Forming the Alliance Team

Firms must carefully choose team members who will match their counterparts in the partnering organization in organizational rank and job experience. Omega’s alliance team, comprised of more senior managers, complained that Alpha lower-level managers lacked the decision-making authority to take prompt action. They also suggested that appointing these less experienced managers to the team initially signaled that Alpha was less committed to the relationship.

To build social ties among alliance team members, the firms hired a relationship consultant to conduct team-building sessions, field trips, and an Outward Bound experience. Building the social fabric of an alliance is essential, because the early communications are intense and the issues are confusing. However, the results of formal team-building exercises will “wear off” if the participants fail to cultivate relationships and strengthen interpersonal ties. As the firms launched the alliance strategy, both formal and informal meetings became less and less frequent. Moreover, critical interpersonal links between the firms were broken as the participants changed over time, particularly on the Alpha side. Turnover levied a heavy toll on the alliance because it involved two key Alpha boundary-spanning managers who also had strong interpersonal ties with Omega personnel. A decision to reassign personnel that makes sense in the confines of an organization can inflict severe penalties and trigger a major setback to an alliance.

Top Management’s Role

Beyond establishing joint goals and determining how the alliance fits each firm’s total strategy, senior executives define the meaning of the relationship and signal its importance to personnel in the respective firms. Top management’s involvement in a strategic alliance encompasses much more than merely appointing an alliance manager or project leader. For an alliance-based strategy to succeed, an ongoing level of backing from top management is required.

Executive leadership also assumes a critical role in communicating the strategic role of the alliance and in creating an identity for the alliance within the organization. A senior executive’s personal involvement galvanizes support for an alliance throughout the organization. Moreover, direct ties at the top-management level across partnering firms spawn organizational commitment and more active involvement between managers at multiple levels of the hierarchy.

If visible participation by senior executives is lacking, the members of the alliance team may question the importance of the initiative to their firm and the value of team membership to their careers. In the Alpha-Omega alliance, the participation of senior executives was unbalanced. Omega assigned a greater strategic importance to the alliance, and toptier executives were more centrally involved. Preoccupied with other strategic priorities, Alpha’s senior managers were generally unaware of the interfirm trust problems that were hampering the alliance. In addition, alliance personnel at Alpha eagerly sought reassignment to other positions when opportunities arose; this high turnover slowed decision-making, hampered alliance-strategy execution, and provided a constant source of tension.

Cultivating Relationships

To achieve alliance goals requires a well-integrated communication and work-flow network among managers within and across firms. Communication and proactive information exchange can be important in building trust in cooperative relationships.23 Our study suggests that a regular audit of evolving social, work, and communication ties is valuable for managers to gauge the health of an alliance and to spot problem areas. At its simplest level, each member of the alliance team can estimate the frequency and importance of alliance-related communications with colleagues — both internally and with the partnering firm. Identifying managers at critical junctures of information flows and those who span organizational boundaries provides a valuable social blueprint of the alliance. Further clarity can be achieved in the audit by identifying close cross-firm relationships.

In any alliance, communication and information flows are crucial in resolving disagreements, speeding decision making, and achieving a shared understanding of alliance goals. When reviewing an alliance network, first focus attention on relationship patterns at multiple levels. Examine connections among operating personnel who require timely access to information and resources and between the project leaders who establish the climate for the alliance (as well as craft the strategy and manage the execution). Assess connections among senior managers who signal the relationship’s importance in their respective organizations, lend critical support at key points, and are central to discussions of new opportunities for successful collaboration.

Next, consider potential trouble spots in internal as well as external communication flows. In our study, the Omega alliance team used a weekly telephone conference to coordinate plans, deal with pressing issues, and keep members informed. As a rule, managers are adept at constructing their own personal networks and in recognizing how to improve the structure of that network to be more efficient and effective.

Combining these individual networks to form a broader picture of social relations provides a unique perspective of the relationship. The relationship audit is a tool for identifying loose connections, key personnel who are not part of the central flow, and relationship ties that are a major asset — as well as those that require special attention. As the alliance relationship matures, as the strategy changes, or as key personnel move on to other assignments, a periodic social network audit may reveal the need to restore balance in the relationship in order to achieve mutual goals.

Managing the Information Flow

A firm enters into an alliance to combine its distinctive competencies with those of a partner to create a competitive position that neither could accomplish alone. For success, each must share information and each must learn from the other. However, since alliances often bring together partners who are actual or potential rivals, alliance managers carefully manage the outflow of information and protect the distinctive skills and knowledge that define their firm’s competitive standing. Experts suggest that alliance managers “draw the line between an active flow of information that ensures the vitality of the alliance, and an unregulated, unmonitored, and unbridled exchange of information that can jeopardize the competitiveness of partners.”24

In our study, Omega used a centralized approach, channeling communication largely through a designated manager. By contrast, Alpha utilized a decentralized approach; alliance team members fielded frequent queries from Omega. Often this decentralized approach slowed the information flow because many team members lacked the experience and authority to discern sharable information and thus required approval from higher-level managers. To Omega, this signaled a lack of openness and responsiveness from its partner, so Omega managers queried other Alpha team members to obtain the required information. Alpha viewed this searching for information across team members with suspicion.

In developing an information management policy, alliance team members should openly discuss and agree upon the level of confidentiality for different categories of information. Ongoing attention to information management issues is required as an alliance grows more complex or as new people join. When defining information boundaries, however, key alliance personnel must have the authority and autonomy to expedite communication and work flows between the firms. An overly restrictive information policy will damage trust, hamper learning, and impede the development of interpersonal relationships across organizations.

Many alliances that appear to have the right strategic ingredients fail because they lack the social ingredients that define collaborative success. The Alpha-Omega case demonstrates that cultivating strong interpersonal ties unites managers in the partnering organizations, and continuing boundary-spanning activities at multiple managerial levels helps the relationship develop. A web of interpersonal connections provides the information-flow circuits, enhanced learning, and formation of strategies. Frequent interactions and the timely exchange of information across organizations resolve conflict, build trust, speed decision making, and uncover new possibilities for the partnership. Our study suggests that a regular audit of communication patterns and social ties is a valuable tool to create a social blueprint of a relationship and isolate the interpersonal connections that make an alliance work.

(Reprint #:4124)

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