We often hear stories of business relationships that appeared strong suddenly turning sour. These relationships may even have existed for some time. So what is going on? It is likely acts of opportunism.
Here’s an example. A client of mine awarded a multimillion-dollar, multi-year deal to the lowest bidder. The bid was characterised as “too good to be true”; and, indeed it was too good to be true. Over 18 months, the supplier has run over budget, been late on scheduled delivery of services, and both companies are in a dispute about whether the supplier actually performed work for which it invoiced my client more than 12 months ago. The supplier has increased its back office staff from five to 15, lost its performance bonus and feels the pressure that its head is on the chopping block. My client is way over budget, had to staff up to meet deadlines and feels quite a bit of buyer’s remorse.
Why would the supplier bid so low? Why would the buying company award the business? Could this situation be explained by acts of opportunism on both sides of the relationship? To understand opportunism we first have to understand trust, because without some level of trust, there can be no opportunism.
Trust Is the Other Side of Opportunism
Trust is the core quality of any collaborative partnership. Trust lowers transaction costs, fosters innovation and provides the necessary space for the flexibility and agility needed in today’s business relationships.
Trust is a choice. Individuals can choose to trust each other and choose to act in a trustworthy manner. Or, they choose not to. It is that simple. Business relationships with high degrees of trust can spend their energies leveraging each other’s core strengths and creating value, rather than on compliance, enforcement, or worse, fighting metaphorical fires as a result of poor performance.
Trust, however, creates the opportunity for one party to take advantage of the other. This ability to take advantage of the other party is often called “opportunism”. Oliver Williamson, the Nobel Prize-winning economist described it as “self-interest seeking with guile”.
Opportunism in today’s pressured environments can be very attractive to decision-makers who are expected to continually improve results. Unfortunately, people don’t get how opportunistic actions are driven by their own desires and not the other party’s actions. In effect, when one party acts opportunistically, they justify their actions by blaming the other party for their own actions.
In the situation above, the supplier chose to submit a ridiculously low bid and my client chose to accept it. Now, mind you they blame outside influences for those choices. The supplier claims it felt economic pressure in the industry to lower prices to stay competitive, and my client also feeling economic pressures to reduce costs awarded the work based on unusually low pricing. Nonetheless, each acted of their own accord. Each was acting out their own form of opportunism.
Why Choose Opportunism?
Trust and the threat of opportunism are two opposing forces fighting for the negotiator’s attention. Commentators have suggested that opportunistic behavior is …read more
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