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

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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