Date: 02/12/2014 Duration: 00:11:59

As the nature of organisations changes to become less insular and more networked, strategic business partnerships are on the rise and HR’s role in these partnerships is critical This podcast looks at HR’s role in business partnerships and the key considerations that should be made when approaching business partnerships. We speak to to Paul Sparrow, Director of the Centre for Performance-led HR and Professor of International Human Resource Management at Lancaster University Management School about why business partnerships are on the rise, the concept of mutual benefits and the three overaching themes that his research has identified as affecting the outcome of partnering arrangements; risk and capability, governance and sharing knowledge and learning beyond your own organisation.

This podcast will be followed up by the February episode where we speak to Shell and Rolls Royce to learn about their experience of HR’s role in the success of their business partnerships.

To discuss this episode on Twitter, use the hashtag #cipdpodcasts.

You're reading the transcript to the CIPD podcast series.

Philippa Lamb: The nature of organisations across the globe is changing as they become less insular and form new relationships. They operate in a changing environment and they need to be more networked and more agile.

As part of this strategic business partnerships are on the rise and HR’s role in them is critical, so critical in fact we’re going to be looking at this issue across two podcasts, this one and February’s. In February’s edition we’ll be getting the inside track on how business partnerships work at Rolls Royce and at Shell and we’ll explore HR’s role in the success of those partnerships.

Today we’re going to look at different partnership models and the key issues to think about before you enter into one. For this I talked to Paul Sparrow, he’s Director of the Centre of Performance-led HR and Professor of International Human Resource Management at Lancaster University Management School.

Business partnerships come in a wide range of guises from outsourcing, joint ventures, multi-agency responses, through to social partnerships among many others but why are we seeing so many more of them?

Paul Sparrow: You actually have very, very complex business arrangements where suppliers might actually have financial stake in the contracts that are being sold and you have to have these sorts of complex arrangements because no one organisation can have all of the technologies, you have to rely on and work with organisations that have got complementary capabilities.

PL: This has been true in private sector contexts for some time now but they're on the rise in the public sector too, particularly across healthcare and social services.

PS: The public might look at that and actually assume that you would have a single coherent delivery of service. Does it really matter if some of it is being done by an NHS Trust or some of it is being done by social services? So the other thing that's happened is that consumers have become more sophisticated and they actually therefore need and expect higher capabilities in the services that are offered and they expect those services to be joined up.

PL: The fact is that although the number of corporate alliances increases by some 25% a year the failure rate sits somewhere around the 60% to 70% mark. It’s a serious mismatch where huge investment leads, in many cases, to great losses.

PS: So we know that some of the more traditional arrangements, certainly joint ventures that these actually are very difficult to always make work. I think there are some sectors where they have operated around this energy and I can give you a classic example there are such long-term commitments they have to work. But there are many other sectors where that's not the case and so we know from previous research that there are high failure rates in those arrangements. We’re now looking at very, very complex arrangements and in much more politically difficult situations – public sector context is a case in point and a challenge of integration is just even more complex and behind a lot of these initiatives there are expectations, for example, about productivity gains and so on. So again although it’s different to the private sector you’re in an environment where if you don’t get this right you will not be able to deliver very stringent productivity requirements that actually face public sector delivery. So we have to know, we have to learn how to get this right and we haven’t got the time, I think, to experiment too much.

PL: In Paul’s research he identified three key partnership models: so it’s competitive...

PS: Yes.

PL: ...where you’re essentially coming to terms with someone who previously, effectively was a competitor.

PS: Absolutely.

PL: Complementary....

PS: Yes.

PL: ...which would be?

PS: That might be something where essentially the two partners have got capabilities which if they are brought together creates an additional capability. So neither partner would be able to actually move into this business model without actually working with someone who has got some other capabilities that can be joined with theirs to create an additional capability.

PL: Okay. And the third one cooperative?

PS: Cooperative and that's really where essentially there may be gains to the collaboration with you actually working in a more partnered arrangement but in some senses a bit more voluntary. So the police forces would be a good example of that. Historically there were attempts to think about merging different police forces and that proved to be very difficult. But the residual requirement was then one of saying however we can still see that if we work together on a voluntary basis and we think about alliances across police forces or across services that might sit behind it, forensic or armed service response, or whatever, we can cooperate but by cooperating both of us will actually either deliver better service or we will be able to improve productivity and make cost savings to apply to new services that we know we have to deliver.

PL: Would it be fair to say that one of the fundamental dangers is that HRs, quite understandably would tend to think about, or think in terms of each organisation rather than the needs and objectives of the partnership as a whole?

PS: Yes.

PL: It’s a very hard thing to do isn’t it to have this overarching strategy?

PS: It is but to be fair to HR it’s not only the HR function that actually has that kind of parochial view, so do most of the managerial team. And again this is one of the differences because with many previous arrangements you could work in a joint venture and you have your needs and requirements and so on. The challenge now is that increasingly for this collaboration to work someone, or functions somewhere in the organisation have to manage on behalf of the whole network and if you think of you or I as an end customer of these we would expect that.

PL: We assume this takes place but of course it might not. So you might have a collaboration which actually requires or creates new capabilities, that's the whole point of having the collaboration. And you might bring to this collaboration your own particular skills and expertise and whatever but there is a need for you to also think about and someone to take responsibility for the whole network. Has the whole network got the capability to actually really understand this, to really deliver this? How much of your world must your partners understand and what skills must they have to be able to do what they must do inside their company to work with you, and so on. But this requires a very different way of thinking.

PS: One of the common points of tension in business partnerships occurs when one organisation clearly benefits more than the other.

PL: Some organisations are better at doing this, they have just learned how to do it. They set up the structures so they learn how to operate the collaboration. But also in many of these collaborations there are really quite asymmetric levels of power, one partner can actually have a very significant role and importance and yet they are having to learn even though we’ve got high levels of power in this relationship we have to actually share and give.

PS: Yes now that's interesting isn’t it…

PL: And that's the difference.

PS: ...because before we’ve been talking really on the assumption that it’s equal partners joint together but it often won't be that will it?

PL: It may not be absolutely because in fact either because there may be a dominant home service, so for example the NHS and Trusts and so on these are huge entities and they might be in some of their service delivery collaborating with voluntary service organisation.

PL: Minnows by comparison?

PS: Yes absolutely.

PL: And yet key.

PS: And yet key.

PL: Paul’s research identifies three overarching themes that affect the outcome of these partnering arrangements. The first is managing risk and capability. These are risks to do with culture and control systems, risk associated with the environment you’re working in and also risk that could stem from one or other of the allied organisations.

PS: Most importantly, and often not thought about, there are risks about the interface. Now you think of most of the scandals that we’ve had, for example, in the public sector or whatever, invariably it comes down to the people who sit between various parts of the organisation and it’s really to do with the fact that well, actually the people at that workface didn’t understand or didn’t have insight, or didn’t share certain information and so on. So there are often also what are basically called interface risks. Now what this is saying to HR of course is that there is actually an important organisation design, an organisation effectiveness agenda here because we can diagnose this. You can look at your collaboration and you can look at the areas where the organisations join together, you can look at the skill groups that suddenly become much more important to your organisation. You can look at the job design of those skill groups, and so on. So you can mitigate these risks or you can actually put in strategies to make sure that the risks have really been minimised.

PL: The second factor is governance. The model that you choose, be it competitive, complementary or cooperative sets the tone for everything that comes later.

PS: All of the HR issues flow from this starting point. It will condition how easy or not it is to actually make the collaborations work.

PL: So the contract that's written in advance of the partnership is vitally important.

PS: The way in which you design and write a contract will shape the behaviour of your partner. And everyone always knows that you really judge the quality of these collaborations when the accident happens or when the crisis hits.

PL: Yes.

PS: That's when you suddenly realise and what you don’t want is every one going back and looking at the contract and saying, “Well it’s your responsibility it’s not mine,” and so on. And so we have learned how you need to construct and almost express contractual arrangements to shape the behaviour of your partners so that they behave in a way which is mutually beneficial.

PL: Finally there's the learning and knowledge sharing beyond the immediate organisation which can make the difference between success and failure and that is all about building capability.

PS: First of all HR can help the organisation build its own internal capability to work well in these environments. Many of these collaborations require very important injections of knowledge to the managerial teams. What’s becoming increasingly evident, people now talk about supply chain HR, if in fact I have now become much more closely wedded with my supply chain it’s in my interests in many instances to build the capability of my suppliers and I need to ensure either that they are doing this or I need to facilitate this or maybe we put our own injections of skill into that process. So what is also now becoming evident is that organisations are realising it is in our mutual interest for us to ensure that we have got key capabilities across the whole network.

PL: Paul will be joining us again in February’s podcast when we’ll look more closely at how HR can best manage these partnerships and HRs from Rolls Royce and Shell will be sharing their experiences. In the meantime Christmas is nearly here and in the first podcast of the New Year we’ll be showcasing big new ideas from a selection of business visionaries for HRs to get their teeth into in 2015. The series kicks off on January 6th. Don’t miss it.

Date: 03/2/2015 Duration: 00:16:40

Business partnerships are on the rise, with 25% more organisations setting one up in 2014 than in 2013. This episode follows on from the December episode which looked at the key considerations that should be made when approaching business partnerships. In this episode we speak to representatives from Shell and Rolls Royce about their experiences of business partnerships. Sofiah Umar, VP for HR Strategy and Planning for Shell tells us about using business partnerships as a way to collaborate with competitors and the challenges HR face in accepting the change of mindset required for success, while Charlotte Dearnley, Head of HR for Controls and Data Services at Rolls Royce, speaks about her role in building an individual culture and identity for her business unit, while remaining part of Rolls Royce, and the importance of fostering communication. Philippa Stokes, Head of Global Employment Relations at Rolls Royce echoes this point by describing why it is crucial to foster common understanding. We also hear from Paul Sparrow, Director of the Centre for Performance-led HR and Professor of International Human Resource Management at Lancaster University Management School on the role of HR in launching and sustaining successful business partnerships.

To discuss this episode on Twitter, use the hashtag #cipdpodcasts.

Correction: The number of Shell employees is around 93,000 not 30,000 as stated in the podcast.

You're reading the transcript to the CIPD podcast series.

Philippa Lamb: Back in December we brought you the first part of our series on business partnerships and here is the second and final part.

Now business partnerships are on the rise in a whole variety of forms. 25% more organisations set one up last year than the year before but failure is still by far the likeliest outcome. For every ten that start out with high hopes as many as seven end up dead in the water.

In the last podcast we heard from Paul Sparrow who is professor of performance led HR at Lancaster University and he outlined the most common problems for us.

Paul Sparrow: So we know from previous research that there are high failure rates. We’re now looking at very, very complex arrangements and in much more politically difficult situations. And the challenge of integration is just even more complex. We have to learn how to get this right and we haven’t got the time I think to experiment too much.

PL: Later we’ll hear from HRs involved with the partnerships on the ground at Rolls Royce and Shell and Paul will be joining us again to shed light on how to avoid the common pitfalls. Shell of course is a giant: a global oil, gas and petrochemical company, spread across 70 countries employing nearly 93,000 people and they have half a million contractor staff. Now they have a multitude of business partnerships on the go at any one time, of various types and lengths, many lasting for decades. Their partners include governments, the owners of the gas and resources, but also other oil and gas companies, in other words their direct competitors. Sofiah Umar is Vice President of HR Strategy and Planning at Shell.

Sofiah Umar: It is ironic because at one spectrum we’re actually competitors, in another spectrum to actually survive and be competitive in this industry you do need to partner with people who you would normally think of as your competitor. So it needs to be a collaborative type of relationship and you need to work as a team.

PL: Business partnerships are considered such a fundamental important part of the organisation that five years ago they established a permanent and specialist HR function just to help them operate smoothly.

SU: In 2009 we decided to create a dedicated organisation to provide strategic oversight to joint ventures all together. So it has the strategic oversight of around eight countries that we would consider as major joint venture partnerships. This helps us to also see okay there may be common themes across those countries that may be popping up that we ourselves in Shell need to have a specific interest in and that's quite important for us as well.

PL: Sofiah, working from central HR, understands all about the challenges for HRs who work in house with their business partners. As she explains doing that involves a complete change of mindset.

SU: I know people find it difficult going from a Shell organisation to a joint venture organisation because previously their governance structure was reporting to the Shell headquarters. In a joint venture governance structure it might be quite separate from the Shell organisation, which is perfectly fine but it does mean you have to think, okay what is the benefit of what I'm doing for that joint venture in the first place that also wouldn’t hurt Shell in the long run.

PL: Yeah that's quite a tricky thing to do isn’t it?

SU: Yeah and those who have been successful in that role, for example, if they were a HR adviser, HR business partner or manager in the joint venture partnership while it’s a continuous conversation of okay what would be most beneficial for all partners which that joint venture organisation and is there any conversation I need to have with Shell in the head office that I need to flag or raise with, if there is any flexibility that I need to make for certain Shell tools and processes that I'm responsible for implementing?

PL: Here’s Paul summing up the role of HR in launching and sustaining successful business partnerships.

PS: The first set of activities are to do with the integrity of the strategy. So the things that you have to do to ensure that those people who are collaborating, the management teams, actually have understood the whole consequence of this collaboration. Second challenge is to then say how do you actually ensure that once operations are in process that you actually maintain alignment with the strategy, because those who execute the collaboration often may forget...

PL: Indeed.

PS: ...what they’re supposed to be doing. So there are things you have to do to ensure continued alignment. The third phase we really would call operational integrity. Often you find that within the operations of partnered organisations there are different ways of thinking. There are ways that will again mean that the execution of the collaboration be knocked off course unless you understand and you address what you have to do to align at an operational level. And the fourth issue we would call operational optimisation. You are now operating and you have learnt how to work in a collaborative environment but as the collaboration evolves it also has new needs, you have to optimise your operations. Now that's when the questions about the HR structures often come in because many HR functions it is only once they get to this stage of we’ve now been working this for several years when they then think maybe we need to design our HR delivery system, which I think is a little bit after the fact and what we’re really saying is you actually should think about the HR design at a much earlier stage.

PL: Charlotte Dearnley is Senior Business Partner Controls and Data Services at Rolls Royce, or at least she has been for the last six months, before that she was part of Aero Engine Controls which was subsequently bought by Rolls Royce and then last year amalgamated with another part of the business to become Controls and Data Services. It has been a convoluted journey where the tension between assimilation and independence has on occasion been tight but despite this Charlotte and her colleagues are absolutely clear about their vision and mission.

Charlotte Dearnley: I think the aspiration for the business is to really be a continuing evolving and growing business unit. So having merged with this other wholly owned subsidiary there's a lot of focus on Controls and Data Services in terms of futureproofing elements of Rolls Royce, adding value to Rolls Royce, using the data part of our business to really capture and analyse data to help our customer, namely Rolls Royce, really think about things differently and add value to the overall business.

PL: Though owned by Rolls Royce and with Rolls Royce as their main customer Controls and Data Services is very consciously a separate organisation.

CD: We’re branded differently than the rest of Rolls Royce. You can go to any of our sites and it’s not branded Rolls Royce, it’s branded Controls and Data Services. Our colour palette is bright green and grey versus the blue and white of Rolls Royce.

PL: So as an organisation where’s the benefit to you in doing that?

CD: Rolls Royce is our main customer but we do have external customers who aren’t Rolls Royce so we have the opportunity to be able to flex our business to external customers when we’re not dealing directly with Rolls Royce.

PL: On the other hand whilst Charlotte is clear on their differences from Rolls Royce the two organisations which merged to become Controls and Data Services had different cultures from one another and they’ve had to find a way to combine these.

CD: Even such things as dress code, you know, so much more relaxed from one part of the business, just the way that things get done round here is different.

PL: So how do you resolve that then as you say because it sounds like a small thing but it’s actually quite a big thing isn’t it?

CD: It’s huge. It’s absolutely huge. So part of the journey that we’ve been on this year, part of the journey that I've led from a HR perspective is about how do we create a culture which is now for the new business Controls and Data Services whilst remaining true to the overall Rolls Royce culture as well.

PL: And what’s happening on the clothes front?

CD: So our clothes are still an issue that we need to resolve at some point but actually the cultural piece in terms of how do we want to be seen? How do we want people to recognise Control and Data Services? How do we want it to be seen versus the wider Rolls Royce group? Do we want a distinct, unique entity? And that basically is where we’ve got to.

PL: For Paul Sparrow it’s the people and how they relate to one another that really determines success or failure in any partnership.

PS: I know these collaborations are incredibly complex. In some senses actually they often come down to simple relationships and everyone will say this: it is the quality of the relationships at senior management level and it is the quality of the relationships between the key players and knowing their opposites inside the organisation.

PL: At the interface points we talked about.

PS: At the interface points absolutely. So every HR partner will know they have opposites in the other organisations, who they can work with and who beforehand they can actually identify the high level ways in which they will respond to various challenges in this collaboration.

PL: Meanwhile Charlotte has set up transformational teams made up of employees from across both businesses and at all levels to find common purpose and culture across their sites in Belfast, Bristol and Indianapolis.

CD: Again it’s opportunities to really drive some upwards and downwards communication through the business. The downwards communication is always easy to do but upwards is not an easy feat. And actually this is an opportunity for us within Control and Data Services to really lead the way in terms of creating a cultural cycle that Rolls could potentially benefit from in the longer term.

PL: In his research Paul pinpointed six areas of people-related risks – coordination, communication, control, culture, capability and finally conflict. Philippa Stokes is Head of Global Employment Relations at Rolls Royce and she's thought long and hard about how they manage their many business partnerships. Like Paul she believes that sitting down and trying to make sense of each other is the foundation of success.

Philippa Stokes: I think often it’s about actually there being common understanding of what the organisation, or that part of the organisation is trying to achieve, what are its goals and objectives, what are the particular challenges that it faces? And therefore you reach some conclusions about what’s the best way of operating? So one of the most important things I think is to have common understanding of that. I mean one of the six Cs is control. Maybe that for me I would translate as governance and how you get that bit right. If you don’t get it right then I think it can create a lot of confusion and perhaps a bit of chaos, that's another C.

PL: Perhaps in terms of responsibility and accountability?

PhS: I think that's right having clarity of accountability is really important to getting organisation working effectively whether that's Rolls Royce or anybody else I think.

PL: As research into business partnerships deepens the issue of accountability grows.

PS: There’s a double-edged sword to this research. On the one hand it says, “We can fairly reasonably say what you’re going to have to do if you work in a collaboration.” That’s the good news you can identify what you have to go and do. The slightly more disconcerting news is that we can say exactly what you have to go and do so if you don’t do it you will be held to account. And that is the challenge now, people will understand and they will look at functions in organisations and they will say many of these issues are foreseeable, they are known and what were your strategies that you put in place to actually manage this? So the accountability is going to increase on many functions and most certainly on HR.

PL: As we know the great majority of these collaborations do fail but why exactly?

PS: It is the early part of the thinking, organisations they make assumptions about their own needs and their own motives and they make assumptions about their partners, and they make assumptions about their partners’ capabilities. And in many cases where things end up going wrong is either because they had not understood the design challenges. So the collaboration was not designed in the way that would enable it to respond to more difficult times. So it’s designed for happy times...

PL: Yes but not designed to be sufficiently robust?

PS: But not more difficult times. Or it is essentially false assumptions about the capability of partners. Or what actually is happening inside your partner organisation, how good or bad they may be about certain things. So the due diligence is important.

PL: Sofiah says her biggest challenge is listening.

SU: Continuously trying to communicate without harm, having prejudgement or making assumptions where we’re coming from I think that's a thing that we need to hold back on is to accept that there are differences between the partners and essentially that is the reason why you became a partner in the first place because those differences were the considered benefits in that relationship and just sustaining that level of interest and communication with each other is probably time-consuming and I think it’s the more behavioural aspect of that relationship that is more challenging rather than anything else.

PL: As a multinational because you’re dealing with an extraordinary breadth of cultures and approaches?

SU: It’s not so much the national cultural differences, it’s more to do with organisational cultural differences, corporate cultural differences.

PL: At Rolls Royce like Shell the focus is on letting business partnerships find an identity which cultivates a sense of pride amongst everyone there.

CD: It’s getting the balance right between the uniqueness and differences within each part of the organisation and the benefits that come with scale, being a large organisation a FTSE 100 that obviously gives you some significant opportunities and benefits but at the same time you've got to kind of what is it that people align themselves to when they come to work in the morning is it the whole Rolls Royce brand? And in many cases absolutely it is but there's something more immediate than that as well. So what is it that connects me to my workplace every day? So I think it’s a combination of those things.

PL: It’s a fascinating challenge and one that more and more HRs are going to face in our evermore networked world. If you’d like to dig deeper into business partnerships and how they work go to before you do anything else.

Now coming up in April it’s our 100th Podcast and CIPD is celebrating in style with an episode all about you! What do you think it takes to be a truly great HR? What have you learnt that you’d like to share with everyone else in the profession?

The team will be out and about asking HRs for their nuggets of wisdom and we want to hear yours. Get in touch, I’ll tell you how to do that in a moment, and give us your tales from the frontline. Now they might be funny or serious, successes, maybe disasters, we want to hear them all and yes you can be anonymous if you want to.

Now which favourite insight you want to give us is up to you but it might be the best piece of advice you ever had, maybe a lightbulb moment when something happened and you really got what HR is all about. Maybe a complete disaster taught you a lesson that you've been using ever since. Maybe you have wise words for your fellow HRs as they make their way up the career ladder.

Here's how you can take part just go to the podcast homepage on the CIPD site and click on the ‘100th Episode’ box on the right. That is it. We’ll get in touch and organise a quick chat to record your thoughts over the phone at a time to suit you. It is dead simple it’ll take you five minutes and don’t worry about sounding like a newsreader we want to hear the real you, ums and ahs, and all. Go on you know you want to!