Can You Recognise When Your Supplier Acts with Commercial Trust?

An intelligent supplier is one that works with their client in a proactive and dynamic way to achieve the best project outcomes. A vital engine of this relationship is commercial trust.

An intelligent supplier must be capable of evidencing commercial trust, from the way in which it works with other clients, that it performs all appropriate due diligence and asks ‘all the right questions’ of its clients in any new project work or change variations.

Why Commercial Trust is a Must

Whenever people talk about ‘trust’, the natural assumption is that someone is talking about one’s ‘integrity’. While they often go hand in hand, commercial trust is slightly different.

The most financially and reputationally successful strategic and complex project service delivery relationships have at their heart a foundation built on commercial trust. Intelligent clients and intelligent suppliers work better together and drive greater value in a commercial trust led environment.?

Client and supplier organisations that pursued a path of improved commercial trust saw an improvement in their financial and reputational performance by up to 98%. From the nearly 600 complex project relationships we have been involved in, we have found this not at all surprising. Such an uptick is governed by the capabilities of individual organisations and the restrictions they must work within, while looking to improve their performance.

How to Evidence Commercial Trust

Commercial trust is hard won and easily lost. It is demonstrated by individuals who do what they say they will do, when they say they are going to do it. This is a very simple statement for what are, in practice, behaviours that are hard to deliver on a consistent day-to-day basis in complex project relationships.

An example of commercial trust behaviour being demonstrated by an intelligent supplier would be:

1. The client requests that some out-of-scope activity be performed by the supplier.
2. The supplier has an intelligent dialogue with the client to understand how the out-of-scope work will change benefit the client’s business or operational processes, once the project has been implemented. This becomes the client’s requirements for the out-of-scope activity.
3. The supplier responds with a due diligence process to get to a proposal (or business case) to support the client in achieving those outcomes.
4. In turn, the resulting proposal is priced at a level where the client can see the evidence that the pricing, operating assumptions and terms for the proposal/business case use a transparent, fair and equitable process.

In other words, the supplier’s response is measured, quantified, qualified and transparent.?

On the other hand, commercial trust has failed when, despite all the added value they have brought to the relationship over time the supplier is perceived as ‘trying it on’ with its pricing for out-of-scope activity. Even if the supplier’s existing service delivery is seen as competent, a lack of commercial trust will degrade the relationship over time, and it will gradually decline into a price sensitive and input activity basis.

To expand on this, we have set out two examples. In example one, a supplier evidences their commercial trust through its behaviours. In the second, the evidence suggests the opposite to be true:

Example 1: A supplier evidences good commercial trust

• A client asks its supplier to undertake some out-of-scope work and/or a new project.
• Rather than the incumbent supplier taking the approach that the client is effectively ‘locked in’ to using it, the supplier clarifies the validity of the client’s expected outcomes from the initiative.
• If the supplier suspects the client requirements is not clear or is potentially misaligned to what if feels the client really wants, it assists the client in articulating its outcomes, rather than just blindly accepting the project.
• Once the outcomes are clear, it works with the client to explore the most effective manner in which the outcomes can be delivered, in an open book and transparent way. If the outcomes of the project cannot be sensibly achieved, the supplier explains this to the client, along with the reasons why.
• Where the outcomes can be sensibly achieved, at each stage through the project/initiative, the supplier critical-friend challenges both its own and the client approach to measuring that the initiative is on track to deliver the outcomes expected. Where it is not, it will realign the activities and behaviours to assure the success of the initiative.?

Example 2: How ‘non-intelligent supplier’ behaviour affects trust:

• A client asks the supplier to undertake some out-of-scope work and/or a new project.
• The supplier does not critical-friend challenge the client on its outcomes. Nor does it explore with the client the most effective manner to achieve the client’s perceived outcomes.
• The supplier quotes for the project, knowing the client is effectively ‘locked in’ to using it. It proposes costs that are often far higher (poor value for money) than a comparatively priced bid (taking into account similar risks that another external supplier would appropriately bear).
• The supplier then simply undertakes the project with few of the ‘right’ questions about the project being asked.
• No measurements for the initiative are put into place that effectively monitor whether the project/initiative will achieve the outcomes (whether these are appropriate or not) or value for money for the client.

This type of poor behaviour from a supplier evidences their clear lack of intelligence and that the interests they are seeking to serve are merely their own. Ironically, by their adopting this approach, it does not serve either their own interests or that of the client. A lose-lose all around.

Conclusion

Commercial trust can be demonstrated and it can be earned. Doing what you say you will, when you say you will, is the most critical aspect. Other examples of commercial trust-winning good behaviour include accepting responsibility for what goes well and what does not, going over and above the call of duty for the good of the relationship, and a strong commitment to innovation.?

It is also worth considering that your strategic partner will, on occasion, be required to seek validation for the accuracy of your assertions or quotations without fear of this impacting on the commercial trust that exists between you. This is by no means an exhaustive list, but the right environment must be created for commercial trust to thrive.