Equitability in B2B Relationships

• Share
• Tweet
• Email

The concept of equity emanates from law – the idea (or ideal!) of fairness in dealings between two individuals/organisations. But how does this concept translate into B2B customer relationships when so many suppliers feel that demands from customers appear unfair, unjustified and almost immoral!

The first thing you have to do is – DECOUPLE THE EMOTION – the most difficult thing to cope with in business is the unexpected and large B2B customers will always reserve the right to throw the unexpected (and unwelcome) demand at suppliers. Often it is the shock of the demand for ‘an extra £5 million’ that generates feelings of inequity.

The second thing to understand is the difference between ‘being DEMANDING’ and ‘being UNFAIR’ – any customer can ask for lower prices or better terms but should not trade in unfair ways. This was captured in the following statement from the recent Grocery Suppliers Code of Practice legislation:

New “fair dealing” provision

“A Retailer must at all times deal with its Suppliers fairly and lawfully. Fair and lawful dealing will be understood as requiring the Retailer to conduct its trading relationships with suppliers in good faith, without distinction between formal or informal arrangements, without duress and in recognition of the Suppliers’ need for certainty as regards the risk and costs of trading, particularly in relation to production, delivery and payment issues.”

As can be seen above ‘fairness’ and ‘equity’ are about dealing in good faith (sticking to promises/commitments) ,without duress ( not abusing positions of power ) and providing an environment of certainty ( and so allow businesses to plan their investments).

The equity in B2B dealings comes with an openness to genuinely negotiate – if we consider a definition of negotiation the reason becomes clear –

“Negotiation is the process through which two parties, who want something from each other, volantarily communicate with each other to reach a demonstrably satisfactory outcome.”

The key words in the above definition are – ‘want something from each other’ and ‘demonstrably satisfactory outcome’…hence it is fine for the customer to ask for an extra £5 million from a supplier as long as they are prepared to respect the fact that the supplier will need to find £5 million of value in return in order to reach an ‘equitable and satisfactory settlement’.

When customers simply make demands and are unwilling/unprepared to negotiate to find a satisfactory outcome then they are both acting without equity and very possibly outside the terms of UK legislation.

Healthily attuned B2B customer relationships should feel stretching/challenging at times but there should be a foundation of EQUITY which allows the relationship to develop within a framework of trust ( a subject to which we will return later ).