alliance governance: balancing trust and control in dealing with risk
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Alliance GovernanceBalancing Trust and Control in Dealing
with Risk
Alex ToddJanuary 21, 2010
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Trust to Create High Value
Time
ValueHigh
Moderate
None
Communicative
Coordinated
Trust Gap
Agility
Supply Chain Configuration Maturity
Collaborative
Co-opetitive
Expedient
Efficient
Effective
Innovative & Sustainable
Trust Equity
Blazer Barn
StrategicTactical
“Trust Enabled Supply Networks: Uncovering the trust-building secrets of highly collaborative supply chains”, Alex Todd
Coordinators Risk Costs
Collaborators Coordination Costs
Source: Report on Business, May 2008
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Risks & Uncertainties
REWARD POSSIBILITY
Risk Uncertainty
Uncertainty
Risk Management Innovation
Control is Confining Trust is Liberating
Trust Definitions
Trust is a person's willingness to accept and/or increase their vulnerability by relying
on implicit or explicit information.
Trust = Acceptable Uncertainty
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Trust Optimizer ScorecardWe do not have clear goals for the future of our alliance 1 2 3 4 5 6 7 8 9 10
We have clear goals for the future of our alliance
We do not have clear goals to optimize the level of trust in our alliance
1 2 3 4 5 6 7 8 9 10We have clear goals to optimize the level of trust in our alliance
We do not know the level of trust alliance stakeholders have in our organization
1 2 3 4 5 6 7 8 9 10We know the level of trust alliance stakeholders have in our organization
We feel there is a low level of trust in our organization
1 2 3 4 5 6 7 8 9 10We feel there is a high level of trust in our organization
We do not have a plan to optimize the level of trust in our organization
1 2 3 4 5 6 7 8 9 10We have a plan to optimize the level of trust in our organization
We feel our alliance processes are slowed down by lack of trust
1 2 3 4 5 6 7 8 9 10We feel our alliance processes are accelerated by a high level of trust
We are reactive and focus on risk management and compliance
1 2 3 4 5 6 7 8 9 10We are proactively taking action to build trust in our organization
We are concerned that a lack of trust is undermining our goals
1 2 3 4 5 6 7 8 9 10We are confident that high trust is helping us achieve our goals
We are not confident that we know how to build trust
1 2 3 4 5 6 7 8 9 10We are confident that we know how to build trust
We do not see trust as a key issue in our company 1 2 3 4 5 6 7 8 9 10
We see trust as a strategic issue in our company
ADD COLUMN TOTALS YOUR SCORE _____
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
• Don’t Trust
• Trust
• Trust• Don’t Trust
Reducing Uncertainty
Experiential Sources of Trust (Eye Witnesses)
Interpretive Sources of
Trust (Expert Witnesses)
I n f o r m a t i o n I n f o r m a t i o n
Source of Information
Sources of Trust
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Is it true that ____________?Interpretive Sources of Trust (opinion, i.e. expert witnesses)
1. 2. 3. 4. 5.
Experiential Sources of Trust (observation, i.e. eye witnesses)
1. 2. 3. 4. 5.
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Acceptability
Motive Forces
Proficiencies
Risk
Transference
Trust
Control
Shield
Trust Enablement® Framework
Experiential Sources of TrustPersonal experiences of the relying party or those of objective witnesses.
Motive ForcesFactors influencing the actions of the beneficiary (trusted party).
ProficienciesAptitude, knowledge, behaviour and disciplines employed to consistently deliver expected value (people, processes & technology).
Risk TransferenceMechanisms and processes that transfer risk away from the relying party.
Develop Trust Protect Trust
Interpretive Sources of TrustSubjective assertions of the source of the information or third parties.
EmpowermentRelying party’s ability to choose.
Certainty Acceptability
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
What does “alliance governance” mean to you?It seeks to create a climate of equity and collaboration by guiding the design of mutually productive policies, structures and processes.
It sets the tone from the top (by leaders) to create alignment by defining, monitoring and adapting principles and policies to alliance stakeholders' motivators ("strategic intent" and external forces) and risk/return preferences for preserving equity beyond the narrow scope of previously established contracts (future ≠ past).
It "memorializes" the tone from the top (by senior leaders) with parameters that guide management decision-making.
It is a "pact", a process for cultivating a "relationship" and "cadence“.
It enables trust, but where control is required (if trust is undesirable or impractical) governance may not be appropriate - however, alliance governance must also deal with a broader set of functional business performance considerations.
It creates an environment within which the alliance can flourish to the benefit of key stakeholders.
It is especially valuable in large/complex alliances.
It helps to identify and create new possibilities and (re)define the rules of the game for the alliance.
It helps to enable trust between alliance stakeholders in order to improve mutual performance.
Alliance Governance DefinedAlliance“An alliance is an agreement between two or more parties, made in order to advance common goals and to secure common interests.” – Wikipedia
Corporate Governance“Procedures and processes according to which an organisation is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation – such as the board, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making.” - OECD
Alliance GovernanceProcedures and processes according to which an alliance is directed and controlled. The alliance governance structure specifies the distribution of rights and responsibilities among the different participants in the alliance – such as the boards, managers, shareholders and other stakeholders – and lays down the rules and procedures for decision-making.
Collaborative Coordinated
CommunicativeCo-opetitive
Alliance Governance Structures
Trust
Control
Operations (risks)Possibilities (uncertainties)
Hierarchy
Market
Equity Controlling Interest
Joint Venture
Equity Participating Alliance
Bilateral Contract Alliance
International Alliance with Central Secretariat
Co-marketing Agreements
National Buying Clubs
Loose Affiliations
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Collaborative Coordin
ated
CommunicativeCo-
opetitive
Alliance Governance Structures
Trust
Control
Operations (risks)Possibilities (uncertainties)
Hierarchy
Market
Equity Controlling Interest
Joint Venture
Equity Participating Alliance
Bilateral Contract Alliance
International Alliance with Central Secretariat
Co-marketing Agreements
National Buying Clubs
Loose Affiliations
Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise: Alliance Governance Structure Diagnosing Conditions for Trust
Alliance Governance System Framework
Trust Enablement® Assessment of Alliance Governance Model Parameters
Experiential Sources of Trust Motive Forces
Proficiencies
Risk Transference
Develop Trust Protect Trust
Interpretive Sources of Trust
Empowerment
• Monitoring: Macroculture
• Coordination: Transfer Prices
• Coordination: Mutual Adjustment
• Coordination: Direct Supervision
• Monitoring: Performance Indicators• Monitoring: Cooperative Scorecard• Monitoring: Virtual Accounting System
• Coordination: Standardization of Work
Structure Mechanisms
• Centralization• Specialization• Formalization• Synergy
Allocation Rules
• Coordination: Standardization of Output
• Motivation: Safeguards
Diagnosing Conditions for Trust
The Trust Optimizer Program
Starter Kit
Alex ToddAlexTodd@TrustEnablement.com
Trust Enabling Strategieshttp://TrustOptimizer.com
Tel: 416.487.1497 Fax: 416.487.9646
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