Question

• Evaluate the importance of negotiating key performance indicators with alliance partners.
  • Why are KPIs crucial to the success of alliance agreements?
  • Describe how KPIs alleviate potential problems with alliance partners.
  • From your research on negotiating KPIs, what types of barriers to agreements often get in the way?
    • How can such barriers be removed or avoided?
• Analyze the effects of foundation accords, governance accords, and change accords on the success of a strategic alliance.
  • How should the organization’s overall strategy drive the accords?
  • What are the potential risks and benefits associated with each type of accord on the success strategic alliances?
  • Which type of accord do you consider most important for the long-term success of the strategic alliance? Why?

Answer 1

Evaluate the importance of negotiating key performance indicators with alliance partners.

KPIs ensures the alliance partners objectives are matched with the corporation goals. This practice helps link the partners' interest to the success of the alliance, hence, alleviate potential pitfall of conflict of interest among alliance partners due to dissatisfaction.

Why are KPIs crucial to the success of alliance agreements?

In the beginning of the collaboration, you have set some clear goals. After all, you started the collaboration to reach a goal you cannot easily reach alone. Along the road, as the partnership progresses, it is important to know how you are doing. Wind and turbulence may show themselves to a partnership in the form of setbacks and unexpected competition. Only by measuring progress and evaluating the outcome of the measurements, you will be able to adjust the course of a partnership if needed.

There are several ways to measure an alliance. I will highlight three of them:

The balanced scorecard finds its origin in the work of Robert Kaplan and David Norton, originally intended as an internal tool for strategic planning and operational performance. The balanced scorecard can also be used as an alliance dashboard.

The dashboard looks at four areas of performance:

•             Strategic: measuring the key performance indicators (KPIs) connected to the corporate objectives of both organizations.

•             Operational: providing the performance of the key processes in the alliance.

•             Financial: indicating the financial contribution of the alliance; are we still on target with our alliance from a financial perspective?

•             Relationship: measuring partner health, loyalty, and satisfaction.

A periodical health check will help to get clear insights on the status of the alliance. The health check can be done based on a set of predefined criteria, where both partners will score their view on the alliance. Criteria can include elements like the progress of the alliance, trust in the partner and responsiveness of the partner. By comparing the scores from the two partners, the areas for improvement can be easily identified.

The third way to measure alliance progress is by conducting alliance review meetings, where the partners will be evaluating the state of the alliance and where they will define the areas for improvement. An alliance review meeting is less structured than the health check and therefore contains the risk that only elements that are easy to identify will be discussed. It is good practice to have an alliance review meeting facilitated by an external independent party. An external party will be neutral to the alliance and will see issues that the involved parties might not necessarily be able to identify. The external independent party can name the elephant in the room.

From your research on negotiating KPIs, what types of barriers to agreements often get in the way?

How can such barriers be removed or avoided?

There are many reasons why negotiations may not be carried out successfully. Here, we shall examine several of the more common reasons and offer solutions, to either repudiate or overcome them.

The Hard-Nosed Negotiator

We’ve all faced them haven’t we? The person who views every negotiation as their own personal war where there can be only one winner. Some of their more charming traits include:

Unreasonable offers.

Will take negotiation concessions, but don’t give them, or do so but only with great fanfare and difficulty.

Will take information and wield it as a weapon against us, while hoarding their own information like a miser guarding their gold.

Bull-headed and unyielding.

Solution:

Probe your negotiating counterparty first to find out what kind of negotiator you’re facing.

Anticipate unreasonable offers and remember your reservation price, aspiration base, and your BATNA (best alternative)

Don’t give out information that can be used against you.

Give a little, mostly harmless information to your counterparty and see whether they reciprocate.

Offer different negotiation solutions and ask which one they prefer.

Be willing to walk away.

Lack of Trust

It happens. Both of you find yourselves sitting at the negotiation table, eyeball to eyeball, wondering just how much you can really trust the person staring back at you. You’ve heard unsettling rumors that the negotiator on the other side has a nefarious reputation, making you unsure how to proceed with this individual. The best advice is to proceed by slowly building a bridge, as the situation may yet be salvageable. We simply need to be a little more cautious.

Solutions:

You can begin by being polite and sincere.

Emphasize that any negotiated agreement hammered out at the table, will be based on the reliability of the information provided by the other side, and will be nullified otherwise.

Ask them to provide documentation to support the data they present.

Design the agreement to stipulate fulfilment of the agreed upon terms.

Use Compliance Transparency to verify the terms of the agreement are being fulfilled. This term refers to using some vehicle to monitor the terms of your agreement. For example, you might want to insist on your right to verify their books to guarantee accuracy, by using an accountant to confirm the figures they provide.

Use enforcement mechanisms, like financial penalties or a security deposit for incidents where they fail to comply with the contractual terms.

Know Enough About Them?

We cannot find it easy to relate to our counterparts when we don’t know anything about them, or their goals and objectives. The reverse is equally true. We might need each other without knowing just how much, and that’s the dilemma. However, if both parties are hesitant to show their cards and reveal their business purpose in response to negotiation questions, than how can we possibly hope to negotiate a favorable deal in the process?

This often transpires when each party fears they will put their side at risk, by opening up first.

Solution:

Nobody can move forward if someone doesn’t take the first step. So, don’t be afraid to take the first crucial step, but be wise and make it a small one by only revealing something harmless about your goals. Generally, the other side will reciprocate and the beginning of a constructive dialogue can now be initiated. By starting slowly, you will also begin to build up the trust levels as your bridge expands slowly across the chasm, from either side towards the center.

Spoilers

This often occurs in multi-party negotiations. Occasionally, there’s at least one party-pooper who’s out to sabotage the negotiations. Their motives may vary, such as wanting to maintain the status quo, or they feel threatened, see themselves as being marginalized and suffer as a result. They may oppose the deal passively by refusing to make a commitment, or actively oppose the deal simply by presenting direct opposition, or using some other form of subterfuge to sabotage the talks.

Solution:

Be prepared for these spoilers, by considering their real fears and anticipating what kind of impact an agreement would have on their objectives. In other words, identify who might have something to lose if a deal were negotiated, or if an agreement was not successful.

Counter their resistance and explain ‘why 'this change will benefit them. Illuminate their gains and explain that they may actually profit from the proposed venture.

Offer them roles so that they will be able to retain control over their business and be more proactive in the negotiation process. Assure them that they will be active and productive members in a partnership.

If all else fails, it might best to form a coalition with the other parties, to overwhelm and counter the spoilers.

Culture and Gender Barriers

Sometimes companies, people, and cultures simply operate differently. One company might be conservative and staid in its approach, while another might be more entrepreneurial and dynamic. We might encounter obstacles in negotiating with a person of the opposite gender, or stumble upon culture barriers because of our different perspectives. As a result, we might blame our difficulties solely on these differences as the basis for the obstacles that block our path to a successful agreement.

It is vital we do not make assumptions in these situations. The solution may lay in stopping ourselves from jumping to a conclusion, and by analyzing the problem thoroughly. We must step outside of any preconceptions or biases that blur our vision. We must view the problem logically to understand what issues are acting as hindrances, or whether there is a pattern that can illuminate our lack of understanding. Go back to the basics. Examine the issues and their positions by learning the motivating reasons that lay behind objections, either theirs or yours. Then, find ways to solve these concerns and revamp the solutions. This process will at least initiate a more positive and productive conversations.