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A Trust-based Business Relationship Often Goes A Long Way!

The importance of trust cannot be ignored even in a well-established contractual relationship!

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Virtual teams that are globally distributed across continents and time zones work seamlessly today. With technology innovation and declining cost of equipment, audio conference calls have been replaced by video conferencing. Hence, with the aid of high quality video conferencing facilities, it is now possible to have conversations as if everyone is in the same room. This has been further enhanced by collaboration tools which helps in increasing productivity for such teams. Yet with all the advancements in tools and technology, one very important factor which is often underestimated and missed out is Trust.

Business relationships that are based on trust is far stronger and can endure much more challenging situations as compared to relationships which are formed just for some immediate benefits. When both parties invest their time and energy to grow the relationship it leads to stronger trust building. The foundation of such relationships is not shaken easily and has a much longer tenure. On the other hand, relationships which are based on contractual commitment only, often during tough times has to weather rough situations.

In the world today, being cost competitive is very important. To achieve cost efficiencies, offshoring and nearshoring has become the de-facto operating model. This is not only helping companies to reduce cost through access of low cost resources but is also helping them improve their reach for global talent. Companies today no longer depend on resources from local talent market but can have a global talent pool. Along with offshoring and nearshoring, the Gig economy has also boosted the approach to get talent on a freelancing basis rather than having them on the payrolls.

In either of the three operating models i.e. offshoring, nearshoring or freelancing, it is important that the resources are part of one integrated team for elevated level of effectiveness and efficiency. Easier said than done, unless a lot of effort is put in to establish trust, it is not easy for team members to work together and operate as one single team.

The use of Service Level Agreements (SLAs) between customer and service providers and Operational Level Agreements (OLAs) between internal support groups is a standard practice to reduce the level of dependencies across teams. Through the presence of KPIs and metrics and a well-designed dashboard, one can monitor performance of individual teams with respect to their agreed SLAs and OLAs. While this works quite well in areas where processes are streamlined or there is a strong standardization element already in place, it doesn't work very well in environments which are complex or non-standardized. In such environments, how closely the team members know each other is what matters the most.

Often in complex work environments, absence of trust leads to a lot of complexities in the way team members operate. The relationship tends to become fact-based and each interaction demands substantial level of documentation to ensure who to blame when things go wrong. The process of decision making becomes stretched with all parties trying to play safe. The legality of contracts become the basis of discussion leading to high degree of dissatisfaction and a fractured long-term relationship.

The five crucial factors or 5Cs that influences the process of trust building in business relationships are as follows:

Culture:  Every organization is different and carries a distinct cultural DNA. The culture depends on a lot of factors including the Companies vision, industry, geography, operating style etc. If one is not able to understand the culture of an organization, rest everything will be misplaced. Hence, it is important to spend some time with key people in the other organization to understand the likes and dislikes of the management and people at large. One should have smart managers with effective communication skills as interfacing points between the organizations.

Complexity: The complexity of work and operating environment must be understood as that determines whether the relationship demands a high touch or a low touch engagement. Companies who are first time outsourcers of work often require high touch to give them confidence that things will work out. More matured outsourcers often may not need this hand holding but may require high touch engagement due to demanding needs. Also, certain kind of engagements will require much closer interaction daily compared to standard processes which can be more protocol based. Organizations need to judge this complexity and accordingly define the operating model best suited to cater it.

Commitment: Most organizations deal with multiple customers and not all the time every customer can be a priority. Smart organizations often prioritize certain customers over others based on the stage of the engagement. Early into an engagement, often the relationship requires more time and attention that helps establish credibility. Also, when the engagement is going through a stressful phase or when it encounters a major roadblock, one need to prioritize and navigate. Organizations need to have early warning systems in place to help them understand when to raise the level of commitment in the engagement journey.

Contract: Open ended language used in contracts often leads to misinterpretation or rather it is open to interpretation as it is ambiguous. Organizations can use open ended language when the scope is not very clear at the point of contracting. Sometimes it is a deliberate act and is done to arm-twist the other party. Either case it is not a good practice and ideally both parties should ensure clarity in the language to avoid future problems.

Control: While the contract should ideally define the roles and responsibilities, often on the ground situation differs in terms of controlling various aspects of the engagement. The management style of organization largely defines who control operational level decisions. Hence, organizations need to understand this aspect to remove short term impediments that can arise due to the issue of control.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Rahul Gupta

Rahul is passionate about Strategy and Change Management. He has around 15 years of experience in Management Consulting, Business Transformation and driving Strategy and M&A across multiple industries, business domains, technologies & geographies. Rahul holds an MBA from XLRI and is a Gold Medalist in Engineering from Jadavpur University

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