Although its merits can be overstated and its principles often are misapplied, there is no doubt that the partnership model of relationships with suppliers and contractors has many merits, at least in certain supply segments.
One of the significant benefits claimed is that it becomes unnecessary to try to pin down every eventuality in the fine print of the contract. With both sides sharing and caring, the theory goes, problems will be solved almost before they are discovered, decisions can be made in real time, a gain for one side is by definition a gain for the other, and only the lawyers lose (which even at this festive season is not something to lose too much sleep about).
That is fine when you are negotiating or contracting with people you know, or at least whose backgrounds, motivations, mind-sets you think you understand – in other words, ‘people like us’, or people we trust. But can you safely use the same thinking with people or companies with different cultures: those ‘far away places of which we know little’?
There are quite a few best selling business books that purport to reveal the underlying cultural differences that international traders must understand. HSBC, the major bank, currently has an advertising campaign based around the idea that displaying the soles of your feet in Thailand is a potential deal-breaker. And there are many stereotypes that actively or unconsciously influence the way we do business – ‘Americans always bring teams of lawyers’, ‘negotiations in Japan always take for ever because nobody will risk losing face by opposing the consensus’, ‘an Englishman’s word is his bond’ (There are of course many rather nastier stereotypes floating about which no reader of this journal would entertain consciously or unconsciously).
Those most like ourselves
But it stands to reason, does it not, that as negotiators and contractors we are going to feel most comfortable dealing with people we feel, for whatever reason, to be most like ourselves – we will let ourselves take more ‘on trust’, have shorter, more general contracts, be more prepared to take rapid decisions without lengthy due diligence and so on? Conversely, if we are dealing with a perceived alien culture – say a European firm contracting with someone in the Far East – then we will bring in the lawyers and consultants to dot every i and cross every t.
Which would mean that trust, in the business sphere, has a real economic value. Well, it may do but, according to some recent research, not necessarily in the way that conventional wisdom predicts.
Chris Snijders and Frits Tazelaar, from the University of Utrecht in the Netherlands, presented a paper at this year’s International Purchasing and Supply Education and Research Association conference* which looked at ‘Trust and cultural differences in international purchasing and supply’. Without going into the methodology too deeply, they looked at the extent to which citizens of one country tend to regard citizens of another as trustworthy, and then at how this translated into practical terms such as the length and complexity of contracts.
Their findings are quite revealing. Firstly, ‘trust’ isn’t the property of one country only – if country A distrusts country B, there is a high probability that the feeling is mutual. The authors did find evidence for economic impact – ‘On average, nationalities that trust each other write shorter contracts and experience fewer problems [in the working of the contract]… Doing business with countries that are trusted more is, on average, cheaper: less need for elaborate contracts and fewer problems after the deal is concluded’.
The intersting bit…
So much accords to the theory. The interesting bit comes when you compare the findings against the business book stereotypes. For example ‘Swedes are good at sticking to agreements’, No such evidence. ‘Dealing with Americans automatically leads to more elaborate contracts’. Ain’t necessarily so. They found that their home nation, the Dutch, ‘trust’ the Germans far more than they do East Asian countries, but in both cases business is arranged orally to a much greater extent than when dealing with England or France (both of which more or less match Germany on the ‘trust’ stakes). Scandinavian contracts produce a disproportionately high level of contract problems for a bunch of countries that the Dutch seem to trust implicitly: by contrast, on this research you would wonder why you would bother writing a contract with the Swiss at all – you just don’t need it!
The point is twofold. Firstly, there really are benefits in learning to trust your business partners regardless of geography, ethnicity or culture. Second, stereotypes, even the nice ones, are at best some sort of average and at worst plain wrong. We contract with unique people and individual companies, not statistical constructs. A good New Year’s resolution for the supply chain would be – learn to trust your partners, and make it possible for them to trust you.
The 13th IPSERA Conference will be held 4-7 April 2004 in Catania, Italy. For details see www.ipsera.org
- Trust in business has real and demonstrable economic advantages
- Trust, or mistrust, is usually mutual
- The conventional wisdom on the business behaviour of different cultural groups has in many cases no empirical validity. Discard it, and make your own decisions.