Master Thesis Suzanne Buter

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Master Thesis Suzanne Buter

“Unilateral decision-making: Dyad Turning Triad”

Suzanne Buter

S1980203

MSc. Strategic Innovation and Management Faculty of Economics and Business

University of Groningen 20-06-2016

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Abstract

This case study investigates the consequences of expanding a dyadic relationship to a trilateral alliance through a unilateral decision. In 2015, ING, a major Dutch bank aimed to increase its level of sustainability of its procurement department. EcoVadis, an expert company with respect to sustainability monitoring, was attracted to engage in the relationships with ING’s suppliers. In addition to the authors own experience through an 8 month internship, 9 interviews with sustainability managers and the account manager of EcoVadis and 28 survey respondents provided further insight in how this arrangement was set up an carried out. Several factors were identified how the unilateral decision-making influenced the overall, neutral outcome of the alliance. The legitimacy of the added partner, communication, managerial engagement, role clarity and commitment were all factors in which ING acted, or failed to act. This ultimately led to the conclusion that the expansion of an alliance through a unilateral decision can be successful, but managers are recommended to have proper management capabilities and to devote enough time and attention before and after the formation process, in order to reach the intended outcome.

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Corporate sustainability remains a hot topic, even though the definition of corporate social responsibility (CSR) is still contested (Marrewijk, 2003). CSR is meant as adherence to the so-called ‘triple bottom line,’ people, planet, profit. With this, it is meant that businesses do not only have the objective to earn money, but also want to do this with minimal negative impact on the environment. The definition that will be used in this paper is from Lea (2002), as it is the most comprehensive and also explicitly names suppliers as a factor in pursuing CSR. In addition, it takes the voluntary nature of CSR into account.

“CSR is about businesses and other organizations going beyond the legal obligations to manage

the impact they have on the environment and society. In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment.”

As internal expertise regarding non-core business processes is often lacking, companies turn to expert companies in the area in which they seek knowledge in order to form an alliance (Carter et al. 2008). Here, knowledge of sustainable supply chain management is needed, thus companies need these expert companies to jump in on the demand to do their business more sustainably. By becoming affiliated with these companies, it is hoped that the implementation greener practices will be faster and more thorough, since the expert company knows what measures will work best. As an extra benefit, the reputation of ‘being green’ may rub off on the focal company as well. The expertise gained from these alliances is valuable, since it will save time and effort (Carter et al. 2008). In return, these expert communities grow and gain more clients to assess. This way, it is not necessary for companies to engage in costly research on what

kind of possibilities there are regarding sustainability.

The efforts that businesses put in the development of these alliances signal that climate

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notes. As such, banks may be considered as indirectly responsible for climate change.

Now that the awareness about the impact of consumption grows, consumers want to

know where their products come from and demand transparency with respect to the innovative efforts in the area of sustainability, as Fernandez-Feijo et al. (2013) find. Christmann (2008) states that multinationals used to exploit differences in regulation between countries, but are being pressured by their stakeholders to be open about their environmental policies. Consumers increasingly base their purchase decision on these policies.

Financial institutions are a subject of this as well, since they invest the money provided by

consumers in different types of other companies. People want to know where their money is invested in and what they are financing. This is in line with the finding of Kolk (2003) that companies increasingly report on non-financial issues in their reports. Being exposed as a faulty company with respect to sustainability can severely harm the reputation of a company. Hence, an alliance with companies that have the ability to make a business more sustainable signals that a

bank is making investments in sustainability.

Moreover, being considered a leader in sustainability is also beneficial for the financial

performance of a company. For example, inclusion in the Dow Jones Sustainability Index (DJSI) has a beneficial effect on the financial performance of the company in question as Robinson et al. (2011) found. In order to reap the benefits of becoming more sustainable, companies do not only want to be green at the front end of their business, but also make an effort to extend their sustainability vision to the back of their organization (Crespin-Mazet and Dontenwill, 2012). This is quite innovative, as it signals that sustainability is not merely a question of reputation. Instead, companies are actively forming partnerships with suppliers to make a deeper impact.

Thus, companies are looking to engage their suppliers in their efforts to become more

sustainable (Kashmian and Moore, 2014). However, at a large company with many suppliers, this is an extensive undertaking. Here, an alliance with monitoring agencies can be of help, as they conduct the analysis for them (Cézanne and Rubinstein, 2012). By partnering with these agencies, a trusted third party will perform the sustainability monitoring, as it is a fairly complex and time-consuming process. Three of the better known companies in the Netherlands that perform these audits are, EcoVadis and Fira. (Sedex global, 2016, EcoVadis 2016, Fira, 2016).

A relationship with a bank and its suppliers is often dyadic, however, this shifts to a

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The timing of joining an alliance is a key factor. As the alliance is established, goals and strategies are set out. This is also the case with a bank and its suppliers, whom may have had a relationship for many years. When a partner joins later, lower productivity is found during the timing of entry, even though this will adjust later on (Lavie et al. 2007). However, Eden et al. (2011) find that there is less direct exchange of information between partners when there are three or more partners in an alliance. The partnership is more difficult to manage when there are more partners, since there is less direct contact and more concerns about knowledge spillovers. Thus, moving from a dyadic to a trilateral alliance may be troublesome.

Partnerships with companies have been researched extensively, both dyadic as

multiple-partner relations. This varies from how alliances are formed, how they are managed and which interfirm characteristics are important (Bierly & Gallagher, 2007. Cullen et al. 2000, Whipple, 2000). In these cases, the partners may have been unequal in their position vis-à-vis each other, but they are assumed to be partners that have voluntary agreed to participated in the alliance. Stephens et al. (2009) found that this might not be the case and studied involuntary partnerships. What is unique in the case presented in this paper is that the relationship is mediated by a third party, while the mediating company has direct relations with both firms. In addition, it happens at

a large scale, with currently over 500 participants.

The company where this is the case is ING, where I have conducted an eight month

internship. As I found, the implementation of a responsible supply chain has been researched, as

is evident by the studies of Allal-Chérif (2015), Carter and Rogers (2008), and Shrivastava

(2007). However, there is a lack of evidence on what the effect is of one party adding a third party to monitor the sustainability efforts of the supplier. In other words, when the dyadic relationship is transformed to a trilateral alliance, where one of the partners decides to add another partner without consulting the original partner. This third party is added as a mediator to

a dyadic relationship, turning the dyadic alliance into a trilateral one.

In this thesis, the consequences of this set up will be explored. This comprises how the

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7 level of trust was not affected in a negative way, due to mediation of preexisting relationship capital. However, I found that EcoVadis was not actively incorporated among the members of the Business Partner Area’s (BPA’s).

I found that the goal of the alliance, increased cooperation with the supplier on

sustainability, was not met due to a lack of role clarity and commitment. Also, the managers were struggling with the alliance as well, since they did not receive enough resources and tools to reach the objective. In addition, sustainability was regarded as less important that cost savings, by both managers and senior management. It resulted in a situation where due to the lack of attention, the alliance was virtually useless. This means that a company should provide sufficient resources to managers in order to enable them in pursuing this new aspect of the relationship and that attention should be given to developing a mutual understanding with a partner on why the alliance is set up.

I will conduct a case study of the relationship between ING, the supplier and EcoVadis,

where I will research how this involuntary partnership and its management is experienced by the managers of an involuntary monitoring alliance which has come into existence by a unilateral decision by upper management. The purpose is to identify key factors that influence this process. In addition, I will be looking at how the alliance is actually implemented within the company itself. As there are an increasing number of companies that are setting up these kinds of alliances, such as Bayer, Heineken and Coca Cola, this phenomenon is spreading. A first glimpse in how these alliances are set up and how managers experience them is therefore helpful to identify how

an initial dyadic relationship is affected in terms of trust and the purposed outcomes.

The main phenomena of interest are the conditions that restrain and facilitate the

expansion of a dyadic alliance to a trilateral alliance. Added to this is the factor that the decision to expand the alliance was taken unilaterally by ING. Similarly, the decision which partner to include was taken by ING as well. The subsequent functioning of the alliance and the reaction of the suppliers are of interest, as one would expect that major decisions that are taken unilaterally have a negative effect on the trust dynamics, communication flows and willingness to accommodate requests from the partner within the relationship and thus on the general outcome of the alliance. In this thesis, this will be researched with a focus on ING and their decision to demand the inclusion of EcoVadis.

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play when a unilateral decision is carried out regarding the expansion of a dyadic relationship into a trilateral alliance and how it impacts the overall relationship. This case study provides a unique perspective, as it allows to zoom in on the micro processes that take place within the organization. Related to this are the issues of how the managers of the alliance in the focal firm experience the addition. As the focal firm does not have sufficient experience with the services of the third party, it may require them to adapt significantly to the new situations.

Thus, taking a look at the enablers of the successful adjustment to the new situation is

valuable to paint a complete picture of the phenomenon. First, I will provide an overview of the current literature on the topics that surround this topic. This will concern relations between partners, trilateral alliances and mediated relationships between companies. Second, the methodology is discussed. This section discusses the way in which data was collected and how the coding process was structured. Third, the interviews and the process of engaging suppliers are examined. Subsequently, the results are discussed and a conclusion is provided.

Literature review

Relationship between partners

Alliances are logically seen set up because the partners believe that they can reach more benefits from cooperating, rather than going at it alone. Numerous research indicates that strategic alliances benefit knowledge exchange and innovation in partner firms (Grand and Baden-Fuller, 2004, Inkpen and Tsang, 2005, Dacin et al. 2007, Walter et al. 2008). A successful alliance benefits a firm by aiding it to remain viable according to Jarratt(1998). She finds that it allows firms to acquire resources to remain competitive in an ever-changing environment. Sambasivan et al (2011) second that, by stating that alliances are an opportunity for “enhancing market power, increasing efficiencies, accessing new or critical resources and entering new markets.”

Saxton (1997) finds that the relationship between alliance partners benefits when the

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Unilateral decisions within alliances

According to Large (2005), the relation between a supplying and buying organization is important for the latter party, thus it is in their interest to maintain a good relation. When considering evolution in alliances, Ariño and De La Torre (1998) find that an alliance does not follow the exact agreements in general. In contrast, the alliance evolves in response to internal and external events. Thus sometimes one of the partners feels the need to make decisions for the other partner, without consulting them first. In these cases, it may occur that a partner takes unilateral decisions.

Taking decisions that another partner in an alliance needs to adhere to is a way for one partner to reach their own objective within an alliance. Alliances may have a certain intention. According to Czakon (2010) over time, this intention may become different, resulting in divergent views of partners on how to continue. This can result in a major cooperative imbalance, caused by an external shock, which was recognized as a concept as well by Das and Teng (2000). Tensions may result in the idea that it is necessary for a partner to act to restore the balance. Here, one of the partner develops a conflicting idea on the role that sustainability plays the alliance and wants to incorporate an additional partner to remedy this defect.

Ariño and De La Torre (1998) concur that an imbalance between partners may result in unilateral decisions on how to act. In addition, they found that when partners had proper conflict resolution mechanisms in place and did not resort to unilateral decisions, this has a positive effect on the quality of the relationship and trust. When combining the insights from these authors, it is clear that this can be applied to this case. The external shock leading to this imbalance is the notion that sustainability is important for clients of the bank. The resulting imbalance is then that there is not sustainability agreements between the bank and its suppliers. Accordingly, the bank tries to remedy this, by taking the unilateral decision of adding a partner which is an expert in the area of supplier sustainability.

Trilateral alliances

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way. They might be a mediator and enhance the overall relationship. However, this third partner can also be a cause of disturbance, resulting in a less intimate relationship between the other two partner than it would have been when it was a dyadic relationship (Tähtinen and Halinen-Kaila,

1997).

Mellewigt and Decker (2013) assert that the process and costs of finding a suitable

alliance partner make that firms want to select their partners carefully. Unfortunately, as discussed in this thesis, sometimes, a partnership is not completely voluntary. Instead, a firm with considerable power forces the partnership between other firms. Stephens et al. (2009) finds this occurs when the focal firm needs the services of a particular firm integrated with the other firm. The objective of compelling the other firms to work together is to ensure that a trusted partner is involved. Increased certainty of the performance of an alliance is namely very beneficial to achieve the desired outcome.

Mediated relationships between companies

The alliances with sustainability analyzers are meant to function as a platform for more cooperation between suppliers. Their main function is to initiate and facilitate deeper cooperation between partners with respect to addressing social and environmental issues. Gimenez et al. (2012) find that in order to have an impact on the triple bottom line, an assessment is not enough. Corrective action is needed in order to produce actual results. Cooperation may occur with respect to different issues regarding sustainability as Sharfman et al. (2009) found. An example is the amount of packaging that is used for the goods. One of the instruments of enabling

procurement to become more sustainable is through monitoring platforms.

Thus, the relationship between the vendor and the buyer is both dyadic as well as

mediated by a third party, in the form of a sustainability assessment platform. A relationship

between one buyer and two suppliersis called a ‘triad’ by Choi and Wu (2009). They point out

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Sustainable procurement

Sustainable procurement can be an way to pull other organizations with the focal company, since its objective results have the ability to impact external organizations according to Meehan and Bryde (2011). This can be seen as sustainability with regard to the supply chain of the organization. There are many definitions, of the practice as Blome et al. found (2014). Salam

(2011) calls it Environmental purchasing and defines is as “activities that include the reduction,

reuse and recycling of materials in the process of purchasing” Walker and Philips (2006) define it as “the pursuit of sustainable development objectives (WCED 1987) through the purchasing and

supply process and involves balancing environmental, social and economic objectives.”

Elkinton (2004) finds that sustainability is a focus that will become imperative for

companies, as the current way of doing business cannot be continued. It concerns all of the so-called Triple Bottom Line: environmental, social and financial benefits. The use of these dimensions are widespread among companies, as they feel the increased pressure to include more than just financial measures of performance indicators (Foran et al. 2005, Colbert et al. 2007, Birkin, 2009). Thus procurement can play an important role in this by including their supply chain (Baden 2011). The importance of scoring suppliers with respect to their performance is quite apparent in the literature. By having a standardized set of criteria, one can objectively

analyze all of the candidates. Thus, the procurement departmentalso has the position to influence

the organizations that it procures from (Seuring, 2004).

Methodology

This study is a single-case study, one might argue that this has negative consequences with respect to the generalizability of this research. However, as Donmoyer (2000) argues, certain social phenomena are too rare to capture with a large n-study. In order to capture all of the dynamics of the changed alliance, intimate knowledge of the situation is necessary. The complexity and uniqueness of a situation can be closely observed in such a setting. Wilson and Vlosky concur with this, while also asserting that when looking at a specific industry, case studies are a proper tool to see which factors are at play between a buying and a selling actor, which is a similar situation in this research. Here, it depends on the interaction between ING, the supplier and EcoVadis. When aiming to capture all of the aspects at play, a large n-study would be inappropriate.

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controlled for (Eisenhardt, 1989). In this case, this will be at the individual level, as well as the unit level. The first way of data collection will be done by conducting interviews with members of the Sustainability Regeltaak and the Contact person at EcoVadis for ING. By doing this, additional in depth knowledge will be gained about the program, how and why the program is set-up and the experiences with informing the respective Business Partner Area’s. The employees involved in the Sustainability Regeltaak are also participants in the dyadic, as well as the

mediated relationship. Hence, they have experiences the transition first-hand.

Using three types of data collection, a better confirmation of constructs and propositions

will be reached. (Eisenhardt, 1989). This thesis is based on both qualitative, as quantitative data.

The quantitative data may show linkages which may not be noticeable to the researcher, while the qualitative data is used to get an in-depth understanding about the phenomenon (Jick, 1979). As this is a single case study, many aspects and viewpoints can be considered in order to provide a thorough account of the workings of the alliance. Moreover, as I am not present when the participants fill out the survey, any bias that may result from me being present in the room is

controlled for.

Flyvbjerg (2006) states that very context-dependent studies are valuable, since data that is

obtained through direct observation is critical to observe the phenomenon in a real-word environment. As a result, it is evident that the ability to provide scientific knowledge is not restricted to large-scale studies. In their paper, Bryman and Bell (2011) find that case studies allow researchers to obtain detailed observations and assert that interviews can be used to gain comprehensive knowledge about the object that is researched. Hence, even though case-study research has its limitations, it has certain advantages, such as close interaction with the object that under observation, cannot be accomplished by large-scale studies. In this situation, providing that the objective is to gin intimate knowledge and details, as case study is thus very appropriate.

Finally, according to van Aken, Berend en van der Bij (2012) the research must have both

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13 der Bij, 2012). In this case, this is achieved by interviewing and surveying respectively nine and 28 people with all different backgrounds. However, as this is a single case in an exploratory research, the value of this research does not lie in its generalizability, but in the exploration of not yet researched phenomena (Modell, 2005).

Research setting

I have observed the situation at ING and their partnership with EcoVadis. The objective of their alliance was for EcoVadis to be added to become an integral part of the dyadic relationships that ING has with its suppliers. The procurement department is therefore clearly affected by the objective of becoming more environmentally and socially responsible. By increasing the areas of cooperation, it was hoped that there would be increased trust, knowledge exchange and overall cooperation between ING and its suppliers. The formation of this kind of network where ING sits in the middle, can thus be considered as a strategic move of enhancing ING’s overall sustainability rate. This is a study where I as researcher have been deeply involved with the situation. I worked as an intern at ING Bank and had frequent contact with EcoVadis, which was the alliance partner that provided services regarding the assessment of selected suppliers of ING. This information is gathered from my own experience, the experience from the interviewees from ING and EcoVadis, as well as the survey.

Initiation phase

ING recognized the pressure from stakeholders to become more conscious about its impact on the environment through its procurement department. As the department did not possess in-house knowledge on how to pursue this goal, a sustainability manager was hired. Through assessment of what the objectives were, she decided that in order to involve all of the suppliers, it was necessary to seek expert knowledge from another firm. Initially, this was Fira, which is a Dutch agency specialized in scoring suppliers. As this firm did not perform according to the objectives that ING had set. Subsequently, EcoVadis was brought on as an alliance partner.

The department

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Sustainability, the Secretary, two data analysts and a control manager. Overseeing it all is the Chief Procurement Manager of the Netherlands.

The department has a clear commitment to reduce the impact of its procurement activities. EcoVadis was attracted to provide the necessary knowledge regarding sustainable procurement. At ING, there was a designated Sustainable Procurement Manager to coordinate this, as well as one or two interns to help her. When I started, in June 2015, the department was just starting its first two campaigns that were meant to add a total of 200 suppliers to a partnership with ING and EcoVadis, 100 suppliers per BPA. This required all of the colleagues at the department to actively pursue this number in order to meet this Key Performance Indicator (KPI). The amount of suppliers engaged was the level as per June 2016.

Table 1.

T

My internship at ING Procurement Bank Nederland lasted for eight months. During this period, I participated in training sessions to make the employees familiar with the EcoVadis portal. In addition, I had contact with suppliers when they had questions regarding their participation, as well as with colleagues about their tasks. Also, I provided dashboards regarding the progress of the addition (so-called on-boarding) of the suppliers onto the platform and had frequent contact regarding mutations in our supplier base with our account manager at EcoVadis. Towards the end of my internship I have performed a call campaign in order to connect with declined or non-responding suppliers as well as aided suppliers when they ran into trouble with the requirements placed on them by ING. I have kept weekly notes about my activities, in order to be able to revisit them later.

BPA Responsibilities Launch date

Amount of suppliers engaged

HR en Groep services Staffing April 2015 102

Facility Management Repairs and Cleaning April 2015 92

Operations&IT Data Technology June 2015 42

Particulier en Zakelijk Promotions and Sponsoring June 2015 61

CIO IT infrastructure October 2015 48

COO Building Administration October 2015 71

ISS IT software October 2015 102

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EcoVadis

We had an account manager at EcoVadis, whom we could contact when we had any questions or requests. This varied from the tone of voice of the reminders that were sent by EcoVadis to the suppliers, to the overall structure of the cooperation effort. The aim of the Sustainability Manager and I was to ensure that the transition from two to three partners would be as smooth as possible and to support the BPA’s to reach their KPI. We provided training for our colleagues and templates to send to the suppliers, as the success of the project depended on the level of cooperation we would receive from our colleagues. We also answered questions from colleagues which they had themselves, or which they got from their suppliers. If necessary, we contacted the

suppliers ourselves in order to provide additional information and support.

The situation I found at the department during my time at ING, was that the objective and expectations of the expansion of the alliance were really high, but that the following execution was suboptimal at best. As the suppliers did not participate in the decision-making process, they seemed to be unwilling to engage with ING and EcoVadis, but the managers did not seem eager to take on the extra work either. Before I joined, there were many people let go, but the demand to save on contracts was up. Hence, the work pressure was immense. The most important phenomena that were looked at are the factors that restrain and facilitate the expansion of a dyadic alliance to a trilateral alliance. These are affected by the decision to expand the alliance, taken unilaterally by ING. The choice which partner was to be included was also made by ING. The subsequent performance of the alliance and the reaction of the suppliers as observed by the managers are of interest.

Figure 1

Previous situation: dyadic alliance

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Current situation: Trilateral Alliance

Data collection

I interviewed 9 individuals from ING as well as from EcoVadis. In addition, I sent out a survey to 49 former colleagues from ING which I did not interview, but were involved in the EcoVadis process as well. The responses from the suppliers are extracted in a more indirect manner, due to resource and time constraints. This consists of my direct experiences with suppliers, as well as observations made explicit in the interviews and in the survey.

In order to prevent researcher’s bias, all of the interviews will be recorded. Moreover, by

using both interviews and questionnaires, there are two separate sources of data. The interviews were done at the ING head office, in the second week of April, 2016. The survey data was sent out separately, with only a deadline before I needed it. By doing a survey as well, I want to prevent that my suggestions or presence influences the answers that are provided by the respondents. The survey thus serves as a form of control by which I can measure whether the responses from the interviews are valid.

The survey was sent out to the individuals that have been performing the role of contact

person at ING for their particular suppliers. They can decide for themselves when they fill it out, which prevents any subjectivity regarding the timing of the questionnaire. 28 people filled out the survey, a response rate of 57%. The objective was to minimize researcher bias by employing multiple instruments of data collection. This was done by analyzing the answers to the questions and comparing the results to what the interviewees told me and my experiences as well. These results were thus used to either bolster and complement my findings, or to lead to dismissal of the results following that my experiences directed the interviewees too much.

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Before doing the interviews or the surveys, I have gathered data in several stages and in

several ways. The first stage was when I worked at ING, thus the first-hand experience that I have had. I not only gained experience, but communicated with my colleagues, EcoVadis and the partners themselves. This involved emails, personal and phone conversations. I attended meetings regarding EcoVadis as well as training and feedback sessions. I also participated in team building activities, as well as lunches and skill-development sessions. This resulted in the feeling that I was really part of the team. Even though the EcoVadis alliance was not the only activity during

my internship, the managing of the alliance was one of my top priorities.

Sources of Data

The first source of data collection is therefore my direct observation. This will guide the research that I performed. During my time at ING, I carried a notebook with me at all times. In there, I recorded important information that occurred. Every week, I made an overview on what activities I performed and what my role was. In addition, I made notes about emails that I sent, received and was CC’D in, as it is prohibited to forward emails to my personal account. This regulation is in place to prevent any leaking of sensitive data or unintended knowledge spillover.

The information that was available through the EcoVadis portal cannot be disclosed

either, as it is sensitive information regarding the internal policies and scores of the companies that participate in the alliance. The exact scores and companies involved are therefore left out of scope of this research. However, information on how EcoVadis functions, its objective and what effect its actions have on suppliers and ING will be included, as I did experience this first-hand.

The second source of data collection consists of the interviews with members of the

Sustainability Regeltaak, which was a group consisting out of employees from each BPA, tasked with the implementation of sustainability at the Procurement Department. In addition I interviewed the contact person at EcoVadis for ING. The Regeltaak consists of one colleague per Business Partner Area and has the objective of integrating sustainability more into the daily sourcing activities of the procurement department. This way, additional in depth knowledge was gained about the program, primarily on how and why the program is set-up and how suppliers

responded.

The third source of data is a survey among all of the employees who have participated in

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person for the supplier at ING, hence, they are the one’s performing both relationships. Hence, they know first-hand how the day-to-day management of the alliance works. This provides additional deep insight into how a dyadic relationship turns into a trilateral alliance. The survey also allows me to quantify the data to a certain extent, meaning that the amount and nature of answers is another important source of data.

The different levels from which I collected data are thus the upper management level,

consisting of the sustainability Regeltaak managers. They are coordinating the activities with respect to sustainability within their BPA. Second, there is the level of the individuals which are actually managing the change of the alliance and the incorporation of EcoVadis. These provide a more insider perspective. Then, there is the external level provided by the EcoVadis professional, which provides an outsider perspective, as he is more aware of the broader issues which are shared by other companies as well.

These three sources of data is meant to triangulate my findings: looking at the amount the answers from the survey’s, the kind of answers from the interviews and incorporating my own experiences. By doing this, there is less chance of researchers bias, according to van Aken et al. (2012). In addition, the interviewees are all from different Business Partner Area’s or come from EcoVadis, . The respondents from the survey are also from the different Business Partner Area’s and all have contact with different suppliers, providing a multitude of views. Table 1 provides an overview.

The survey is connected to the interview by incorporating questions that I have asked

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Table 2

Coding Process

After conducting the interviews, I transcribed each one to start coding. First, I established categories to guide the coding process. The primary method to establish these categories was by the questions that guided the interview. During the interview, I asked questions following the answers that the interviewees provided. While establishing the categories, I took into account that some answers were in the domain of a different category than the main question that I posed. After establishing these overarching categories and assigning -parts of- answers to each one, I compared answers. As Boeije (2002) states, comparing and reflecting is a key part of the coding process of qualitative research. Looking for similarities and differences is key in this process. By performing such an iterative process, I was able to analyze the data in detail.

Moving from theory to the interview data and back again had the objective to go beyond

initial impressions of the data. As I worked at the same department, I needed to move beyond my own experiences and interpret the experiences from my former colleagues with different eyes. According to Soy (2015), a frequent way of analyzing data was to create categories. This is what I did with the interview questions and surveys. The coding scheme of the interviews can be found in Appendix 2. In order to keep track of the answer within the survey, I counted the frequency of answers, such as what kinds of activities were undertaken when spending time on the analysis. The results can be found in Appendix 3.

Interviewees per BPA ING Function

Particulier en Zakelijk Sustainability regeltaak manager Facility Management Sustainability regeltaak manager Group Services Sustainability regeltaak manager HR en Groep services Sustainability regeltaak manager

CIO Sustainability regeltaak manager

COO Sustainability regeltaak manager

ISS Sustainability regeltaak manager

Operations&IT Sustainability regeltaak manager Interviewee EcoVadis

Accountmanager ING Contact for ING at EcoVadis Survey respondents

28

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Interviews

The in-depth interview is semi-structured. The questions are set, however, the objective was to ask additional questions to explore issues that come up during the interview itself (Drever, 1995). It allows for freedom in the interview procedure, while providing a context to guide the process. Interviews are very personal and respondents may note things that spark additional questions. In order to get a complete understanding of the case that is being studied, these need to be explored further. In order to obtain a general sense of how sustainable procurement looks like, the questionnaire developed by Tillon et al. (2011). However, as this is an exploratory research, the questions regarding the dyadic turned triad relationships mainly came forth from the experience

as an intern at ING.

The point of semi-structured interviews is that the main questions of the interview may

similar, however, some of the interviewees have answered questions that others did not. These questions were adapted to whether the interviewee had knowledge about a subject, or the questions were already answered when responding to another question. Repeating questions may be considered as irritating, hampering the interview process. Moreover, it allows for additional comprehension by permitting the interviewee to go off-topic. Reducing the rigor of only using pre-determined questions may lead to obtaining more contextual knowledge about the

collaboration process.

Teemu Malmi (2001) uses this technique as well in his research. The author finds that

semi-structured interviews are the most suitable manner when the subject is a fairly new phenomenon. This is the same for the case at hand in this study. Flint et al. (2005) highlight the significance of obtaining comprehensive knowledge regarding the fundamental object of research. He also states that a more general theory can be developed by coding the information from the interviews. In addition, Hausman (2005) conducted semi-structured interviews, as she finds that quantitative research has a lack of details and she sought to comprehend all of the factors that influenced her object of study.

Findings

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21 whether the intended outcomes were realized. Factors that will be discussed are the general process of engaging supplier and the research question of the effect of unilateral decision-making will be answered. Furthermore, the legitimacy of the new partner, communication, management, role clarity and commitment are key factors in the process of turning a dyadic relationship to a

trilateral alliance.

Model 1

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The process of engaging suppliers

As one could see in Table 1, there are 8 BPA’s, all of which needed to initiate the expansion of 100 alliances with suppliers to include EcoVadis. The basic procedure of alliance formation that was followed is summarized in the table below. Two Business Partner Areas were involved per launch, which occurred around every three months, except for the final launch in October, which launched four BPA’s at the same time in order to meet the KPI that was set for 2015. This can be observed in Table 1. First, the members participated in a training to learn what EcoVadis is and what this partner does. Moreover, they learned how to use the tools that are provided by

EcoVadis and how the process of engaging suppliers was set-up.

Subsequently, the participants made a selection of which suppliers they wanted to enter

into an alliance with ING and EcoVadis in the campaign. This selection was made based on the amount of spend that ING has with these suppliers. As they needed to pay a fee to EcoVadis as well, suppliers that conduct business that is insignificant would not be eager to pay that fee. ING does not make the alliance with EcoVadis obligatory yet, it is therefore relatively unproblematic to refuse because of the fee. After the selection is made, the buyer sends an invitation to the selected suppliers. By doing this, ING tries to prevent blindsiding the suppliers and introduce them to the new alliance partner first. This way, the partner knows that the alliance is initiated by

ING and that the request is legitimate.

Following the actions by ING, EcoVadis comes into play. They send a request to the

supplier to register themselves on the platform. Subsequently, the supplier is asked to fill out a questionnaire. The questionnaire considers themes such as human rights and labor practices, procurement, environment and fair business practices. There are certain topics within these areas about which the supplier has to answer and upload documents to support their claims. In addition, these topics are given a priority regarding the importance of remedying the issue when the supplier fails to comply to these. Hence, the topics are weighed according to the severity of the

impact of non-compliance.

Next, analysts of EcoVadis consider all of the answers and documents that are uploaded

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23 to participate, they were first contacted by EcoVadis in order to determine the causes of the non-responsiveness. When they did not respond to the efforts of EcoVadis, this would be communicated to the buyer at ING.

Figure 2

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Unilateral decision-making

ING decided that EcoVadis was to be the new alliance partner that would be added to the alliance with ING’s suppliers. When looking at the main research questions regarding the effect of the unilateral decision to add EcoVadis to the alliance, the expectation was that there would be a significant breach of trust and strong resistance of suppliers to participate. However, there are no real negative or positive results from the alliance, since the unilateral decision did not lead to any significant action from ING or the supplier. As one sustainability manager stated: “There are no real results following the involvement of EcoVadis.” An altered nature of the relationship overall was also not the case. 25 respondents from the survey stated that the fact that the decision was unilaterally taken by ING did not affect the overall relationship. 24 respondents of the survey found that there was no alteration in the contact from the decision by ING when there was more information about the supplier available.

The other 4 respondents stated that they only had a little more communication, but that was merely to coordinate the effort and the questions resulting from filling out the questionnaire. In my own experience, I have not heard that any dyadic relationship was immediately terminated after a supplier received the invitation. Only the interviewee from COO found that there was a negative impact on the relation. "Yes, the communication is certainly altered, the involvement of EcoVadis is not universally appreciated." However, this is only one outlier and insignificant

when looking at the responses of the other interviewees and surveyed individuals.

Trust

The trust relationship seemed only somewhat violated. During the initiation phase, suppliers would ask questions regarding the objectives of their participation. All of the participants in the survey indicated that requests after the invitation by EcoVadis was not differently responded to. When this would be the case, it might be an indication of some hostility against ING. When linking up with suppliers regarding EcoVadis, ING made a very conscious effort to explain why they selected this partner and the reasons behind it. This is also why I worked on the tone of voice of the reminders and the overall construction of the campaign. Selected suppliers were to be addressed in a friendly way, to increase the likelihood of participation.

Legitimacy of EcoVadis

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25 benefit would be in it for them. The importance of this is underscored by the HR BPA interviewee who confessed that “When the introduction letters were not sent out by mistake, the partners would ask a lot of questions whether the invitation from EcoVadis was legitimate.”

In the survey, participants indicated that questioning the objective was one of the main issues that they ran into when EcoVadis was introduced to the suppliers. Alliances are primarily established to provide all partners with some kind of benefit. The interviewees also noted that suppliers asked questions in order to know whether EcoVadis would provide some kind of benefit in return for the resources that they committed. As one of the managers stated: “A supplier naturally does not want to invest in something without some kind of idea what they are gaining.” Trust building by added partner

Here, EcoVadis plays a large part, as they need to prove that they are a trustworthy partner. In their description of EcoVadis, 24 of the 28 surveyed individuals indicate that their relationship with EcoVadis is either good or neutral. With respect to commitment to ensure the ease of the transition from a dyadic to a trilateral alliance, EcoVadis was very committed to facilitate both ING, as well as the supplier. EcoVadis has been brought in by ING, however, it does not mean that the focus lies solely with them. As the EcoVadis manager put it: “Suppliers can request deadline extensions or do not have to share the score if it did not meet their expectations.”

With respect to trust, it is clear that EcoVadis finds that this is one of the key elements of the relationship during the establishment of the alliance. In this first phase, the supplier may ask to not share the score with ING when they find that this is too low to be published, or when they do not want to share supporting documents with ING. However, in my experience, this has not occurred regularly, which might be an indication that the suppliers quickly feel comfortable sharing sensitive documents with EcoVadis, as well as with ING. This observation was also validated by the EcoVadis account manager, which asserted that “suppliers are often okay with sharing documents for our assessment team, but sometimes request that these documents remain confidential between them and EcoVadis.” EcoVadis may thus be considered as a ‘neutral’ partner.

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ING has with the supplier. “The relation is separate, not integrated at all. It is just a matter of priorities what needs to be discussed,” as one of the interviewees stated. This view is shared by the interviewee from EcoVadis: “There is a double relation, but we treat the suppliers the same as the requesting partner, this way, the communication is neutral.”

Communication

The objective of the expansion of the alliance was that there would be increased cooperation and knowledge sharing on the topic of sustainability. When initiating the alliances during the first phase of the formation of the alliances, ING was very well aware of the possible negative consequences of their unilateral decision: they knew that having no say in who the alliance partner was would generate some reluctance to participate. In the words of a sustainability manager from CIO: “Of course there would be some resistance, nobody likes to get unexpected tasks, especially because this alliance formation requires time and real effort.”

In my experience, the focus was ensuring that the following process would be as easy on the suppliers as possible. To achieve this, I had regular conversations with EcoVadis about the tone of voice of their communication as well as clear communication from ING about the changing alliance, before the suppliers were contacted by EcoVadis. By communicating what the decision held in for suppliers, prevention of backlash was prevented. The sustainability manager from ISS stated that: ”The letter with the brochure helped to let suppliers know what they needed to do.” lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll

In addition, the reluctance of sharing information also originated from the fact that suppliers are only informed after they are selected to include EcoVadis in their partnership with ING. The manager from Group Services mentioned that: “The negative reply that I often got was that they did not want to participate in something they had no say in.” In the survey, the lack of consultation was 17 times the subject of negative feedback from the supplier when indicating their reason why they do not want to participate.

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27 did not only concerned the monetary aspect, but the psychological aspect as well, which will be explained below.

The interviewee from EcoVadis stated that “the main reasons to refuse participation are a lack of time or that they are not willing to pay the fee to get assessed.” Thus, the results regarding the need to participate in taking the decision of who to involve in the relationship remain inconclusive. This was also observed in the results from the survey, where 15 participants indicated that this was a major complaint of suppliers.

However, around 65% of the suppliers respond to the invitation issued by EcoVadis, which suggests that even though this was a unilateral decision of the main partner and on a voluntary basis, they view the relationship with ING as important. This is also recognized by the interviewee from the Operations and IT: “Simply put, for some suppliers, ING is a big client and they want to keep that relation healthy.” In addition, almost all of the suppliers renew the alliance with EcoVadis, meaning that they value the partnership and are open to increasing the areas of cooperation.

Managerial engagement

Increasing the cooperation with suppliers was deemed as very important to the managers of the program. The idea was to form a network of suppliers, where best practices could be shared through the EcoVadis platform and with their corrective action plans. However, this was not shared by the people that were supposed to execute this new arrangement. In the survey, 23 participants indicated that they spend only 1 or 2 hours per week on EcoVadis. They find themselves too busy with their work and prefer to take up other delayed tasks.

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Excerpt Table 1

Managing post alliance formation

Later in the alliance process, sustainability managers as well as supplier contract managers were supposed to monitor the scorecards that EcoVadis provided and set corrective action plans for improvement. However, this is not done by the managers. As the manager from Facility Management put it: “I check whether they are scored, not how or what they are scored, there ends the process for me now” This view is shared among the rest of the interviewees. Another manager stated that: “the scorecards are interesting, but I do not discuss them during meetings. I want to discuss more important issues then.”

In sharp contrast with this failure to pursue their unilateral decision and make the

expansion to a trilateral alliance a success, is the desire of the interviewees and the surveyed individuals to make procurement more sustainable. For example, meetings to discuss the results and the joint set up of a corrective action plan to remedy flaws in the sustainability status of the supplier are respectively 12 and 11 times mentioned in the survey as outcomes when the alliance would work smoothly. This goal was also apparent in my experience, my colleagues seemed very much inclined to pursue this.

Also, several of the interviewees explicitly mentioned that the lack could change when the

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Supplier participation

This issue is also present when it comes to the actions of suppliers. Even though the decision to add EcoVadis was taken unilaterally, ING still considers the participation in the expansion of the alliance as a voluntary choice. The involvement of EcoVadis requires suppliers to commit resources and make investments. However, while they do not perceive any initiative from ING, there is no motivation of suppliers to actively participate in the alliance. As the surveys as the interviews indicate, the relation with EcoVadis is not integrated in the existing relationship with the supplier. One of the interviewees even stated that: “For me, the extension of the alliance is there, but is not realized at all. I do not take it in consideration.” Suppliers expect some commitment by ING, however, this is met with confusion and reluctance.

The overall objective of the decision to add EcoVadis by ING was to engage the supplier into a dialogue regarding the results of the analysis that is performed. Here is where the decision shows to be underdeveloped. As EcoVadis is more of a facilitating partner, they left the initiative to initiate these discussions up to ING and the supplier. Thus, one major consequence of taking the unilateral decision of ING to include EcoVadis, is that they are expected to follow through and carry the alliance. However, managers did not have the time or knowledge what to do after the alliance was formed, only a vague general objective. For example, as the manager from Group Services put it: "It is still free format. ING is trying, but it is not fully developed yet."

Mismatched expectations

The expectation was that the alliance was going to lead to increased cooperation between managers and suppliers. However, it was quickly pushed to the background. This notion is shared by the interviewee from EcoVadis: "Some companies do it, but not a lot. These things are seen as non-priority issues." Also he added that: “The client is the owner of the relation.” A skeptical observation from an employee from ING was that “The engagement was merely a poorly executed attempt, that had no additional value to the alliance.” Some kind of mismatched expectations seem to be at play here. The managers from ING might have expected more from EcoVadis in terms of support with the expansion to a trilateral alliance.

Discussion

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discussed. Furthermore, some propositions will be offered following the discussion of the factor at hand to extra highlight how the findings fit within the existing literature.

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Response to the research question

Looking at the effects of the unilateral decision on the alliance, it is clear that nature of the partnership between ING and the suppliers virtually remains the same. Suppliers were sometimes reluctant to actively participate, so that EcoVadis is merely present as an indication of some effort that ING undertook to make the procurement department more sustainable. Hence, the expansion from a dyad to a triad did not result in dramatically altered relationship. The reason why the objectives were not met may be due to the unilateral nature of the decision-making process. The goals of increasing sustainability may be shared with suppliers, however, the lack of consultation led to the notion that they were following ING’s goals, rather than joint goals. This will be further explored in the ‘communication’ section below.

Furthermore, there were only struggles regarding some pragmatic issues, such as the fee

that was to be paid. There was some resistance, but this had no major effect, as will be explained below. This view contrasts with previous research by Ariño and De La Torre (1998). They foresaw skirmishes between partners due to hostilities between the partners. Unfortunately, the alliance did also not result in improved results due to increased cooperation either, while in the literature, it was found that that strategic alliances benefit knowledge exchange and innovation in partner firms (Sarkar et al, 2001, Walter et al. 2007).

In addition, other previous studies (Cullen et al. 2000, Ik-Whan and Kwon Taewon 2005)

found that behavioral uncertainty significantly reduces the trust in the partner displaying this behavior and that when the environment changes, it is desired that partners preserve the relationship in an unchanged manner. This diverges then with the findings in this case study. While ING exhibited unexpected behavior by expanding the relationship from a dyadic one to a triad, in response to a changed demand for increased sustainability, this was not met with significant resistance or furious suppliers.

Effect on trust

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33 showing that it has genuine attention for sustainable procurement. Considering previous research and taking this case into account, the following proposition was established.

.Proposition 1: Unilateral actions and subsequent unilateral decisions do not necessarily lead to a shift in inter-alliance practice or a significantly altered relationship. S

Legitimacy of added partner

The legitimacy of the added partner can be naturally considered as something that causes apprehension with the suppliers. It must be noted that the willingness to accept an unknown partner was already established by Stephens et al (2009). However, when starting this research, this seemed an outlier. Prior research namely indicated that it was necessary to screen a potential partner, for example by carefully researching the fit and potential benefits (Mandal et al. 2003, Beckman et al. 2004, Bierly & Gallagher, 2007). Thus, is was essential for EcoVadis to prove itself first as a reliable partner which did not have only the interest of ING in mind and had

something to offer for the supplier as well.

Making an effort

Here, Thorgren et al. (2011) is followed with respect to the influence of effort to establish generalized exchanges on trust building. ING makes the first effort here, by sending the first information about EcoVadis. In addition, Daellenbach and Davenport (2004) are followed, who find that the association with another company can also form an indication of trustworthiness. Then, the legitimacy of EcoVadis is established, as ING connects itself to them. In addition, EcoVadis makes the effort to send out an invitation and be available for support when suppliers run into trouble with the questionnaire. Also, offering to not share sensitive information with ING, by withholding scores or documents by request of the supplier and showing what the benefits are for them seem instruments to establish this trust through exchanging information on their neutral role in the alliance.

Proposition 2: A partner which did not yet earn trust in the beginning of the alliance itself, should

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Communication

Following the notion that suppliers were not eager to participate in an alliance in which they were not consulted on, it seems that a decision which is taken by both partner in an alliance has a better chance of success. Here, I agree with Sakar et al. (2001), that communication is key in this respect. Also, Biehl et al. (2006) are followed regarding their finding that joint decision-making between buyers and suppliers is beneficial for the overall performance of the alliance. Since ING did not consult the supplier due to their unilateral decision-making, suppliers were not eager to participate. They might have shared to overall goal of becoming more sustainable, but there were no jointly established goals between the supplier and ING. This ultimately led to resistance of the supplier to the involvement of EcoVadis. Thus, in line with previous research, the outcome of the unilateral decision was not according to the intention of deepening the communication and increasing the areas in which knowledge is exchanged.

Perceptions of decision-making process

However, in line with the lack of finding a major breach in trust, is that around 65% of the suppliers does respond favorably to the invitation, which indicates that the addition of EcoVadis is to a large extent accepted. There were some struggles, as indicated by the questions regarding why a fee should be paid and what kind of benefits it would result in. This cooperation might be for various reasons, as the interviewees and surveyed individuals indicated. A possible explanation may offered by Walter et al. (2010), which stated that perceptions of the decision-making procedure affects the performance of the alliance. In this case, suppliers might genuinely like the idea of increasing the level of participation in the realm of sustainability. More importantly, is means that alliances constructed from a unilateral decision can be accepted.

Relationship capital

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35 Proposition 3: Acceptance of the alliance partner without prior consultation is conceivable, but

provides for some disinclination, which is moderated by the established relationship capital.

Management capabilities

Active management after the alliance is formed is an important condition to reach the objective of the alliance. Prior research by Stephens et al. (2009), indicates that an alliance which is formed by the focal firm without direct accordance with the other firms can be successful. Moreover, as the previous sections show, there are no significant hindrances set up by the supplier or EcoVadis why this is not possible. Their findings contrast with this case in the active pursuit of the cupid firm to extract value from its coupling attempt. Hence, the management of the alliance after it is formed is important to reach the initial objectives.

Motivation

As noted by various researchers (Anderson, 1994, Kelly et al. 2002) CEO’s increasingly realize that alliances and networks can be a great competitive advantage for all parties involved. As can be observed, ING realizes this as well and tries to improve its procurement sustainability performance by attempting to establish a network of suppliers to foster cooperation in more than one area, in which ING is embedded in the center. However, this effort was thwarted after the initial effect of the launch period.

When looking at prior research, Lambe et al. (2002) found that the commitment of senior management is very important when looking at the chance of an alliance to reach its full potential. This case ties in with this finding, when considering the fact that senior management only provided vague guidelines and there were no significant consequences for not reaching the KPI. The focus of senior management was more on cost savings, which led to the easy dismissal of the importance of managing the alliance after the formation by managers.

Resources

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how to proceed from the initial addition of suppliers prevents them from effectively reaching the goals set by upper management. Providing training in alliance management is found to enhance the absorptive capacity (Kale, 1999 Draulans and Volberda, 2003). Here, this might be a good approach, since the managers indicated that the pre-alliance formation training did give them clear guidelines.

Proposition 4: Adequate alliance capability management results in an increased chance of the

alliance to be successful.

Role specification

It is clear that confusion over what the role of the partner actually can pose a significant problem in the relationship between alliance partners, as is also considered a possible problem in prior research (Kelly 2002, Gardet & Mothe 2011). When none of the partners signal any expected initiative from the other party, there is no inclination to resort to doing anything themselves. It would mean that they would invest resources without any indication of getting a return on this investment (Das & Teng 1998).

The specific expectations of different managers in each firm are often unknown by alliance managers. They do not know which actions to undertake, leading to suboptimal outcomes (Park and Ungson 2001, Casciaro 2003). In this case, after the suppliers participated, they were not inclined to undertake action themselves, as it was ING that made the request. Added to this was that EcoVadis states that ING is the owner of the relationship, while the interviewees from ING indicate that they consider EcoVadis not a great addition to the alliance. Here, role ambiguity seems to be at hand: EcoVadis appeared to expect that ING would take the lead in the actual shaping of the alliance, while the managers from ING expected that EcoVadis would play a larger role in supporting ING in this effort. This lack of initiative hinders the alliance performance as there is not clarity of how the strategy is executed.

Proposition 5: Role clarity is an important factor which significantly influences the performance

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Commitment

Prior research indicated that cooperating with a partner that serves its own interest may actually be beneficial, as the overall relationship can be strengthened (Bello et al. 2010). It can result in pro-relationship behavior of the partner that displays opportunistic behavior and more commitment, thus altering both the role of the supplier and the buying firm. This is in line with Delerue-Vidot (2006) who found that unilateral signs of commitment signal opportunistic behavior to the other partner. This does not have to lead to a decrease in the overall quality of the relationship, as this effect is moderated by relationship capital (Delerue-Vidot 2006)

This is recognized by looking at the behavior of suppliers in this case, of which 65 percent accommodated the action by ING in order to keep the relationship positive or in an attempt to strengthen it. However, it did not lead to increased commitment by ING, which neutralized this possible effect. This a missed opportunity, as there are significant benefits for a buying firm when commitment to a supplier is shown, as increased levels of trust resulting from this signal may result to easier access to resources (Krause et al. 2007). This is another factor why ING initiated the expansion. Signs of commitment to an alliance have a positive effect on the willingness to cooperate (Doz 1996). One could see unilateral commitment, as ING displayed here by showing willingness to expand the areas of cooperation, as a signal of good intentions.

Here, the trust levels have not changed, as the suppliers did not observe an actual commitment to them by ING, resulting from the unilateral decision-making process. By not following through properly with the alliance, ING signaled that it is more committed to its own interests. The suppliers made an investment by paying the fee and committing resources to get scored, which was in vain in hindsight. Since deciding to participate was still voluntary and the relationship prior to this was good and fruitful for both parties, as the supplier would not have been invited otherwise, there was no significant breach of trust. This is also in line with the overall observation that there was no real decline of trust in ING by the supplier. Overall, it resulted in no real additional benefits for ING. From these observations, the following proposition ensues.

Proposition 6: A properly followed through unilateral decision may be positively considered by

Master Thesis Suzanne Buter