Category Archives: How to Collaborate

Selecting the Right Partner for Collaboration

Motivation

Selecting the wrong partner can have dire consequences. Not only will the wrong partners erode the value we come to expect from successful collaborative ventures, but a bad experience with the wrong partners may jeopardise future attempts for collaboration as organisations may become more risk averse and less trusting.  In this blog we will explore strategies to select partners that are most likely to achieve collaborative outcomes. These strategies apply to both the buy and sell side of business.

Engagement Strategies

In the IACCM research report “Unpacking Relational Contracts”, the authors advocate the release of a request for partner rather than the traditional approach of releasing a request for quote or request for proposal.[1] This approach departs from our tradition supplier selection processes with the recognition that technical capability and price are not the only drivers for ensuring successful delivery.  The challenge for buyers then becomes “how do we evaluate supplier behaviours or likely behaviours?” From the sell side, the question becomes “how do I know my customer will engage in positive collaborative behaviours?”  The first point to recognise is that it is exceptionally difficult to evaluate parties’ behaviours in a one-off, remote, ‘paper based’ assessment.  In our blog covering commercial strategies, we recognised that early and ongoing engagement between buyers and suppliers is crucial to establish a shared vision, effectively manage all risks and opportunities, and sow the seeds of collaboration.  Early engagement also offers unique opportunities for the parties to evaluate behaviours and where appropriate, recalibrate these behaviours. 

Evaluation Methodologies

Desktop analysis of bids can reveal some insights into the capability and capacity of a prospective partner’s behaviours and the ability to collaborate.  Exploration of past performance, referee checks, and commitment to collaborative frameworks such as ISO 44001 are all useful indicators, but they are likely to be insufficient for the following reasons:

a.      Past performance may only be relevant where the tendering entity has previously worked within the buyer’s organisation.  Successful collaboration is a two-way street.

b.      Past failures could be largely attributed to adverse buyer or customer behaviours;

c.      New entrants will not have a track record (good or bad) for evaluation; and

d.       Tender responses inherently incorporate a ‘response bias’. If relationships and behaviours are included in the tender evaluation criteria, then no credible tenderer will claim that they are unable to achieve the desired collaborative outcomes.

There is also a more subjective element associated with evaluating supplier behaviours.  Some critics of alliance selection processes have labelled the selection process as a ‘beauty parade’.[2] To make evaluations more robust, a more interactive approach is needed. Not only must evaluation processes focus on measuring potential behaviours, but the process must also be transparent, fair, repeatable, reproducible, practical, and efficient.[3]

Try Before you buy?

Traditional desktop evaluation processes are unsuitable for evaluating supplier behaviours.  A more interactive approach is needed such as workshops and interviews.  Though additional resources and some probity risks may emerge with such approaches, the benefits far outweigh these costs.  Preparation is essential when conducting interviews and workshops. The expectations of all parties also need to be clearly defined.  One of the critical aspects of conducting workshops is to ensure that the actual delivery teams from both the buy and sell side are present.  That is, the actual key personnel who will perform the work will get to interact.  This will discourage suppliers ‘bidding with the A-team then substituting the B-team’. Likewise, this approach ensures the customer team is engaged prior to source selection and discourages arms-length centralised procurement control. Workshops need to explore business as usual as well as high stress scenarios. In my experience, high stress scenarios should be credible and explore how the parties will react collaboratively to achieve enterprise outcomes whilst at the same time cater for the reasonable commercial needs of each party.  Workshops should not degenerate into contract negotiations. More specifically, the workshops should not overly focus on commercial terms.  Nonetheless, Van den Berg and Kamminga[4] recognise that interactive selection process may provide significant insights into the negotiating style of each party.

 What to Measure?

A cynic is a man who knows the price of everything and the value of nothing.” – Oscar Wilde, Lady Windermere’s Fan (1892)

 A key challenge for selecting the right partner is getting the right evaluation criteria.  Great mischief can arise where parties blindly follow prior tender selection criteria for similar activities or simply tack on a relationship management piece to a traditional selection process.  A top down process is recommended with evaluation criteria tailored to ensure the selected partner is most likely to deliver value.  Planning should also anticipate the possibility that no tenderer can deliver value, and hence, the selection process may need to be abandoned.  There is a plethora of checklists, guides, and best practice available to assist in crafting evaluation criteria for collaborative contracts.[5] At a high level, we could use the four-C model[6] of

a.            Cooperative Culture

b.            Complementary skills

c.             Compatible Goals

d.            Commensurate levels of Risk

Alternately, we could use a more comprehensive evaluation process. Peter Simoons offers a helpful partner selection checklist in his book The 4-step Guide to Partner Selection Not only does this checklist include the attributes we would expect from a collaborative partner such as culture, vision and management styles, but the checklist also address the key hygiene factors we need to consider from a collaborative partner.  For example, compatibility with decision making speed is addressed with the criteria “How do you and your partner align in speed of operation and “decision-making?[7] Where the relationship demands agility and flexibility, selecting a local partner who is governed by an overseas parent who makes all financial decisions at the board level could introduce insurmountable problems to delivery.  In summary, checklist and guides should be used as aide-memoirs and should not be blindly copied without suitable tailoring.

Conclusion

Effective partner selection most focus on what is important to the relationship and how this will achieve the desired enterprise outcomes throughout the partnership.  Selecting the right partner for a collaborative venture should involve interactions and dialogue that allows both parties to observe the behaviours of each other and to also reflect upon their own behaviours. 


[1] D. Fydlinger, K. Vitasek, T. Cummins, J. Bergman – IACCM Research Report “Unpacking Relational Contracts (2016) p23.

[2] B. Lloyd-Walker & D. Walker Collaborative Project Procurement Arrangements (2015)

[3] Adapted from NSW Government ‘Tendering Guidelines’ (2011)

[4] Van den Berg, Matton and Kamminga, Peter, ‘Optimizing Contracting for Alliances in Infrastructure Projects’ (2006) 23(1) International Construction Law Review p 18.

[5] See e.g. ISO 44001 Collaborative Business Relationship Management Systems – Requirements And Framework (2017); Australian Government ‘National Alliance Contracting Guidelines – Guide to Alliance Contracting’ (2015);  T. Lendrum Building High Performance Business Relationships (2011); J.M. Geringer, Joint Venture Partner Selection: Strategies for Developed Countries (1988);   P. Simoons “The 4-step Guide to Partner Selection” (2013);  Duncan Haughey “Supplier Selection Checklist” (2014).

[6] Yannis A. Hajidimitriou, Andreas C. Georgiou “Decision Aiding  – A goal programming model for partner selection decisions in international Joint Ventures” European Journal of Operations Research 138 (2000) 650.

[7] P. Simoons “The 4-step Guide to Partner Selection” (2013) p33.

When to Use Collaborative Contracts

In this blog we will explore when we should, and should not, pursue collaborative contracts.  We must remind ourselves that collaborative contracts are not binary structures involving either zero collaboration at one of the spectrum, versus an incorporated joint venture or alliance at the other end.  Collaboration can take many forms and is a scalable concept that must be tailored to the activity at hand.

Motivation

“Virtually all of the collaborative projects out-performed most defence projects” – UK NAO Good Governance ‘Measuring Success Through Collaborative Working Relationships’ (2006).

Firstly, we only pursue collaborative relationships where the benefits outweigh the costs.  That is, we have a motive for collaboration.  Cost and benefits though need to be considered in as broad as terms as possible and not just in terms of contract price.  Collaborative benefits may include:

  • improved prospects for repeat business
  • continuous improvement and innovation opportunities
  • increased likelihood for supplier participation
  • enhanced satisfaction for all employees
  • improved flexibility
  • less time wasted on disputes and issues management

Similarly, we also need to explore the ‘hidden costs’ associated with collaboration, which may include:

  • increased time and effort in tender evaluation and tender development
  • increased efforts in relationship monitoring and cultural alignment
  • supplier lock-in
  • increased likelihood of opportunistic behaviours.[1]

In summary, we first need to craft a robust business case when considering collaborative endeavours and ensure this business case is continually evaluated.

Means

Where collaboration is able to realise superior benefits,  then we should explore whether we have the means to engage in collaborative ventures.  We should ask ourselves if we have the right culture, appetite to risk, and internal capabilities to realise collaborative benefits.  The United Kingdom National Audit Office offers the following ‘gold standard’ for enabling positive working relationships. 

UK National Audit Office Gold Standard for Sustaining the right Cultural Environment[2]

The Australian Department of Defence Capability Acquisition Sustainment Group, in their Collaborative Contracting Better Practice Guide, also provides guidance to help ‘buy-side’ organisations gain insight into their ability to pursue collaborative outcomes through the use of a contract maturity model, which asks the following questions:

  1. Suppliers favour your organisation because it “always keeps its promises”, treats suppliers fairly, promotes trust, and minimises the cost of doing business.
  2. Both parties openly discuss “interests and desired outcomes” throughout the procurement lifecycle commensurate with the strategic importance of the relationship.
  3. Each contracting party understands the other’s goals and how to help achieve and quantify them
  4. The contract is viewed as a tool to plan and track business relationships
  5. Procurement practitioners are viewed as valued facilitators and integrators of stakeholder interests

Asking yourself, ‘do I have the capacity and capability to achieve these gold standard or contract maturity model outcomes’ will help you understand whether collaboration is the right step for your organisation.  If the answer is no, then leaders can take remedial action. Future blogs in this series will explore strategies to shift organisation capabilities and culture to better enable collaborative outcomes.

Opportunity

With the means and motive for collaboration established we now explore whether the right opportunities exist for collaboration.  The opportunities for collaboration will be driven by the commercial model, geography, and market power of buyers and suppliers.  Collaboration will only work where both buyers and suppliers are committed.  Opportunities for collaboration may be limited in the following circumstances:

  • A transactional environment where buyers and suppliers operate on a ‘take it or leave it basis’.
  • Inflexible governance arrangements exist (especially in the public sector) which inhibit the full range of relational outcomes. This is especially the case where compulsory competitive tendering rules are too onerous.
  • Key leaders and managers are unavailable to support collaborative outcomes.
  • Pre-existing and inflexible contract structures prevent the full range of collaboration outcomes. An example of this would be ‘government to government’ contracts such as Foreign Military Sales.

Even where some of these adverse features exist, there still may be opportunities to engage in some level of collaboration. 

When not to use collaborative contracts

Collaborative contracts should never be used where an organisation lacks the means to effectively implement them.  This may stem from an inappropriate organisational culture or lack of commercial maturity.  If an organisation is mostly ‘transactionally’ based, where disputes and issues are normally resolved by resorting to ‘lawyers at twenty paces’, then that organisation will be unlikely to engage in effective collaborative relationships. 

As we previously discussed, we therefore need to ask ourselves some very hard questions about our internal capabilities and the means to engage in collaborative ventures.  This could involve benchmarking the commercial maturity of the organisation through tools such as the International Association of Contract and Commercial Management  (IACCM) Capability Maturity Model or undertake a collaborative contract skills assessment under Supplier Relationship Management processes.  Organisations may also rely on performance scorecards to benchmark their relationships and skills in collaboration.

There is also an overwhelming temptation to pursue collaborative contracts to mask systemic failures in an organisation. When facing failure, the allure of collaboration may be seen as a quick fix.  Simply sticking a partnering charter on an existing contract and hoping for the best will unlikely create value.  Positive relationships and collaboration are necessary but not sufficient for success. That is, organisations must still make sure they address the key hygiene factors before they attempt collaborative contracts. This includes ensuring the following are addressed:

  • A clear and shared organisational vision
  • Leadership commitment
  • robust commercial skills
  • A mature Project Management framework

The evidence is clear that collaboration can deliver fantastic benefits both between and within organisations.  We need to ensure we implement collaborative contracts for the right reasons and understand what barriers exist to successful implementation. Future blogs will explore collaborative contract case studies of where things have gone well and where things have failed.


[1] Hikan Hakansson and Ivan Snehota, ‘The burden of relationships or who’s next?’, (11th IMP Conference Proceedings, Manchester, 7-9 September 1995), 522-36.

[2] UK NAO “Driving the Successful Delivery of Major Defence Projects: Effective Project Control is a Key Factor in Successful Projects” HC 30 Session 2005-2006 p7.

Collaboration? Why it’s elementary my dear Watson!

It seems that collaboration is everywhere nowadays.  Whether it is Ed Sheeran and Justin Bieber producing a number 1 single, designer Tommy Hilfiger and Formula 1 driver Lewis Hamilton delivering exclusive clothing lines to Apple putting CarPlay into a variety of cars.  Everyone seems to be doing collaborations.  But are they all as successful?

Recently, I put on my detective cap like the famous fictional British detective Sherlock Holmes to find out whether individuals and organizations are achieving success including whether they are using updated methods to improve collaboration.

The short answer is no, unfortunately, and a change is long past due!

It seems that most practitioners are forgetting that collaboration really is ‘elementary’ but are omitting a couple of important details.  They are still focusing only on both the financial and non-financial benefits. Not much is written in detail about the best ways to collaborate to get desired results.

Isn’t that what we all want?  If we prioritize financial gains only, haven’t we blindsided ourselves?  I made a similar point in my recent article published in the International Association of Contract and Commercial Management (IACCM) Contracting Excellence Journal.

It’s discouraging that although ISO44001:2001 Collaborative Business Relationships Standard offers an extremely well structured approach for establishing and maintaining collaborative business relationships and provides high level guidance on the process, the standard still does not offer much to help readers design a collaborative contract that gets results for all parties.

My experience is that despite the best intentions of an organization and the individuals within it to collaborate, without the motive, opportunity and means to collaborate, the chance of success is unfortunately very low. This becomes clearer if you take a closer look behind three words: motive, opportunity and means.

Motive (the why)

Prior to any collaboration you need a compelling reason for why either buyer or seller needs to collaborate.  Motive reveals why by highlighting the costs and benefits both on an individual basis (e.g. financial reward such as a bonus) and group basis (e.g. reduced costs and improved profitability).

For example, buyer and seller may want to collaborate to mitigate uncertainty in the scope of the commercial arrangement, or to review constantly changing and evolving technology.  This is then reflected in the commercial terms of the contract to ensure that both buyer and seller end up with a fair distribution of risk and reward with the arrangement being perceived as neither too generous nor too punitive.  Moreover, the benefits of collaboration could be linked to personal financial rewards.

Regardless, both buyer and seller should be clear about the reason why they want to collaborate, because a good motive is the cornerstone to our overall collaborative approach.

Opportunity (the what and the when) provides opportunities for buyers and sellers to collaborate through various events, forums and activities such as formal scheduled meetings, supplier forums, innovation or hackathons, etc.

The opportunity to collaborate needs to be part of the everyday culture for both individuals and organizations, but simply having both the motive and the opportunity is not enough to deliver collaboration.  Unless collaboration meetings are formalized as part of our daily, weekly, or monthly working routines, such opportunities will be first to go when schedule and resource pressures occur — and they almost certainly will.

Means (the who and the how) provides detailed guidance on who and how to collaborate when individuals and organizations are brought together through an opportunity.

The means refers to providing the right tools, including policies, guidance and processes so that people will naturally collaborate — assuming they have been given the right motivation and opportunity.

It could be as simple as ensuring the collaboration meetings have specific terms of reference (scope and limitations of collaboration) and standardized agendas. This should ensureeveryone is clear about the roles and responsibilities of each individual and organization.  This includes whether a meeting is co-chaired, whether either buyer or seller has an ultimate decision right — and, if there are disputes, how are these resolved?

The means can be even more complicated.  Examples could be determining the financial arrangements due to changes in scope, realization of risks, or sharing of cost reductions due to the successful implementation of continuous improvement and innovations.

In my experience, especially in very procedural and hierarchical organizations, if the means are not specified, you will not get the full benefits of a collaborative approach.  I’ve summarised this in Figure 1.

collaboration-diagram-1.jpg

Figure 1 : Motive, Opportunity, and Means of Collaboration

So, where does this leave us?

Successful collaboration continues to deliver benefits for both buyer and seller alike resulting in the need for more effective and efficient collaboration in our commercial arrangements.  We need to understand the fundamentals even though various policies and practices including guidelines and standards help us with this challenge.

Accordingly, I suggest that we think carefully about the commercial arrangements, and their underlying collaborative architectures to ensure there is motive, opportunity and means to collaborate.  After all, at the end of the day, collaboration should be ‘elementary my dear Watson!