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OptimiceWhitePaper:ThePartnershipScorecard

July2008

THEPARTNERSHIPSCORECARD

Largescalepartnershipsoftenliveonaknifeedge.Thingscanbegoingwellmostofthetime,withwhatappearstobeacordialandcooperativepartnership.Butassoonassomethinggoeswrongthefingerpointingandaccusationsstartinearnest.

Whiletheintentofthepartnershipmightbewellarticulatedinthetermsofthecontractualagreement,itisoftennotthecontractedaspectsofthepartnershipthatcausetheproblems,butthesofter,moreintangibleaspects.

Oftentheseaspectsareparticulartoanindividualroleandthereforenotcapturedintheheadsofagreement.Whatismissingisamechanismforassessingthevalueflowsattheindividualrolelevelwithinpartnerships.ThisiswhatthePartnershipScorecardisdesignedtodo.

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THEPARTNERSHIPSCORECARDThe concept of the business partnership hasbeen fundamental to economic developmentand success, but the attention it now attractshasneverbeenhigher.

Thenumberofequityalliances intheUSAonlynumbered in the hundreds throughout thewhole of the 1970s, whereas today, such alliances would number in the thousands eachyear(Pekar&Margulis,2003).

Morecritically,withthecontinuedflatteningofmodern organisationalstructures, the businesspartnership is also gaining prominence insidetheorganisation.

For the larger multinational corporations, selfmanaged teams, informalnetworksandpeertopeer partnerships arereplacinga total relianceonhierarchicalcontroltocoordinate business activities.

Such mechanisms have become essential forlargerorganisationstomatchtheflexibilityandfast response achieved by smaller and morenimblecompetitors.

Despite the fundamental importance of thebusinesspartnershiptobusinesssuccesstoday,there remains little support for the measurementandmanagementofthebusinesspartnership.

Unlikebusinessprocesses,which through theirvery nature lend themselves tomeasurementmechanismscontained inTQM,SixSigmaand

Lean Manufacturing techniques, partnershipsareinherentlyhumancenteredandintangible.

Where measurement mechanisms do exist,they tend tobehigh levelmeasures like compliance to agreed codes of conduct and/oroutcome measures like revenues generatedfromallianceactivities.Thedifficultywithhighlevelmeasuresisthattheyareframedasapplyingequallytoeveryoneinvolvedinthepartnership.

MechanismsliketheBalancedScoreCard(Kaplan&Norton,1996)workat thestrategy level.While the intent may be clear, individual accountability for activities that constitute thepartnership are not. Relationship Managersareoften appointedwith the responsibility for

thepartnership,but thelack of high fidelitymeasurement mechanisms makes it next toimpossible to understandthedynamicsofatypicalpartnershipatalllevels.

Therefore the ability toeffectivelymanage andimprove partnershipperformanceislimited.

This paper introducestheconceptofthePartnershipScorecard.Itisdistinguished fromotherpartnershipmeasurementmechanisms inthat itworksdowntotheindividualorrolelevel.

The fundamental process for creation of thePartnershipScorecardisvaluenetworkanalysis (VNA).VNA identifiesboth tangibleand intangiblevalueflowsbetween identifiedroles inthepartnership.

Each role is identifiedwithbothcreatingvalueflows forother rolesaswellasassessingvaluefromthevalueflowsthatitreceives.

For the largermultinationalcorporations, self managedteams, informal networksand peer to peer partnerships are replacing a totalreliance onhierarchical control to coordinate business

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TheresultingPartnershipScorecardidentifiesforeachrolethe individualvalueflowsthattheroleisaccountableforaswellasthevalueflowsthateachroleisresponsibleforassessing.

Inthiswayperformanceisassessedattherolelevel enabling corrective or enhancement actionstobeimplementeddirectly.

ValueNetworkAnalysisAvaluenetworkcanbedefinedas:

anywebofrelationshipsthatgeneratestangibleandintangiblevaluethroughcomplexdynamic exchanges between two ormore individuals,groups,ororganizationsVernaAllee

VNA is therefore the businessmodeling techniqueforcapturing,visualisingandthenanalysing the network of interactions for improvement opportunities,whether they result in anorganisational structure change or the implementationofanewITsystem.

Thetechnique inheritstheattributesofatraditional business process mapping technique,with the addition of some unique features foridentifyingintangibleflows(Allee,2006,2008).

AVNAmapconsistsofthreebasicelements:

1. The ovals identify participants. Participantscanbeattheindividualorgrouplevel,but at all times represent human decisionmakers.

2. Thearrows identifya flowbetweenparticipants.Theyarealwaysonedirectional.

3. Solid lines represent tangible flows,dottedlinesare intangible flows.Labelson thearrowsaredeliverablesthatmovefromoneparticipanttothenext.Theycanbetangibleorintangible.

Boundaries are typically drawn to limit thescopeoftheanalysistoaworkable levelofdetail.

VNA is typically conducted in aworkshop setting, ideallywith the participants representingtheidentifiedroleswithinthepartnership.

Oncethetangibleandintangibleflowsareidentifiedbetween the roles, analyses can be conducted to assess the dynamics of the valueflowsacross thepartnershipas representedbythenetwork.

Imbalances in value exchange between rolescanbeaddressedthroughnegotiationtocreateanagreedoverallvaluenetwork.

Anextractfromanactualvaluenetworkmapisshownbelow:

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Onecanseethattheabovevaluenetworkhasabalanceof tangibleand intangiblevalue flows,withthelevelsofreciprocitybalancedtoensureasustainablepartnershipbetweenrolescanbe

achieved.Wearenow ready tobuild thePartnershipScorecard.

ThePartnershipScorecard isadirectoutputfrom the VNAmaps. Each deliverable can berepresented on the scorecard with the valuecreator and value receptor identified.The firststep however, is to decide what value flowsneedtobecapturedonthescorecard.

Typically,alltheintangiblevalueflowswouldbeincluded, together with those tangible valueflowsthatarentcaptured inotherservice levelagreement reportingmechanisms.Ashortsurvey is constructed with the identified valueflowsframedassurveyquestions,as illustratedbelow.

Theobjectiveofthesurvey istoassesscurrentperformanceonintangiblevaluedeliverables.It

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1 -2: strongly disagree; -1:disagree; 0:neutral; +1:agree; +2:strongly agree2 1=Little value; 2=Some value; 3=Appreciated; 4=High Value; 5=Critical Value3 1=Minimal; 2=Modest; 3=Nominal; 4=High; 5=Very High

140BusinessReps

Wearewellappraisedofthemajortechnologytrendsandrisksaswellasthe

opportunitiesthattheymayprovideCIO

EmergingService/TechnologyOpportunities

140VendorsWearekeptwellinformedonITbudgetforecasts,bothlongandshortterm

CIOBusiness/Budget

Forecasts

522CIOThevendorskeepmewellappraisedoftheir

businessdirectionsandactivitiesVendors

VendorBusinessStrategies

151CIOIfeelwellinformedaboutbusinessissuesand

opportunitiesthatITcouldassistwithBusinessReps

EmergingBusinessIssues/

Opportunities

251ServicesDirector

Ifeelwellinformedinemergingbusinessissuesthatmightimpactonus

BusinessReps

EmergingBusinessIssues

240VendorsIfeelwellinformedonemergingbusinessissuesthatmightimpactdemandforour

services

ServicesDirector

EmergingBusinessIssues

331BusinessRep

Ifeelwellinformedaboutpotentialservicedeliveryrisks

ServicesDirector

ServiceRiskAssessment

Cost/RiskofProvision3

Valueto

Role2

Assessment1

Assessedby:

SurveyQuestionDelivered

by:IntangibleDeliverables

1 -2: strongly disagree; -1:disagree; 0:neutral; +1:agree; +2:strongly agree2 1=Little value; 2=Some value; 3=Appreciated; 4=High Value; 5=Critical Value3 1=Minimal; 2=Modest; 3=Nominal; 4=High; 5=Very High

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is anticipated thatmany of the tangible valueflowswouldbeassessedbyexistingcontractualscorecards, though tangible value flows couldalsobeincludedinthesurvey.

The columns for Value toRole and Cost orRisk of Provision could have been assessedduring the VNA exercise or can be capturedheretoprovideabasisforprioritisinghighvalueopportunities, as well as identifying areas ofpotentialoverservicing.

Changes in the Value/Cost levels identified intheVNAcanbeadjustedwithexperience,overtime.

Targetsforperformance improvementcanalsothen be set alongwith identified activities required tomeet these targets. The completedsurveyisanalysedforrelationshipimprovementopportunities.

Quick wins can be identified where performance gaps exist on highly rated value flowsand costo