The art of cooperation

In order to achieve benefits such as cost reduction, standardization, flexibility and quality improvement, more and more companies are entering into partnerships or sourcing contracts with partners [Hughes et al 2010, p.6].

“Sourcing focuses on the acquisition of resources or services from external providers, while a partnership is a long-term and strategic alliance between companies based on common goals and close collaboration.” In this blog post, the focus is on partnerships between companies.

Such relationships are essential, in order to remain competitive in a complex world (access to new markets, promotion of innovation, risk sharing, etc.). Entering into partnerships is not new, they have been around since the beginning of economic transactions, but the complexity and also the dependencies, whether due to globalization, emerging technologies or the external partner, have increased in recent years. For example IT outsourcing: If an outsourcing provider takes over the entire IT landscape of an outsourcing recipient, supporting value-added processes are outsourced in order to achieve economies of scale and greater flexibility for the outsourcing company. Ideally, both sides benefit from the partnership, but numerous examples show the consequences of failure [Rayess 2016].  On the one hand, an important instrument for such partnerships is the fulfillment of service level agreements (SLAs). These so-called hard factors (contracts, etc.) of a partnership must be well worked out but are usually not the crux of why partnerships fail. In most cases, soft factors (culture, for example in communication etc.) are decisive for failure.

The top 5 problem factors for the failure of partnerships include [Dahm 2021, p.43 pp.]

– lack of clarity about your own role in the partnership,

– lack of understanding of dependencies

– lack of planning

– lack of trust and

– inadequate communication

This shows that partnerships need to be actively planned, managed and maintained. If you look at the process of building a partnership, it usually starts with a personal relationship and is therefore dependent on the relationship skills of individual people. However, when the process moves on to the next phase, it is no longer the individual person who has the greatest influence, but the entire relationship between two organizations. Efficient partner management and relationship management must therefore be repeatable and be able to survive changes in personnel and management.

If we take a closer look at the reasons for the failure of partnerships, the following special features should be emphasized [Dahm 2021, p.68ff]:

– one-sided benefit

– lack of staff skills (on both sides)

– not or insufficiently shared knowledge

– lack of communication between key people

– lack of commitment to the joint project

– insufficient cooperation

– too little trust and too much blame

– lack of reliability of the partners

This shows that it is often the soft factors that lead to the failure of partnerships. While an SLA is clearly defined in the contract, the soft factors usually remain undefined.

Whether in a partnership (long-term collaboration) or in a cooperation (temporary collaboration), it is always important to take a closer look at the overall context and weigh up the risks. On the one hand, attention must be paid to conflicts. Conflicts can arise in processes, structures and operations or in interpersonal issues such as culture, behavior, etc. On the other hand, it is important to keep an eye on the opportunism of the individual parties in the sense of a one-sided advantage through deliberate deception, misleading or withholding information. This can also be the case if one partner looks for alternative partners behind the back of another partner. Finally, unethical practices such as false promises, non-compliance with agreements, etc. are present as a risk in a partnership or cooperation. The elements of risks in partnerships listed here are certainly not exhaustive; operational elements such as increased coordination effort are excluded. Nevertheless, it should be emphasized that partnerships are not only characterized by contracts and the like, but rather the interpersonal factors that cause the boat to sink or the rocket to take off [Dahm 2021, p.74 ff.]. But how can partnerships become successful and what norms must be met?

According to Dahm [2021, p. 74], the following norms are relevant for partnerships:

• Communication is essential for any kind of partnership/cooperation. An open, appreciative and appropriate exchange is crucial for partners that they want to talk to each other or not.
• Solidarity, which refers to whether organizations support each other in difficult situations and whether they address conflicts through cooperative solutions or egocentric advocacy [Ivens 2002; Wünsche 2010].
• Reciprocity. This means that the partners in cooperative relationships benefit fairly from the collaboration. The conviction that you can only be successful together promotes cooperation enormously.
• Conflict management. Conflicts are inevitable in every partnership.  How do you deal with conflicts, can they be resolved internally and informally, or do you have to take legal action?
• Role integrity. Clearly defined roles and a consensus on these definitions are relevant for expectations and one’s own actions [Ivens 2002; Macneil 1980].
• Use of power. Whereby the use of power defines whether and how partners use their power potential for their interests, whereby power is used carefully in partnerships so as not to jeopardize the relationship [Ivens 2002; Wünsche 2010].
• Planning behavior and long-term orientation. The strategic planning and orientation of the cooperation partners towards long-term business relationships are important, whereby common goals and iterative planning play a decisive role [Ganesan 1994; Ivens 2002; Palay 1984; Wünsche 2010].
• Flexibility. The willingness of partner organizations to deviate from existing agreements in order to be able to react to changes in the environment or in the organization is also of decisive importance [Palay 1984].

In addition to these points, other parameters are also decisive. Framework conditions are, for example, the support from top management, the dependencies of the partners on each other, the understanding of the business, governance (contracts etc.), the quality of the relationship, the commitment of the parties, trust and satisfaction [Dahm 2021, p.75ff].

If all of these points are positive, success is ultimately still missing. Success is essential for the parties to be able to assess the value of the partnership. If the connection between partnership and success can be demonstrated, the stakeholders will be willing to provide financial and human resources to shape the relationship [Dahm 2021, p.81, cf. Grover et al. 1996; Lee and Kim 1999; Swar et al. 2012; Wünsche 2010].

Concluding thoughts

The increasing completion of sourcing contracts and partnerships between companies is a strategic response to the complexity and dynamics of today’s business world. Companies are looking for benefits such as cost reduction, standardization, flexibility and quality improvement that can be achieved through such relationships. While the benefits are obvious, the risks and challenges should not be underestimated.

Overall, the aspects considered show that successful partnerships are not only based on hard factors such as contracts, but above all on interpersonal relationships, trust and a shared understanding of the goals and needs of all parties involved. Only when these elements work together harmoniously partnerships can be successful in the long term and strengthen the competitive advantage and resilience of the companies involved.

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References

[1] Dahm, M. H. Kooperationsmanagement in der Praxis. Lösungsansätze und Beispiele erfolgreicher Kooperationsgestaltung. FOM Edition. Springer Fachmedien Wiesbaden GmbH, 2021.

[2] Hughes, J., Wadd, J., Webb, M., & Faneuil, A. (2010). Value delivered by strategic supplier relationship management in major organizations. Vantage Partners; future purchasing. Boston, Guildford. S. 6

[3] Rayess, R. (2016). 5 reasons most outsourcing projects fail. CIO. https://www.cio.com/article/3021822/5-reasons-most-outsourcing-projects-fail.html.

[4] Ivens, B. S. (2002). Beziehungsstile im Business-to-Business-Geschäft: Formen, Erfolgswirkungen und Determinanten einer Differenzierung des Beziehungsmarketing in industriellen Geschäftsbeziehungen. Nuremberg: GIM-Verlag.

[5] Macneil, I. R. (1980). The new social contract: An inquiry into modern contractual relations. New Haven: Yale University Press.

[6] Wünsche, M. (2010). Performance Contracting: Effiziente Kooperations- und Leistungsanreize in der Outsourcing-Beziehung. Berlin: dbusiness GmbH.

[7] Ganesan, S. (1994). Determinants of long-term orientation in buyer-seller relationships. Journal of Marketing, 58(2), 1-19. https://doi.org/10.1177/002224299405800201

[8] Palay, T. M. (1984). Comparative institutional economics: The governance of rail freight contracting. The Journal of Legal Studies, 13(2), 265-287. https://doi.org/10.1086/467741

[9] Grover, V., Cheon, M. J., & Teng, J. T. C. (1996). The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 12(4), 89-116. https://doi.org/10.1080/07421222.1996.11518102

[10] Lee, J.-N., & Kim, Y.-G. (1999). Effect of partnership quality on is outsourcing success: Conceptual framework and empirical validation. Journal of Management Information Systems, 15(4), 29-61. https://doi.org/10.1080/07421222.1999.11518221

[11] Swar, B., Moon, J., Oh, J., & Rhee, C. (2012). Determinants of relationship quality for IS/IT outsourcing success in public sector. Information Systems Frontiers, 14(2), 457-475. https://doi.org/10.1007/s10796-010-9292-7