The rationale for closer cooperation between the MOD and industry has never been greater. The need for better collaboration - highlighted in the Defence Industrial Strategy (DIS), continues to be driven now and into the foreseeable future by the pursuit of through-life capability management, increasingly constrained budgets and the growing complexity of equipment procurements and support service contracts.
As the defence community awaits the successor to the DIS, and the publication of the MOD's handbook on partnering, it is clear that these challenges remain part of the landscape. Increased collaboration between the MOD and its strategic suppliers through partnering style relationships will be one of the key mechanisms available to address them. However, effective partnering has always been a challenge and few relationships have truly embraced partnering and achieved its full potential. Various external studies show partnering-style relationship failure rates of between 50% and 70%, with an average strategic lifespan of around seven years.
While recognising that the application of a partnering approach is not a panacea, it is also true that, when implemented effectively, partnering can improve the effectiveness of customer/supplier relationships and generate improved outcomes for all involved. To succeed, partnering requires earlier engagement between industry and the MOD to develop new concepts and solutions and, at the same time, agreed performance metrics and the methods of measuring them, which are incorporated into the payment and performance model in the contract. Not only will this clarify responsibilities but it will also establish greater accountability and therefore create the right conditions for a collaborative style of relationship to develop. The payment and performance mechanism(s) should reward the right behaviours so that a culture of partnering can evolve in a way that is both effective and enduring. Bolting partnering on as an afterthought (after the contract has been signed) prevents the full benefits of partnering to be realised. However, there are still many aspects of partnering that can be developed yielding some benefit for all involved.
So how do you create a successful partnering relationship that will deliver on the promise?
Experience shows that while partial implementation of a partnering approach can yield some benefits, full implementation leads to exponentially greater value and benefits for all involved. In our view there are four key challenges that must be addressed to fully realise the opportunity available from the implementation of a robust partnering relationship:
- establishing a common purpose
- developing a performance driven commercial regime
- building a joint management framework and capability
- driving the change to build a collaborative relationship.
Challenge 1 - Establishing a common purpose
There will always be differences between the organisational goals of customers and suppliers, particularly when the customer is a government department and industry is the supplier. For partnering to be successful, all parties need to recognise these differences and work together to translate organisational goals into a common set of objectives for the relationship that are supported by all parties. These must be visibly endorsed by the senior stakeholders to provide a focus for developing collaborative working at all levels within both organisations. This needs to be done as early as possible in the relationship as it provides a point of reference for all involved.
There is also a requirement to recognise the differences between strategic partnering and project partnering - and to choose the appropriate type of relationship. Strategic partnering is often used as an umbrella type of relationship under which the partners work together to develop future requirements. It is often characterised by relatively ‘soft’ objectives and the challenge is to forge a framework that is meaningful and provides the authority for joint working. Strategic partnering is, in reality, a way of working together to achieve high-level goals that are then delivered through a series of individual partnering projects. Project partnering, in contrast, is very focused on the delivery of specific ‘hard’ objectives and as such, accountability needs to be clear and unambiguous. Recognising the differences between the two styles of partnering relationship and using them appropriately can present a major challenge, especially when working with the same service partner on both strategic and project based relationships. The danger is that some believe that establishing and enforcing ‘hard’ objectives is outside the spirit of partnering. This is not the case as they are an essential element in defining the requirements and clarifying the responsibilities of those involved in the relationship.
Challenge 2 - Developing a performance-driven commercial regime
One of the most important principles to recognise in a partnering relationship is that, ultimately, reward will drive behaviour. The aim should be to create an incentive based win/win arrangement rather than the win/lose arrangement that often characterises competitive procurement models. This means that the MOD and industry must carefully design and agree performance and commercial mechanisms that lead both parties to act and behave in ways that will drive the delivery of the outcomes sought, and avoid the very real potential for incentivisation of undesirable behaviours. Performance is a ‘two-way street’ – both the MOD and industry must be clear of what is required, and a key early challenge for MOD is to generate a clear understanding of the capability it needs, values and is prepared to pay for, and both must play their part in delivery.
A particular challenge is establishing the intent to partner early enough in the procurement process so that the performance-driven commercial regime that is developed supports the objectives of partnering. In our experience, failure to do this can result in a commercial regime that drives the wrong behaviours.
It is essential that the partnering regime has a hard commercial edge. This is not, as it may sometimes be seen, outside the spirit of partnering, but rather, this edge is an essential mechanism to ensure that the loss of a competitive stimulus within the relationship does not result in a reduction in innovation or cost efficiency that would, in the end, be damaging to both parties. This commercial edge must also be driven into supply chain relationships.
A critical first step in this process, and one that is often poorly implemented, is to agree specific, quantifiable, outcome-based performance metrics. The complexity that will be inherent in many of the strategic relationships moving forward means that this will be far from easy. Many outcomes appear at first sight too subjective and, often, a great deal of thought and effort is needed to establish objective and measurable metrics. However, measurement drives performance - and you get what you measure. So, each partner should be careful to define the right outcome-based performance metrics that incentivise everybody to respond to issues in a fast, flexible and confident manner to ensure that agreed outcomes are achieved.
Challenge 3 – Build a joint management framework and capability
Successful collaboration demands a different style of management and enhanced capabilities on the part of both the customer and the service partner. All parties will face the challenge of identifying, developing and supporting people who can operate successfully in a collaborative environment; people who can manage relationships and take the broad ‘big picture’ perspective.
Joint governance and management processes can provide effective levers to promote partnering behaviours. The processes must reflect the key principles of open communication and information sharing and the governance arrangements must recognise that the relationship will need constant and active management.
While partnering arrangements will expound the need for trust and win/win relationships, tensions will inevitably be encountered. It could be argued that unless a degree of conflict arises, it is unlikely that the arrangements provide a sufficiently robust and challenging environment to drive the agreed performance; “constructive tension” is healthy. The real test of the strength of the relationship will be the way in which these conflicts are dealt with. A well-defined, effective escalation and conflict resolution mechanism is therefore essential.
Challenge 4 – Driving change to build a collaborative relationship
Failure to realise the benefits from partnering often stems from the failure of the organisations involved to recognise the effort and commitment that is needed to drive the change that enables a truly collaborative relationship to develop. Once established, effort is also required to sustain the collaborative relationship throughout the life of the agreement. The ultimate delivery of partnering relies heavily on the confidence and trust that develops between the individuals involved and their ability to talk to each other openly, regularly and honestly.
Moving from a traditional, competitive, contractual relationship to a partnering style of relationship represents a significant culture change that not only requires a change of attitude and approach, but may also require the development of new policies, procedures and working practices. Both parties need to identify and develop ‘relationship managers’ who can lead the business in the new partnering environment. Driving the change from the senior team to the middle management layers and throughout the workforce is both essential and difficult, and will require sustained management effort and commitment. Without this continued effort, the intended partnering relationship will simply unravel as people from both parties seek to reinforce old ways of working or, worse still, make assumptions based upon their own, incorrect perceptions of what partnering means.
But it is not enough to just commit to partnering; there is a need to live the rhetoric, at all levels, throughout the life of the agreement. This means that there is a requirement to constantly review and enhance collaborative working, especially when new stakeholders are introduced to the relationship. This is a particular challenge as senior MOD stakeholders tend to move on relatively frequently, and this ‘churn’ is a feature that the MOD will need to address as partnering-style relationships become increasingly important. It is difficult to sustain a relationship based on mutual trust, confidence and respect when there is a requirement to continually develop new relationships.
The challenges of partnering might at times appear daunting, particularly when the pressure is on to implement a new contract or deliver the agreed outcomes and each of the challenges set out above need to be tackled ‘head on’ if the potential benefits are to be fully realised. Once established the relationship needs to be constantly “worked at” if it is to be sustained, but there is little doubt that those involved in a successful partnering relationship will appreciate the benefits - you can both feel and measure them.