The alliance had been underway for 1 year, so opinions had solidified regarding the relationship. In the third phase of the study, we conducted interviews with the same forty-two managers to (1) isolate the specific beliefs or “themes” that shape their feelings of trust, commitment, and compatibility; and (2) capture any differences in perspective that may have divided the alliance counterparts. In each interview, we queried the executive about the factors that built and/or eroded trust, commitment, and compatibility. Working independently, two judges coded the content of the interviews, and ten major themes emerged from the data (see Figure 2).19 Alpha and Omega managers held opposing views of the salient dimensions of the alliance relationship (see Figure 3).

Contrasting Views

Overall, Alpha managers held a constructive view of the alliance, whereas Omega managers were considerably more negative, and many of their negative comments were infused with bitterness and emotion. While seldom praising their partner for alliance successes, Omega shamelessly blamed Alpha for many of the alliance’s shortcomings. Attributions of self-blame were rare on both sides; Alpha also laid more blame than praise on its partner. However, perhaps because the alliance was not as strategic to their organization, Alpha managers were much less likely to assign blame for missteps in the alliance.

For both alliance partners, lack of trust tarnished the alliance relationship the most. As compared to commitment and compatibility, trust generated the most lengthy and lively discussions, indicating its central place in the minds and hearts of managers. Negative thoughts about establishing trust outnumbered positive ones, accounting for 54 percent of all negative thoughts about the alliance and only 29 percent of the positive responses. In contrast, positive sentiments for commitment and compatibility outnumbered negative ones across both firms. However, a more fine-grained analysis of each firm’s position on the specific alliance themes highlights Omega’s deep discontent about certain aspects of commitment and compatibility.

Trust

Managers’ discussion of trust centered on three themes: communication, competition, and the integrity of team members (see Figure 2). For both partners, integrity of alliance team members (e.g., honesty, opportunistic behavior, underlying motives) represented a dominant concern of managers and assumed the largest role in destroying trust. Fear of “hidden agendas” and ulterior motives preoccupied managers on both sides. Alpha and Omega accused each other of opportunism: their needs were routinely superseded by the self-interest of their counterpart. While both firms felt that trust had been damaged, the source of this deep-seated disdain differed. Omega’s fingerpointing centered specifically on Alpha’s sudden withdrawal of the incentive program to support the cobranded card and, more generally, on Alpha’s failure to give the cobranded card more prominent attention in advertising campaigns. Meanwhile, Alpha blamed Omega for “not following through on prom ises.” Alpha was also irritated by Omega’s intelligence-gathering tactics, which often included “fishing for information” from multiple contacts within Alpha (because Alpha’s alliance structure allowed Omega access to many Alpha team members).

Managers also identified communication frequency and openness as important drivers of trust. While Alpha participants were generally constructive about the nature and level of communication among alliance members, Omega was disappointed (see Figure 3). In fact, Omega frequently blamed Alpha for not communicating problems and, in general, for being too cautious and careful on all alliance matters. Lacking insight and confidence on several occasions, it appeared that Alpha’s inexperienced alliance team withheld even nonproprietary information from higher level counterparts. Alpha’s decentralized alliance structure compounded the problem by potentially involving each junior-level manager in the Alpha-Omega communication flows.

Finally, Alpha’s and Omega’s competitive positions in the financial services industry clearly provided an uncomfortable backdrop for launching a cobranded product in the same industry. Alpha worried that Omega would leak proprietary information to Alpha’s fiercest competitors, with whom Omega maintained similar alliance relationships. Likewise, Omega managers feared that Alpha might exploit Omega’s competencies to leverage Alpha’s own position in the financial services market. In addition to these obvious concerns, the competitive relationship also had far-reaching effects on the social ties among alliance participants. The alliance was embedded in a contentious competitive environment, so perceptions of hidden agendas, deceit, opportunistic behavior, and carefully measured communication heightened the tension.

Commitment

The alliance managers’ view of commitment comprises three themes: senior management involvement, dedication of alliance team members to shared goals, and alliance outcomes (e.g., current results and future expansion plans). For both Alpha and Omega, actions of senior leadership — including willingness to invest resources, personnel assignments, and direct hands-on involvement — shaped perceptions of commitment to the alliance (see Figure 2). While Alpha managers were satisfied with the level of senior commitment on both sides of the alliance, Omega’s team was disheartened by the seeming lack of commitment from Alpha’s senior leadership (see Figure 3). They blamed their partner for “not committing enough staff,” for taking too long to replace key players in the alliance, and for avoiding direct involvement in the relationship. According to Omega, the excessive turnover on Alpha’s team conveyed signals from the leadership that the alliance was “unimportant.” In contrast, Omega viewed its senior managers as supportive and involved, praising senior executives for their willingness to commit resources wherever necessary to ensure the alliance’s success. These sentiments revealed an imbalance in the degree of importance that the partners assigned to the alliance.

The alliance counterparts were similarly divided in their view of team dedication and its impact on commitment (see Figure 3). Both alliance partners viewed dedication of team members to advancing the alliance as a crucial component of commitment. However, while Alpha was satisfied, Omega was sorely disappointed with the behavior of Alpha’s alliance team. Most notably, they were outraged by Alpha’s failure to implement the aggressive marketing plan for the cobranded product. Across the board, Omega managers blamed their Alpha counterparts for “dragging their feet on making product enhancements,” failing to offer promised customer incentives, and for “providing only the ‘bare bones.’ ” Omega managers theorized that Alpha was “holding back” to enhance the value of its financial services product.

Despite the contentious debate surrounding senior management involvement and team dedication, both partners were generally positive on their views of alliance performance. They agreed that the alliance was a success and that success builds commitment.

Compatibility

The alliance participants focused their discussion of compatibility on four dimensions: firm size and status, goals and values, policies and procedures, and interpersonal relationships (see Figure 2). On the surface, the partners appeared to be compatible. Although Alpha was somewhat larger than Omega, employees from both shared the same frustrations and experiences that accompanied life in large and successful firms. Across both firms, managers agreed that the goals and values were aligned and that the alliance “made sense.” Compatible goals, and even similarities in size and stature, provide the necessary cornerstones for a successful alliance. Attention directed at the inner workings of the alliance, however, revealed some bothersome incompatibilities (see Figure 3). While both firms stumbled over the policies and procedures of their counterpart, Omega found Alpha’s bureaucratic structure to be particularly distasteful. They blamed the lack of decision-making authority by Alpha’s junior-level managers for slowing alliance progress. On the other hand, Alpha blamed Omega’s aggressive and derogatory demeanor for dampening the interpersonal relationships among team members, resenting “being treated like a vendor.”

Implications for Alliance Management

The Alpha-Omega case demonstrates that in a strategic alliance, interpersonal relationships matter: companies must forge strong interpersonal ties to unite participants in their organizations, and they must continue boundary-spanning activities at multiple managerial levels as the relationship evolves. “Broad synergies born on paper do not develop in practice until many people in both organizations know one another personally and become willing to exchange technology, refer clients, or participate in joint teams.”20 Superimposed over the formal infrastructure of an alliance, a web of interpersonal connections expedites communication, conflict resolution, and learning. Interactions that the parties judged to be efficient and equitable strengthen the bonds among managers and help to increase trust between the firms. Of course, if trust in the relationship erodes, interpersonal bonds become strained, and formal processes rule. Our study suggests several implications for initiating and managing strategic alliances.

Laying the Foundation

Alliance negotiations set the tone for the relationship. Smooth alliance negotiations depend on finding the proper balance between the formal, legal procedures that establish detailed contractual safeguards for the parties and the informal, interpersonal processes crucial to successfully execute an alliance strategy. Frequently, alliance negotiations represent the first meeting of key personnel from the partnering organizations. These initial exchanges form the foundation for the relationship. For the Alpha-Omega alliance, several managers indicated that the difficult and protracted negotiations created hostilities between company representatives that persisted more than 2 years later! One key Alpha manager wondered, “How do you go from being a negotiator having no trust, commitment, or compatibility to being a partner who needs all of those things?”

If negotiations are difficult, alliance architects may be tempted to consider the appointment of a new set of managers — free of past conflicts — to execute the alliance. However, this may be a risky course. By replacing those managers who have the greatest personal stake in the alliance and the best understanding of the partnering firm’s culture and key personnel, a valuable bank of knowledge is lost. Moreover, the momentum and enthusiasm for the partnership may suffer. Some Alpha managers voiced this concern when the firm reassigned several colleagues who were central to the initial negotiations to new projects after signing the cooperative agreement.

Developing Interpersonal Ties

Legal documents that establish an alliance and specify the boundaries in elaborate detail are never complete and exhaustive. Countless ambiguities become evident as middle managers begin to flesh out the specific elements of the alliance plan. To resolve these issues and move the alliance forward, personal relationships must develop and supplement formal role relationships. Importantly, these ties provide an alternative route for resolving conflicts and form the basis of an informal understanding that clarifies the commitments made by the parties.

Alliance negotiations should be structured to promote development of interpersonal ties. Experts suggest that more effective transactions are likely to evolve when managers, rather than lawyers, develop and control the negotiation strategy.21 Likewise “negotiations appear to go more smoothly when parties from different organizations interact with their role counterparts (e.g., managers with managers or lawyers with lawyers).”22 Interactions between lawyers are largely based on institutionalized professional norms, center on a specific activity, and take place over a relatively short period of time. Whereas the work of the lawyers culminates in a signed agreement, manager-to-manager relationships formed during negotiations provide the social structure to realize alliance goals.

(Reprint #:4124)

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