BUILDING MUTUALITY AND TRUST IN STRATEGIC PARTNERSHIP: ... relationships are usually called partnerships, alliances, or joint ventures (Lee 2001,.
BUILDING MUTUALITY AND TRUST IN STRATEGIC PARTNERSHIP: MEANING OF EARLY STAGES IN RELATIONSHIP FORMATION – A CASE STUDY Jari Ylitalo, Eerikki Mäki, Kirsi Ziegler, Helsinki University of Technology/BIT Research Centre INTRODUCTION Collaborative relations crossing organisational boundaries are an elementary part of current business. Companies that strive for competitive advantages through collaboration create new inter- and intraorganisational structures and networks. Organisational relationships in these networks go often beyond the traditional demand-supply-chain relationships. Risks, investments and profits of joint efforts are shared among network members. Long- term business relations are built on mutual trust and win-win –situation for all the partners. Collaboration is usually expected to reduce the costs of acquiring and implementing relevant knowledge and competencies needed for efficient business processes. Collaborative relationships are usually called partnerships, alliances, or joint ventures (Lee 2001, Blomqvist 2002, Brinkerhoff 2002a, 2002b, Kelly et al. 2002, Bamford et al. 2004). However, building a successful long-term collaborative relationship between two different organisations seems to be more demanding and complicated than usually expected. According to Bamford et.al (2004) success rate for alliances was only 53%. Kelly et al. (2002) found in their study that failure rate varied from 50% to 60%. The focus might very often be in legal and financial aspects when partnership is formed. Yet, collaboration happens between people. Seeing a partnership also as a social phenomenon beside financial and legal aspects might lead to improved and more lasting results. Early stages in a partnership formation process are critical in creating the atmosphere of the relationship (Blomqvist 2002). Partnership formation is an iterative and multi-dimensional process in which economical, psychosocial and legal sub-processes are simultaneously proceeding (Dwyer et al. 1987). Shared goals and rules, communication, mutual trust and commitment, and partner compatibility are needed in successful partnership. According to Blomqvist (2002) trust is “actor’s expectation of the other party’s competence, goodwill and behaviour”. Trust has been seen as a critical factor in long-term collaborative relationships (i.e. Larson et.al 1992). Trust and commitment are closely linked to each other. They seem to have selfenforcing relationship because some trust is needed for commitment and investments to relationship, which are increased through trust (Blomqvist 2002). Collaborative partners must have some common or complimentary interests for the basis of the relationship. Ford et al. (1986) have introduced the concept mutuality to describe the importance of this common interest. They defined it as “a measure of how much a company is prepared to give up its own individual goals in order to increase positive outcomes of others, and thus increase its own ultimate well-being”. Brinkerhoff sees (2002b) mutuality as a primary dimension of a partnership. According to her the mutuality refers to horizontal orientation, coordination, accountability, and equality in decision-making. Mutuality refers also to mutual dependency between partners. Important practical and theoretical question is how mutuality and trust can be supported in a long-term collaborative relationship between two independent companies? One contradictory demand seems to be that negotiations are based on argumentation, but building shared meanings and mutual understanding requires dialogical communicating. Objectives The objective of this study is to explore the meaning of early stages of partnership formation process in terms of trust and mutuality building between collaborative partners. More specific research questions are:
1) What are the factors that build trust and mutuality in partnership formation phase? 2) How mutuality and trust building can be supported in early stages of partnership formation? The study is a part of a larger multi-case research project in which leadership, knowledge management, and social capital are explored in collaborative relations between organisations. The Case The case is a strategic partnership between TransServe, a large service company, and GlobeIT, a global IT and business consulting company. TransServe decided to make a large scale outsourcing of its IT department and form a strategic long-term partnership with an IT company capable to provide cost efficiently competencies needed. The outsourcing contract was the first of a kind for GlobeIT in the matter of scope and scale in the specific market area of TransServe. A high number of the former TransServe IT people started to work in a new joint venture, which was established as a part of the contract. By the time of the study the partnership was less than two years old. Major processes and organisational practices were established and the 18 months transition and transformation period was over. Materials and Methods The study was a qualitative, inductive case study. The data gathering started with a pre-study phase that included gaining of pre-understanding about the content of the case and planning of actual data gathering. Pre-understanding was formed through documents and half a day working seminar with key persons of the case. The data consisted of 18 thematic interviews of key managers from both companies involved in collaboration. Interviews lasted 1½ hours. The interviews dealt with partnership formation, collaborative practices and processes, common forums, conflict resolution, common rules, deal making, and developmental needs. Additional data was gathered through a qualitative survey questionnaire that was sent to 240 employees of both companies. The questions of the survey dealt with conceptions about the partnership and its successfulness, communication, knowledge sharing, conflicts and possibilities to resolve them. There were 122 respondents to the survey (the response rate was 51%). Results Preliminary findings concerning trust and mutuality building in the early stage of partnership deal with pre-set goals for the partnership, characteristics of the negotiations process, and involvement of key managers in early stage of partnership. TransServe’s strategy is to concentrate in their core business and outsource support functions. One of the first outsourced functions was IT. The goals for outsourcing were to increase efficiency and cut costs, release capital, and ensure competencies and resources in software system development and support. The partnership has a vital importance for TransServe. For GlobeIT partnership with TransServe represents their new strategic direction “in advance” and it has turned to an important international reference case for them. The partnership contract covers the whole range of IT services from hosting servers to innovating new applications for the future. Inside GlobeIT there seem to be pressures to build a real success case. From the TransServe’s point of view capital release is fully received. The reduction of IT costs is not achieved. From the GlobeIT’s point of view the main focus is still in establishing basic services. They have not fully achieved the position of a strategic partner for TransServe in IT and business development. There is a lot of “money talk” inside the partnership. It looks that there still is a gap between the views what is profitable business for GlobeIT and what are reduced IT costs for TransServe. Mutual vision concerning the partnership and its development is lacking. TransServe management had a very clear and straight forward plan for outsourcing process and partnership formation. One GlobeIT executive commented that it was really exceptional in their experience. The negotiations were also accomplished due to the date indicated in the plan. The negotiations were taken care by a small team on behalf of TransServe. Financial and legal aspects
were represented in the team. In the final stage of the negotiations more IT expertise was involved. On behalf of GlobeIT negotiators changed often during the negotiation process. Those who took operational responsibility after the negotiations were included quite late in the negotiation process. Later on lot of interpretations have needed concerning the “spirit” of the contract. It was impossible to write everything on the contract, and persons who negotiated the deal are now working elsewhere. Contractual and financial aspects were more on stage at the time of data gathering than other themes. Some interviewees doubted that potential value-added has been lost because arguing about the money. TransServe business units (BU’s) were informed about the contract not until the deal was done. Yet, business units are the major customers and finance the contract in practice. The outsourcing changed inevitably the practices how business units get IT support or how they must set up and run software development projects. The outsourcing was not seen or run as a change project. The idea was not “sold” to BU’s in advance but informed afterwards. There were a lot of dissatisfied comments from the interviewees of business units. Mostly dissatisfaction dealt with costs and experienced stiffness concerning the GlobeIT’s processes and practices. On the other hand, some improvements have also experienced. Negative tunes were, however, more on the surface. Conclusions Our preliminary findings indicate that the spirit and point of views adopted in the early stages or even before the negotiations tend to turn ruling aspects in collaborative practices later on. In the case GlobeIT’s negotiators changed many times during the process. Those who took the operational responsibility were not involved in the operation very early. Thus common culture could not start forming in the very beginning. Outsourcing inevitably changes organisational practices and boundaries. The process should be managed and led as a change process that concerns much larger number of people in both organisations than just those working in the interface of organisations. References Bamford, J., Ernst, D. & Fubini D.G. (2004) Launching a World-Class Joint Venture. Harvard Business Review, 82(2), 90-100. Blomqvist, K. (2002) Partnering in the Dynamic Environment: The Role of Trust in Asymmetric Technology. Doctoral Thesis. Lappeenranta University of Technology: Lappeenranta. Brinkerhoff J. (2002a) Government-non profit partnership: a defining framework. Public Administration & Development. Vol. 22, Iss. 1; p. 19-30. Brinkerhoff J. (2002b) Assessing and improving partnership relationships and outcomes: a proposed framework, Evaluation and Program Planning, Volume 25, Issue 3, August 2002, Pages 215231. Dwyer, F.R., Schurr, P.H. & Oh, S. (1987) Developing Buyer-Seller Relationships. Journal of marketing, Vol 51, Issue 2, April, 11-27 Ford, D., Håkansson, H & Johansson, J.(1986) How do companies Interact? Industrial Marketing and Purchasing, Vol 1, Issue 1, 26-41 Kelly, M.J., Schaan, J.-L. & Joncas, H. (2002) Managing alliance relationships: key challenges in the early stages of collaboration. R&D Mangement, 32(1), 11-22. Larson, A (1992) Network Dyads in Entrepreneurial Settings: A study of the Governance of Exchange Processes. Administrative Science quarterly, Vol 37, Issue 1, March, 76-104 Lee J.-N. (2001) The impact of knowledge sharing, organizational capability and partnership quality on IS outsourcing success. Information & Management 38, 323-335.
