Alliance Governance Balancing Trust and Control in Dealing with Risk Alex Todd January 21, 2010

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

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Coordinators Risk Costs

Collaborators Coordination Costs Source: Report on Business, May 2008

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Risks & Uncertainties

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 Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Trust Optimizer Scorecard

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Dont TrustDont Trust TrustTrust Dont TrustDont Trust Reducing Uncertainty Experiential Sources of Trust (Eye Witnesses) Interpretive Sources of Trust (Expert Witnesses)

Source of Information Sources of Trust

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Is it true that ____________? Interpretive Sources of Trust (opinion, i.e. expert witnesses) Experiential Sources of Trust (observation, i.e. eye witnesses)

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Acceptability TrustTrust ControlControl ShieldShield

Trust Enablement ® Framework Experiential Sources of Trust Personal experiences of the relying party or those of objective witnesses. Motive Forces Factors influencing the actions of the beneficiary (trusted party). Proficiencies Aptitude, knowledge, behaviour and disciplines employed to consistently deliver expected value (people, processes & technology). Risk Transference Mechanisms and processes that transfer risk away from the relying party. Develop TrustProtect Trust Interpretive Sources of Trust Subjective assertions of the source of the information or third parties. Empowerment Relying partys ability to choose. CertaintyAcceptability

Agenda Some Alliances - a perspective Risk, Uncertainty, Control and Trust Exercise Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise 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 Defined Alliance 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 Governance Procedures 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. Alliance Governance Procedures 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.

CollaborativeCoordinated 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 Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Collabor ative Coordin ated Commun icative Co- 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 Exercise: Trust Optimizer Scorecard Reducing Uncertainty Exercise Exercise: Conditions for Trust Worksheet Trust Enablement Framework Alliance Governance Exercise Exercise: Alliance Governance Structure Diagnosing Conditions for Trust

Alliance Governance System Framework

Trust Enablement ® Assessment of Alliance Governance Model Parameters Experiential Sources of TrustMotive Forces Proficiencies Risk Transference Develop TrustProtect Trust Interpretive Sources of Trust Empowerment Monitoring Monitoring: Macroculture Coordination Coordination: Transfer Prices Coordination Coordination: Mutual Adjustment Coordination Coordination: Direct Supervision Monitoring: Monitoring: Performance Indicators Monitoring: Monitoring: Cooperative Scorecard Monitoring: Monitoring: Virtual Accounting System Coordination Coordination: Standardization of Work Structure Mechanisms Centralization Specialization Formalization Synergy Allocation Rules Coordination Coordination: Standardization of Output Motivation Motivation: Safeguards

Diagnosing Conditions for Trust

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