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    The document summarizes a new approach to formal relational contracts between companies called the vested methodology. Traditional contracts often led to problems like hold ups, incomplete terms, and rising costs. The vested methodology involves a 5-step process to establish trust, shared vision, guiding principles, aligned expectations, and monitoring teams between partners to produce sustainable partnerships. Over 57 companies that used formal relational contracts through this process achieved cost savings, improved profits, and better relationships.

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    The document summarizes a new approach to formal relational contracts between companies called the vested methodology. Traditional contracts often led to problems like hold ups, incomplete terms, and rising costs. The vested methodology involves a 5-step process to establish trust, shared vision, guiding principles, aligned expectations, and monitoring teams between partners to produce sustainable partnerships. Over 57 companies that used formal relational contracts through this process achieved cost savings, improved profits, and better relationships.

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    9 views2 pages

    Summary of Article New Approach: Submitted by

    Uploaded by

    zara
    The document summarizes a new approach to formal relational contracts between companies called the vested methodology. Traditional contracts often led to problems like hold ups, incomplete terms, and rising costs. The vested methodology involves a 5-step process to establish trust, shared vision, guiding principles, aligned expectations, and monitoring teams between partners to produce sustainable partnerships. Over 57 companies that used formal relational contracts through this process achieved cost savings, improved profits, and better relationships.

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    © All Rights Reserved
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    of 2

    Summary of article new approach

    Submitted by:

    Zara Ayaz

    Mehwish Akber

    Mahnoor Soofi

    Suhama Kashif

    Zainab Zia
    The article starts with dell and FedEx’s example that how companies have problems keeping up
    with the contracts and are not really satisfied with the partnership. The article stresses upon
    importance of supplier relationships because of problems with traditional contracts. The remedy
    is formal relational contracts. Other problems include hold up problems, incomplete contracts
    which leads to bad investments raising costs. The idea was to come up with a new approach
    which would produce sustainable partnerships this led to the vested methodology for creating
    formal relational contracts although Informal handshake deals have been promoted for decades
    for example Japanese keiretsu is a type of relational contract, Keiretsu model ties up capital and
    limits flexibility. Formal Relational contract addresses these deficiencies.

    Around 57 companies have opted for formal relational contracts this resulted in cost savings,
    improved profitability and better buyer-supplier relationship. Before binding into a formal
    relational contract it is best to determine if it is right for the company

    Vancouver Island Health Authority, South Island Hospitalists and university of Tennessee came
    up with 5 step process

    Step 1: lay the foundation

    Here the goal is to establish trust and a partnership mentality for example the Island health and
    South Island chartered a team to design a formal relational contract.

    Step 2 co-create shared vision

    A company should have excellence in patient care, a sustainable and resilient hospitalist service,
    a strong partnership, and best-value hospitalist service.

    Step 3: Adopt Guiding Principles

    Reciprocity, autonomy, honesty, loyalty, equity, and integrity are important traits every company
    should adopt.

    Step4: In this step stress is on how both parties expectations should align

    Step 5: Lastly different teams should monitor different aspects. The relationship team should
    monitor health of relationship; the excellence team should monitor quality control and
    innovation. The sustainability team should monitor basic HR activities. Lastly the best value
    team should monitor finance and operations.

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