Contracts articulate the terms behind a finalized negotiation. Formally, they are legal agreements. What is not described in the terms of these agreements, however, is the relationship between the contracting parties. It is largely the relationship that determines whether a contract succeeds in achieving its primary goals. In other words, your contract team must focus on relationships first because success of a contract is directly related to the strength of the relationship between the contracting parties.
Why Build Relationships First?
According to an article by IACCM, contract management and relationship management will slowly integrate into a single competency. Contract management enables parties to a contract to meet their obligations and achieve contract goals, because it allows parties to build the relationship beyond the contract.
Collaboration between contracting parties is not only about what the parties do together, i.e. per the terms of the contract, but also about what the parties believe about each other, and about how they interact. For example, a strong relationship can generate better solutions to disputes because of the availability of communication lines and an understanding of the other company's culture. A strong relationship also delivers economic efficiency, better understanding of obligations, and improved resolutions of disputes.
Relationships Help Parties Understand Each Other’s Values
Individuals on different sides of a contract usually operate under different organizational cultures and systems. This easily and frequently leads to miscommunication. According to roundtables of 50 different executives, primary skill areas in which people lack are communication and information sharing. Unfortunately, communication is not natural to most people. To address this, some organizations are now directly tackling communication as a competency that can be taught and are building initiatives around it.
Strong Relationships Retain Clients
Relationships can also help organizations retain clients. For instance, it's unlikely a customer would look elsewhere when the customer trusts the organization. There would be no need when the customer feels he is a priority and has received the right products and services for reasonable prices.
Building the relationship is an investment. Your organization begins to build trust when it is able to show the other contracting party that it has its best interest at heart. While trust requires time and concerted effort, it allows for more secure and successful contracts in addition to future savings in contract administration.
Solid Relationships are Key to Success
An organization cannot succeed without solid relationships. Relationships build success because they provide the reasons behind continued partnerships. The stronger the relationship – that is, the more communication, understanding, and trust – the more stable the contract will be.