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Management – Alliance is the name of the game and we want to play the

There can be few more inspiring instances of the triumph of hope over experience than the continuing wave of mergers and acquisitions. Everybody knows that the proportion of such transactions that meet expectations is alarmingly low, yet still the deals keep coming. In the past, stockmarket uncertainty has tended to put paid to such deals, but the turmoil that has dogged the global economy of late seems only to have intensified the activity. The largest organisations seem to be acting according to some sort of “when the going gets tough, the tough get bigger” credo. But mergers and acquisitions are not the only deals in town. Many companies are dipping their toes into unfamiliar areas of activity or new markets through various sorts of relationships that have come to be termed “strategic alliances”. Though that is, in some cases, a rather grand description of what can be merely ad hoc arrangements, there is little doubt that the corporate landscape is becoming a lot less straightforward than it used to be. Not only are companies using such arrangements to increase their sphere of influence without going to all the trouble of a full-scale merger or acquisition, they are adopting the same sort of approach to dealing with the carrying out of tasks not deemed core to their activities: temporary working, virtual organisations and the rest of it. The result is the growth of what some academics have started to call “co-opetition” because of the way in which certain organisations are seen to be co-operating in certain areas at the same time as competing as fiercely as ever. Perhaps the most striking examples of this come from the motor industry, where some manufacturers have saved development costs by sharing car body parts, and the oil business, where – especially in their North Sea operations – many of the big players have entrusted such activities as accounting and the supply of rigs to Andersen Consulting, leaving a smaller band of key employees to do the work that gives the company its “competitive advantage”. Assuming that a company can decide which of its activities can properly be described as non-core and can satisfy itself that it is not leaving itself too exposed by not having sole call over certain staff, it sounds enticing enough. However, a new book by two consultants from AT Kearney fires a warning shot over the bows of this growing enthusiasm for forming partnerships. “Partnering is fine in theory, but too many alliances that have been billed as bold, resource-leveraging initiatives have foundered as a result of conflicts of interest and personalities or have absorbed huge amounts of management time for very little return for the practical case for partnering to have become universally indisputable,” write Anne Deering and Anne Murphy in The Difference Engine (Gower). It is not that they are against the idea in principle. Indeed, they acknowledge that the notion that the large, integrated organisation is “the undisputed king of the business jungle” has given way to “more sociable corporate creatures, hunting in packs” – and they point to statistics indicating that the rate at which US organisations, for instance, have been forming partnerships has increased tenfold since the 1970s and is still increasing. But all this activity does not mean that everything is turning out happily. Indeed, partnerships can end for “reasons other than failure” which makes assessing the failure rate difficult. Deering and Murphy reckon that “barely one in three succeed in the sense that they fulfil their objectives and earn a return in excess of their cost of capital”. In other words, not much better than the hit rate for outright mergers and acquisitions. A large part of the problem, they maintain, is that those pursuing the partnering option take along all the attitudes and aspirations they have traditionally applied to mergers and acquisitions. That is, they go looking for synergies, similar cultures and all the other things that chief executives spout about when they seek to convince the world of the wisdom of their latest deal. Instead, they should be putting more emphasis on the complementary – not just in terms of operations, but also with regard to such facets as approach and type of people. Noting that this can be just as hard for organisations as it is for individuals, Deering and Murphy attempt to ease the way for organisations to make the adjustment from the supposed safety of dealing with “people like us” to the potentially more rewarding situation in which they embrace the less familiar. Being consultants, they have come up with a matrix – “the partnering grid” – to provide a language for explaining partnering and partnership perceptions. Essentially, this is a development from the notion that diversity enriches an organisation. Like those that have sought to move the diversity debate on from just talking about quotas and encouraging assimilation to valuing difference, Deering and Murphy are hoping to convince organisations that they are wasting their time striving after control or harmony. The book is overly technical in places, but the notion behind it – that organisations need to change their attitudes and the ways in which they behave if they are to succeed in the modern world – is a powerful one. If this sounds familiar, it is because it is not a million miles removed from what the consultants and gurus have been saying managers have to do within their own organisations. And we all know just how many organisations have truly abandoned “command and control” in favour of something more fluid and collegiate. Eminently sensible as it is to suggest that successful partnerships tend to be those that emerge rather than those that are centrally planned, it will take a lot of their colleagues’ time to convince companies to abandon the ways that come most naturally to them. Roger Trapp is management editor of The Independent and Independent On Sunday.

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