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Take the guesswork out of business relationships

Take the guesswork out of business relationships

Research from Amsterdam offers a framework to navigate adversity in strategic alliances

We all understand the advantages partnering can bring to business. But, as any CIO who has had to negotiate a partnership-gone-bad knows, adversity is not often a good bedfellow when it comes to keeping partners — and your CEO — happy.

“Although, strategic alliances have established themselves as cornerstones for the competitive strategies of many firms, they tend to exhibit a mix of promise and peril,” visiting professor at Melbourne Business School and assistant professor in management and organisation at VU University in Amsterdam, Brian Tjemkes, said.

Tjemkes advises managers to be responsive to the threat of adverse situations, such as a lack of economic performance and trust, to avoid the premature termination of their partnerships. He and his research team have created a response strategy framework that shows what triggers each type of possible response to help executives better manage business relationships.

Four factors influence how a manager responds to an adverse situation, according to Tjemkes:

  1. The economic satisfaction with the alliance
  2. The social-interaction satisfaction with his alliance partners
  3. The level of alliance-specific costs
  4. Whether there are alternatives that could replace the current alliance.

While economically satisfied managers are likely to be patient or neglect any adverse situations which may arise other issues can cause them to rock the boat by acting opportunistically or by finding new ways to solve the problem.

Social dissatisfaction, most often shown in a lack of trust and commitment, triggers more passive responses, such as waiting patiently for the issue to resolve or neglecting the relationship and ceasing to invest in it.

If the quality of the relationship is good, managers are more willing to wait to let adversity to resolve itself, Tjemkes said.

“We also found the lack of alternatives or the presence of alliance specific investments that can not be easily deployed in other relationships, for example a proprietary IT system, hold exiting a relationship at bay, so managers are more likely to be constructive,” he said.

“Similar results were found for a lack of alternatives. For example, if you are locked into a relationship, you are more willing to work on it. If you have alternatives you will tend to look elsewhere.”

Consider personalities

Responses to adversity within a business relationship are also influenced by the personalities involved. Risk averse people are likely to increase their commitment to the partner, or to be patient. More risk prone people are more likely to threaten to exit the partnership, be opportunistic and aggressively voice their opinions.

A third factor to influence a manager’s response is the particular industry environment. Tjemkes found opposing effects given different external conditions.

“Firms with high technological turbulence and rapid developments in technology, such as the cellular phone industry, are more likely to use constructive strategies in their relationships, where they work together with their partner to deal with technological change,” he said.

“Whereas competitive intensity, where firms heavily compete with each other, breeds uncertainty and partners are less inclined to work together.”

Professor Tjemkes recommends managers recognise the different types of responses, which are characterised by a different degree of activeness, passiveness, destructiveness and constructiveness.

“Personality matters,” he said. “Perhaps you need to hire alliance managers who are risk-prone because your alliance has outlived its usefulness.”

He is quick to point out, however, that this is just a piece of the puzzle, and that companies must invest in developing high-quality relationships.

Bring your work home

Although useful in business, the framework can also be used in other contexts, such as romantic relationships or supervisory relationships.

“I tell my students that if they have a personal conflict in their relationship with their partner, use the framework,” he says. “It works. Make specialised investments and your partner will not leave you.”

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Tags Melbourne Business SchoolIT LeadershipbusinessstrategyPartnerships

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