They may have different ideas and strategies on how the work should be performed. There is a fine distinction between competition and cooperation (Porter and Fuller, 1986). The companies must maintain a balance between the alliances and their own strategic position. The companies must avoid situations where one partner overshadows the other one (Dussauge and Garrette 1995).
Borys and Jemison (1989) found that four main factors affect the performance of partnerships. These four factors were the breadth of purpose, boundary determination, value creation process, and stability mechanisms. The breadth of purpose of the project in the construction industry is typically defined as the duration of the construction phase of the project. Boundary determination has more to do with how contractors interact with one another. Sometimes this is defined by a contractor, subcontractor relationship and sometimes it represents a truly collaborative effort. Sometimes boundaries are a part of the negotiation process.
The value creation process is another factor that may affect the performance of the partnership. The value creation process means taking into consideration the strengths and weakness that both entities bring to the table. This may include equipment, labor or experience in the construction industry. The fourth factor discussed by Borys and Jemison was the presence of stability mechanisms. When one considers the nature of the construction project, this is the factor that is least applicable to the topic of this research. Stability is typically not an issue in a short-term contract.
During the 1970s and 1980s the trend toward forming partnerships and alliances gained the attention of the academic community. As a result there were a large number of studies conducted during that time which sought to identify and isolate the various factors that influence joint venture performance and longevity. These studies are generally too old to be considered in for modern academic research. However, these studies form the theoretical basis for the present research study. Therefore, they cannot be ignored for the purposes of this research study. Several patterns emerged during this research, which have a significant impact on our discussion of the anatomy of a successful partnership.
One of the most important factors that have an impact on the performance of partnerships is the organizational and structural elements of the company (Rumelt 1974). Of the factors explored, the management of strategic partnerships was determined to be the single most important dimension of the outcome of the alliance. Management determines the manner in which the operational tasks are carried out. There are a number of studies that confirm this finding (Killing 1982, 1983, 1988; Doz, Hamel and Prahalad 1989; Hamel 1991; Lorange and Roos 1992). This group of researchers focused on the aerospace industry, but there findings are highly relevant in the construction trades.
These studies unanimously concluded that the partnership has a dramatic impact on how the day-to-day functions of the combined organization are carried out. This means that both firms will have to modify their work flow in order to accommodate a successful relationship. In some cases, certain tasks were carried out by one of the partners, exclusively and in other cases a task was carried out as a joint effort. This takes advantage of the strengths and weaknesses of both firms.
Four taxonomic classes were identified in the research. The first class is the consortia where various entities operate their own independent project, within the same parameters that comprise the larger picture of the project. The second class is where various tasks are distributed to the entities in the group and each performs their tasks independently. These two forms of classes are relatively unstructured. This is often the form taken on construction sites where the various contractors have been hired to do a portion of the work in which they specialize. Typically, this type of structure will not use a general contractor to oversee the projects.
The next group of alliances is the semi-structured alliance. In these partnerships some of the functions are carried out by individual firms, while others are carried out in a joint fashion. The fourth class of alliances is those in which one of the partners dominates the relationship and hence makes many of the rules. This is a common scenario in the construction industry. One partner may hire the other as a subcontractor to aid in some portion of the project with which they do not have the capabilities.
These four classes of partnerships are defined by different strategic and organizational factors (Miller, 1986). It may be noted that the managerial style does not have to stay the same through out the entirety of the project and may be changed to suit changing needs. The structure of various organizations is better suited to different tasks (Bartlett and Ghoshal 1989). Therefore, it is important to examine the underlying structure of the organizations in order to determine where they would be most useful. This too can be a factor in the formation of a partnership that can greatly enhance the outcome of the entire project.
These studies were summarized in the works by Dussauge and Garrette (1995). They form the basis of the structure and knowledge that is still used in the formation of partnerships today. We have now visited several factors that play a role in building successful partnerships. It should be apparent by now that forming successful partnerships is no easy task, but that there are several important characteristics that can be used to help increase the chances of a successful partnership.
Partnerships and Negotiations
Partnerships are forged from the negotiation process, whether they are self-forming or the result of general contractors and the competitive tendering process. Partnerships are dynamic and change throughout the duration of project, each time needing to renegotiate one or several factors that formed pat of the original partnership. At times negotiations may be hostile and result in one firm attempting to dominate the other. Studying these negotiations and the dynamics of power in the relationship is one way to help define and improve the chances of success in a partnership (Subramanian 2003).
When one hears the term "negotiation" they automatically envision a table to people sitting across from one another arguing back and forth. However, Cindy Saunders (2005) feels that negotiation should be seen as a process instead of a one time event. Saunders feels that the process should be seen as collaborative instead of combative. However, that is not to say that the two parties should take the stance of such complete cooperation that they are placed at a disadvantage. She sees the goal of the negotiation process as the need to strike a balance between competition and cooperation among the parties involved.
The goal of negotiation is mutual gain. Therefore, the attitude that treats the other party as a partner rather than an enemy is the most likely scenario that will lead to a successful negotiation in which both parties come away feeling as if they have gained something. Saunders feels that unsuccessful negotiation strategies are the number one reason why 70% of all business alliances fail. Saunders also highlights the importance that the people that negotiate the terms are the same people that will be managing it throughout the project duration.
One of the key techniques used in vendor or contractor negotiations is that information is often kept back on one side. Saunders stresses that the sharing of information is the most important aspect of successful negotiations. The expectations and commitments by both parties should be stated clearly so that both parties can concentrate on achieving these objectives. Saunder's perspective and techniques are a new way of looking at the negotiation process. This is perhaps one of the most useful books on negotiations in recent years. It provides a fresh perspective on an old subject.
Saunder's perspective is an important element in understanding the elements of a successful relationship. Often one sees the negotiation process as being separate from the formation of partnership. This is especially true of negotiations that take place after a merger or acquisition. However, if one considers negotiations to be a form of partnership, then it is easy to see how successful partnerships are the result of skilled negotiation techniques.
Like partnerships, negotiations have several characteristics. In a negotiation communication is open and interactive between the parties involved. Intermediate solutions are possible. Both parties can make temporary offers and counteroffers directly to the other person. An agreement is not reached until both parties accept a proposal from the other. The nature of negotiations provides a mixed motive in the process. Negotiation implies that a tension exists between the creation and claiming of one's values (Lax and Sebenius 1986).
Negotiators can be grouped into two different categories. Those with individualistic orientation tend to use argumentation, calls for concessions and threats to enhance their position. Negotiators with a cooperative orientation end to use integrative behavior such as multiple issue offers, information exchange, and statements of a supportive nature. When two negotiators are cooperatively oriented they tend…