Amsterdam Business School
One IOR and multiple transaction characteristics: a case study to
the effect of trust and control
Name: Wim den Boef QC Student number: 10902031
Thesis supervisor: Jort ten Berg MSc Date: June 19, 2016
Word count: 13120
MSc Accountancy & Control, specialization Control
Statement of Originality
This document is written by student Wim den Boef who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Abstract
This paper contributes to further understanding of the interaction between control and trust, dependent of the transaction characteristics of two distinct services within one single IOR. By reviewing the impact of contracting, controls, asset specificity, appropriation concerns on trust, the paper describes how trust is more or less impacted per individual service. It has become evident that asset specificity is a main driver in this specific case setting, creating a dependency, or lack of dependency, with both having a different impact on trust. Trust is put at the test in the situation where there is low asset specificity and doesn’t grow because of the lack of positive expectations about the future. Trust is thick, in the situation of high asset specificity, in a cooperation where commitment is signaled and a strong normative frame is in place. The effect of contracting and controls is basically happening in line with theoretical expectations in building thin trust.
Contents 1 Introduction ... 5 2 Theory ... 7 2.1 Inter-Organizational Relationships ... 8 2.2 Control ... 10 2.3 Trust ... 14 3 Casestudy ... 17 3.1 Research methodology ... 17 3.2 Case setting ... 20
4 Findings of the case study ... 22
4.1 Contracting ... 22
4.2 Formal controls ... 23
4.3 Asset specificity ... 26
4.4 Appropriation concerns ... 27
4.5 Trust ... 29
5 Discussions and key conclusions ... 31
6 Referencing and literature list... 34
1 Introduction
Control and trust work together in a process of building a stable long-lasting Inter Organizational Relationship. Both elements need to be present at a certain level to start. Contractual agreements provide formal controls to ensure alignment of interests and consequently a safeguard against legitimate negative expectations about future behavior. The institutional environment provides a basic assurance through legal-, social- and economic arrangements, also referred to as institutional trust (Rousseau et al. (1998). The powerbase that is shaped by the formal controls and institutional environment is creating the governance structure that will lead to “thin trust” (Vosselman and Van der Meer-Kooistra, 2009, Minnaar et al., 2010). At this point, a “zero-positive situation“ is reached at which expectations of negative behavior are compensated and the focus can be put on the IOR. Unfortunately, the governance structure is not able to capture all possible opportunistic behavior. From here, parties must show they are willing to take a risk, by having positive expectations about the ability, benevolence and integrity of the other. This is a voluntary decision to take by the parties concerned and is a first signal of positive expectations about future behavior. This self-initiated signal of positive behavior is coming forth from a normative frame (Lindenberg, 2000) where the priorities and focus are set on the shared goal of the IOR so commitment and willingness to act to together is serving the long-term interest of the individual parties, more than any other goals. Giving up on the common goal can have consequences that can do more harm than continuing to pursue the common goal. Partners will come to a self-enlightened-situation, and will actively prevent each other to switch to a loss-frame. At this stage, trust is gradually growing as parties are pro-actively signaling their co-operative intentions to make the IOR successful. Supported by the accounting-function, parties voluntarily share information on costs, performance and ad-hoc calculations to confirm and express their commitment to the common goal (Tomkins, 2001). This “relational signaling” is contributing to the building of thick trust (Vosselman and Van der Meer-Kooistra, 2009), and has strong presence in “solidarity situations” (Lindenberg, 2000), where various situations occur where information sharing is supportive to increasing trust. Moreover, in case this positive behavior is lacking, the basis of the normative frame is insufficient strong. Previous research (Vosselman and Van der Meer-Kooistra, 2009, Minnaar et al., 2010) shows that trust and control are interacting in the process of reaching a stable and durable relationship. When no trust is present, agreed contractual arrangements and the institutional environment are creating a thin layer of trust. Consequently when parties start relying on each other’s positive motivations behind the IOR, the need to be perceived as trustworthy will lead to relational signalling, initiating additional control measures and practices.
This paper will focus on the interaction between controls and trust, giving in to the request of previous research (Dekker, 2004; Vosselman and Van der Meer-Kooistra, 2009) and more specific following on previous research of Minnaar et. Al (2010), by trying to infer theoretical implications from different context specific situations: how does the dynamic between control and trust look like, given two services with specific transactional characteristics, within an IOR?. Drawing on the concept (Fig. 1) of Vosselman and Van der Meer-Kooistra (2009), the paper aims to make a contribution to the scientific debate by an empirical investigation of the relationship between control and trust in an IOR.
First, an overview of the existing literature will be presented to create a better insight in the theories that make the baseline, and the constructs of the accounting-control-trust nexus (Vosselman and Van der Meer-Kooistra, 2009). Next, the methodology is described, as well as the setting of the case study, consisting of Partner A, a supplier in IT hardware, software and services, for which partner B is delivering repair and support services, and end-user support services. The final section consists of an analysis of the findings with regards to the dynamic in formal and informal controls in answer to the variables of the construct.
2 Theory
Growing competition drives organizations to look for competitive advantages; an Inter-Organizational Relationship can offer such advantages. By going into a strategic alliance, expertise that was missing before in the organization, becomes available (Das and Teng, 2001; Nooteboom et al., 1997). Much research has been performed (Coletti et al., 2005; Gulati and Nickerson, 2008; Vosselman and Van der Meer-Kooistra, 2009; Tomkins, 2001; Williamson, 1991) to this phenomenon to study the control problems that arise when processes are moving beyond the organizations boundaries, instigated by the request of Hopwood (1996) to researchers to switch their attention from the thoroughly analyzed traditional hierarchies to the new developments following from the organizational evolution. Vosselman and Van der Meer-Kooistra (2009) refer to three views to understand what is making an IOR work: a rationalist view, a constructivist view or a mix of both views. This paper is taking the rationalist view, which is basically supported by ‘transaction cost economics’ and researches the relationship between control devices and management control problems. The roles for control and trust are considered different concepts, where control is aiming on predicting certain behavior and trust is about expecting certain behavior, but both are key when it comes down to handling uncertainty and opportunistic behavior. The relationship is in two directions, either substitutive or complementary. Where there is substitution, the increase of trust will result in a decrease of control and the other way around. In situations where the relation is complementary, where more control will lead to more trust, though there is a certain limit to consider when too much control might lead to distrust. (Anderson et al., 2000; Dekker, 2004; Langfield-Smith and Smith, 2003; Van der Meer-Kooistra and Vosselman, 2000; Vosselman and Van der Meer-Kooistra, 2009; Tomkins, 2001). The constructivists are taking the role of accounting as being key in building IOR’s. According to their view, trust is following, as a complementary consequence from management controls. As such, control is a vehicle on which trust arrives in a relationship. When trust is not present, control practices are ensuring the continuation of the business processes. Ultimately trust is expected to show up again. (Cuganesan and Lee, 2006; Håkansson and Lind, 2004; Mouritsen and Thrane, 2006). The mixed view of both rationalist and constructivist base, see the interrelationship between the control instruments and the social environment as a starting point (Chua and Mahama, 2007; Free, 2007; Thrane and Hald; 2006). Coordination of tasks that go beyond the boundaries of an organization requires more attention, and appropriation concerns related to asset-specificity are justified (Williamson, 1991). In order to respond to these control problems, formal and informal controls can be implemented. Formal controls that are following from contractual agreements or institutional environment as well as formal control following voluntary initiatives of the partners.
Trust appears in varying size throughout the relationship, from thick to thin, either resulting from formal controls or resulting in formal controls.
2.1 Inter-Organizational Relationships
In several research studies in the past, Inter-Organizational Relationships (IORs) has been referred to differently, such as “collaborative environments” (Coletti et al., 2005), “exchange performance” (Gulati and Nickerson, 2008), “interfirm transactional relationships” (Vosselman and Van der Meer-Kooistra, 2009), “relationships, alliances and networks” (Tomkins, 2001) or as one of the basic “discrete structural alternatives” (Williamson, 1991). The motives for organizing economic activities in an IOR are broad and can be explained by more than one theoretical lens. Williamson (1979) argued to distinguish production costs as well as transaction costs. The latter is focusing on the costs to manage the primary process, and is challenging the costs for internal production (vertical integration) against the costs for buying directly on the market or production through a cooperation-form with another party. Judged by the features of the transaction, Transaction Cost Economics states that reducing costs related to the transaction is the main driver for selecting a best-fit governance structure, “the institutional matrix within which transactions are negotiated and executed” (Williamson, 1979). He argued that between the two main appearances of economic organization, market and hierarchy, also a third, a hybrid governance form, is to be acknowledged taking any form between the two extremes. The market is anonymous and focused on the here and now, and basic classical contract law can govern the transaction with specific attention on the transfer of ownership, meeting the agreed delivery requirements and consequential actions in case of non-delivery. Moving to more long term contracting, with occasional but rather specific transactions, also more uncertainties arise for which it will be very costly to take appropriate countermeasures upfront, not to mention recover these high costs in an uplift to the price. In these situations, neo-classical contracting law is able to govern the transactions, as it allows more flexibility in case of any unforeseen contingencies by giving priority to bringing the transaction to a good end through arbitration instead of litigation. When the characteristics of the transactions still remain specific, but the frequency is recurring, than the area of attention of contracting law is moving away from the pure transactional exchange process and its possible adaptions, to a specific cooperative environment with its own standards. Relational contracting has developed as a spin-off of classical and neo-classical contracting law, focusing on the relation, and how it develops through time. Basic motivation for contracting is in aligning the interests in order to mitigate opportunistic behavior (Williamson, 1979). Each form of economic organization has its own inherent governance structure. The governance for the market mode will be focused on
anticipating on price changes resulting from demand and supply in a free competition. Risks are mitigated through classical contract law. The hierarchy mode will be less adaptive to the market, but is capable to react to disturbances in a coordinated way due to its formal organization, though bureaucracy will increase. Finally the hybrid model is a combination of both, integrating the strong characteristics of both market and hybrid mode. According to Williamson (1991), the theory behind TCE predicts that the type of governance will be chosen that comes with the lowest costs of transaction, consisting of the costs for writing, monitoring, adapting and enforcing contracts, which are dependent on the specific characteristics of the transaction itself. Both the frequency, occasional or recurring, that a transaction takes place as well as the uncertainty that comes along with a transaction, are important characteristics but asset specificity is considered to be the most significant one (Williamson, 1991; Langfield and Smith, 2003). Asset specificity is concerned with the ease of which an investment in an IOR can be used for alternative business purposes, without losing value. The more dedicated and transaction-specific the investment is to the IOR, the more ‘asset specific’ or idiosyncratic (Williamson, 1979) it becomes, and also the less the possibilities become for alternative use of the investment outside the IOR. Asset specificity leads to dependency between both partners, due to the fact that the supplier lacks alternative uses, but the buyer also has no alternatives for replacing the supplier any different than at high costs. Asset-specific investments can be in the shape of investments in physical capital as well as in human capital, by knowledge-building through training. At the same time appropriation concerns arise, as each proposal to adapt to contingencies can bring in tempting short term opportunities that compete with the long term goal of the relationship. Although a contractual agreement is contributing to aligning the interests of both parties (Williamson, 1979; Minnaar et al., 2010), it remains unrealistic that every possible risk can be mitigated by writing an all exhaustive contract, and in order to cope with these appropriation concerns more (costly) coordination controls are necessary (Dekker, 2004). Governance is able to compensate for expectations of appropriation concerns (Vosselman and Van der Meer-Kooistra, 2009), but it only created a thin layer trust. From a control perspective, hierarchical controls are very capable in dealing with appropriation concerns by incentivizing goal congruent behavior, monitoring on progress and having the ability to control by fiat (Gulati and Singh, 1998), but bureaucracy is lurking. To overcome the dilemma between control and associated costs, the hybrid governance model is offering a flexible mixture of features of both market and hierarchy controls, as it incorporates the advantages of both, albeit that it puts tempting short-term interests to the flank in favor of allowing to commit to the interest of the IOR (Vosselman and Van der Meer-Kooistra, 2009) .
In summary, an IOR is cost effective cooperation of two or more parties, where control problems arise, appropriation concerns are legitimate and coordination requirements are needed. Controls are necessary to safeguard investments, balance interests and to control for the interdependence coming from processes that go beyond organizations boundaries. As a result of incomplete contracts, these risks will need to be mitigated through formal and informal controls.
2.2 Control
The general purpose of control is to predict another one’s behaviour (Das and Teng, 1998). As the processes are going beyond the organization’s boundaries, it is obvious that control problems arise in an IOR, especially in the area of appropriation concerns and coordination of tasks. The purpose of an IOR is to pursue a mutual interest by collaborating. The IOR is exposed to relational risk, if due to a lack of cooperation the common interest cannot be reached (Coletti et al., 2005). Opportunism is tempting in situations where it is difficult to measure the individual input, related to the output of the collaboration (Vosselman and Van der Meer-Kooistra, 2009). To ensure commitment to the common goal, Lindenberg (2000) speaks about framing, where the focus of the organization is on the goal with the highest priority while putting other competing goals to the background. Risks for opportunism or a frame-switch (gain, or loss frame) is low when parties are in a clear and obvious, normative frame where there is a strong presence of a main goal, to cooperate as expected, comply to the “accepted norms of behaviour”. This focal goal is a push for co-operative behaviour. Formal controls, like monitoring to verify that all performed actions are in the IORs interest, incentivizing to stimulate desired behaviour, and penalizing to discourage opportunistic behaviour, will stimulate more goal-congruent actions, and can further mitigate the relational risk that Coletti et al. (2005) refer to. When formal controls are in place, the interests of the IOR are being safeguarded, and are contributing to building thin trust (Vosselman and Van der Meer-Kooistra, 2009). Thin because it only has a protective character instead of also stimulating cooperative behaviour. Thin trust however, is able to build a track record of desired behaviour that will gradually enhance trust (Das and Teng, 1998).
Control is contributing to building trust. However, others argue that control can also be perceived as a signal that one party does not trust the other, and so negatively impacting the cooperation (Das and Teng, 1998; Rousseau et al., 1998). Coletti et al. (2005) conclude that it is a quest for the “optimal level of control, considering both the benefits (through reduced incentives for opportunistic behaviour) and the costs (including a degradation of trust)”. Vosselman and Van der Meer-Kooistra (2009) argue that when there are no legitimate motivations to expect opportunistic
behaviour, formal controls should not be in place. When the existing normative frames of the partners are already strong, unwarranted formal controls can easily produce opposite, negative behaviour, and thereby frustrating the previously good cooperation.
Merchant and Van der Stede (2012, P.6) define management control as "all devices and systems that managers use to ensure that the behavior and the decisions of their employees are consistent with the objectives and strategy of the organization". They argue that the programmability of the activities, together with the measurability of the outcome is determining the “best fit control” (Fig. 2). In case the activities are clear and they can easily be caught in a process but the output is difficult to measure, than action controls are preferred. On the other hand, when it is not clear what tasks have to be performed but the output is clearly measurable, than result controls are a better fit. When both task programmability and measurability are high than action combined with result controls are in place. Finally, social controls come in place when there is uncertainty about the tasks to be performed and the output is difficult to measure so both action- and result controls cannot be applied (Merchant and Van der Stede, 2012).
Fig. 2
Result controls are indirect controls, often used when it is not clear exactly what behavior will be desired to achieve the objective. Result controls provide a high level of autonomy to the employee but also require "knowledge of the desired results, ability to affect the results and ability to measure controllable results effectively" (P. 40). Consequently, result controls are well equipped to influence the behavior of managers, or at least employees that are entitled to take decisions. It is for that reason, that result controls are perceived as a basic element in setting up decentralized organizations (Abernethy et al., 2004). Divisional managers are measured on the results their division is producing , and it appeals to their entrepreneurial talent as it allows the division managers to run the division independently and get compensated according to the level of their performance. A good example of an effective result control is the return-on-investment measure,
where the profitability of a division is measured. It is of high importance that the measure is in line with the organizations goals and can be measured objectively (Merchant and Van der Stede, 2012). Action controls are a direct type of control as they steer the direct actions of the employees. They are effective as they touch all three control problems, lack of direction, motivational problems and personal limitations through one of the following four forms: 1) behavioral constraints, where measures like passwords, locks and access rights but also segregation of duties, physically limit the potential behavioral possibilities up front, 2) pre-action reviews, as often is visible in budgeting cycles, in which planned actions are thoroughly reviewed and possibly adapted to get the final approval to perform from the reviewer, 3) action accountability holds the employee accountable for his actions, either by referring to procedures and policies, or companywide instructed codes of conduct but also less clearly communicated but nevertheless from professional point of view explicitly expected behavior and 4) redundancy, which is a rarely used and expensive solution by over-applying headcount or equipment to a task to make sure it gets done. Critical to their effectiveness is that both desired as well as undesired actions are determined, and the ability to make sure that these actions respectively do, and do not occur (Merchant and Van der Stede, 2012). Personnel/cultural controls can be considered social controls, based on shared norms and beliefs, attitude but also expected behavior in the same way as trust (P. 90). From costs point of view they are the less expensive controls and at some point they have to be relied upon. Personnel controls are almost self-evident as they come forth out of the employee’s natural habit to control or motivate oneself. They help creating an understanding of what the organization wants, help ensuring that an employee is well equipped to perform his job, and help to get the employee to turn into self-monitoring, and therefore show loyalty or intrinsic motivation. Personnel controls can be implemented through careful employee selection and placement, formal training as well as informal training, like mentoring and a job design that gives the right people a fair chance of success. Cultural controls are about mutual monitoring, and create a way of mitigating undesired behavior by the group. Referring to shared traditions, norms, values, beliefs and practices, a long lasting culture can arise. Contributing to the organizational culture are codes of conduct, group rewards, intra-organizational transfers and tone at the top. Personnel/ cultural controls are best implemented from the earliest stages of an organization, when the management of the organization can ultimately influence the organization’s norms and values. Consequently employees of the organization will accept the culture, following from the norms and values, as self-evident. The resulting behavior will be seen as “business as usual” and not been looked at as again another control. A too strong presence of personnel/ cultural controls, where organizations goals are “naturally” close to the employee’s goals, can also have a negative effect that if the organization
wants to change, it would be difficult to turn around such strong culture (P. 95). Moreover, in such a situation, relying too heavily on personnel/ cultural control can also facilitate opportunistic behavior by overly trusted employees, as was suggested by a survey of KPMG Forensic (2007). Usually though, organizations with a strong culture are often performing more consistent. Organizations with less stable cultures, often are faced with mergers, resulting in multiple cultures among their employees (Merchant and Van der Stede, 2012).
In a similar vein, like Merchant and Van der Stede (2012), Simons (1994) refers to four formal control systems, used by managers: 1) beliefs systems, comparable to the social controls and used to build, share and strongly repeat the norms and core values, as well as the goals of an organization, 2) boundary systems, comparable to action controls and used to ensure appropriate behavior, 3) diagnostic systems, comparable to result controls because of their monitoring characteristics and 4) interactive control systems. The latter can result from all previously mentioned control systems, when management attention is temporarily but repeatedly focused on a subject coming forth out of the diagnostics. The personal involvement of management should lead to dialogue and a learning effect to overcome the uncertainty that the subject embodies. Research from Simons (1994) showed that top managers rely heavily on the leveraging effect of these 4 controls systems to provoke organizational change in a drastic (revolutionary) or more organic (evolutionary) way.
Abernethy et al. (2004) see the organizational model also as a rationale behind the control choice. Their statistical research indicates that result controls like divisional summary performance measures (DSM’s) are highly favorable in decentralized organizations. Information asymmetry arises when corporate management is lacking knowledge that is essential to the division’s performance or when it becomes too expensive to acquire that same knowledge (Christie et al., 2003). It is for that reason that decision rights are delegated down the line to a decentralized divisional level. Consequently the use of DSM’s will increase. They also show that it is important to understand the direction of the interdependency that can arise, as it will decrease the usage of DSM’s when other organizational divisions are impacted by the performance of the decentralized division. A too big a focus on the isolated divisional performance would not be supportive to stimulate cooperation and discover the full potential of synergy between both divisions. However, when the decentralized division is the dependent party, DSM’s are likely to increase even though the information captured in the DSM is more noisy by the uncontrollable impact from other divisions. Main thought behind this opposite direction is that if the DSM contains information about the ability of the manager to deal with interdependencies, it can be used as a benchmark towards other divisions that are impacted by interdependencies. Ideally, the DSM’s capture
measures that are able to represent the performance of, as well as the delegated decision rights to the division (Abernethy et al., 2004).
To conclude, when it becomes unclear on what steps to take to perform successful, or other forms of control become too expensive, organizations will rely more on social controls, which is in the basis relying on people acting in a normative frame, in the best interest of the company. Researchers claim that formal controls can have a negative effect on trust due to perceived mistrust or to the opposite, formal controls can enhance trust by providing a “track record” of goal congruent behavior (Das and Teng, 1998; Vosselman and Van der Meer-Kooistra, 2009). Merchant and Van der Stede (2012), as well as Simons (1994) acknowledge social controls respectively the beliefs systems as ways to establish and grow the norms and values, or even provoke new culture in an organization, where reliance on an employee’s behavior is key. At the same time, an organization should be careful in relying too heavily on trust as it can bring employees in situations that might conflict with their short term interests (Merchant and Van der Stede, 2012).
2.3 Trust
According to Bradach and Eccles (1989), “trust is a type of expectation that alleviates the fear that one’s exchange partner will act opportunistically”. One way of mitigating the risk of opportunism as a consequence of cooperation, is by not entering into a cooperation at all and perform the anticipated tasks within the organization itself (vertical integration) or by using formal controls to limit opportunistic behaviour. Trust can be an acceptable substitute if it will result in lower costs than the alternative solutions to mitigate opportunistic behaviour (Bradach and Eccles, 1989; Nooteboom et al., 1997, Das and Teng, 1998). Trust can also be complementary to formal governance (Das and Teng, 1998; Dekker, 2004) and Vosselman and Van der Meer-Kooistra (2009) suggest that trust building and control are connected in a bi-directional way; the mere absence of trust requests for the implementation of formal controls in the process towards thin trust, whereas the clear presence of trust can give rise to additional initiatives of voluntary disclosing information, giving insight in information that was previously regarded as confidential. The latter is signalling the commitment to the IOR and confirming the trustworthiness of the partners. Lindenberg (2000) refers to 5 solidarity situations where such voluntary signalling of commitment is likely to be expected, such as 1) “common good situations”, signalling the willingness to cooperate, 2) “sharing situations”, signalling the willingness to share even unexpected gains, 3) “need situations”, expressing the willingness to help one another in case of
need, 4) “breach situations”, signalling the willingness to withstand tempting offerings that compete with the common goal and, 5) “mishap situations”, where clear compensating behaviour is shown in case a partner unintentionally cannot meet his agreement. The willingness to accept vulnerability seems to be the deeper philosophy behind trust. Before actually starting to act co-operatively, one has to rely on the good intentions of the other. By entering into a cooperation, the risk that one is willing to take can be considered as a confirmation of trust (Dekker, 2004; Vosselman and Van der Meer-Kooistra, 2009). Parties are in a stage of enlightened self-interest when their ever present tendency to act opportunistically in favour of their own short term interest is tempered by strong enough, conflicting goals, that are embedded in the setting of the normative frame they are in. It results in a delicate balance between short term, and long term interests (Vosselman and Van der Meer-Kooistra, 2009), but as long as the IOR’s goals are strong and stable enough, they will be able to absorb the uncertainty potentially coming from opportunistic behaviour within their normative frame. Especially when the measurability of the performance of the IOR is difficult or expensive, such strong normative goals will contribute to the stability of the relationship. Partners in the IOR will work hard to grow the relationship, and are keen on keeping the relationship stable. Whenever circumstances can give rise to a potential switch of the normative frame of one of the partners into a loss frame, the other partner will do anything to prevent this switch from taking place, due to the potential damaging effect a loss frame may bring. By actively investing in the relationship, leading to a continued strong and stable relationship, both partners to the IOR are creating a stable balance between their personal short term interests and the long term interest of the IOR. By signalling their commitment to the IOR to the other partner, trustworthy behaviour is getting shape. The partners is making clear it has faith in the partner’s competence, benevolence and integrity, and thereby, step by step thin trust is growing into thick trust.
Trust can originate due to the belief that the other party will always act in the best interest of the IOR (goodwill trust) or due to the belief in the competencies (capability trust) of the other party (Sako (1992) as referenced in Dekker, 2004). Rousseau et al. (1998) distinguish three kinds of trust. One is calculus-based trust, which is based upon credible information (reputation, certification), coming from other sources, proofing the intentions or competencies of the trustee. Deterrents like for example one’s reputation that is at stake if opportunistic behaviour is in play, are reinforcing calculus-based trust. Second is relational trust, coming from previous experiences between the Trustor and trustee, in which it is expected that due to the lack of opportunistic behaviour it will lead to an increased cooperation. Third is institution-based trust where trust is built on the presence of legal forms, social network and societal norms regarding conflicts and
cooperation. The latter is, together with the contractually agreed formal controls making the powerbase for the governance structure and a baseline for thin trust. The agreed controls are necessary to mitigate opportunistic behaviour and to reward behaviour that is in line with the IOR’s goals. For example, open book accounting can take away any information asymmetry between the two partners, by providing sufficient insight. On the other hand, financial incentives in combination with performance indicators on income and costs can be useful in stimulating desired behaviour (Dekker, 2004). These controls are contributing to aligning the interests of both parties by providing trust, and as such controls are acting as vehicles for trust, in line with the constructivist view of Mouritsen and Thrane (2006). Governance following from contracting will provide safeguards to a certain level in the cooperative relationship, but is by itself not sufficient to provide thin trust. Rules and legislation coming from the institutional environment however will provide additional trust by covering the uncertainty and complicated structures with regard to the transactional relationship.
Trust is a building on previous, interactive and repeated experiences and will depend on information about the activities as well as information about the state of trust (Tomkins, 2001). The more trust is increasing through repeated interactions, the lower the risk that the activities are not managed in the collaboration’s interest (opportunistic behaviour) and so the less the need for information will be. The relation will be an inverted one because of the limited risk inherent to the low level of uncertainty due at the beginning of the relation, when breaking the collaboration will not have large consequences. At the stage following, when the collaborations matures, the need for information will grow in line with the trust that is build: trust needs information to build. On a certain point in time the need for information will reduce as the level of trust is sufficiently high. When there is a trust relation, it is also expected to continue for a longer period of time.
In summary, trust is an important mechanism to mitigate control problems. Complementary to or substitutive of formal controls, trust is capable to reduce the level of opportunism to an acceptable level at reasonable costs. Formal controls can enhance trust and overtime trust can reduce formal controls, as the build-up experience has proven to be trustworthy.
3 Casestudy
3.1 Research methodology
This paper aims at investigating the interaction between control and trust in an IOR where two specific services are being offered. As the paper will focus on the motives and context of this specific situation the research method will be qualitative, compared to quantitative research which is strong in averages and distributions, coming from data analysis and complex models with predictive powers. By collecting our data through qualitative research, it is possible to carefully analyze the actions of the key players, and therefore this paper aims to better understand the motivations for what is happening in the IOR between trust and control. The review of existing theory on IOR’s, trust and control is the basis from which questions have been derived. (Smith, 2011). Because of the specificity of the setting, the selected methodology is field research (Silverman, 2005), and it involves qualitative data, retrieved from document analysis, own observations and semi-structured interviews with key-players, which allows the freedom to ask the questions in random order as seems suitable, but also gives the possibility to ask additional questions when perceived in place to gather more information (Smith, 2011). Data will come from contractual agreements, balance scorecard reviews, financial reviews and interviews with 3 key players at the trustee and 3 key players at the Trustor. The selected candidates for the interviews all have a longstanding relationship with the case organization. From both the organization acting as the Trustor (TO), as well as the case organization (TE) three employees have been interviewed, making a selection highly involved actors. To safeguard anonymity of the actors, they will be referred to as TOx, and TEx, where the x represents interviewees 1 to 3.
• TO1 works in the function of Project Manager, responsible for organizational issues with the case organization and internal reporting where alignment is made between operational, and financial KPI’s, and selected because of the specific role he performs providing cross divisional information from both trustee and Trustor 1, through business intelligence. • TO2 is the Country Manager Netherlands of Trustor 1, the Dutch division of the global
delivery organization and as such responsible for granting assignments to the case organization.
• TO3 represents the Country Lead Benelux of Trustor 2, responsible for mobility workplace services, referred to as Capabilities, and as such measured on the financial performance of the accounts that the case organization is delivering services to.
• TE1 represents the General Manager of the case organization, accountable for the performance towards both Trustors, represented by TO2 and TO3.
• TE2 is Service Delivery Manager Mobile, and as such responsible for the work granted by TO2, and finally
• TE3, acting as Business Unit Manager and working closely, amongst others, with TO3. Interviews are perceived as a first choice method, when it comes down to understanding how a concept actually works in real life (Silverman, 2011). Reasons for opting for semi-structured interviews is that they offer the possibility to ask follow up questions when answers from an interviewee require more back-up information and it allows the interviewer to rephrase questions in line with the professional vocabulary and place in the organization of the interviewee, so that the meaning of a question is well understood. The questionnaire contains the following questions:
Number Group Purpose of question Question
Dat of interview:
1 Identification Personal identification What is your name?
2 Identification Partner identification Who do you work for?
3 Identification Hierarchical identification What is your function?
4 Identification Find the historical perspective How long are you personally involved with the case organization (CO)/ partner? 5 Dependency Define the rationale behind IOR What is your organization's
interest in working with case organization/ partner? 6 Dependency Set the impact of CO's output in the
right perspective; costs/ quality of service
How does the output of the CO/ partner affect your objectives?
7 Dependency Determine the priority: costs versus
customer service How important is the level of costs of the CO? 8 Dependency Determine the priority: costs versus
customer service How important is the customer satisfaction related to services of the CO?
9 Controls Define the controls in place How are you informed
concerning output of the CO/ partner?
10 Controls Check the completeness of controls in
place How do you ensure that the information reported about the CO/ partner is sufficient? 11 Controls Measure the reliability of the formal
controls How reliable do you perceive the formal reports? 12 Controls Check for other informal information
resources If you would like additional information, how do you retrieve complementary information about the CO/ partner? 13 Controls Measure and understand the perceived
reliability of the informal controls How reliable do you consider the informal information sources? Why?
14 Controls Confirm if level of formal controls are
perceived sufficient Would you prefer more formal controls to manage the relationship?
15 Controls Understanding the quality of the
quarterly meetings (TS) How do you perceive the regular formal meetings?
16 Asset
specificity Define the (human) asset specificity How important is the level of expertise of the engineers to you?
17 Asset
specificity Define the dependency on expertise/ sensitivity for hostage purposes How difficult would it be to find a substitute for their expertise?
18 Asset
specificity Confirm asset specificity based on the requested qualifications (knowledge, rates)
What are the relevant key features that make the right partner?
19
Appropriati-on cAppropriati-oncerns Determine the level of appropriation concerns How do you ensure that the partner is performing at your best interest? Think about price, quality, timeliness, reporting…
20
Appropriati-on cAppropriati-oncerns Determine possible incentives/ punishments to mitigate appropriation concerns
Do you feel enough empowered to challenge the partner?
21
Appropriati-on cAppropriati-oncerns Confirm perceived appropriation concern How do you perceive the goal congruency of the CO?
22 Trust Determine and understand the level of
trust How do you perceive the level of transparency of the CO?
23 Trust Confirm level of trust as hierarchical
organization offers more direct controls
Would you prefer a vertical integration of the CO's activities? Why?
24 Trust Determine level of confidence How would you recommend the
CO to any other line of service within the mother organization?
25 Trust Determine if the level of trust is
starting point for new opportunities How would you involve the CO in case of a new expertise, in which there is little expertise available?
26 Trust Understand the perceived stability of
the relation. How would you describe the relation with the CO/ partner?
27 Trust Understand how and if the contracts
are providing a basic trust experience. Why do you consider it important to agree operational KPI's and training and tooling instructions in the CDS Operations Guide?
28 Trust Understanding the level of thin trust
and potential presence of signaling How do you perceive the contractual agreed controls (basically operational KPI's)? 29 Trust Understanding the level of thick trust
(control practices/ demonstration "acting from normative frame"/ do the right thing/ thick trust)
Looking also at external partners, how do you compare the CO as a partner?
30 Competency Understanding if competency and
capabilities performed satisfactory How does the case organization performs against their operation KPI's?
31 Competency Understanding the perception of benevolence (perception of the trustee's (CO) intention to do good/
How would you describe the working-relationship with CO?
refraining from opportunism/ challenge demand manager)
32 Competency Understanding the level of perceived integrity (trustee adheres to set of principles and values that trustor finds acceptable: way of working is
becoming more and more a relationship)
How would you consider the CO against the values of your organization?
33 Solidarity Understand presence of solidairity
situations. Can you give an example of a situaton where the CO was actively offering support in a situation where a problem occurred?
The document analysis will give insight in the formal arrangements that have been agreed upon, where the financial reviews will reveal information how the monitoring has been done and to which level actions have been set out in case of under- or over-performance. For reasons of confidentiality, financial documents are not part of the scientific evidence of this paper. To come to final conclusions, the existing theory on the topics of IOR’s, control and trust, together with the findings of the field research will be used (Lukka and Modell, 2010). As a result, the conclusions in this paper will be of an interpretive nature as it presents an insight in an actual operational situation based on a critical interpretation of the experiences of participants to the study (Covaleski and Dirsmith, 1986)
3.2 Case setting
The case organization (trustee) is a Dutch 100% subsidiary of an international Information Technology supplier (Trustor) selling hard-, software and services. Despite being a subsidiary, with a focus on the mother organization’s brand, the case organization is a separate legal entity with an own identity, and the divisions within the corporate organization are not forced by corporate to a truck system, but are also allowed to use services of external suppliers. The two main services that are being delivered, require different levels of knowledge and skills and are delivered to two separate Dutch divisions of the corporate organization. For the division that is responsible for Technological Support (Trustor 1), deep technical product knowledge, with frequent update trainings is required to deliver the services related to calls for support with regard to equipment, while for Enterprise Support (Trustor 2), more basic knowledge is required for the type of service delivered on customer site to support end-users. The case organization in its current appearance is shaped in 2009 by merging two service-delivery organizations out of the need to create more flexibility in the workforce and cost reduction. The case organization is offering both services using a pool of 450 engineers, of which 30% consists of contractors and temporary contracts,
offering flexible capacity to respond timely to fluctuations in the workload and optimizing utilization through economies of scale. Cost reduction is coming from reduced labor costs by offering more discreet terms of employment, less expensive as what the mother organization is offering. The case organization does not have any other customers than customers from the mother organization, in order to have a pure focus on the delivery of services, and not being distracted by other business processes that require management attention. Initially delivery costs were charged in a lump sum format without supporting evidence, and giving no insight as relevant management information could not be drawn out of the available data, but gradually this has moved into a so called factory model, based on hours and standardized labor rates, providing an open, transparent insight in how many hours and costs were spend to what activity by which engineer. The case organization is measured on financial result, where it is expected to operate at cost and be breakeven for both Trustors. Under recovery means a situation of overcapacity that has not been utilized and over recovery means that the hourly rates are too high and are eligible for reduction. At the time that the interviews are taking place, recently new leadership has started at Trustor 1, which is responsible for case management. This has given rise for a critical review of the situation by the newly appointed general manager.
The author of this paper has full access to contracts, financial data and key players at organizations and will also bring in own observations to further clarify if useful to create a clear picture of a situation.
4 Findings of the case study
4.1 Contracting
The case organization has a contract with the mother organization, referred to as “Master Engagement Framework”, valid when delivering IT services to any business unit of the mother organization and describing “where the commercial responsibility sits at each stage and the parameters, that from a management perspective will govern the cost allocation for each business relationship”. It gives a clear definition of the various types of services the case organization can provide, mainly classified by either nature of the service, or methodology of quotation, which can be service level based at a fixed price, or resource level based at actual costs or labor rates. The framework points out the different consequences following from these two cost allocation methods when it comes to responsibility of the service. Fixed prices quotations will leave the responsibility and operational risk at the case organization. The case organization is responsible for the design of the solution and size of the team and can manage the recovery accordingly. Quotations at actual costs or labor rates are under the responsibility of the hiring business unit, leaving responsibility for solution design and team sizing at the hiring business unit. Besides this general contract providing high level governance, there are contractual agreements on business unit level, so per Trustor.
For Trustor 1, the Operations Guide is set, that states standards and definitions of onsite break-fix and installation delivery. It describes the end to end processes and sets expectations to the case organizations to meet the service levels that Trustor 1 has committed to their customers, as well as training and certification strategy to ensure a consistent and high level of delivery quality. Finally the operational guide describes the KPI’s that are set and actively monitored relating to turnaround times of delivery activities based on operational data recorded in information systems owned by Trustor 1, utilization of the available workforce based on information coming from both parties and customer satisfaction based on survey data.
For Trustor 2, a Service Agreement is further describing the specific details of the scope of service in relation to an individual customer of Trustor 2, the remuneration for the services and additional commercial terms. In practice this come down to a back to back contract covering the same delivery terms and conditions that Enterprise Services has committed to their customers.
We are transferring a part of our responsibilities, in good faith, that they will be executed accordingly (TO2, Country Manager Trustor 1, May, 2016)
The interviews reveal that the contract for Trustor 1, referred to as the operational guide, does not play an active role as such. According to the Country Manager Trustor 1 (TO2) the contract is assuring that the case organization is covering the full responsibilities in the same way as Trustor 1 has agreed to their customers. This assurance is confirmed in the close daily cooperation, and intense contacts, allowing the partners to have a focused attention on reaching customer satisfaction and cost control. This is in line with a “zero-positive situation” where formal controls, together with institutional rules and legislation are setting a powerbase where there is “thin trust” and the focus can be put on the IOR.
In a similar vein, the Statement of Work (SoW) that is agreed per individual customer of Trustor 2, also ensures a full back to back transfer of the committed service levels between Trustor 2 and the customer, but aims to be more complete in mitigating possible opportunistic behavior at customer site.
the importance of the contract has increased in the course of the years…customers are keen to look for the grey area’s…(TO3, Country Lead MWS, June 2016)
In general, delivery of services according to the contractual agreements is carefully guarded in order to prevent opportunistic behavior. The characteristic of the transaction also allows them to do so, as the service itself is becoming increasingly commoditized and requires less specific knowledge. Williamson (1979) refers to asset specificity, to be the most significant characteristic of a transaction, determining the costs associated with a transaction. With a decreasing human asset specificity as a consequence of less demanding knowledge requirements, also the dependency is reducing, as it creates possibilities for Trustor 2 to find alternative suppliers for the service, without the risk of bearing high costs for transferring the service. The back to back clause in the contracts sets the same conditions for the case organization, aligning the interests, but the associated hybrid governance model is gradually moving its emphasis towards a market governance model focused on pricing and risk mitigation.
4.2 Formal controls
The case organization is measured on result. In line with Abernethy et al. (2004) where decentralization and delegation of decision rights are in play, result controls like Divisional Summary Measures are in place. As such, the case organization is monitored on its financial performance per business unit, and targeted to be breakeven. The metrics are reported in a Balance Scorecard, covering the financial performance, operations, customer satisfaction and people. On an operational level, the controls in place for services delivered to both business units are based
on data that is collected in the financial system of the case organization, consisting of detailed information of tracked time, per day, per engineer and per customer which is shared on a monthly base, supporting the internally charged costs.
And then there is a scorecard, coming from Trustor 1, which we discuss weekly to see where we stand from a business point of view (TE2, Service Delivery Manager Mobile, June 2016)
Specifically for the business unit Trustor 1, data is collected that is registered directly by the engineers of the case organization in the operational systems of Trustor 1, covering detailed information on travel time and spend hours on delivered service activities. From this data all kinds of KPI’s are calculated expressing turnaround times of support activities and case volume. Combined with the financial data, cost per case and utilization metrics per engineer are calculated. These KPI’s are important. There are a number of KPI’s which are nice to know, but what does it have to do with me? (TE2, Service Delivery Manager Mobile, June 2016)
The formal controls in place for Trustor 1 are perceived as numerous and sufficient and not always within powers to be influenced. The measuring of turnaround times for example, is done for the entire process, and so any delay caused by another department, in the start of the process, will be transferred into the performance of the scheduled Mobile engineer. As a consequence of the big number of KPI’s , not all KPI’s are regarded as significant. The project manager, responsible for business integration remarks in this light:
An increasing level of detail, doesn’t necessarily mean an increase of insight as well (TO1, Project manager Business Integration)
General impression coming from the 6 interviews is that the relationship with Trustor 1 is very solid. It can be summarized as that both partners are in a strong normative frame, with a high level of identification to the common goal. In such a situation, there is a risk that unjustified formal controls can be counterproductive to the good cooperation.
We clearly stated, that we have appointed managers and if there is something to discuss, please come to the manager instead of turning directly to the engineer (TE2, Service Delivery Manager Mobile, June 2016)
Monitoring on the systems of Trustor 1 can take place on engineer level, where the Service Delivery Manager Mobile feels limited in his managerial powers as, due to this personal insight, Trustor 1 organization was addressing the engineers directly.
Sometimes discrepancies appear between the information from our systems and the information that you are reporting…but in the end, if you check the total numbers that we both present, then we are practically aligned. (TO2, Country Manager Technology Support, May, 2016)
Overall, from Trustor 1 point of view, the KPI’s in place are perceived very reliable and are supporting to the financial measures and building of trust. If deviations from the metrics appear, then there is joint effort to find the cause, understand the impact and take corrective actions if necessary.
From the Trustor 2 point of view, formal controls are also in place but vary per account. Metrics are set like customer satisfaction, utilization per engineer as well as turnaround times. Costs per engineer are the main attention point for control. Or, as the General Manager of the case organization remarked:
..there is a force at work, where people have a full time job, to prepare a set of numbers, and as long as it is clear to their boss that they have put enough pressure on me to improve their set of numbers, than their jobs is accounted for…(TE1, General Manager, May 2016)
The strict focus on costs seems to be resulting into the opposite effect. It puts pressure on the normative frame of the case organization, as it is lacking commitment to the desired savings target and potential risk of switching to a loss frame as the financial goal of performing breakeven is undermined if the case organization cannot optimize their engineers for Trustor 2 related services. The capability lead is preventing me from making optimal savings, because he is so one-sided. An account team can also drive savings by being measured on margin…capability leads are not expected to balance (TE1, General Manager, May 2016)
It appears that the goals of the individual account teams are not always congruent to the goals of the Capabilities team. Where the account executive is responsible for both revenue and costs but also customer satisfaction, the Capability Lead has a clear order to reduce costs.
Summarizing, the controls in place are measuring the output of the case organization, and are supportive in building a basic layer of trust as they confirm financial charges from the case organization, being in line with the operational KPI’s. The information shared by the case organization is perceived as valuable to the two partner business units as they provide insight that is looked for and detailed supporting evidence to the costs. From case organization point of view, there is a mixed feeling: on one hand the KPI’s are appropriate to be held accountable for, but on the other hand, can be perceived as a form of mistrust, despite the strong normative frame they are in.
4.3 Asset specificity
To deliver the services for Trustor 1, knowledge is considered of great importance, both in soft skills as in hard skills. The Operations Guide dedicates a chapter on how to grow and foster knowledge, by leveraging the available training and certification program within Trustor 1. In general, the number of training days per employee is one of the KPI’s included in the Balance Score Card as an indicator of continuous training.
Knowledge is what we sell, the expertise of the people. What matters is, what is the right knowledge…(TE1, General Manager, May 2016)
As the portfolio of products for which training is required is evaluating through the years, where products reach their End of Life stage and new products are introduced, also the spread of knowledge that needs to be maintained is immense.
It is not just that you have keep pace with the latest developments, but we also have long term service obligations to old systems…..this means that we also need to maintain our knowledge about such aged systems (TO2, Country Manager Technology Support, May, 2016)
The case organization has a reasonable number of senior engineers that still possess that dated knowledge because they practically received training on those products from the start. It is agreed that for products that have reached their End of Life stage, the respective knowledge must be guaranteed for over a period of 2 years. For products in that category, for which continued servicing is required because of long term service obligations, the knowledge needs to be safeguarded through internal workshops. The costs for training are therefore high, and the nature of required services makes the dedicated engineers to specialists in their field. The dependency that is expected to follow from this need for a wide range of knowledge is obvious.
A transfer to another partner, would be feasible for knowledge that is currently state of the art, so current equipment and current operating software, but that doesn’t bring in the knowledge of 10 years ago. We are also looking for continuity (TO2, Country Manager Technology Support, May, 2016)
Trustor 1 is stuck to aged expertise, which is not easily available on the market….you need to have a critical mass to deliver 24/7 support (TE1, General Manager, May 2016)
For Trustor 2, the nature of the service requires less training.
…you are really dealing with a different type of engineer. In the infrastructure area, you would really need a technician, …, you can imagine that you need to be confident if you are pulling a plug somewhere. That is different when it concerns the end user (TE3, Business Unit Manager, May 2016)
The services for Trustor 2 are for the larger part delivered on site, at the end user of the product. The required knowledge is far less than for Trustor 1, and considered less important than the soft skills needed in order to communicate clearly to the end user.
Substitution for another supplier is not that difficult. In the end, it is decided in an Request for Proposal…money rules. It is no longer our decision (TO3, Country Lead MWS, June 2016)
The low level of technical skills can be explained by the increased standardization of hardware and software, allowing the services to become increasingly commoditized.
…they are considered more software guys, low skilled so to say. Price prevails…hiring on the market is easy, and cheaper than my engineers. And when I my expensive, specialist engineers are considered for once, they don’t have the required knowledge (TE2, Service Delivery Manager Mobile, June 2016)
Optimization of the utilization of the engineers dedicated to Trustor 1 is hindered by the discrepancies in knowledge and skills, and even more so costs, required for Trustor 2. The dependency of the case organization from both business units, Technical and Trustor 2 for granting suitable work is clear. The result measures will become more noisy and challenges the management of the case organization to meet the breakeven objective that has been set.
4.4 Appropriation concerns
A good manager will try to keep his team complete as long as possible, and only when it is absolutely necessary he will let them go…the financials support that (TO1, Project manager Business Integration)
Trustor 1 is depending on the case organization to control the delivery costs. The case organization has a dedicated team of engineers available to deliver services upon requests for support (cases). The size of the team is depending on the volume of cases, which in general show a relatively stable pattern. In case of a low volume of cases, and consequently less work for the available team, the Service Delivery Manager Mobile is expected to optimize the utilization of the team by incidental request for support, like replacing engineers on site when absent or short term project work. Current products are less disrupted by disturbances than the older products…replacing parts is becoming more and more simplified and doesn’t always require the attention of an engineer. Consequently the volume of work is gradually decreasing (TO2, Country Manager Technology Support, May, 2016)
It is in the interest of Trustor 1 to reduce the costs for Mobile service delivery in line with the decreasing volume of the cases, as well as it is of importance to safeguard the knowledge base, especially of aged products.
…so we are constantly looking for the ultimate solution to retain engineers with knowledge of aged products…as we need them to safeguard quality, and keep them multi employable, despite their age (TO2, Country Manager Technology Support, May, 2016)
By taking engineers out of the team for Mobile service delivery, and allocating them to another form of service delivery, using the flexible capacity, the case organization is signaling their commitment to Trustor 1 that they reduce the team and consequently the costs, as well as retain the engineer for the organization.
At some point you can loosen the grip, when things are going right and the financial numbers are right, until something happens…but then you do not immediately expect it to be intentional (TO1, Project manager Business Integration)
The normative frames are strong, of both the case organization as Trustor 1, made clear by the fact that both do what it takes to avoid the other from switching into a loss frame.
The biggest concern of Trustor 2 is costs. The commoditized services they deliver with regard to end user workspace are putting pressure on the margin, and so cost control is of greatest importance.
We are examining every opportunity where we can deliver the same services with less people…we need to find the limit…If I see what Belgium has done, reduced their workforce with all of their expensive engineers, they really have acted to make the cost structure compatible…I have missed this attitude in the Netherlands, even though funding is available (TO3, Country Lead MWS, June 2016)
The expressed concern of the Country Lead makes it clear that with Trustor 2, the normative frames are not sufficiently strong. The case organization is expected to realize more cost savings but are blamed for taking no appropriate measures.
We are fully aware that if we clearly show that we are actively looking for savings, that that would surely help the relationship on the long term, but sometimes you also get surprised, that a proposal has been made that is operationally feasible, and can save up to 20% of costs, but Trustor 2 decides not to agree (TE3, Business Unit Manager, May 2016)
Though on account level, the case organization is signaling their commitment to drive cost savings, apparently other competing goals are stronger than the normative goals as the proposal has been declined by Trustor 2.
4.5 Trust
…within the internal organization, everybody is very aware, both within the case organization as in Trustor 1, that you always have your back covered for certain activities (TO1, Project manager Business Integration) From the interviews it becomes very clear that the relationship between the case organization and Trustor 1 is very stable and transparent. It is salient that the key players in the relationship have been working together within Trustor 1 for several years. The General Manager of the case organization, is the prior Country Manager Trustor 1.
…in the merged Dutch organization, management positions have been filled in by former Trustor 1 employees already having strong connections. On surrounding EMEA countries, that did not happen, so you will still effectively see two individual parties, strictly formal organized. People don’t seem to overcome that. (TE2, Service Delivery Manager Mobile, June 2016)
Only the Dutch case organization is created by merging a prior local, and prior international supplier. The international supplier has been integrated to become the service delivery division in the other EMEA countries, maintaining its existing management and culture.
..I often receive information that, from a legal point of view, would never be shared…it is a matter of trust from the case organization that I will not abuse this information (TO1, Project manager Business Integration) By voluntary disclosing such confidential information with their partner, the case organization is confirming their trustworthiness to Trustor 1, as the nature of the information makes them vulnerable. This vulnerability is made clear by the Service Delivery Manager stating that the openness is sometimes too much.
..that is openness. At first we received information in one liners, and we did not understand what was behind that, which lead to discussions. What we receive today comes close to our own time registration system (TO3, Country Lead MWS, June 2016)
…we are very transparent. More transparent than surrounding countries, so we seldom receive critical questions…and if adjustments are needed, then they are relatively small and are being processed immediately (TE3, Business Unit Manager, May 2016)
From Trustor 2, the layer of trust is thin. Transparency is perceived as sufficient, and in case corrective actions are requested, they get performed accordingly. From operational point of view, Trustor 2 is relying on the case organization. On account level, the level of cooperation seems to be varying with the personal characteristics of the Account Executive. But it is on the account level where the real substantive discussion takes place. On that level the case organization is pro-actively doing proposals for cost savings. More generic discussions, in a broad perspective are held
between the Country Lead MWS, responsible for the Mobile Workspace Services and the Business Unit Manager of the case organization.
Cost saving targets are agreed on EMEA level, but I do not see any serious effort to do the savings from the Dutch case organization (TO3, Country Lead MWS, June 2016)
Driven by the goals of the Capability team, the pressure on reducing costs is high, but the willingness of the case organization to commit to the savings goal is perceived low.
