Balancing Trust and Control in Alliance Governance

By |2018-12-04T02:03:35+00:00December 4, 2018|

Governance isn’t exactly the most exciting topic. Yet, it is essential in any partnership. At its heart, governance is a system for managing performance. Most of the partner managers I’ve known that positioned themselves as relationship managers are long gone from the profession, laid off in the one of the last economic downturns. Those who managed – and delivered – performance can prove their worth. They can demonstrate their contribution in creating innovation pipelines and consequently, new revenue pipelines.

So what does governance look like?

I am reminded of a long time IBM alliance manager, who remarked after one of my alliance mastery workshops “When I came into your class, I didn’t know what governance was. Turns out I’ve been doing it for 20 years!” The formal definition is: governance is the system of checks, balances, oversight, roles and responsibilities, and business processes, including decision making and decision escalation processes used to manage alliance performance and organizational accountability.

The type and complexity of the alliance governance structure and the specific processes are dependent upon the level of perceived risk in achieving the targeted performance outcomes. Risk may managed by control processes, but the level of perceived risk is dependent on trust. Trust in your partner’s ability to meet their commitments and trust in their ethos to behave honorably. It can be a tricky business to find the right balance between trust and control.

Trust is intuitive; you know it when you have it. My experience is that it’s kind of like air. When it’s there you don’t think of it much. When it’s not, well, that is very distressing.

Defining Trust

People define trust in many ways. With respect to governance and control and in managing risk in a partnership, it is useful to think of trust in two flavors: Trust in Performance and Trust in Relationship.

Trust in Performance relates to how capable and predictable your partner is in delivering on their commitments. People sometimes make commitments with the very best of intentions, and with no deliberate deception, they miss the mark due to factors which may or may not be within their direct control. Missing commitments can be due to many things: poor internal governance i.e. poor management of timelines, budget, or resources. It can be a result of a lack of skills or capacity; For example, if you are seeking a global customer support partner and your partner may try to do their best but can’t support you in certain countries. A lot of this kind of risk is ideally surfaced during partner selection and due diligence and can be built into the governance from the beginning. Some partner managers call this de-risking the collaboration.

Trust in Relationship is pretty straight forward but not always easy to determine beforehand. Do you trust those guys to be fair, honest, and to look out for your interests as well as their own. Are they a ‘good’ partner? This can be seen by their behaviors, but you often know in your gut if your partner is trustworthy.

If trust is not present in either of these dimensions, there will be an inclination to tighten control, to set up more governance reviews, to put more penalties or exit triggers in the contract for non-performance or breach of faith. You will be checking and double checking all the KPIs and metrics to manage your risk. This of course adds a big burden to the governance process.

Trust is Money

We don’t normally assign a dollar value to trust, but there is indeed a cost. When there is distrust between partners, cost is manifested in the extra time and attention required to manage the relationship and to manage performance. You’ve probably all experienced low trust environments. There is so much bureaucracy and oversight redundancy that everything slows down and it seems impossible to get things done. This can have an adverse effect on the relationship, stirring up politics, exacerbating negative attitudes, demoralizing the team. So, the two flavors of trust are not totally unrelated; one can play on the other. It is not surprising that high trust environments are so much more productive than low trust ones.

I recall one situation where trust was problematic between two partners. One partner was large a pharmaceutical working with a smaller one. The alliance manager from the larger company commented that their partner were good guys but they surprise us from time to time and it creates problems. ‘Surprise you? How?” “Well they will get right up to a delivery deadline and tell us ‘Oops, we aren’t going to make it.’ We recognize these things can happen, but if they were more transparent and gave us earlier warning, there are things we could do to bring things back on schedule, like take on some of the work.” This is a case where if the partner had been a bit more open and trusting, they may have averted a missed deadline by working together on the problem.

Check the Mirror

While we have been talking about if your partner is trustworthy, it is equally important to look in the mirror. Are you behaving in a trustworthy manner? Are you meeting your performance commitments? Are you being open, transparent? Have you earned trust?