by André de Waal, Robert Goedegebuure and Eveline Hinfelaar
- Purpose – The importance of partnerships to organizational success has increased considerably the past decades and many organizations strive at creating High Performance Partnerships (HPPs). For this to happen, organizations in the partnerships have to be of high quality and their collaborations should be world-class. Whereas the factors that create High Performance Organisations (HPO) are by now reasonably well established, the HPP factors are still unclear. The purpose of this paper is to develop a scale for measuring the factors of importance for creating and maintaining High Performance Partnerships, and relates these factors to the factors of the HPO framework and to the success of the partnership.
- Design/methodology/approach – During a literature study ten potential factors of importance for creating and maintaining High Performance Partnerships were identified. These potential factors were put in a questionnaire, together with the factors that create the HPO and the factor that measures the success of the partnership. This questionnaire was administered to a cable company, which was working on becoming an HPO, and four of its main suppliers. The data were subjected to a factor analysis which yielded a HPP framework consisting of three factors and 19 underlying characteristics. In addition, these HPP factors were put in a regression analysis with the factors of the HPO framework and the success of the partnership factor.
- Findings – The research results show a strong relationship between three HPP factors, the five HPO factors, and the success of a partnership factor.
- Research limitations/implications – This research adds to the literature by extending the concept of HPOs to the value chain these HPOs operate in. Thus the research into the factors of successful partnerships has been brought forward. The practical benefit of the research is that organizations can use the HPP factors to increase the quality of the partnerships they have with their suppliers and customers.
- Originality/value – There is much literature on partnerships but not so much on partnerships between organizations which strive to become a HPOs, and in the process need to create partnership of high quality.
- Keywords – Partnerships, HPO, High Performance Organizations, High Performance Partnership Diagnosis, HPP
In the past decades the interest in high performance and world-class excellence has increased steadily, cumulating nowadays in many organizations that strive to become a high performance organization (HPO) (Collins, 2001). An HPO is defined as an organization that achieves financial and non-financial results that are exceedingly better than those of its peer group over a period of time of five years or more, by focussing in a disciplined way on what really matters to the organization (de Waal, 2012b). Because of this interest in HPOs, several HPO models have been developed and described in the literature (Crutchfield and McLeod Grant, 2008; Keller and Price, 2011; McFarland, 2008; Shockley-Zalabek et al., 2010). At the same time, organizations have increasingly started to realize that they do not operate in a vacuum and that they need to work closely together with their suppliers and customers to create value added chains (Azar et al., 2010; von Massow and Canbolat, 2014). As a logical consequence of this realization, all parties in the value chain have to strive to be high performance and their cooperations need to be of the same high standard, in order to jointly deliver the desired world-class quality (McCarter and Northcraft, 2007). After all, when one of the parties in the chain is not high performing the resulting gap in performance levels between the various parties can potentially restrict the performance level of the total value chain. This in turn negatively influences the performance of each party in the value chain. When, for example, a supplier in the value chain is not performing on a high level and therefore supplies sub-standard semi-finished products, there is a high probability of the quality of the end product delivered to the customers being sub-standard. Thus, not only should all parties in the value chain strive to be high performing, their collaboration also has to be of a high-performance nature in order for the outcomes of the value chain to be products of constant high quality. Thus the links in the value chain also need to improve to a level of a High Performance Partnerships (HPP). To define the High Performance Partnerships we look at Lambert et al. (1996) who suggested a definition and systematic approach for implementing partnerships which are helpful for developing successful partnerships (Zybell, 2013). Their definition concentrates on partnerships between organizations of all types while we specifically focus on organizations that strive to become HPO. Therefore we have adapted their definition slightly, by adding the sentence in italics: “an High Performance Partnerships is a tailored business relationship, based on mutual trust, openness, shared risks and shared rewards that yields a competitive advantage, resulting in business performance greater than would be achieved by the firms individually (Lambert et al., 1996, p. 2) and which is greater than that of other partnerships in the same industry.” Figure 1 depicts the relationships in an High Performance Partnership (see PDF below).
The goal of the research described in this paper is to develop a scale for measuring the factors that create and sustain an High Performance Partnership. For this, the literature on successful collaborations, partnerships and alliances was studied. What makes this research different from previous studies is that its starting point was looking at partnerships between organizations that are aiming to become HPOs. Thus, from the onset this research ambitiously aimed at identifying the factors of High Performance Partnerships rather than of successful partnerships, the difference being that in the case of the former the partnership is highly successful for a prolonged period of time. Therefore, the research took place at an organization acutely undergoing a transformation process toward an HPO, using Waal’s HPO framework (de Waal, 2012a, b), and at four of its best suppliers. The results of the research show that it is possible to develop a measurement scale for the factors of an High Performance Partnerships and that there is a strong relationship between these HPP factors, the factors of an HPO and the success factors of a partnership. In this respect, this research adds to the literature on value chains by extending the concept of HPOs to the value chains these HPOs operate in. The practical benefit of the research is that managers of organizations can use the HPP factors to increase the quality of their partnerships and to promote HPO thinking in their own organizations. This paper is structured as follows. In the next sections the HPO framework which was used during the research is described. After this, potential HPP factors as identified from the literature are discussed. Subsequently the research approach, the case organization and its suppliers, and the research results are described. The research results are then analyzed and discussed. The paper ends with limitations of the research and possibilities for future research.
The HPO framework
This section contains a brief description of the HPO framework used in the research. The HPO framework was developed based on a literature review of 290 studies into high performance and excellence, and a survey administered to organizations worldwide (de Waal, 2006/2010, 2012a). In the literature review, for each of the 290 studies, elements that the authors indicated as being important for becoming a HPO were identified and categorized. Because different authors used different terminologies, similar elements were put in the same category. The resulting categories were labeled “potential HPO characteristic.” For each of the potential HPO characteristics the
“weighted importance” was calculated, i.e. the number of times that it occurred in the examined studies. Finally, the characteristics with the highest weighted importance were considered the HPO characteristics. These characteristics were subsequently included in an HPO survey, which was administered worldwide encompassing over 3,200 respondents. In this survey, the respondents were asked to indicate how well they thought their organizations were performing as to the HPO characteristics (on a scale of 1-10) and also how the results of the organization they worked at compared to those of peer groups. By performing a non-parametric Mann-Whitney test, 35 characteristics, which had the strongest correlation with organizational performance, were extracted and identified as the HPO characteristics. The resulting correlation was as expected: the High Performance Partnerships scored higher on the 35 HPO characteristics than the lower performing organizations. A principal component analysis with oblimin rotation was performed on the 35 characteristics, which resulted in five distinct HPO factors with sufficient high Cronbach’s α’s.
The first HPO factor is the quality of management of the organization. In an HPO, managers at all organizational levels maintain trust relationships with employees. They work with integrity and are a role model to others: they are honest and sincere, show commitment, enthusiasm and respect, have a strong set of ethics and standards, are credible and consistent, maintain a sense of vulnerability and are not
self-complacent. They are decisive, action-focussed decision makers. The second HPO factor is openness and action orientation. In an HPO, management demonstrates that it values the opinions of employees by having frequent dialogues with them and involving them in all important business and organizational processes. HPO management allows experiments and mistakes by seeing these as opportunities to
learn. In this respect, management welcomes and stimulates change by continuously striving for renewal. The third HPO factor is long-term orientation (LTO). In an HPO, long-term gain is far more important than short-term profit. An HPO continuously strives to enhance customer value creation by learning what customers want, understanding their values, and being responsive to them. In addition, an HPO
maintains good long-term relationships with all stakeholders by networking broadly, taking an interest in and giving back to society, and creating mutual, beneficial opportunities and win-win relationships. The fourth HPO factor is continuous improvement and renewal. An HPO adopts a unique strategy that will set the organization apart by developing many new alternatives to compensate for dying strategies. After that, an HPO continuously simplifies, improves and aligns all its processes to improve its ability to respond to events efficiently and effectively and to eliminate unnecessary procedures, work, and information overload. The fifth and final HPO factor is employee quality. An HPO makes sure it assembles a diverse and complementary workforce and recruits people with maximum flexibility to help detect
problems in business processes and incite creativity in solving them. An HPO also continuously works on the development of its workforce by training staff to be both resilient and flexible, letting them learn from others by going into partnerships with suppliers and customers, and inspiring them to improve their skills so they can accomplish extraordinary results.
An organization can determine its HPO status by conducting an HPO Diagnosis. During this diagnosis managers and employees fill in the HPO Questionnaire, in which they indicate how well the organization performs on the 35 characteristics, on a scale of 1 (very bad) to 10 (excellent). Thereupon the average scores on the five HPO factors are calculated and put into a graph. From this graph it can be seen whether the organization is already an HPO (which means a score of at least 8.5 on all HPO factors) and which HPO factors show a dip in the graph and therefore have to be improved. During a workshop with management and employees the results of the HPO diagnosis and the HPO graph are discussed and an action agenda, with actions to improve the HPO scores, is drafted. In the next one to two years, the organization then has to work dedicatedly on these actions in order to improve its HPO scores and its competitive performance. By now 130 organizations worldwide have conducted an HPO diagnosis. Research over the last seven years at 23 organizations that have conducted the HPO diagnosis at least twice over a period of two years showed that those organizations that achieve higher HP scores indeed achieve better financial and
non-financial results (de Waal, 2012a). In addition the HPO framework has been empirically validated in various countries by administering the questionnaire to organizations in a country and performing confirmatory factor analyses on the collected data. In each case, basically the same factors with underlying characteristics – or a subset of these – appeared (de Waal and Chachage, 2011; de Waal and Frijns, 2011; de Waal and Sultan, 2012; de Waal and de Haas, 2013; de Waal et al., 2014). This makes the HPO Framework, to our knowledge, thus far the only scientifically validated HPO improvement technique in many countries. Appendix 1 lists the five HPO factors and accompanying 35 characteristics (see PDF below).
Potential High Performance Partnership factors
The importance of partnerships for the success of organizations has increased considerably these last decennia (Chung et al., 2000; Hagedoorn, 1995). Where in the past many partnership had an ad hoc nature which made them basically temporary cooperations to achieve certain short-term goals, nowadays many organizations maintain long-term national and international partnerships which interfere with crucial business processes (Powell et al., 1996). Successful partnerships can increase the turnover of the partners with two to 19 percent and 16-24 percent of the average value of an organization can be attributed to these partnerships (Kalmbach and Rousseau, 1999). Further benefits can be expected in cost reductions, higher quality levels and new product designs (Goffin et al., 2006; Monczka et al., 1998; Primo and Amundson, 2002). During a literature review potential High Performance Partnership characteristics and factors were identified. In addition, the items with which the success of the partnership can be evaluated were also identified. This was done by searching the EBESCO, Science Direct and Emerald databases and Google Scholar with the key words “High Performance Partnerships and successful partnerships” to identify literature sources with potential characteristics important for creating an High Performance Partnership. The articles which were purely theoretical were removed as the starting point was that that the potential HPP characteristics had to be derived from practical evidence in real-life organizations. As authors each used their own terminology, similar characteristics were grouped into categories which formed the potential HPP factors. All in all, ten potential HPP factors along with 54 underlying potential HPP characteristics were identified (see Appendix 2 in PDF below). In addition, the literature review yielded items which describe how to evaluate the success of a partnerships. These items were grouped into the factor “success of the partnership” which is also detailed in Appendix 2 (see PDF below). A short description of the potential factors follows underneath:
- Control. Control is needed to prevent the display of undesired behavior of the organizations in the partnership. There are two types of control: formal control and informal control. Formal control consists of high levels of output and process control, such as formal contracts. Informal control includes the informal organizational cultures and systems influencing the collaboration and the behavior of parties, such as the norms and values embedded in the organizational culture (Dekker, 2004; Geringer and Hebert, 1989; Kauser and Shaw, 2004; Otley, 1994; Ouchi, 1979; Smith et al., 1995).
- Trust. Trust refers to the expectation that a partner will not behave in an opportunistic manner and has the true intention to achieve mutual benefit. Trust is a prerequisite for the development of high levels of communication needed to facilitate the sharing of knowledge and achievement of continuous improvement in the partnership. Trust develops over time and the previous history between the partners is a determinant of the future direction of the relationship (Berry et al., 2008; Casey, 2006; Gardener, 2003; Garvey and Williamson, 2002; Newell et al., 2002; Ring and Van De Ven, 1992; Sako and Helper, 1998; Sanatoro and Gopalakrishnan, 2000; Tomkins, 2001).
- Commitment. Commitment is defined as the interest in the relation and willingness to develop a long-term partnership. Valuing cooperation and being committed to share responsibility, risk, power and accountability is a necessity for a successful partnership relation (Anderson and Weitz, 1992; Bacherach and Gambetta, 2001; Clegg et al., 2005; Dwyer et al., 1987; Gillies, 1998; Huxham, 2000; Kernaghan, 1993; Monczka et al., 1998; Morgan and Hunt, 1994; Torjman, 1998).
- Coordination. Coordination is the management of important organizational activities and the extent to which partners and their processes are mutually integrated to reduce uncertainties and improve the collaboration and performance. Organizations which create clear coordination structures to manage organizational change are the most successful in their partnership. Coordination enhances balancing the level of autonomy within the partnership (Alexander et al., 2001; Boddy et al., 1998; Kauser and Shaw, 2004; Klein Woolthuis et al., 2005; Mohr and Spekman, 1994; Monczka et al., 1998; Olson and Singsuwan, 1997).
- Dependence. Dependency is defined as the equality between the partners in terms of investments and resources, and the substitutability of the partnership itself. Partnerships where partners are equally and mutually dependent perform better as partners share the same interest and decision power. Inequality between partners is one of the main contributors to partnership failure and therefore organizations have to search for partners that are similar in terms of organizational characteristics and abilities (Casey, 2006; Geyskens et al., 1996; Kauser and Shaw, 2004; Kumar et al., 1995; Van De Ven and Walker, 1984).
- Communication. Without any form of communication (face-to-face, letters, e-mail, etc.) collaboration would not be possible. Communication influences partnership behavior and the ability to respond quickly to changing customer needs as improving the lines and quality of communication shortens partner and market distance. Good communication entails three practices: high quality of information, effective information sharing and high levels of participation (Anderson and Narus, 1990; Anderson and Weitz, 1992; Badaracco, 1991; Dwyer et al., 1987; Lasker et al., 2001; Olson and Singsuwan, 1997; Trefry, 2006; Vanpoucke et al., 2009).
- Conflict handling. There are many causes of partnership conflict, including differences in culture, management style and operational processes. Often these differences lead to misunderstandings and distrust, with the consequence of reduced cooperation and poor performance. Joint problem solving of conflicts can enhance the success of a partnership. Solutions to conflicts include constant
feedback and evaluation of performance and processes and creating a balance of power and systematic resolution of conflicts, because they lower the change of bias and miscommunication. In the partnership such solutions have to be implemented cooperatively to increase the efficiency of conflict resolution and understanding (Brown and Day, 1981; Cummings, 1984; Ding, 1997; Li et al., 2001; Mohr and Spekman, 1994; Monczka et al., 1998; Park and Ungson, 1997; Tilman, 1990).
- Diversity. Everywhere humans interact there is the possibility of miscommunication, caused by noise, or more personal differences like norms, values and customs. To develop effective partnerships it is necessary to create an organizational environment where diversity is both acknowledged and valued. In such a partnership individuals develop cultural awareness and sensitivity to valuing differences. Cross-cultural teams should be trained to recognize and respect cultural differences and use differences to create mutual advantages (Gilbert and Cartwright, 2008; Higgs, 1996; Hutchings and Michailova, 2003; Seymen, 2006; Trefry, 2006; Weir and Hutchings, 2005).
- Closeness. There should be strong interpersonal relationships between the partners, which means that people need to be able to have open and honest, face-to-face communication. In addition, for a good coordination there needs to be a high level of interaction between the partners, so that the adequacy, completeness, credibility and accuracy of information is safeguarded. The face-to-face communication and coordination is thus helped when the perceived distance is small, which means that people are able to physically meet each other regularly (Bickenbach and Liu, 2010; Demirbag et al., 2010; Drejer and Vinding, 2007; Meyskens and Carsrud, 2011; Narula and Santangelo, 2009).
- Management quality. Each partner in the partnership should have strong and effective leaders that manage the partnership proactively on the aforementioned factors. At the same time, these leaders are strongly focussed on achieving the mutual goals of the partners so they must be able to balance a style aimed at relationship building with firmness of achieving results (Broussine and Miller, 2005; Vangen and Huxham, 2003; Wong, 2001).
- Success of the partnership. To be able to judge whether the partnership was experienced by the partners to be a success, it has to be the evaluated if the partnership adds value to each partner by increasing the effectiveness, profitability and quality of each partner (Brinkerhoff, 2002; Esteves and Barclay, 2011; Johnsen et al., 2008; Schulz et al., 2007).
Research approach and results: High Performance Partnerships
A large multimedia company in the Netherlands was approached for the research. This company was in the process of transforming itself into an HPO and had at the same time expressed interest in raising the quality of the value chain it operated in. The multimedia company asked four of its main suppliers – providing billing and collecting services, engineering services, client contact center (sales and call center activities) services, and cable repair services – to participate. The multimedia company and its suppliers received both the HPO questionnaire and the HPP Questionnaire. The “standard” HPO Questionnaire consisted of the 35 HPO characteristics, as given in Appendix 1 (see PDF below). The HPP Questionnaire consisted of the 60 items as given in Appendix 2 (see PDF below).
The questionnaires were put in an electronic format and placed on the internet. Through a link sent to potential respondents the questionnaires could easily be filled in. Contact persons at the multimedia company approached their contacts at the partners to invite them to an information session about the High Performance Organization / High Performance Partnerships research. During this information session, two of the authors explained the concepts of HPO and High Performance Partnership and asked whether the partners would be willing to participate. All partners agreed and subsequently informed their own personnel about the survey link they were going to be receiving shortly. After receiving the data directly in the database of the authors, these were statistically analyzed and put in a draft HPP framework. This model was presented and discussed in a series of workshops with the multimedia company and each of its partners. As a last step, the HPP framework was finalized.
Both the HPO and HPP questionnaire were filled in by managers and employees who were working in departments that were part of the partnership, i.e. dealing with one or more of the other parties in the value chain. For the HPO Questionnaire respondents had to rate – on a scale of 1 (very poor) to 10 (excellent) – how their departments performed on the HPO characteristics. For the HPP Questionnaire they
had to rate how their partners’ departments performed – again on the scale of 1-10 – on the HPP characteristics being explored. Thus the people in the departments of the multimedia company rated the suppliers they were dealing with, and the people in the suppliers’ departments rated the departments at the multimedia company they had their affairs with (see Figure 2 in PDF below).
High Performance Partnership factor analysis
A total of 239 filled-in questionnaires were received back, 46 from the multimedia company and on average 48 per supplier. As only 48 of the received questionnaires were filled-in completely, pairwise deletion was applied in order to make maximum use of the available information; the resulting correlation matrix was filled with at least a hundred respondents for each pairwise combination of items. Using factor analysis
with Varimax rotation HPP characteristics that did not load higher than 0.50 on any of initially extracted factors, and confounding characteristics loading higher than 0.50 on two or more factors were removed. In addition, characteristics with communalities lower than 0.70 were removed. The rule of thumb for the inclusion of a variable into a factor is a factor loading that is at least W0.3 but often a higher loading cut-off is taken – in this case 0.5 – in order to make sure that a strong factor is obtained (Hayton et al., 2004). The communalities figure makes visible how much of each variable variance is elucidated through the included factors. The rule of thumb here is that when
a variable has a communality score o0.3 it has to be excluded from the dataset for further analysis. One again, we have chosen for a higher cut-off value – this time 0.7 – in order to obtain stronger factors (Sekaran and Bougie, 2010). As a result, from the original ten theoretically predicted High Performance Partnership factors, five factors – with sometimes different characteristics than listed in Appendix 2 – came out of the factor analysis. These five factors were given new names….
Read ‘Developing a scale for measuring High Performance Partnerships’ published in the Journal of Strategy and Management in PDF!