Efforts at collaborative logistics partnerships are said, generally, to be successful in only 2 out of 10 serious efforts. Very few business ventures have had more analysis as to why such a concept based squarely on win-win business philosophy so often fails. A plethora of studies and scholarly articles have reported on key reasons for failure of collaborative logistics partnerships. They almost always come to similar conclusions:
- Lack of effective choices for partners
- Cool Hand Luke’s, “failure to communicate”
- Poor definition of shared goals and incentives, etc.
I would like to add another suggested root cause of failure, which might be translated as :
- Overly complex and “legalistic” contract language which fails to properly take into consideration the real objectives of such collaboration.
Faculty member, Kate Vitasek, and the staff of VESTED/University of Tennessee, School of Business, have been developing a much more sophisticated business model for collaborative logistics partnerships. Recently, I had reason to review their Vested Business Model, having the primary purpose of getting potential partners to an effective agreement, which anticipates many of the historical reasons for failure. As you might expect from such a world leader in supply chain management, the Vested movement is a paradigm shift in effective planning and execution of a collaborative logistics partnership. They emphasize that the collaborative agreement must immediately send a message of continuous cooperation, rather than control by one party or the other.
But as excellent as Vested is in concept and design, it too can fail on the “drafting board” of lawyers for either or both potential collaborative partners.
During my career on both the business and legal side of logistics management, I have been fortunate to have participated in several successful collaborative logistics partnerships. Because of this experience, as I reviewed the Vested materials I was impressed with it all, but a few points in particular. Their contrast between zero sum and win-win contracting strikes at one of the reasons for failure which does not receive as much attention by analysts, but which must surely be remedied.
We lawyers must approach advising clients who want to enter a truly collaborative venture with a much different mindset than we might for conventional, transactional, power-leveraging contract negotiation. We must realize that our clients are entering a very non-traditional contract, where “fairness” cannot be overly demonstrated, and certainly must not end all hopes for success by the immediate nature of the language in their agreement.
We must learn to express open ended commitments, without rigidity, which allocate risk to the party best empowered to mitigate it. In short, we must adapt to the notion that all contracts are incomplete, and collaborative contracts in particular must leave some flexibility for recovery, rather than demise; and, preserve continuity of the partnership, even if some mitigation must occur. The parties must have hope for informal principal led mediation, rather than litigation. Contract language must promote and show the way to continuous give and take efforts at managing “cooperation”, rather than “control”.
Developing such a new mindset might begin with the words of Nobel Prize winning economist (and legal scholar), Oliver Williamson, “The distinguishing feature of contractual obligations (in business) is that they are not imposed by the law but undertaken by the parties.”
We must fairly infer from such insight that while we have the duty to represent our client’s best interests, in some instances, such as collaborative ventures, best representing such interests is reflected in clearly understanding the need to shift away from adversarial, or “muscular” contracting. And even if we feel the need to get an informed consent waiver, we should do so, rather than stick with traditional, one side wins approach.