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Perception of Trust Has Positive Impact on Performance in Buyer-seller Relationship
Trust between buyers and suppliers in the health sector is defined as a firm’s belief that the other will act in the best interest of the firm and the relationship, and is definitely perceived to improve performance (defined as the impact that the relationship has on the organization in terms of providing a strategic advantage), according to information presented at the NAMCP Managed Care Forum by Eugene Schneller, PhD, of the WP Carey School of Business.
“While there is no doubt that excellence in purchasing goods and services and high productivity in the health sector is grounded in trust between suppliers and providers,” Dr Schneller said in an interview with First Report Managed Care, “there continues to be suspicion that suppliers will not always act in the best interests of providers and that providers do not see their suppliers as trusted partners. Smoothing such relationships are carefully crafted contractual specifications which provide comfort that neither party will act opportunistically.”
Factors that enable trust consist of:
• Contracts (A formalized, legally binding agreement that parties establish to govern their relationship)
• Dedicated resources (Relationship-specific investments to support the other part, can be related to site, physical, or human resources)
• Information sharing (The exchange of information or data that may have a positive influence on the other party’s business decisions)
Those factors that act as barriers include:
• Dependence (When one party has an overdependence on the other. This can cause a power imbalance and negatively affect organizational behavior)
• Conflicting views (When divergent economic priorities, management styles, philosophies, or organizational cultures cause tension in the relationship)
• Health care operating model (Context-specific factors that affect trust unique to health care such as regulation or physicians as “power buyers”)
Dr Schneller went on to discuss findings from a study he conducted, which consisted of interviews and surveys with providers (n=459) and suppliers (n=460).
One finding was that conflicting views should not be a distraction; providers may feel more vulnerable in situations of divergent economic priorities and incentives, but the effect on trust is lower in magnitude than the aforementioned enablers of trust.
Contracts and information sharing showed the strongest impact on trust. Suppliers value information sharing, but to a lesser degree than providers,who may have a greater need for it (eg, utilization, equivalency studies, availability, and recalls).
Interestingly, he said, although it is often theorized that a power imbalance in a relationship may entice the powerful party to take advantage of the situation, there was no evidence of this dynamic in their study.
Although dependence is viewed as a barrier, it can set the stage for higher performance, through more diligent contracting and development of trust over time. Both providers and suppliers appeared to counteract potential dependence issues with stronger contracting, improving trust in the long run.
Dedicated resources (ie, relationship-specific investments to support the other and can be related to site, physical, or human resources, especially suppliers employed of “independent” representatives) were shown to improve the recipient’s performance but did not impact trust.
Dedicated human resourcesappear to have become an expectation for doing business and carry little additional relational value, he said.
Discussing these results in more detail, Dr Schneller explained that survey results of provider subgroups (respondents working at the system level versus hospital level) showed hospital-level executives perceived no significant relationship between trust and dedicated human resources whereas the system-level executives did perceive a negative and significant relationship between the two.
Providers whose best supplier served a surgical service also perceived no significant relationship between trust and dedicated human resources whereas providers whose best supplier served a nonsurgical service line did perceive a negative and significant relationship between the two.
But there was no question about the positive roles of dedicated resources and trust on performance. Physicians and other clinicians are used to a highly supportive supplier environment. Embedded human resources, although not associated with trust, are associated with productivity.
According to Dr Schneller’s presentation, suppliers should make a number of considerations, including:
• Considering the impact on productivity when customers request changes to the pricing model and services
• Identifying opportunities to reduce expenses associated with the development of new products
• Providing internal and direct support to help manage the risks associated with changes in customer interface
• Assuring an efficient flow of product-related information for those who embrace a direct and internal service model
• Finding ways to lower selling costs.
Dr Schneller told First Report Managed Care that provider-supplier relationships characterized by carefully crafted contractual specifications will result in greater acceptance of embedded human resources by suppliers to improve services, an enhanced willingness to share information, and reductions in concern about the differences in supplier and provider business models and levels of profitability.
“While trust may be the ‘secret sauce,’” Dr Schneller continued, “contracts are a key to managing across the continuum of care.”—M. Mihalovic
