Industrial Marketing Management Vol...ess to business professional se ...

Industrial Marketing Management 36 (2007) 709 – 718

Relationships in the purchasing of business to business professional services: The role of personal relationships Paul C.S. Lian a,⁎, Angus W. Laing b,1 a

Exeter Occupational Health Service, Royal Devon and Exeter NHS Foundation Trust, Exeter Occupational Health Service, 79 Heavitree Road, Exeter EH1 2HZ, United Kingdom b School of Business and Management, University of Glasgow, University of Glasgow, School of Business and Management, Gilbert Scott Building, Glasgow G12 8QQ, United Kingdom Received 19 July 2003; received in revised form 26 April 2006; accepted 17 May 2006 Available online 10 July 2006

Abstract There has been a shift from transactional to relational exchange and relationship marketing both in the business to business and professional services contexts. This paper seeks to explore the manner in which personal relationships affect the process and outcomes of purchasing of professional business services. Specifically, it focuses on the role of the professional service providers as boundary spanners in the formation of personal relationships. These personal relationships constitute the underlying basis of long-term relationships between the purchasing and provider organizations in such complex service settings. The findings of this study demonstrate that the manner in which the boundary spanners cultivate relationships support the concept of relationship specific tasks. It extends this conception by use of the data to outline the chronological process over time Understanding the roles, function, and ultimately importance, of these relationships facilitates the identification and development of appropriate strategies to manage these relationships. © 2006 Elsevier Inc. All rights reserved. Keywords: Business to business; Professional services; Personal relationships

1. Introduction: relationship building as a core marketing function The move from transactional to relational exchange and relationship marketing has resulted in a shift in emphasis in both marketing theory and practice. Understanding the connected processes of marketing and purchasing has to be recast and extended to include the development and maintenance of relationships as core activity (Meldrum, 2000). Andersson and Soderlund (1988) contend that “investments in relationships and the handling of relationships have become central marketing problems”. Reflecting this refocusing, research into interorganizational purchasing has evolved from the study of individual purchasing interactions in isolation to focusing on ⁎ Corresponding author. Tel.: +44 1392 405062. E-mail addresses: [email protected] (P.C.S. Lian), [email protected] (A.W. Laing). 1 Tel.: +44 141 3308693. 0019-8501/$ - see front matter © 2006 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2006.05.004

the multiple purchasing interactions undertaken by an organization and the broader strategic implications of multi-interaction based buyer–seller relationships. It follows that the environmental and personal influences permeating the purchasing process require to be critically examined in order to understand the evolution and dynamic of such relationships (Wilson, 1999). This is because each individual purchasing and marketing interaction occurs in an atmosphere influenced by a broader set of relationships existing at both personal and organizational levels. Wilson (1999) maintains that individual decisions cannot be adequately understood unless one takes account of the ongoing relationships in which these decisions are embedded and from which they emerge. Therefore, it is more appropriate to view the purchasing process as transient formal organizational episodes within the context of an ongoing, frequently informal personal, relationships. In the specific context of services, Czepiel (1990) argues that interactions within the service encounter provide the basis for the buyer and provider to nurture accumulated operational encounters into an increasingly strategic relationship.

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The critical role of relationships has been further illustrated in studies involving professional services (Halinen Kaila, 1997; O'Malley & Harris, 1999) where the complexity of services results in a premium being laced on relationships as a means of managing the purchasing process. Acknowledging the central role of relationships in the management of the purchasing process, examining the manner in which relationships, in particular personal relationships are built and managed is invaluable in understanding the processes underpinning the purchasing professional business services. The development of organizational relationships is frequently perceived to be anchored in the personal relationships that exist between staff in the respective organizations, and in turn such personal relationships are seen to be key influences on the fort and nature of the purchasing process (Javalgi, Joseph, & Gombeski, 1995). Knowledge of the manner in which interaction between individuals in purchaser and provider organizations occurs and relationships are formed is crucial in building an understanding of the process of relationship development, and hence patterns of purchasing in business to business markets. This is particularly critical in business service markets given the complexities engendered by the intangibility of business service and the concomitant difficulties faced in evaluating the service provider performance. Understanding the personal relationships which facilitate the purchasing process is particularly critical in this context as it is the relevant service professionals who by default have responsibility for the evaluation of service provision. Of significance in this regard is that the buying group in the purchasing of professional services is typically small and comprises relevant professionals with strong extra-organizational links. This highlights a further feature of the purchasing of professional services, namely that it is not procurement professionals who are dominant in the purchasing process but rather service professionals. Research evidence suggests that that procurement professionals have markedly less involvement in the purchasing of professional business services compared to other organizational procurement settings (Fearon & Bales, 1995; West, 1997). These service providers function as boundary spanners, that is organizational members whose role requires the maintenance of both intra and inter-organizational relationships (Seabright, Levinthal, & Fichman, 1992), and in turn frequently have an extra-organizational focus. Granovetter (1985) proposes that the personal and professional contacts of boundary spanning individuals provide a network of relationships that supports and governs the success of inter-organizational relationships, a proposal supported empirically by Uzzi (1997) in research into the nature of inter-organizational relationships in the textile industry. In this regard, Halinen Kaila (1997) argues that personal relationships can be used to moderate the perceived subjective performance of providers of professional services. Ennew and Ahmed (1999) found that personal relationships can contribute to satisfaction with the service, even when technical performance may not be up to standard at all times. Similarly, Dibben and Hogg (1998) found that in the case of client consultant relationships, the consultant with a more resilient relationship as a result of his workplace or social interactions with the client is more likely to retain the consultant beyond the initial brief regardless of the consultant's

specific competence to carry out the subsequent brief. This finding is in line with Palmer, Friedland, and Singh's (1986) findings that social interaction can facilitate the building of bonds that interlock. In view of this, it is not surprising that Crosby and Stephens (1987) observe that the personal friendships and liking by the exchange parties was crucial in developing loyalty. This is consistent with Cook's (1977) claim that “firm attachments or commitments often develop between exchange partners due to the investments made and the costs involved in establishing and maintaining the relationships”. This claim is supported by Seabright et al.'s (1992) study of attachments in auditor client relationships which concludes that ties between boundary spanners play a major role in the maintenance of inter-organizational relationships by reducing the likelihood of switching. The blurring of time, place and transaction boundaries is very much a feature of relationships (Sheth & Parvatiyar, 1995). Schein (1970) and McGrath (1984) suggest that in this boundary spanning role, the relationships that develop can become socially embedded in an incremental and escalating progression of cross-organizational socialization. This can result in the emergence of an embedded market in which economic and social exchanges are intermingled and together shape the patterns of inter-organizational interaction (Czepiel, 1990; Frenzen & Davis, 1990; Grayson, 1996). 2. Aim of study In light of this boundary spanning role, the professionals responsible for providing such services are seen not only to have a technical function, that is the delivery of the service, but equally play a critical role in shaping the purchasing process and in the formation and development of long-term relationships. In other words, professional service providers have dual responsibilities, in that in addition to their technical function, they have a significant marketing function centered on the development and maintenance of inter-organizational relationships (Laing & McKee, 2000). In view of the arguments above, this paper focuses on the role of professionals involved in the purchasing process in respect of complex business services and in particular on the role personal relationships play in facilitating the purchasing process. Specifically, it looks at the manner in which they form these relationships as well as the potential consequences of their actions for the organization. The personal relationships that boundary spanners form is especially important in high contact services (Halinen Kaila, & Salmi, 2001; Lovelock, 1983; Turnbull, 1979) as the interaction that occurs during the service encounter can become the basis of organizational relationships (Berry, 1995; Czepiel, 1990). Wackman, Salmon, and Salmon (1986) found that personal relationships were the most significant predictor of client satisfaction. The paper concludes with a consideration of the way in which such personally anchored relationships can be utilized by the purchasing organization in enhancing procurement performance. 3. Research context This paper is based on research undertaken as part of a largescale study into the purchasing of occupational health services by


public and private sector organizations in the United Kingdom. The study was specifically concerned with examining the approaches adopted by such organizations to the purchasing of a highly intangible and professionally dominated business service. The purchasing of professional business services has to date attracted relatively limited academic attention in comparison to the level of research into industrial product procurement (Hart & Hogg, 1998). Yet the effective purchasing of out-sourced professional business services encompassing services from IT through corporate legal advice to occupational health is increasingly critical to the performance of modern organizations. These services are collectively characterized by a high degree of intangibility, comprise non-standardized offerings, and involve a high degree of interaction between the supplying organization and the purchaser. In this context, occupational health services can be viewed as the archetypal professional business service, possessing the same underlying service and market characteristics as many other professional business services such as accounting and legal services. Utilizing the definition of professional services proposed by Gummesson (1978), occupational health services can be seen as fulfilling all the main characteristics of a professional service. Firstly, they are provided by qualified and accredited professionals who operate in an advisory manner. Secondly, such professionals are easily identified within the organization as they perform a discrete function e.g. as an IT specialist, lawyer or physician. Thirdly, the professionals have specialist knowledge to deal with problems falling within the ambit of their responsibility. Finally, there is the presence of professional bodies and associated codes of ethics to regulate the professionals who provide the service. In addition, professional services are characterized by the existence of significant entrance barriers in the form of exams and licensing, associated with this substantial professional autonomy, and the focus of professional loyalty being towards clients and peers, as well as society more broadly, rather than the organization (Abbott, 1991). Organizationally occupational health services have conventionally subscribed to the professional norm of operating as relatively small firms owned and managed by the professionals delivering the service. However, mirroring the evolution of other professional services, occupational health is undergoing a process of organizational consolidation with the emergence of larger managerially led corporate organizations in which professional control is eroded (Vermaak & Weggerman, 1999). Before looking at their roles, it is necessary to examine this service's characteristics. This is because Shostack (1977) and Berry (1980) amongst others have maintained that the distinct characteristics of services in general and professional services in particular i.e. their heterogeneity, inseparability, perishability and intangibility affect the marketing and purchasing of services. This research was done in the context of organizational purchasing of occupational health services. Occupational health services are part of a range of health services that can be offered by employers to their employees. In the next section, an analysis of this service will demonstrate that the service characteristics of occupational health services is similar to professional services in general, making it an appropriate context for studying the process of purchasing business to business professional services.

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In placing health services in product–service continuum based on its intangibility, it is regarded as a pure service. Occupational health services are highly intangible as it emphasizes promotion of good health and prevention of ill health and injury rather than treatment. With less emphasis on treatment, the intangibility of occupational health services in comparison to other health specialities is even greater as illustrated in the tangibility continuum in Fig. 1. The intangibility of occupational health services with long service delivery periods result in difficulty in performance and outcome evaluation with outcomes not being known for a considerable length of time. Owing to the long lag between delivery and outcome, circumstances beyond the control of the provider can also affect the outcome. The inseparability of the service delivery means that the outcome cannot be entirely attributed to the provider in that the buyer may play an active part. Furthermore, with people delivering the service, each service delivery is unique, making it a heterogeneous service. Finally, it is a specialist professional service not easily evaluated by health professionals. These characteristics result in the service having strong credence qualities (Darby & Karni, 1973), in that even after the service has been rendered, the buyer finds it difficult to objectively evaluate the outcome. In support of this contention, Thakor and Kumar (2000) demonstrated a high correlation between professional services and credence qualities, with health services achieving the highest ratings. It follows that the inability to objectively evaluate occupational health services will make it a high-risk purchase for organizations, necessitating the use of risk reducing mechanisms. Since traditional risk reducing mechanisms like guarantees are less applicable in this setting, it is proposed that alternative mechanisms like relationships are used as a basis for risk reduction. Accordingly, this leads to the interaction being more relational in nature. Koelemeijer and Vriens (1998) proposed that the highly credential, process orientated nature of professional services and the associated high level of perceived risk encourage long term relationships between buyers and

Fig. 1. Product–services continuum of intangibility for occupational health services (Shostack, 1977).

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sellers…. …therefore, customers seek to reduce risk by developing stable and loyal relationships. The characteristics of occupational health services underpin the central role of relationships in the purchasing of these services. In other words, the service characteristics of occupational health services are such that it implies the process of purchasing of occupational health services will tend to be more relational in nature. Consequently, this sectoral focus is also significant in that the occupational health market in the United Kingdom has experienced a process of rapid consolidation with highly fragmented and localized professional dominated providers being replaced by large corporate providers operating at a national level. Such providers deliver both conventional occupational health services as well as providing advisory ‘safety’ services geared to the prevention of workplace illness and injuries. Hence, established relationships and patterns of purchasing within this market have experienced significant disruption and change. In other words, occupational health exists in a commercial market environment very similar to that encountered by other professional service organizations like accounting and legal firms which operate in increasingly dynamic contexts. Due to such service and market characteristics, occupational health services provide an appropriate context in which to examine the purchasing of professional business services and, in turn, the nature of buyer–seller relationships in business markets. Equally this single sector focus allows the underlying conditions and processes inherent in relationship development to be identified without the patterns of such relationship development being distorted by macro-environmental market conditions. 4. Methodology The research involved a combination of quantitative and qualitative methods. The first phase of the research involved a questionnaire survey of human resource directors of FTSE 350 companies (The FTSE is the Financial Times listing of companies quoted on the London Stock Exchange and the FTSE 350 consists of the 350 largest quoted companies measured by market capitalization) and a sample of 40 selected public sector organizations. Human resource directors were targeted as preliminary background discussions highlighted that they played a central role in the procurement of occupational health services and were best placed to provide an overview of the purchasing process within their organization. The private sector sample was based on the FTSE 350 index in order to provide appropriate breadth of sectoral coverage and because earlier research (Bunt, 1993) indicated that large listed companies (in excess of 250 staff) were the main purchasers of occupational health services. The public sector sample comprising local authorities, National Health Service (NHS) hospitals and other central government agencies was limited to 40 organizations due to greater commonality of purchasing behavior as a result of legal requirements on placed by central government on contracting within these organizations. The sample was structured to ensure balanced representation of public sector bodies as well as representative spread in terms of size and

location. The objective of this phase of the research was to ensure that the full spectrum of purchasing behaviors, from transactional to relational, was captured, thereby avoiding the emerging critique of case-based research in business marketing being unrepresentative (Pels, Coviello, & Brodie, 1999; Tanner, 1999). The design of the questionnaire was informed by extensive discussions with occupational health professionals and managers undertaking an MSc in Occupational Health course at the University of Aberdeen, and further developed following piloting with this group to ensure that the questionnaire reflected the inherent complexities of occupational health provision. In total, after one follow-up letter, completed questionnaires were returned by 110 organizations from both public and private sector samples, representing an overall response rate of 28.2%. For the private sector (FTSE 350) sample the response rate was 25.7% and for the public sector sample the rate was 50%. Such a response rate compares favorably with response rates achieved in other business surveys (Jobber & O'Reilly, 1998; Paxson, 1992). The resultant data was analyzed through SPSS with cluster analysis being utilized to facilitate the identification of distinct alternative groupings of selection-approaches employed in the purchasing of occupational health services. As a result of the cluster analysis the three selection-approach categories initially identified from the preliminary discussions, namely competitive tendering, recommendation, and quotes were replaced with seven empirically anchored selection-approach categories. The questionnaire results thus facilitated the identification and theoretical sampling of seven selection-approach based dyads for in-depth examination in the second phase of the research. The qualitative data from the second phase of the research provides the primary empirical basis for this paper. The dyads selected and their core characteristics are outlined in Table 1. The second phase of the research involved in-depth case studies within each of the seven purchasing dyads. Such casebased research facilitates exploration of the dynamics of the purchasing process and, in particular, the characteristics underpinning the development of inter-organizational relationships (Easton, 1998; Wilson & Vlosky, 1997). In light of the overarching objectives of the research the use of such case studies is critical in that, as Kvale (1996) argues, “qualitative research most often focuses on the identification of meaningful categories of organizational phenomena” (p.38). The selected case study dyads were chosen from respondents to the questionnaire survey on the basis of the identified selection approaches adopted with respect to both health and safety components of occupational healthcare identified through the cluster analysis. The case study sample consisted of six private sector organizations, representing a cross section of sectors, and a single public sector organization, giving a total of seven case study dyads. In each dyad, semi-structured interviews were conducted with the key professionals and managers involved in both the purchasing and provision of occupational health services. A total of 16 interviews were conducted across the seven dyads with two to four interviews being undertaken per dyad depending on the organization of the purchasing process and hence number of staff involved in that purchasing process. The length of the interviews was between 45 min to 2 h. The relatively low number


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Table 1 Summary of case study dyad Dyad

Selection approach

1

Open tender

2 3 4 5 6 7

% of sample

Industry

Purchaser interviewees

Provider interviewees

7.2

Local authority

HR manager

Closed tender Tender + recommendation Quotes + recommendation

13.6 18.2 21.8

Media Insurance Manufacturing

Recommendation Preferred provider Internal provider

24.5 8.2 6.4

Investment Chemicals Retail

Employee relations manager Health and safety manager CMO, HR manager, group safety advisor HR advisor CMO, training manager CMO

Business development manager, contract manager, OH nurse Senior OH advisors Medical director, OH physician, nurse OH physician General practitioner OH physician General practitioner

CMO — chief medical officer.

of individuals interviewed in each dyad reflected the limited number of staff in both buying and selling organizations involved in the purchasing process. With the exception of the public sector organization, in none of the organizations studied was specialist procurement staff involved in any aspect of the contracting process. This mirrors evidence from research examining the purchasing of complex business service such as advertising (Halinen Kaila, 1997) and corporate legal service (Hart & Hogg, 1998) which highlighted the primacy of service specialists rather than procurement specialists. In addition, relevant supporting documentation, for example procurement protocols, contracts and minutes of relevant meetings, were also gathered from both purchasers and providers to facilitate the verification of assertions made during the interviews. Such qualitative case study data, underpinned by robust quantitative data, provides a sound basis for understanding the role of personal relationships in the development of inter-organizational relationships in professional business services. 5. Research results: personal relationships and service procurement 5.1. Participation in procurement process: professionals as boundary spanners It was found that the buying groups for purchasing occupational health services are small, similar to other professional services (Czepiel, 1990; Marshall & Na, 1994). Data from the questionnaire suggest that the buying group average between two and three individuals. Those most commonly involved people are from Human Resources, followed closely by professional practitioners who were either the medical or the health and safety personnel. Therefore, the core people involved in purchasing are not purchasing professionals but human resource personnel and service providers. The dominance of Human Resources and the technical service providers in the buying group demonstrates a fundamental difference between the purchasing of professional services and the purchasing of manufactured goods. The purchasing department was acknowledged to be involved in only three organizations. Moreover, in the organization with a purchasing department involved that was interviewed, it was found that purchasing had a facilitative and administrative role. This is similar to West's (1997) study where it was found that if purchasing personnel were

involved, it was more as an administrative facilitator than as an active participant. This difference in composition and role of the people involved in buying occupational health services has important implications in the development and role of relationships. This is because it was found that the people involved in purchasing this service are also the people who manage and monitor the service. Crucially, it is these same people from the buying group who form relationships with staff from the provider organization. The key people involved in the purchasing of professional business services are the boundary spanning individuals. Both the in-house and outsourced health professionals are seen to act as boundary spanning personnel. In addition, outsourced health professionals have expanded boundary spanning roles, akin to ‘key account managers’. They are usually seen as an intermediary and the first port of call for both the buyer and provider. By combining professional and managerial roles, the professional ‘key account managers’ are closer to the clients and are able to manage and cultivate the relationships better with first hand experience and knowledge of the client. Core to their marketing and management role is the building and cultivation of relationships. The next sections expand on the role of boundary spanners and the relationships that they form and cultivate to ensure satisfaction. A simplified summary view of this process is outlined in Fig. 2. 5.2. Shaping the procurement process: boundary spanners and personal relationships Fig. 2 outlines the relationship formation process and the role of the boundary spanner. The process typically begins with an embedded boundary spanner selecting a new provider. Over time, the service providers are able to form personal relationships with the buyers of the service. Personal relationships have increased significance in this context as the buying group is small. The significance of personal relationships is recognized by the providers of the service as outlined below. Personal relationships are invaluable. I know. I have many, many myself and what each of my doctors is developing in their own right is really important. Dyad 3, medical director, tender + recommendation, insurance industry The importance of personal relationships is such that it is common even in large occupational health providers to have

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Fig. 2. The relationship building process.

medical managers retain some professional responsibilities. These managers cum professionals try to retain their own clients and accounts. Retaining this hands-on approach allows the professionals from the managerial ranks to maintain the personal relationships that they have set up. I still do 40% of my week hands on with my clients. I set up a new service on-site at GS which is very exciting. I do N. I have been doing it since 1990 so I still go there on a Tuesday. I still personally look after R and K and that sort of thing. My other doctors are forming this sort of ownership so that the person can pick up the phone and speak to the same doctor. Dyad 3, medical director, tender + recommendation, insurance industry Personal relationships can be divided into professional and social relationships. Professional personal relationships relate to work matters. Social relationships are built outside working time and work places and serve to consolidate the professional relationships as well as influence satisfaction with the service provision. As illustrated in Fig. 2, through a professional relationship, boundary spanning professionals are able to function as unofficial key account managers. This is because communication is facilitated by the informal relationship between the boundary spanner and the buyer. Communication between professionals in a boundary spanning capacity and the buying organization is typically more spontaneous and informal. Through informal

communication, the boundary spanners function as the liaison between the purchaser and the occupational health provider organization. In this liaison capacity, the boundary spanners have the ability to listen and be aware of the purchasing organization's needs and convey them to the provider organization managers to ensure that resources for these services are available. As well as being the ‘eyes and ears’ of the provider organization, the providers of the service are responsible for shaping the service delivered. In the context of occupational health services, the professional provider fits into this role as recognized by the manager in the provider organization as well as the health professional below. Because we have a nurse in situ there, she acts as a gobetween for the personnel manager and the contract manager. If there are issues then it will be brought up. Dyad 1, business development manager for service provider, open tender, local authority I am the occupational health advisor and I liaise with the HR Director (at the local authority) and the managers (in the service provider organization). Dyad 1, occupational health nurse employed by service provider, open tender, local authority By being the liaison between the buyer and seller, the boundary spanners are able to identify the needs of the buyer as well as


provide a customized service to meet the buyer's needs. In this respect, there is evidence in this context that the purchasers rely on their primary service providers to identify problem areas in the organization. They (health professionals) have been able (to provide a good service) because they are able to identify a serious problem and prevent it from getting more serious. By preventing the problem from getting more serious they have helped us out. Dyad 2, employee relations manager, closed tender, media Once these problems have been identified, if the service provider is unable to provide these services themselves, the buyers would then rely on the primary service provider to select and recruit people to provide these services. In other words, the purchasers were willing to trust their primary service providers to set up a particular service. The willingness of managers to delegate some of their purchasing responsibilities to the professionals is exemplified by the next quote. We actually, ask people who are interested and approach them and we go and interview them. Then we go back to management and say these are the people whom we have chosen and short-listed 2 options and this is the cost, what would you like to do? So we do that for say for travel services, this is the service you can have at this level, at this cost or you can have a lesser service at this cost. Then they make a decision say ‘oh yes, go ahead and set up an agreement with that company’. So a lot of the time we do a lot of finding services and (then) going to management to get their agreement. Dyad 2, OH advisor, closed tender, media The providers of occupational health services recognize the importance of customization to meet needs. Another way whereby the service providers perceive that service customization can be achieved is by providing a highly personalized service as illustrated in the two quotations below. It would seem extremely arrogant but I reckon that I've set up something that I do which nobody else in Edinburgh is doing. I have developed my own way of doing lifestyle medicals without the use of nurses and technicians. Because of the way I do it, I am the only person in Edinburgh that I am aware that does it my way. Dyad 5, GP, recommendation, investment trust Personal services are our real vision for going forward. We have just done a big research for decision makers as to what do they want. They want time with a physician, they want a personal service and they want high quality customer delivery and that is what we are concentrating on. Dyad 3, medical director, tender + recommendation, insurance industry Customization plays a key role in this context as it contributes to the stability of a relationship. The ability to customize and make relationship-specific investments is vital to the formation of a long-term relationship. Therefore, the knowledge and

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understanding that the occupational health provider has of the buyer and the ability to customize can be perceived to be of such value that it becomes a barrier to switching and facilitates the formation of a long-term orientation. In having a long-term orientation, both the buyer and seller can coordinate their activities. One example of co-ordination is by coming together to decide and pick a new/additional service provider. The next quotation outlines how a relationship is built with preferred suppliers and activities are coordinated. Well, we've had for a number of years a number of preferred suppliers, and the reason they're preferred suppliers is because we have the ability to negotiate with them in terms of what we as a company want compared to what are the standard things on offer. And we have built up a relationship with these organizations for a long time. But time and time again we, the people we use at the moment, we sit down on a regular basis, we revisit what we do, and then we adjust, amend and move forward Dyad 6, training manager, preferred provider, chemical industry This close co-ordination in turn provides the basis for an even more customized service, thus creating a self-reinforcing cycle. Hence, the service professional can strengthen and cultivate a longterm relationship by facilitating communication, and by providing a customized service through close co-ordination with the buyer. In addition to professional relationships, there were personal social relationships formed in the out of work context. The formation of more resilient relationships is as a result of social interaction in the occupational health context. In other words, the stronger relationships characteristically have a social element to them. For example, the outsourced GP for Dyad 6 knows the Dyad 6 Chief Medical Officer socially. They had been friends since they were together in medical school. The business relationship was initiated through an informal contact between the Dyad 6 Chief Medical Officer and the GP's wife. This is possibly one reason why the GP was retained even though he is not fully qualified. In this case, even when the provider's qualifications and skills were not up to the purchaser's standards, the social and personal links that initiated the relationship made dissolution difficult. I suppose the disadvantage is that you are passing the clinical and decision making responsibility to somebody else who may not carry out the work to your satisfaction. It may be that I have different standards from Dyad 6's Chief Medical Officer. I certainly am not anything like as well qualified as him in occupational health terms as I am primarily a GP. Dyad 6 GP, integrated relationships, retail 5.3. The outcome of relationships: creating satisfaction From the preceding section, the manner in which boundary spanners interact through personal relationships are discussed. Through this interaction, the boundary spanners are able to influence the purchasing process through the process of building a relationship. Similar to findings in the textile industry (Uzzi, 1997), the relationships outlined above are able to produce

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unique outcomes that are not reproducible by other means. This is because the assessment of a supplier's competence is a process frequently based on personal judgments as well as objective facts. As the evaluation of quality in this context is subjective, the health professionals can influence this subjective evaluation. The reliance on personal judgments is significant in the occupational health context due to the inability to objectively evaluate the service. The development of attachments may lead to the maintenance of an existing relationship even though it provides fewer of the needed resources or when a more attractive alternative is available. Nevertheless, in the occupational health context, there is evidence that in most cases, the lack of switching is more due to satisfaction with the positive manner in which the relationship is progressing rather than the lack of alternatives. The buyers did not perceive that there was a lack of occupational health providers. In Dyad 2, there were so many alternatives that the buying organization had to limit the number of organizations that submitted tenders. More significantly, the finding in this dyad of an ample number of providers infers that the lack of switching is more due to satisfaction as opposed to the lack of alternative providers. This is reinforced by these quotations by two buyers who have decided to retain their current providers as a result of a satisfactory service provided. We are satisfied with them and they are doing a good job. That's the reason why we have changed from a three to a five year contract period. Dyad 1, HR manager, open tender, local authority They (the providers) have provided a satisfactory service so we have elected to keep them. Dyad 2, employee relations manager, closed tender, media For the provider organization, the frontline professionals are an essential element in the service offering as they are responsible for developing and sustaining relationships with the buyers. These relationships often become long-term in nature and can become part of the differentiation of organizations which provides competitive advantage. In order to meet the needs of the providers effectively, long-term relationships are required to be able to change and adapt to customer needs. This meeting of needs creates satisfaction which strengthens the relationship. The boundary spanner who is the professional provider not only delivers the service but needs to manage the relationship as well. The provider functions not only as a part-time marketer but in a fully-fledged relationship building role side-by-side with delivering the service. In this context, it was found that the relaztionships that boundary spanners form are critical in minimizing switching. Therefore, in line with Halinen Kaila's (1997) findings in the advertising context, this implies that the personal element in this context can be so important that the relationships between people can become stronger than relationships between firms. In this case, the relationship and trust between the buyer and primary outsourced service provider can be seen as the mechanism preventing opportunism on the part of the service provider. The primary outsourced service provider is seen to act for the benefit of both parties. But this does not mean that opportunism

will or does not occur. However, the gains from a good relationship may be adequate to discourage the service provider from being opportunistic. In addition, being opportunistic would be contrary to the ethics of the health professional. 5.4. Managing the procurement process: embedding personal relationships The previous discussion underlines the importance of people, especially the boundary spanners, and the personal relationships in the purchasing process. The relationships that develop in the occupational health context can be viewed as a framework that suggests embeddedness. In examining close relationships in the context of occupational health services, embeddedness exists to such an extent that the providers are unsure of their position. The boundary spanning role of professional providers is such that their position is not clear-cut as seen in the next quotation. I would like to think I am outsourced in practical terms but they see me very much as their personal chap. It's not like we go to PPP or we go to Bupa, it is very much we go to DS who looks after us. So even though I am outsourced in employee terms, I regard myself as fairly friendly in my relationship with them. I am on the phone a lot with problems of this and that individual that it is such that when I phone up, it's very much the case of the telephonist knowing who is on the end for J or S or G and they will know me immediately. All the people who see me at Dyad 5 know exactly who DS is, I am the company doctor. Dyad 5, GP, recommendation, investment trust (DS) The embedded relationships can become so close that the status of these professional providers of the service is such that their positions between the buying and selling firms are blurred. As such, the more developed the relationship for an outsourced service, the more ambiguous becomes question of which organization the professional providers belong to. There is an element of boundary blurring for the boundary spanners. The evidence presented above in the discussion on relationships suggests that the more customization and idiosyncratic investments there are, the closer is the relationship. As it is a professional service, these investments take the form of human capital investments rather than physical capital. This reflects the importance of the role of people, especially the boundary spanners, in forming and maintaining relationships. Additionally, the higher the level of adaptation and relationship-specific investments, the more dependent the buyer and seller are on each other. The adaptation and relationshipspecific investments can occur to such a degree that some outsourced service providers can have more in common with the organization in which they provide the service than the organization that pays their salary. In view of this, some of these relationships are so close to the point that the boundary spanning individual wants to be part of the purchaser. In other words, the outsourced professionals ‘go native’ by identifying more with the purchaser than their employer. In the following quotation, the outsourced occupational health advisor describes her divided relationship with the firm in which she provides the


service. However, in the end, she professes a desire to be part of the firm that she provides the service to rather than the one that pays her salary. It is interesting because we see employee relations manager at Dyad 2 once a week and we call him our boss. The nice thing is he is our boss but since we are contracted in, we can be more impartial while at the same time allow us to approach people. It is actually quite nice contracting, we have a different relationship with our client than we would to our boss that we report to. But I do wish we were Dyad 2 (i.e. in the purchasing organization). Dyad 2, OH advisor, closed tender, media This blurring of boundaries is a natural result of the close relationship between the purchaser and the professional provider of occupational health services. However, Seabright et al. (1992) suggested that this may be at variance with normative expectations about professional detachment and avoidance of personal ties to clients. So professionals may desire to be independent as outlined in their code of ethics but in this context, in order to be able to perform their duties well, they may have to compromise. This mismatch in professional and organizational objectives may be one constraint on establishing a close relationship with the client organization. While there are constraints to establishing a closer relationship, in all dyads studied, it was consistently found that the health professional(s) were trying to form as close a relationship as these constraints would allow. There was recognition among health professionals that a close relationship to the point of being embedded in the purchasing organization was preferable in order to be seen as part of the purchasing organization. The health professionals perceived that being close to a buying organization even to the point that they became embedded in the buying organization enabled them to perform better and be aware of the changes and agendas of the buying organization. In this way, they would be better placed to meet the needs of the buyer, thus creating satisfaction and safeguarding their position within the purchasing organization. At this point, the purchasing cycle begins again with the embedded boundary spanner typically being involved in selecting new or additional service providers. 6. Conclusion: purchasing services and/or relationships By exploring the role of personal relationships, this research gives support to the premise that relationships, particularly those at the personal level are a critical element in the purchasing process. In particular, the health professionals in a boundary spanning role were able to cultivate long-term relationships between the purchasing and service provider organizations. The manner in which the boundary spanners cultivate relationships support the concept of relationship specific tasks outlined by Ritter, Wilkinson, and Johnston (2004). It extends this conception by use of the data obtained to outline the chronological process over time as illustrated in Fig. 2. The findings of this paper will be useful to managers as understanding of how personal relationships are formed, cultivated and function as well as the potential outcomes of these relationships will assist in the development of suitable strategies

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to manage these relationships. What is significant is that as this research has demonstrated the importance of personal relationships, these strategies will have to be targeted at the individual as opposed to organizational level. For example, communication skills could be enhanced. Enhanced communication will then enable the boundary spanner to identify the needs of the buyer better and subsequently provide a more customized and personalized service. Recognizing the importance of personal relationships, internal marketing programmes could include content on developing and cultivating such relationships. Staff retention programmes can similarly be instituted to ensure that the personal relationships are retained. The stability of the relationship could then be used as the platform for jointly developed and better co-ordinated services. The role of the personal relationships formed by service providers raises additional questions. One is the question of whether organizations purchasing occupational health services are buying the services or personal relationships or a mixture of both services and personal relationships. It is also not known whether and in what circumstances a strong personal relationship is beneficial to the purchaser and service provider. The health professional perceive being in close relationships as being beneficial to themselves. In this respect, they can become so close as to embed themselves in the buying organizations. However, it is unclear if the outcomes of these personal relationships resulting in longterm relationships are beneficial to the buying organizations, especially as it may allow both inertia and opportunism to occur. Both these issues need to be specifically looked into in the future. One limitation of this research is that only one dyad was interviewed for each of the purchasing mechanisms identified. More work needs to be done within each specific purchasing approach by investigating more dyads to determine if the findings in this research are consistent for each purchasing approach. Nevertheless, the findings in this research were consistent across the different purchasing approaches. This would suggest that there may be little added value in investigating more than one dyad for each purchasing approach. Furthermore, while the research context i.e. occupational health services has the properties and characteristics of professional services in general, it would be prudent to research other professional services and also services in general to determine if the results here are reproducible. Finally, the methodology employed in this research means that it was retrospectively based on the recollection and perspective of people involved in the process with its inherent biases. The next logical step in the research is by using the flowchart proposed in Fig. 2 to follow the process in real time, concentrating data collection on the boundary spanners. In reality, tracking this process in real time may be difficult as the relationship building process may take years and as it involves social elements, may involve time outside the normal working hours as well. References Abbott, A. (1991). The order of professionalisation. Work and Occupations, 8, 355−384. Andersson, P., & Soderlund, M. (1988). The network approach to marketing. Irish Marketing Review, 8, 310−323.

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