Tip 25: Measure Alliance Performance on Leading Indicators
Once you’ve got your alliance or partnership formed and running, how then do you determine if your endeavor is headed towards success or not? Do you measure the success of your alliance or partnership based on the revenue it generates, or do you consider other factors showing its success?
For many alliances, revenue is an important element. However, many people tend to forget that revenue is an outcome. It is the result of all the elements we have done before in the alliance and in creating the alliance.
When measuring alliance performance, we need to measure leading indicators versus lagging indicators. We need to measure those elements that can be adjusted to ensure alliance success and revenue as an outcome.
Filling up an alliance balanced scorecard, which we discussed previously, can be a helpful tool to keep track of the alliance’s performance. The measurements on strategy and financials are outcomes, while measurements on operations and relationships are leading indicators. The leading indicators are the ones that will tell you where to adjust and where to optimize the outcomes of your alliance.
Financial metrics are relatively easy to gather data on, and that forms the risk of measuring what is easy to measure. The relationship elements are often seen as the soft elements. However, the soft elements are the ones that lead to the hard results. Hence, they need to be measured and adjusted where possible.
It is advisable to acquire outside help to assess the relationship elements. Only an independent assessment will help you get a clear view of the relationship. Being fully honest on how one party views the relationship with the other is one of the most difficult things to do when you are actually talking to the other. An independent outsider can help you objectively assess the relationship and work with the alliance partners to create an improvement plan.
Many alliances fail due to relationship issues that could have been prevented by timely health checks and proper course adjustment. Make sure you are measuring the right elements in your alliances.
The white paper “Enabling Transformational Alliances – Best Practices in Partner Health Diagnostics” by Norma Watenpaugh dives into the topic of partner health assessments more thoroughly. It is recommended for further reading on this topic.
Instead of basing the alliance’s success on the revenue it generates, you need to evaluate possible relationship issues to determine if the alliance is still healthy and working as it should.
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