it often results in suppliers withholding 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 by 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. This is not a group hug. It is a balance of advocacy and inquiry. It means standing up for the shared vision of the partnership.

Power in the hands of people without appreciation for how to use it (i.e. “discretionary use”) is short-lived. For good leaders who find themselves occasionally uncertain, “standing up for the shared vision of the partnership” is all you need to remember.

—Tom Finn