Four strategies to deliver value with contract partnerships
Strategic alliance partnerships are a common contracting vehicle for maintenance and modifications work in industrial markets. Yet, as we see more and more opportunities to bid on such alliance contracts, I fear that the true value of an alliance is sometimes lost in the competitive procurement process.
If the processes driving supply and demand in the marketplace are changing, and they always do, then it stands to reason that the structural forms around which we organize ourselves are also subject to change to continue to create value.
Alliances are special bonds between companies and should be formed any time there is an opportunity for both parties to operate and excel in a way that is greater when combined than when each is operating separately. It is this special relationship which creates value.
At Day & Zimmermann, we believe that the relationship between an owner and a contractor should be one of aligned goals, streamlined work processes, and shared rewards aimed at asset management. In order to achieve the full potential of the relationship, we recommend a "single organization" approach. The spectrum of this approach ranges from selected integration of the two organizations to full merger of certain human assets. At any point on the spectrum, the goal should be continuous movement toward an asset management model that completely eliminates all conflicting objectives and focuses solely on high-performing work processes in an environment fully encouraging the engagement of each individual.
So what should plant operators be looking at when evaluating alliance partners for maintenance services? Below are four strategies that plant operators can use to ensure that they will achieve valued alliance relationships.
The saying goes, an alliance contract is like a marriage. You don’t want to have to pick a partner more than once. But some of the traditional strategies that plant operators use when selecting partners do not weigh long-term benefits as much as short-term cost considerations. When evaluating contractors for a stand-alone maintenance project, the risk is lower; in an alliance agreement, a poor contractor will result in ongoing headaches that are difficult to manage. Reliability, a proven track record of safety performance, and broad experience should be strongly considered when choosing an alliance partner. If these items are weighed equally with cost, a plant operator can be more confident the alliance will work.
It can be unsettling for any plant operator to bring in an outsider partner for services. Even when the benefits of the relationship are clear, bringing in non-company personnel is a big change for frontline employees and even leadership. That’s why it’s important to consider not only the services a partner offers, but how company cultures match up.
It’s an often overlooked but critical aspect of successful alliances. Plant operators should look at a maintenance partner’s leadership structure, its treatment of employees, and its core values. If these seem drastically different from those of the operator, than it will be difficult to integrate the two teams and maximize efficiency.
Tailor the team
Even when organizations find a good culture match, alliances still require strong leadership in order to thrive. There’s not a more important individual relationship in an alliance than the one between the managers from each organization that are tasked with overseeing its success. These individuals must balance the needs and goals of their own organization with those of their partner. They must have a collaborative and collegial relationship with each other. Even in the most successful alliances there are occasionally conflicts. Without strong leaders to manage these issues, they can spiral out of control and derail or delay a project.
Every maintenance contract, whether it’s an alliance or not, outlines a set of goals that the contractor is expected to meet. But setting goals in an alliance should be different than those for individual projects. First of all, goals in alliances are most likely to be achieved when they are mutually agreed upon. This requires ongoing debate and discussion between leadership on both sides.
While this might be uncomfortable at first, shared goals ensure that both parties have a vested interest in seeing them achieved. Secondly, although outlining project deliverables is a necessity, goals in an alliance contract should be broader. Since it is a long-term agreement, the goals should align closely with the plant operator’s overarching company goals. In some cases, the language may even be the same.
Even as many contractors and companies tout the benefits of alliance models, not all are actually able to develop the type of long-lasting relationships that result in maximum value for both sides. A truly advanced alliance would be one in which work processes are mapped, activities are grouped into jobs, and jobs are assigned to the persons most qualified without regard to owner/contractor affiliation. In that world, there are no redundancies and no low-value jobs, and efficiency and effectiveness are maximized.
The sticking point to all of this seems to center on trust. Can the owner really trust the contractor, and vice versa? Let’s move to the conversation to value. A well-defined and smooth operating "alliance" work process uses fewer people, so staff costs are lower, and produces faster, more accurate results. How much is this worth in your organization?
Ken Jobe is vice president of Process & Industrial at Day & Zimmermann.