Tip 24: Measure and Evaluate Alliance Performance
An airplane is off its course most of the time. Wind, turbulence and air traffic are all factors why an airplane can’t fly in a straight line from Airport A to Airport B. Yet it arrives at its destination thanks to constant corrections along the way. An airplane only reaches the right destination because of measurements and evaluations of the data acquired, upon which the pilot or the autopilot adjusts the airplane’s course.
The same principle applies with alliances, partnerships and other collaborative business relationships. In the beginning of the collaboration, you have set some clear goals. After all, you started the collaboration to reach a goal you can’t easily reach alone. As the partnership progresses, you have to know how you are doing. Wind and turbulence may show themselves to a partnership as setbacks and unexpected competition. Only by measuring progress and evaluating the outcomes of these measurements would you be able to adjust the course of your partnership if needed.
There are several ways to measure an alliance. I will highlight three of them.
One way to measure an alliance’s performance is the balanced scorecard. The balanced scorecard finds its origins in the work of Robert Kaplan and David Norton. It was originally intended as an internal tool for strategic planning and operational performance. The balanced scorecard can also be used as an alliance dashboard.
The dashboard looks at four areas of performance:
- Strategic – measuring the key performance indicators (KPI) connected to the corporate objectives of both organizations.
- Operational – providing the performance of the key processes in the alliance.
- Financial – indicating the financial contribution of the alliance, if the alliance is still on target from a financial perspective.
- Relationship – measuring partner health, loyalty and satisfaction.
An article on the January-February 2010 issue of Harvard Business Review entitled “Managing Alliances with the Balanced Scorecard,” written by Robert S. Kaplan, David P. Norton, and Bjarne Rugelsjoen, extensively described how Quintiles and Solvay used the balance scorecard to manage their alliance.
The second way to measure an alliance’s performance is the health check. A periodic health check will help you get clear insights on the alliance’s status. The health check can be done based on a set of predefined criteria, by which both partners will score their view of the alliance. Criteria can include elements like the progress of the alliance, trust in the partner, and the responsiveness of the partner. By comparing the scores from the partners, the areas for improvement can be easily identified.
The third way to measure alliance progress is by conducting alliance review meetings. In these meetings, the partners will be evaluating the state of the alliance and define the areas for improvement. An alliance review meeting is less structured than the health check and, therefore, contains the risk that only elements that are easy to identify will be discussed.
It is good practice to have an alliance review meeting facilitated by an external independent party. An external party will be neutral and will see issues the involved parties may not necessarily be able to identify. The external independent party can talk about the elephant in the room.
These three ways to measure and evaluate alliance performance will allow you to adjust your course for the alliance to reach its goals.
You can only tell if the alliance is heading towards the direction it’s supposed to take if you consistently measure and evaluate its performance.
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