An alliance can be broken or underperforming, yet too many companies fail to see that their partnerships are just drifting or not producing. Recognizing that an alliance is broken and taking steps to mend the various relationships are vital if a company is to realize its expected ROI. This author has sound advice for maximizing the return from the substantial investment in an alliance.
A great deal of time and energy are invested in understanding why alliances fail, but it is the alliances that drift that are an executive’s real nightmare. Like characters in a horror movie, broken alliances linger like zombies-sometimes for years-generating little or no revenue, draining capital and productivity, damaging morale, increasing employee attrition, and unnecessarily consuming the precious focus and energy of senior management. A survey conducted in 2001 by the consulting firm Accenture, found that 49 percent of alliances drift into a “suspended state of underperformance,” while 20 percent are successful and 30 percent fail outright.
An organization with the capability to identify broken alliances, and then repair or terminate them effectively and amicably, can improve its ROI and develop a reputation for being a “partner of choice,” thereby improving the likelihood other organizations will seek it out when considering new joint ventures.
This article describes a methodology, Relationship Relaunch, which has enabled a number of organizations to achieve these goals. While it cannot guarantee the success of any individual alliance, a Relationship Relaunch, when applied systematically, can help an organization significantly improve its success rate.
Understanding and identifying broken alliances
There are as many reasons why alliances underperform or break down as there are alliances. However, our own experience from working with clients consistently indicates two underlying causes: (1) The business model on which the alliance is based is inappropriate, or, more commonly, (2) The relationship between the alliance partners has broken down, compromising levels of trust, the work environment, communication and, ultimately, the ability of the partners to work together toward a common goal.
Our firm recently completed a three-year cross-industry study of alliance relationship management that found that poor business strategy and poor or damaged working relationships between partners account for 94 percent of all broken and failed alliances. On their own, poor or damaged working relationships account for 52 per cent of all broken alliances (see Figure 1).
There are several symptoms that indicate an alliance is broken. Interpersonal problems, an “us” and “them” mentality, the failure of team members to communicate critical information, high attrition rates and, most importantly, failure to reach target milestones and timelines are all signals of relationship breakdown. Unfortunately, these symptoms often go unrecognized, and most organizations only become aware they have a broken alliance once one of the two underlying causes becomes so obvious it can no longer be ignored: Enormous sums have been invested without a sufficient return or the relationship has become so acrimonious that the parties can no longer communicate. By this point, however, the alliance may already have been broken for months, if not longer.
Why do so many organizations fail to recognize –at least formally-they have a broken relationship on their hands? This happens because, in many corporate cultures, openly discussing relationship breakdowns is perceived as political or unprofessional, and so individuals are reluctant to communicate their experiences to their manager. Also, managers tend to be ill-prepared to address relationship problems, preferring to focus on business processes or individual metrics when results are unsatisfactory. However, a manager who pays heed to whether individuals in the alliance trust each other, work together and communicate effectively will not only be able to recognize the key warning signs, but will be in a better position to flag relationship issues and address them before they affect the ability of the partners to work together.
Setting the foundation for a renewed alliance relationship
Once an alliance is identified as broken, there are a number of critical tasks to perform and decisions to be made. Partners need to diagnose why the alliance has broken down, explore and understand the existing obstacles, conflicts or tensions, and make specific plans to overcome these problems. In essence, they must equip themselves to manage the long-term relationship. A Relationship Re-launch provides a framework for accomplishing this task. While not a panacea, it is an important first step. It can improve the working relationship, help partners build mechanisms for managing the relationship, and put in place the necessary skills for sustaining a strong relationship over the lifetime of the partnership.
Companies like those in Figure 2 (Figure 2 is included as the last page of this article) understand the benefits of the Relationship Relaunch. Prior to a Relationship Relaunch, the companies in Case A could not work together effectively. This not only reduced the profitability of the alliance but also led to significant employee attrition. The companies relaunched their relationship, and today have a healthy partnership that adds value to both of them.
The relationship relaunch: A three-step process
As a precursor to the Relationship Relaunch, the leadership of all partnering organizations jointly announce that the alliance is not functioning effectively. The announcement explains the relaunch process and each individual’s role within it. A successful announcement creates a sense of urgency and accountability for resolving the problem while discouraging finger-pointing. The leadership may take the added measure of acknowledging some of the ways in which the organization, or they personally, have contributed to the present problem. Handled correctly, this announcement can encourage individuals to examine dysfunctional working relationships, think about how they have contributed to the problems, and begin a collaborative effort to change how the partners work together.
Step 1: Audit the relationship Diagnosing the root causes
The relaunch process begins immediately after the leaders have announced that a relationship problem exists. The partnering organizations then conduct a two-step diagnostic process to determine why the alliance broke down in the first place.
The first step is to confirm that the alliance really is failing, and establish why. Ideally, this includes surveying everyone across the alliance interface, as well as interviewing key individuals. Respondents will be asked to assess their overall working relationship with the partner organization on matters such as trust, communication and operational issues. Individuals should also be prompted to share what they perceive to be the strengths and weaknesses of their partner’s organization, and their own. Ultimately, the data gathered will enable managers to assess if there has been a breakdown in the alliance’s working relationship, and whether it is the result of conflicting corporate culture or procedures, misalignment over roles, or different interpretations of the alliance’s purpose.
The second step in the diagnostic is to assess if a business case for the alliance still exists. The process for completing this part of the diagnostic will vary for each organization, but generally, a company will need to determine if the purpose and goals of the alliance are aligned with its own needs and goals.
Terminate or Relaunch
The partnership can succeed only if both organizations are fully persuaded that the alliance is the most effective means to meet their goals. If one of the partners decides that the business case is no longer compelling, that they are unwilling to invest more resources in the alliance, or that it no longer meets certain strategic goals, then the partnering companies should begin the process of terminating the relationship. Effective termination leaves open the possibility that the organizations will work together in the future, enabling each to extract meaningful lessons about relationship management, minimize the potential effects on concurrent alliance work between the partners, and prevent damage to the partners’ reputations in the marketplace.
If the partnering organizations agree to carry on with the alliance, they continue with the Relationship Re-launch process.
Step 2: Conduct relationship planning Build joint contract and deal understanding
Differing interpretations about the content, meaning and intent of contracts and alliance agreements are at the root of many problems. Unaligned expectations can cause breakdowns in communication and lead partners to unknowingly surprise and disappoint each other. Thus, the management teams from each partnering organization must meet to jointly review the purpose and vision of the alliance agreement.
Each partner’s commitments as prescribed by the agreement should be clarified, and contractual provisions for governance, decision-making and the like should be reviewed. At the end of this discussion, the management teams should reaffirm a common understanding of the context in which they are working together, realign themselves around the purposes and structure of the relationship, and reconfirm what each partner expects from the other.
Jointly explore and address relationship problems
One of the most difficult challenges that partners face as they relaunch a relationship is moving beyond the tensions and ill feelings that have been created. Even when entirely new teams are brought in to manage an alliance, perceptions tend to linger and shape the relationship; it is easy for people to develop negative opinions about a partner based on stories that have circulated. Once these expectations, founded or unfounded, have been set up, individuals almost inevitably view their partner’s actions through a negative lens.
An effective relaunch must therefore address the source of any existing tensions, perceived or real. To accomplish this, the alliance teams should openly share and discuss their concerns about the alliance and their working relationships. This discussion will involve some risk, namely that the conversation may lead to attributions of blame and finger-pointing; however, the risks of not recognizing the obstacles and challenges that threaten the alliance are far more damaging.
Creating a list of past tensions and future potential obstacles in the relationship will enable the teams to plan for and manage them. While the tensions and obstacles will vary, we have found there are three general categories: tactical, procedural and systemic.
Tactical problems are discrete operational issues that can be addressed through specific fixes. For example, one common issue is that there are not enough people operating in the partnership to make it function effectively. Procedural problems are challenges that address differences between the partners’ standard ways of operating, and these can be addressed by developing a set of protocols, or what is sometimes called a Procedural Agreement. For example, the companies may have different methods for running meetings, a different sense of time, or different implicit or explicit ground rules about how to have difficult conversations. Finally, systemic problems relate to dynamics at a structural level, such as differences in the ways the partners resolve conflict, make decisions or manage change.
The Relationship Planning step ends once the relationship challenges and obstacles have been categorized as tactical, procedural or systemic. At this point, some partners may want to address the tactical issues, while others will want to put these in the hands of joint sub-teams to work out after the relaunch. As tactical issues are largely operational matters that generally do not directly impact the quality of the working relationship, they can be addressed at either time. Procedural and systemic challenges, however, have a more debilitating impact on the working relationship, and are better dealt with during the relaunch process.
Step 3: Design Relationship Management Infrastructure Draft a Procedural Agreement
As mentioned above, every organization has its own operating culture that dictates how employees work together. When organizations partner, the norms, procedures and assumptions that make up their operating culture will inevitably differ. These differences often create tensions in the working relationship.
For example, each company may have different operating practices around managing commitments. The first organization may have a culture that perceives saying “yes” to requests for help as a symbol of good teamwork; therefore, its people readily take on responsibility for additional work, then worry later about how it will get done. At the second organization, commitment management might look very different. There, individuals prize meeting expectations, and so are cautious about accepting commitments they are unsure they can meet. It is easy to see how such differences in commitment-management styles, which often go unnoticed, can create frustration and difficulty—one partner is perceived as irresponsible and untrustworthy, the other as unhelpful and unwilling to be a team player. In a relaunch, partners who have observed this problem can create and agree to one common set of commitment-management practices and encode them in a Procedural Agreement.
To craft a Procedural Agreement, partners should review their list of procedural challenges and, for each one, brainstorm specific behaviours or assumptions that might prevent misunderstandings, miscommunication, conflicts and other frustrations. By aligning expectations, the Procedural Agreement reduces the prospect of miscommunication and conflict, and sets up principles upon which the partners agree to base their interactions.
Design supporting methods and process
Systemic challenges, such as managing and resolving conflict, making decisions, spotting and dealing with changes that affect the partnership, and reviewing and adjusting the relationship over time require more complex planning and management. Partners should assess which systemic issues concern them the most, and agree to build a set of relationship-management methods and processes to address those challenges.
For example, partners in a technology alliance used their Relationship Relaunch to outline what later became an effective process for managing conflict. The partners wanted to minimize escalation of conflict and learn from it, so they defined a step-by-step conflict resolution process for solving problems where and when they originated. The partners in this example also provided specific criteria to identify escalating conflict, and built a database to track it. Managers reviewed the database to help diagnose underlying problems that came up again and again across the alliance interface. In this example, as in many others, work on refining and instituting effective relationship management mechanisms extended beyond the relaunch.
To a large degree, the methods and processes that each partnership requires will depend on past and predicted relationship challenges. However, almost all partners need a method for tracking an alliance’s performance and the quality of the partners’ working relationship. This process can enable managers to spot early symptoms of the two main causes for broken alliances—poor business strategy and relationship breakdowns-so they can be addressed early on. While the mechanism measures depend on the relationship goals discussed earlier in the relaunch, it is helpful to include indicators of a healthy relationship, such as degree of trust, quality and frequency of communication and ease of decision making. Measuring the quality of the working relationship and maintaining clear business milestones provide partners with information about how well they are working together and why they may be experiencing problems or conflicts. This information in turn helps partners to monitor, maintain and improve their working relationship and, as a result, increases the likelihood that the alliance will achieve its goals.
Learn relationship management skills and tools
The best-laid plans and strategies, with the best processes and methods for relationship management, will still fail to capture value unless the team has the proper skills to bring them to life. Relationship management skills enable partners to resolve conflict more effectively, solve problems together, communicate openly and make sound and efficient decisions. Key individuals from across the alliance need joint training in how to solve problems, resolve conflict effectively, conduct difficult conversations and maintain good-quality communication.
Together, partners learn about concepts like joint contribution, partisan perceptions and interest-based problem solving; and they share tools and practice specific skills that enable participants to apply the concepts. For example, they are provided with a framework for joint problem solving that leads to solutions that protect the interests of each partner; that are objectively determined; and that maximize potential value between the parties. Relaunch participants are also introduced to tools that make tough conversations easier and less damaging, and are taught skills such as how to balance advocacy with inquiry and separate impact from intent.
Numerous firms have found that these kinds of skills and tools can prevent misunderstandings from damaging relationships, and help to create new and unforeseen value from the partnership.
Plan for going forward
While every individual who touches the alliance needs to work toward its success, they may not all participate directly in the Relationship Relaunch. The last piece of the process, therefore, requires agreement on a series of future planning activities. These will include communication activities and follow-up work to finalize Procedural Agreements and methods and processes that the partners outlined during the relaunch. Thus, prior to the end of the relaunch, and while the issues are still fresh, teams take the opportunity to assign responsibility for finalizing their Procedural Agreement and refining and testing the methods and processes. To finish this work, sub-groups may need to collect feedback from individuals outside the relaunch and then reconvene.
Finally, relaunch participants must send a clear, definitive message to all of the individuals within the partner organizations who will be affected by the Relationship Relaunch. They will need to craft messages that communicate the goals of the partnership, a vision for the relationship, new relationship management methods and strategies, and individual expectations. Delivered well, these messages will help to establish a mindset that supports the “renewed” relationship. Communication should be carefully coordinated so that the messages sent into each partner company are consistent. Lastly, partners involved in a relaunch should consider how the skills developed during the relaunch can be transferred to other people working on the venture.
The benefits of holding a Relationship Relaunch are significant. By jointly diagnosing the causes of a broken alliance, conducting relationship planning, and building tools, skills, methods and processes for managing their relationship, partners can overcome past tensions and build a new, common understanding. They can do this in the context of the partnership, but separate from its day-to-day workings, bringing more focus to the alliance relationship.
It is not uncommon for individuals within partnering organizations to ask, “Do we have time to do this?”
However, without properly establishing processes for managing the working relationship, it will be difficult to achieve the desired business results. Alliances are difficult structures to manage. Successful alliances require hard work and significant investment in order to be successful.
Historically, companies have relied on the skills and personalities of a few individuals to ensure that partnering relationships succeed. This simply does not work. A strong working relationship is the responsibility the partners outlined during the relaunch. Thus, prior to the end of the relaunch, and while the issues are still fresh, teams take the opportunity to assign responsibility for finalizing their Procedural Agreement and refining and testing the methods and processes. To finish this work, sub-groups may need to collect feedback from individuals outside the relaunch and then reconvene.
Finally, organizations should try to mend their broken alliances or terminate them as quickly as possible. This way, resources that could be dedicated to successful alliances are not stuck in moribund ventures that drain the organization of resources while failing to create any value.
Several years ago a small biotechnology company joined forces with a global pharmaceutical company to co-market a blockbuster drug that cured a serious and widespread medical condition. Spurred by a competitor’s product on the heels of theirs, the companies went to work without paying particular attention to the relationship, or to how they planned to work together. A year into the collaboration, the organizations were at odds. Conflict between partners was rampant; work was not getting done; valuable employees were resigning and the partners were losing critical time to market. It was at this point that the partnership decided to “re-launch” their relationship.
In the launch, the partners shared with each other problems they believed existed in their working relationship. As they began to understand one another’s perspective of the problems, and opportunities, they decided that they would co-draft a vision for an effective working relationship. They went beyond short, topical descriptions of a quality working relationship to articulating what such a relationship would actually look like in practice. From there they began mapping a course to achieve their joint relationship vision. They put in place a number of joint protocols and processes to improve day-to-day interactions between partners.
For example, prior to their re-launch, neither partner trusted the other to take their interests into account during decision-making. In fact, the partners were unable to make decisions together without invoking the contract or using their formally assigned authorities to impose decisions on each other. During their re-launch, to break out of this dynamic, the partners developed a systematic decision-making process. For each important kind of decision, they identified exactly how other members of the collaboration and of each company’s own internal constituents would be involved. They first decided who would be consulted for their advice or relevant knowledge. They next designated people that would be informed of decisions once they were made so that no one would be surprised by a decision later. Lastly, they designated whom, depending on the kind of decision, would need to agree before a decision could be considered final. This system has helped the partners make better decisions together and has improved each company’s trust in the joint decision-making process.
In addition to this decision-making process, the partners used the launch to put in place a number of other relationship management processes, including a relationship audit process. They also developed a Procedural Agreement that spelled out how they agreed to work together going forward, regarding such issues as communication, information-sharing, and roles and responsibilities.
Each company found it is hard to go back and try to start from scratch once serious conflicts had already broken trust and partisan perceptions about “the other side” were already deeply imbedded. However, the partners managed to create a new way of looking at their relationship and overcome these challenges. It is no longer a matter of “us” vs. “them,” but one of “we”. The partners have re-built trust and have a new appreciation for each other’s strengths. Clear decision-making processes, roles and responsibilities and ways of working together more efficiently and effectively have paid off and enabled the partners to focus on the product and increasing market-share. Given the success of what they were able to achieve, these organizations are now building Relationship Launches into their company’s standard alliance and partnering methodologies.