- Adversarial tactics threaten to walk away from the bargaining table, to throw a deal breaker into the mix and bring a winner-take all competitor under consideration. The negotiations comes down to price, rather than satisfying secondary and long term objectives. They leave a legacy of mistrust, guarded revelations and suspicions of each others' deceptive maneuvers.
- Collaborative tactics explore each others secondary and long term objectives. They interact to uncover common ground, shared interests and mutually agreeable compromises. They set a standard for working together again, understanding each others' viewpoint and trusting underlying intentions.
Chapter Ten of The Firm as a Collaborative Community explores this same distinction within industry supply chain negotiations. Following on Albert Hirschman's 1970 book: Exit Voice and Loyalty, John Paul MacDuffie and Susan Helper contrast the "exit approach" and "voice approach" in auto industry procurement practices. Detroit automakers have long practiced the adversarial, "exit approach" of dropping suppliers to force added price reductions and relying on competitive bidding to get the best price. Japanese automakers have a long history of the collaborative "voice approach" of listening to suppliers while working together on cost reductions. Large suppliers of parts for both kinds of automakers, like Delphi, realized several fascinating differences within their organizations.
When faced with the adversarial, exit approach, auto parts were small, poorly designed, and different for each model of car. Cost reductions were sought from design 5%, material 50%, labor 15% and overhead 30%. Parts suppliers were told by auto executives to "stop your whining" Cost reductions occurred at the expense of quality which resulted in considerable returns, rework and warranty expense. The automakers displayed a "sink or swim" attitude toward the suppliers which undermined the long term health of the Detroit automakers themselves.
When immersed in collaborative, voice approaches, auto parts have been integrated into larger assemblies, become much better designed and are made uniform across many different models of cars. Cost reductions were sought from design 70%, material 20%, labor 5% and overhead 5%. The increase from 5% to 70% design impact necessitated much more delegation of design responsibilities to suppliers, coordination of designs across bureaucratic silos and learning by the automakers from the suppliers' considerable expertise. Cost reductions were accompanied by improvements in quality, reductions in returns, rework and warranty expense. The automakers displayed a "we're all in this together" attitude toward the suppliers which nurtured the long term health of their entire industry.
Neither the outcome measures, positive role models or the rapport with suppliers realized by the "voice approach" has had much influence on Detroit automakers. Having recently sabotaged their unusually collaborative, Saturn Car Company, GM appears to be "dead set against the voice approach". This provides us with a wonderful case of "conflicts with the adoption of collaborative networks". To those not already benefiting from collaboration, the change from working against into working together appears like a very bad idea to be avoided at all cost.