Win-Win? – The Problem of Analytic Subjectivity and Straw Men

This guest post comes from Professor Andrew Cox, whose book “The Problem with Win-Win,” which we discussed earlier this month, has stirred some debate. We are delighted to publish his response.  

The discussions in Spend Matters UK/Europe about my views on the logical impossibility of ‘win-win’ outcomes for buyers and suppliers is welcome, as it once again draws attention to an important topic in procurement and supplier relationship management. Having researched and written about business relationships for twenty years, I still find it disappointing that so many practitioners – be they buying or selling – remain seduced by over-simplified notions about what makes some relationships successful and others less so.

The latest discussion revisits familiar territory, and once again I find that respected commentators have failed to address any of the central issues I raised in my book Win-Win? Recent commentators have chosen instead to use subjective analysis and/or create a straw man to completely ignore, or make spurious criticisms about, my central arguments.

Peter Smith argues (here) that ‘win-win’ outcomes are possible by citing an example in which a consultancy works for nothing to test out a new approach, while the buyer receives great work for free.

The problem with this view is that Smith at no time defines objectively what he means by a ‘win-win’. Now, I recognise that he is most likely keen to encourage debate on this issue, but sadly in his depiction of the consultancy scenario, he is guilty of the error I warned against in my 2004 book of using subjective definitions of buyer and supplier interests to analyse relationship and negotiation outcomes.

As I explained in 2004: if a ‘full win’ for a supplier is objectively defined as the ability to make above-normal returns, while also closing the market to competitors, and if a ‘partial win’ for a supplier is defined as the ability to make some returns and achieve some market share, then the specific example Peter provides is clearly a ‘win’ for the buyer, but only a ‘partial win’ for the supplier.

This is because the supplier may have tested a new approach from which it may make returns from other buyers in the future, but it has not in the specific dyadic relationship being analysed achieved any financial returns directly from the buyer.  From the supplier’s perspective, therefore, only a ‘partial win’ has been achieved – it has tested a new consulting methodology, but at its own expense.  From the buyer’s perspective, however, a ‘full win’ has been achieved objectively (i.e. great work at no cost). Objectively, this is a ‘win-partial win’ outcome favoring the buyer; whatever the participants (or Peter) may believe subjectively!

This is an example of how the pursuit of subjectively defined ‘win-win’ can lead to sub-optimal outcomes.  It is important for practitioners to understand the rules of the game of contested exchange—namely, that buyers and suppliers have commercial interests that are not fully commensurable, and as a result both parties cannot simultaneously achieve their ideal (a full ‘win’) commercial and operational goals.  It is also necessary for them to understand that, if they subjectively misconceive this reality, they are likely to be taken advantage of by those who understand the rules of the game better than they do.

The critique by Stephen Ashcroft (here) is less a discussion of the merits of my arguments, rather a disappointing attempt to construct a straw man to draw attention to his own consulting services. Ashcroft states bluntly:  “Cox fails to present an analysis that probes the quality of pre-negotiation planning and presence of strategies. What would Cox inject into business negotiations? That is the unanswered question,” then goes on to explain his view that ‘win-win’ (which he fails to define) is possible in some situations, and that pre-negotiation planning is critical.

Unfortunately Ashcroft never engages with the central arguments in my work. He states that ‘win-win’ is feasible, but fails to define a ‘win-win’ outcome by reference to the ‘objective interests’ of buyers or suppliers.

This error is then compounded by making simplistic statements about the need to: undertake negotiation planning to achieve ‘win-win;’ be careful about making 50/50 compromises upfront; make mutually advantageous concessions founded on mutual trust and respect.

These recommendations are as dangerous as they are simplistic. Ashcroft appears to have fundamentally misunderstood the central thesis in my book and related papers (‘The Problem with Win-Win’). This is that all relationship outcomes are the product of the interplay of the objective power and leverage situation and the objective, but usually subjectively defined, interests of buyers and suppliers.

It follows from this that the way in which any negotiation or post-contractual relationship should be conducted is ultimately a product of the game theoretic position of the buyer and supplier. This means that, depending on whether buyers and suppliers are in one-off or repeat games, the way in which pre-contractual negotiation is undertaken and post-contractual relationships should be managed will vary.

In one-off games zero-sum (win-lose/partial win-lose) outcomes (based on the use of short-term opportunistic strategies) are appropriate. In repeat games, non-zero-sum (win-partial win/partial win-partial win, but NOT win-win) outcomes are necessary for the relationship to continue to work over the long term. In such circumstances less opportunistic and more principled strategies, based on a careful mutual understanding of relative power and leverage positions pre- and post-contractually, are appropriate strategies.

The practical challenges faced by buyers and suppliers in managing business relationships where there is an imbalance of power and leverage are not insubstantial. Securing optimum value for money is a perpetual struggle against the forces of inertia and sometime malign intent of those seeking to create a ‘win’ exclusively for themselves. Practitioners are not helped by overly-simplistic slogans such as ‘win-win,’ ‘partnering’ and even ‘collaborative working,’ none of which provide the basis for predictable success. Buyers and suppliers, if they are to be successful, need to fully understand the reality of the power circumstances they find themselves in within each of their counterpart relationships. Only then will they determine and deploy the appropriate methods that are likely to lead to the most favourable (or least unfavourable) outcome.

If any readers would like a more comprehensive explanation of the issues raised here they can read Win-Win?. For those interested in the debate the insightful discussion by Dave Atkinson is also worth reading.

 

Disclaimer:  The opinions expressed in our contributed articles are those of the guest author and do not reflect the opinions of Spend Matters UK/Europe writers and analysts.

Voices (3)

  1. b+t:

    I think a ‘win-win’ is when both sides get a better deal than their competitors would have.

  2. RJ:

    totally agree with you, Dan. In its purest sense i agree with Prof Cox’s assertion that achieving the ideal outcomes for both parties in a negotiation is nigh on impossible. However, as the article itself seems to acknowledge, it is generally only in those rare one-off circumstances where most buyers or sellers genuinely have expectations of achieving their ideal outcomes. In reality, especially in a complex business negotiation all we ever truly expect is the “partialwin-partial win” scenario that is described here. However, that’s not a very snappy moniker for a philosophy and so I suspect that most of us abbreviate it and understand what we mean. In academic circles it is clearly appropriate, and helpful, to study the game theory approaches and outcomes in absolute terms but in real life situations most of us do know what we’re talking about when we seek for a “win-win” outcome.

    As Mick Jagger so eloquently put it “you can’t always get what you want, but if you try sometimes, you know you just might find, you get what you need”.

  3. Dan:

    It’s a bit of a semantic argument – your assertion depends on your definition of ‘win’ as ‘the ideal outcome’, which is not a definition in any dictionary or in common usage. You could argue that a ‘win’ means achieving your objectives (a definition which I feel would be more widely acceptable), which would be a much lower standard to meet in order to ‘win’. To blithely declare that win-win situations are impossible when that depends purely on your own narrow and debatable definition of ‘win’ is slightly misleading.

    I do take your wider point though – too many people could be satisfied with what they think is a win-win situation as the textbooks all state that this is the ideal outcome, without questioning whether they could have done any better.

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