Analyze This

To Err Is Human, To Fess Up...Rare

By Kerry J. Sulkowicz
Featured on Business Week

My company is writing a new contract with an offshore vendor, completing the negotiations during upcoming meetings. Our previous agreement included performance-linked penalties and bonuses, but this vendor always refused to admit to errors. Is there a way to word the contract so the supplier doesn’t lose face by admitting to mistakes, while still protecting ourselves? And how can we make the talks agreeable to both sides? – M.H.S., Hawthorn Woods, Ill.

The world would indeed be a better place if more people could admit to making mistakes. Alas, we won’t hold our collective breath waiting for that to happen. The inability–or refusal–to admit errors often grows out of fragile self-esteem, a reflexive need to externalize responsibility rather than owning it, or a macho cultural norm that equates fallibility with weakness. The capacity to admit that one has screwed up is, in my view, indicative of one of the healthiest levels of psychological functioning.

Now that I’ve gotten that off my chest, let’s talk about your vendor. Assuming these denials aren’t simply a business ploy, your instinct to help the supplier save face is a smart one. But I’m a psychiatrist, not a lawyer, so you don’t want my advice on how to write an agreement. It wouldn’t hurt, though, to talk to your attorneys about what you’re trying to accomplish here. A lawyer I know says it can be provocative, for instance, to “pile it on” in a contract, repetitively enumerating all the ways a supplier could fail.

In the end, the face-to-face negotiations are where you stand to make the most progress, or mistakes. Without attacking the other party’s integrity or pride, you should be honest about your view of past performance, making it clear that you’re evaluating things in the context of a continuing relationship.

Start with, “We’d like to revisit the way each of us assesses performance.” Then raise the question of whether the criteria have been explicit enough. Does the offshore location make it harder to communicate standards? Should a process be started to address that? (If you decide, mutually, to initiate on-site visits, make sure the person your company chooses for this is good with people.)

You might also try to create an incentive for the vendor to be more forthcoming about problems–by acknowledging, for instance, that in your industry the occasional error is unavoidable. If it’s appropriate, mention that your company, too, has to make it up to customers when you don’t meet standards. This might “normalize” mistakes for your supplier, offering a face-saving way to take responsibility–and to shoulder the costs of the errors.