OVERCOMING THE PARTNERING DILEMMA
OF PUBLIC PRIVATE PARTNERSHIPS:
THE ROLE OF MUTUAL KNOWLEDGE AND TRUST
Master thesis, MscBA, specialization Change Management University of Groningen, Faculty of Management and Organization
August 28, 2010
Henk S.A. Broekema Student number 1313649 Klaprooslaan 210 9713 SW Groningen tel.: +31 (0)6 4630 8520 e-mail: henkbroekema@yahoo.com Supervisors
Dr. C. Reezigt, University of Groningen, Groningen
1 ABSTRACT
The change in the infrastructure sector from traditional relationships to public private partnerships, is in the current study considered to require a fundamental shift in the mindset of the people involved. In order to take this fundamental step, it is argued that project personnel must overcome a partnering dilemma. Overcoming the dilemma requires trust in the intentions of the partner organization’s project personnel. Two mechanisms are empirically studied through which cross project team knowledge may positively affect initial levels of intentional trust, thereby potentially facilitating project personnel in overcoming the partnering dilemma.
2 PREFACE
The study reported in this thesis is conducted in cooperation with AMI-Consultancy. As a professional implementation company, AMI supports organizations in change processes, organizational improvement issues and project management.
A specific point of interest for AMI is how to continuously improve the impact of their consultancy services for projects in the infrastructure construction sector, in particular with respect to the increasing utilization of Public Private Partnerships. Based on this interest, the empirical study presented in this thesis focuses on characteristics of the relations between members of client and contractor organizations, that are potentially of great value for the creation of successful Public Private Partnerships.
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TABLE OF CONTENTS
INTRODUCTION 4
What is partnering? 5
The dilemma of partnering 7
The role of trust in partnering 9
Overcoming the partnering dilemma: the role of knowledge 10
Mechanism 1 10 Mechanism 2 11 Theoretical framework 13 Hypotheses 14 METHOD 15 Participants 15 Instruments 15 Procedure 16 RESULTS 17 Descriptive statistics 17 Hypothesis 1 18 Hypothesis 2 20
Hypothesis 3 & Hypothesis 4 21
DISCUSSION 23 Hypotheses 23 Practical implications 24 Limitations 26 Research implications 26 REFERENCES 28
4
INTRODUCTION
For roughly two decades, the distribution of tasks between governmental and private organizations is changing in the Netherlands. The change is a characteristic of the liberal time spirit, in which former public organizations are (semi-)privatized, while other public organizations find themselves handing over tasks and responsibilities to private parties. This transfer of governmental tasks and responsibilities to private parties, is also present in the infrastructure construction industry.
The transfer of tasks from the government to the corporate sector takes place under different types of contracts. Contract formats like Design & Construct, in which the private party is responsible for designing and building the works, are regularly utilized. An upcoming type of contract is the Public Private Partnership (PPP). According to the Dutch Ministry of Finance (2010), a PPP stands for ‘a long-time partnership in which the government and the corporate sector, each retaining their own identity and responsibility, create a joint project on the basis of a clear and optimum allocation of duties and risks’. In addition to the Design & Construct (D&C) contract format, a PPP requires from the private party to Finance the project and to perform the necessary Maintenance for a specified period of time. The resulting contract is named a DBFM contract, and this type of contract is the narrowly defined, pure type of PPP (e.g. Weihe, 2008).
Through time the contracts utilized in the construction industry have changed considerably. When traditional contracts are compared to D&C contracts, the transfer of tasks and responsibilities to the private party is most characteristic. When PPP’s are compared to D&C contracts, the transfer of risks to private parties, the maintenance period and the private funding of the project are prominent. By gradually moving away from traditional contracts, through D&C contracts, towards PPP’s, a very subtle but fundamental change is also occurring in the relationship between public and private party employees: the relationship between public and private party employees changes from being vertical and hierarchical to being horizontal and based on equality.
5 What is partnering?
To start the discussion on partnering, first a definition of partnering is presented. It concerns one of the most cited definitions and is provided by the Construction Industry Institute (1991). According to the Construction Industry Institute, partnering is:
‘a long-term commitment between two or more organizations for the purposes of achieving specific business objectives by maximizing the effectiveness of each participant’s resources. This requires changing traditional relationships to a shared culture without regard to organizational boundaries. The relationship is based on trust, dedication to common goals, and an understanding of each other’s individual expectations and values. Expected benefits include improved efficiency and cost effectiveness, increased opportunity for innovation, and the continuous improvement of quality products and services’
Looking at this definition, it becomes clear that partnering is not a goal in itself. Partnering is perceived of as an approach to conduct business. It is expected to lead to results such as improved efficiency, which ultimately benefits the objectives of the partnering parties. An element of the definition that is of special interest for the current study, is the required change from traditional relationships to a shared culture.
The involvement of a culture change in the definition, underlines the major challenges that Public Private Partnership’s face. This culture change is considered a precondition for partnering to be successful (e.g. Kumaraswamy, Rahman, Ling, & Phng, 2005; Chen & Chen, 2007). Changing a culture is however known to be a change of a fundamental nature: The basic assumptions, values and norms a culture consists of, ‘represent a powerful set of forces that are broad, run deep and are resistant to change’ (Manley, Shaw, & Manley, 2007: 5). This resistance to change is also reflected in a median success rate for cultural change projects of 19% (Smith, 2002). On top of the general finding that cultures are difficult to change, the required culture change in the infrastructure construction sector represents a change between two complete opposites. While the construction sector is historically plagued with a confrontational and adversarial culture (CIRC, 2001; Egan, 1998), and eight years ago there even was a Parliamentary Inquiry on fraud in the Building & Construction Industry in the Netherlands, the PPP’s require from all parties to work together cooperatively.
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The fundamental nature of the culture change required for partnering to be successful, is by Larson (1995: 31) referred to as a paradigm shift: ‘Partnering attempts to break the adversarial grid lock by replacing deception with open communication, delays with timely decisions, factionalism with synergy, litigation with joint problem solving, and win-lose with win-win’. Thompson & Sanders (1998) likewise emphasize the ‘disconnection’ between competition on the one hand, and their partnering continuum of cooperation, collaboration and coalescence on the other hand. Bresnen & Marshall (2000) state that ‘the determination to move away from adversarialism and litigation and
to resolve problems jointly and informally through more effective forms of inter-firm collaboration’ is central to partnering. Bresnen & Marshall (2000) conclude that a fairly wide consensus exists about the philosophy of partnering: it involves a commitment between two party’s to cooperate.
Partnering thus represents a shift from a situation in which each party predominantly serves its own interests, to a relationship in which parties consider each other’s perspectives and work as equal partners. The ‘recognition of mutual benefits and win-win scenarios though more co-operative relationships’ forms the basis of what Rahman & Kumaraswamy (2002: 46) call relational contracting, which resides outside of the formal contract. Likewise, Tang, Duffield, & Young (2006) describe the presence of consideration and equality among partners as an extra element of the relationship, existing besides the contract. Tang et al. (2006) call it a cooperative philosophy (see Figure 1).
Partnering is thus referred to as a philosophy and as a relational contract existing besides the formal contract. In the current study, partnering is approached from the actor’s perspective. Instead of calling it a philosophy or a relational contract, the author considers partnering to be a mindset. It is a mindset, directed at the realization of win-win situations. The mindset of partnering is considered not to come natural to everyone. And those project team leaders and members who are willing to guide their behavior by the partnering mindset, are expected to face a dilemma: If I act cooperatively, will I be taken advantage of? This dilemma is by the author considered as being fundamental to the partnering relationship. Likewise it is considered to have an important influence on the willingness of project personnel to engage in partnering-like behaviors.
7 The dilemma of partnering
An important characteristic of the cooperative philosophy of the partnering relationship is, that it is not supported by clear gain share / pain share incentives, as is the case with alliance relationships (see Figure 1). While a project team and its members may be willing to behave in a partner like fashion - for example communicate openly, solve problems jointly, stay away from litigation - adopting the cooperative philosophy of partnering is inherently risky. There is always a chance that the other party does not adopt the philosophy as well. When that happens, parties run the risk of not having their interests met, or even worse, being manipulated and deceived. It is even harder to stay committed to the cooperative philosophy, when short term interests reward uncooperative behavior: Within the context of the construction industry, compromising on the partnering attitude in the face of commercial pressures is found to be the most significant problem for partnering (Chan, Chan, & Ho, 2003). And Ng, Rose, Mak, & Chen (2002) found that the main reason of project partnering failure, from the contractor’s perspective, is the unwillingness of the client to fully commit to the partnering agreement.
The risk of partners adopting uncooperative strategies has been investigated by Wong, Cheung, & Ho (2005), who treat it as the classic prisoner’s dilemma – a non-constant-sum game. In this game, two parties have to adopt a strategy of either competition or cooperation throughout multiple rounds. When choosing for competition, a party is focusing on its own interests, and retaliation or defensive responses by the other party can be expected. When party X chooses for cooperation, party Y may respond by acting cooperatively, or take advantage of party X’s vulnerability. Taking advantage in such a situation will lead to short term wins for party Y, while cooperation may lead to long term profits for both parties X and Y. An initial cooperative strategy adopted by party X is therefore characterized by uncertainty and risk. Because of the uncertainty and risk involved, adopting the cooperative strategy requires the willingness of party X to be vulnerable to the actions of party Y, based on the expectation that party Y will act in accordance with party X’s interests.
The competitive and cooperative strategies of the prisoner’s dilemma, can in general be compared to the traditional and partnering relationships. Traditionally parties acted competitively, and with the new partnering relationships they are expected to cooperate. Despite the partnering relationship’s cooperative philosophy, the absence of clear incentives for cooperative behaviors does cast a shadow of doubt.
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possible; and as the test of belief is willingness to act, one may say that faith is the readiness to act in a cause the prosperous issue of which is not certified to us in advance’ (James, 1882: 70).
In terms of the prisoner’s dilemma, party X takes a leap of faith when behaving cooperatively, leaving the choice to party Y to either cooperate or compete. Whether the first mover decides to cooperate, is found to be the most important factor influencing the second mover's choice (Clark & Sefton, 2001). Once a history of reciprocal cooperative behaviors has been established, the cooperative behaviors may alter from representing merely a cooperative strategy to being based on actual trust (Jones & George, 1998; Lazar, 2000). Likewise Nooteboom (2002: 73) argues that reciprocity may be seen as ‘an intermediate form between self-interest and altruism’. Reciprocity is therefore considered to play a central role in the creation of a cycle of repetitive cooperative actions generating trust.
9 The role of trust in partnering
Trust is a complex phenomenon that comes in many forms (Nooteboom, 2002). Trust is often identified as a success factor for partnering relationships (e.g. Black, Akintoye, & Fitzgeral, 2000; Cheng, Li, & Love, 2000; Chan, Chan, Chiang, Tan, Chan, & Ho, 2004). Central to most definitions of trust is the willingness to take a vulnerable position based on positive expectations regarding the behavior of another (Rousseau, Sitkin, Burt, & Camerer, 1998). In the context of PPP’s these characteristics are also distinguished, for example by Edelenbos & Klijn (2007) who list vulnerability, risk and expectations. The willingness to take a vulnerable position is needed to overcome the partnering dilemma. In other words: trust is needed to take the initial leap of faith. In particular trust in that one’s partner will not respond competitively at one’s cooperative strategy. This kind of trust is called intentional trust.
Nooteboom (2002) distinguishes two types of intentional trust: ‘trust in dedication’ and ‘trust in benevolence’. Like the prisoner’s dilemma, intentional trust deals with the presence of opportunism. Trust in dedication entails trust in that a partner will perform tasks as best as he can. When dedication is absent, this is considered as a weak/passive form of opportunism. Trust in benevolence entails trust in the moral intentions of a partner. When benevolence is absent, a strong/active form of opportunism may be present, potentially in the form of lying and cheating. Although an undedicated partner may cause serious concerns, the result of having a manipulating and lying partner can be far worse. This strong/active form of opportunism, is characterized by an actor ‘seeking interest with guile’ (Williamson, 1975). When these malevolent intentions are believed to be absent, the trustor is said to have trust in benevolence, or by the words of many other authors, goodwill trust.
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Overcoming the partnering dilemma: the role of knowledge
Once a trusting relationship is established, the abovementioned beneficial effects may occur. But unless intentional trust spontaneously appears in a relationship or preexists from earlier contact or reputation, intentional trust will first have to grow (Lazar, 2000).
As previously explained, a first mover’s cooperative act within the context of a prisoner’s dilemma involves vulnerability, risk and positive expectations. Before a trust-cycle of reciprocal cooperative acts sets in, this partnering dilemma must be confronted by one of the parties. By altering the tipping point for an individual or project team to act cooperatively instead of competitively, the chance of a trust cycle setting in increases. Underneath are two mechanisms discussed which may increase the initial level of intentional trust, thereby increasing the chance of a first mover’s cooperative action in the face of a project’s first serious obstacle that challenges the client-contractor relationship.
Mechanism 1
In the domain of inter-group dynamics, such as the relation between clients and contractors, Allport’s (1954) contact hypothesis is one the most often treated concepts. The starting point of the contact hypothesis is that lack of familiarity with another group can be a breeding ground for inter-group hostility. When the ignorance and unfamiliarity is diminished by the means of personal contact between members of both groups, chances for better inter-group relations increase. Pettigrew (1998) lists four processes through which the contact hypothesis benefits inter-group relations: learning about the out-group, changing behavior, generating affective ties, and in-group reappraisal. The first process of learning about the out-group, is the core process through which the contact hypothesis works, and the point of focus for the current study.
Ignorance is known to promote prejudices (Stephan & Stephan, 1984: 238). These prejudices often guide an individual’s attention looking for cues and information (attitudes and behaviors) that confirm one’s initial prejudice. So if for example a client expects a contractor to be untrustworthy, the client is bound to perceive untrustworthy behavior. Ambiguous events and behaviors will be interpreted more negatively, thereby lowering one’s intentional trust.
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Party X’s knowledge
Trust in benevolence on behalf of Party X Trust in dedication on behalf of Party X
Mechanism 2
When a project is awarded to a contractor, it is common to organize a project start-up attended by client and contractor organization personnel. At some point during the meeting people will in general explicate their intentions to work cooperatively and in good faith. After the meeting some weeks or months of preparation may pass, until at a certain moment in time the explicated intentions of cooperation and good faith are put to the test. As the proof of the pudding is in the eating, the following mechanism is argued to facilitate the eating.
The mechanism is inspired by a view on the causes of social problems as treated by Foldvary (1998). Foldvary (1998) argues there are three fundamental and mutual reinforcing causes underlying social problems: greed, apathy and ignorance. Greed refers to wanting and taking more than one morally deserves. It is therefore related to the strong/active form of opportunism (Nooteboom, 2002). Apathy refers to a lack of interest or concern for something or someone. When interest or concern for a cause is missing, dedication and devotion to that cause will be low. Apathy therefore appears related to the weak/passive form of opportunism (Nooteboom, 2002). Finally, ignorance is by Foldvary (1998) argued to be a source of both greed and apathy (see Figure 3).
Inspired by the line of reasoning by Foldvary (1998), the author considers the diminishment of ignorance to be important for the creation of intentional trust. As in Foldvary’s view, in which ignorance concerns ignorance about other social groups, ignorance in the current study concerns the knowledge clients and contractors have about each other.
As ignorance is argued to be a source of greed and apathy, diminishing ignorance should lead to less unintentional greedy and apathetic behavior. As greed is related to the strong/active form of opportunism, which is in its turn related to a partner’s trust in benevolence, a reduction of party X’s ignorance may lead to an increase of party Y’s trust in benevolence. Similarly, as apathy is related to the weak/passive form of opportunism, which is in its turn related to a partner’s trust in dedication, a reduction of party X’s ignorance may lead to an increase of party Y’s trust in dedication.
+ +
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Greed Ignorance
Apathy
Low trust in benevolence on behalf of partner Low trust in dedication on behalf of partner
Party X’s knowledge
Trust in benevolence on behalf of Party Y Trust in dedication on behalf of Party Y
In the case of a client and contractor partnering, this means that the less ignorant the parties are about each other, the less unintentional greedy or apathetic behavior will occur, and the higher the level of intentional trust among the partners will be. By actively getting to know one another as individuals and each other’s (project) organization, right from the start, people are better able to comprehend each other’s perspective on the project. This increased comprehension for each other’s perspective helps to better attune choices and behaviors during the bridal days. Through these better attuned choices and behaviors, expectations may be more often met, which helps develop trust. Through the development of trust, parties are better prepared for the relationship challenges that will inevitably occur and hopefully more prone to act cooperatively in the face of vulnerability and risk.
Congruent with this line of reasoning, the current study explores whether the knowledge reported by the members of one party - about the other party’s project team members, project organization and mother organization - is positively related to the levels of trust in dedication and trust in benevolence reported by the other party (see Figure 4).
+ +
Figure 3: Concepts of ignorance, apathy and greed based on Foldvary (1998), linked with trust in dedication and trust in benevolence as described by Nooteboom (2002).
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Partner’s knowledge
Trust in dedication Knowledge about partner
Willingness to partner
Trust in benevolence
Theoretical framework
The following theoretical framework summarizes the core concepts of this study. Knowledge about a partner is hypothesized to be positively related to intentional trust in two ways.
The first way concerns the abovementioned mechanism one. According to this mechanism, participants that are more familiar with the other party’s project personnel, project organization and mother organization, will better understand their partner’s choices and behaviors. This will result in higher levels of trust in dedication and trust in benevolence, with regard to their partner project organization’s personnel.
The second way concerns mechanism two, which can be summarized as following: When party X better understands the desires and demands of party Y, party X is better able to attune its choices and behaviors to these desires and demands, thereby meeting Y’s expectations and generating trust on behalf of party Y.
The relation between trust in dedication and trust in benevolence, and the willingness to engage in partnering-like behaviors, is beyond the scope of the current study.
Hypothesis 3 Hypothesis 2
Hypothesis 4 Hypothesis 1
14 Hypotheses
The hypotheses follow the central idea of this study that the knowledge partners have about one another and each other’s organization is related to their levels of intentional trust. Knowledge about one’s partner is divided in knowledge about the individual project team members, the project team, and the mother organization. Intentional trust is divided in trust in dedication and trust in benevolence. The hypotheses are as following:
Hypothesis 1: Participant’s knowledge about the other organization’s project team
members, project organization, and the mother organization itself, is positively related to trust in dedication.
Hypothesis 1A: Participant’s knowledge about the other organization’s project team
members, project organization, and the mother organization itself, is not or negatively related to trust in dedication.
Hypothesis 2: Participant’s knowledge about the other organization’s project team
members, project organization, and the mother organization itself, is positively related to trust in benevolence.
Hypothesis 2A: Participant’s knowledge about the other organization’s project team
members, project organization, and the mother organization itself, is not or negatively related to trust in benevolence.
Hypothesis 3: Knowledge about the other organization’s project team members, project organization, and the mother organization itself, on behalf of one’s partner, is positively related to one’s own trust in dedication.
Hypothesis 3A: Knowledge about the other organization’s project team members, project organization, and the mother organization itself, on behalf of one’s partner, is not or negatively related to one’s own trust in dedication.
Hypothesis 4: Knowledge about the other organization’s project team members, project organization, and the mother organization itself, on behalf of one’s partner, is positively related to one’s own trust in benevolence.
15 METHOD
Participants
The study included 80 participants. All were involved in one of the 15 infrastructure construction projects that participated in the study. Of the participants 39 work for public parties, such as city councils, Rijkswaterstaat or ProRail, and 41 work for private parties like construction or engineering companies. All respondents work in the upper level of the project organizations, for example as project manager, contract manager or technical manager.
As the number of PPP-contracts in the Netherlands is limited, the projects participating in the study are projects with other types of contracts (Traditional, Design & Construct, Economically Most Beneficial Offer, Alliance). As the goal of the current study is to explore the general relation between the mutual knowledge and trust of public and private infrastructure project team members, the fact that they do not actually work in PPP-contracts is considered to be acceptable.
Instruments
As no existing measures of intergroup or interpersonal trust were considered appropriate for the current study, two measures of trust were specifically developed: a ‘trust in benevolence’-scale and a ‘trust in dedication’-scale (see Appendix A). The items were constructed in line with the rational approach (Van den Brink & Mellenbergh, 1998). This means that the author considers the items representative for the constructs that are to be measured. An example for trust in benevolence is I think
the members of the project team withhold information (reversed), and an example for trust in
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Furthermore, the knowledge respondents have about the individuals and organization they are working with is measured. For the public party respondents, it concerns their knowledge about the private party individuals and organizations, and vice versa. A questionnaire was developed consisting of three categories (see Appendix A). The items of the first category refer to the individual project team members (e.g. I know in which projects the team members have recently participated). The second category refers to the project organization (e.g. I know how decisions are being made within the
project organization). The third category refers to the mother organization (e.g. I know how the mother organization has dealt recently with similar projects). Respondents are asked to rate the extent in
which they agree with the statement on a seven point Likert scale ranging from totally disagree to
totally agree.
The Cronbach alpha coefficient for the knowledge about individual members scale with 11 items is .907, inter-item correlations range from .139 to .765 and standard deviations range from 1.18 to 1.76. For the knowledge about project organization scale with 11 items the Cronbach alpha coefficient is .924, inter-item correlations range from .255 to .786 and standard deviations range from 1.10 to 1.48. Finally, the Cronbach alpha coefficient for the knowledge about mother organization scale with 7 items is .885, inter-item correlations range from .267 to .856 and standard deviations range from 1.36 to 1.68. Considering these test statistics, the quality of the three knowledge scales is deemed to be satisfactorily for the exploration of the general relation between knowledge and trust.
Procedure
The author has acquired several participating projects through the network of AMI Consultancy. In addition, the author has searched on the internet for projects. For reasons of standardization, the projects were screened for being in the realization phase at the time of the study. The reason for not choosing projects that were in the start-up phase, was the – in personal communication generally underlined – expectation, that project personnel would not actively try to get to know one another and each other’s organization during the start-up phase of a project. Hence the differences in knowledge between projects would potentially be too limited to yield statistical significant results.
Project team members of either the public or private party were generally informed about the study and asked for their cooperation. In addition, they were asked whether they would be willing to include their partner project organization (client - contractor) in the study as well. All participating projects agreed with this request.
17 RESULTS
Descriptive statistics
To provide an overview of the data, descriptive statistics are presented. The descriptives for the three knowledge variables are listed in Table 1. The three knowledge scales all consist of multiple items (see Appendix A). For each respondent, a mean score is calculated for each of the three knowledge variables. The overall means, of these individual mean scores, are listed in Table 1. The minimum and maximum scores represent the mean scores of the least and most knowledgeable respondents – for each of the three knowledge scales. Using ANOVA it is tested whether participants of client and contractor organizations have different mean scores on the knowledge variables. No statistical significant differences are found (see Appendix B, Table B1).
The descriptive statistics for trust in dedication and trust in benevolence are presented in Table 2. The descriptives are presented separately for client and contractor participants, because using ANOVA contractor organization participants are found to report statistical significant lower mean scores on trust in dedication (see Table 3).
Table 1: Descriptive statistics for knowledge about individual members, project organization and mother organization, for client and contractor participants combined.
Variable Min Max Mean SD
Knowledge about individual members 1.00 6.55 4.09 1.06
Knowledge about project organization 1.91 6.36 4.84 1.02
Knowledge about mother organization 1.00 6.29 3.86 1.21
Table 2: Descriptive statistics for trust in dedication and trust in benevolence, differentiated for client and contractor participants.
Variable Min Max Mean SD
Client participants Trust in dedication 3.71 6.86 5.34 .82
Trust in benevolence 3.00 7.00 5.65 .98
Contractor participants Trust in dedication 2.71 6.86 4.89 .83
Trust in benevolence 3.17 7.00 5.46 .89
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Table 3: Analysis of variance statistics for the trust in dedication scale.
Variable and source SS MS F (1,77)
Trust in dedication
Between groups 4.022 4.022 5.906*
Within groups 52.435 .681
* p < .05, ** p < .01
Hypothesis 1
The first hypothesis concerns the relation between the levels of self-reported knowledge and the levels of self-reported trust in dedication. The correlations between these variables are presented in Table 4. For the respondents of the client organization, strong correlations are found ranging from .569 (p < .01) between knowledge about mother organization and trust in dedication, to .712 (p < .01) between knowledge about individual members and trust in dedication. For the respondents of the contractor organizations these correlations are lower or absent. The only statistical significant correlation of .340 (p < .05) is present between knowledge about project organization and trust in dedication. A nearly statistical significant correlation exists between knowledge about individual members and trust in dedication (r = .316, p = .053), while a correlation between knowledge about mother organization and trust in dedication is absent (r = -.016, p = .920).
Regression analyses are conducted to determine the unique predictive value of the three knowledge variables for trust in dedication. For client organization participants, the results are presented in Table 5. Knowledge about individual members has significant predictive value for trust in dedication, but knowledge about project organization and knowledge about mother organization have no unique predictive value. For the participants of contractor organizations, none of the knowledge variables significantly predicts trust in dedication (see Appendix B, Table B2).
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Table 4: Within subject correlations between levels of reported knowledge and levels of self-reported trust in dedication, differentiated for client and contractor participants.
Knowledge about individual members Knowledge about project organization Knowledge about mother organization Trust in dedication Client participants ,712** N = 32 ,580** N = 37 ,569** N = 35 Contractor participants .316† N = 38 .340* N = 40 -.016 N = 41 † p < .10, * p < .05, ** p < .01
Table 5: Regression analysis of trust in dedication by client, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by client.
Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 3,601 ,461 7,816 ,000
Knowledge about individual members ,446 ,166 ,719 2,686 ,012
Knowledge about project organization -,057 ,181 -,087 -,318 ,753
Knowledge about mother organization ,043 ,143 ,079 ,304 ,763
R = .713 R² = .509 with F (3, 28) = 9.665, p < .01
Table 6: Within subject correlations between levels of reported knowledge and levels of self-reported trust in benevolence, differentiated for client and contractor participants.
20 Hypothesis 2
The second hypothesis concerns the relation between the levels of self-reported knowledge and the levels of self-reported trust in benevolence. The correlations between these variables are presented in Table 6. For client participants, knowledge correlates significantly with trust in benevolence. The correlations range from .437 (p < .01) between knowledge about project organization and trust in benevolence, to .583 (p < .01) between knowledge about individual members and trust in benevolence. For contractor participants, these correlations are weaker or absent. A nearly statistically significant relation is found between knowledge about project organization and trust in benevolence (r = .310, p = .052). The correlation between knowledge about individual members and trust in benevolence is not significant (r = .227, p = .170), while the correlation between knowledge about mother organization and trust in benevolence is absent (r = -.023, p = .885)
To determine the unique predictive value of the three knowledge variables for trust in benevolence, regression analyses are conducted. The results are presented in Table 7 for the client organization participants. Knowledge about individual members has significant predictive value for trust in benevolence, but knowledge about project organization and knowledge about mother organization have no unique predictive value. For the participants of contractor organizations, none of the knowledge variables significantly predicts trust in benevolence (see Appendix B, Table B3).
Considering these results, hypothesis 2 is partly accepted. For client personnel all knowledge variables correlate significantly with trust in benevolence. In addition, a client’s knowledge about individual members has predictive value for the reported level of trust in benevolence. For contractor personnel however, hypothesis 2 is rejected.
Table 7: Regression analysis of trust in benevolence by client, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by client.
Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 3,874 ,617 6,275 ,000
Knowledge about individual members ,460 ,196 ,629 2,340 ,026
Knowledge about project organization -,026 ,205 -,033 -,127 ,900
Knowledge about mother organization -,017 ,196 -,026 -,088 ,930
21 Hypothesis 3 & Hypothesis 4
The following hypotheses concern the relations between the levels of knowledge as reported by the client organization and the level of trust reported by the contractor organization. And vice versa. The levels of knowledge and trust that are correlated, are the mean levels of knowledge and trust per project, per project team (client or contractor).
A statistical significant correlation is found between the knowledge about the partner organization reported by contractor participants, and trust in dedication (r = .563, p < .05) and trust in benevolence (r = 675, p < .01) as reported by client participants (see Table 8). A regression analysis is conducted to test the unique predictive value of the three knowledge variables as reported by contractor organizations for the levels of trust reported by client organizations (see Tables 10 and 11). Knowledge about project organization by the contractor organization is found to statistical significantly predict client organization’s trust in dedication and trust in benevolence.
The levels of knowledge reported by client organizations are not related to the levels of trust in dedication and trust in benevolence as reported by the contractor organizations (see Table 9 and Appendix B, Tables B4 and B5).
Based on these results, hypotheses 3 and 4 are partly confirmed: The knowledge of contractor participants about the client’s project organization, is positively related to the client’s trust in dedication and trust in benevolence.
Table 8: Correlations between mean contractor project team levels of knowledge, and mean client project team trust in dedication and trust in benevolence (N = 14).
Contractor team Knowledge about individual members Knowledge about project organization Knowledge about mother organization
Client team Trust in dedication .237 .563* .333
Trust in benevolence .263 .675** .305
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† p < .10, * p < .05, ** p < .01
Table 10: Regression analysis of trust in dedication by client, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by contractor (N = 14). Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 1,152 1,810 ,637 ,539
Knowledge about individual members -,322 ,420 -,220 -,766 ,461
Knowledge about project organization ,765 ,309 ,669 2,474 ,033
Knowledge about mother organization ,504 ,312 ,405 1,614 ,138
R = .678 R² = .460 with F (3, 10) = 2.836, p < .10
Table 11: Regression analysis of trust in benevolence by client, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by contractor (N = 14) Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 1,968 1,294 1,521 ,159
Knowledge about individual members -,299 ,300 -,248 -,995 ,343
Knowledge about project organization ,745 ,221 ,795 3,371 ,007
Knowledge about mother organization ,394 ,223 ,386 1,767 ,108
R = .768 R² = .589 with F (3, 10) = 4.784, p < .05
Table 9: Correlations between mean client project team levels of knowledge, and mean contractor project team trust in dedication and trust in benevolence (N = 14).
23 DISCUSSION
Hypotheses
In the current study two mechanisms are described that can facilitate partnering project organizations in kick-starting a trust-cycle. The first mechanism is intra-personal in nature. It is hypothesized that the better individuals are informed about the other party, the more trust they will have in the other party’s intentions. The results support the hypotheses for the project’s client personnel. Their level of knowledge about the contractor’s individual team members, project-, and mother organization, is positively related to their levels of trust in dedication and trust in benevolence. Regression analysis points out that in particular their level of knowledge about the contractor’s individual team members is related to their levels of trust. This is in line with Lau (2009), who found that clients have the tendency to trust contractors on an individual level, more than on an inter-firm level.
For the project’s contractor personnel, positive relations are found as well. Their levels of knowledge about the client’s individual team members and the project organization is positively related to their levels of trust in dedication and trust in benevolence. These effects are less convincing than is the case for client organization personnel, and regression analysis does not yield significant statistics. What is of interest though, is that the positive correlation between knowledge and intentional trust is slightly stronger for knowledge about the client’s project organization than knowledge about the client’s individual team members. Despite the weak support, this finding appears in line with Lau (2009), who found that contractors tend to trust more on an inter-firm level than on an individual level.
The difference between the core sources of trust for client and contractor project personnel, can potentially be explained by the characteristics of public and private organizations. Public organizations are in general more bureaucratic. When a contractor does not understand how the client bureaucracy works, it may seem like the client organization lacks dedication. Contractor participants are in fact found to report lower levels of trust in dedication than client participants. The finding that a client’s level of trust in dedication and trust in benevolence is predominantly related to knowledge about the individual members of contractor organization, may be due to the larger mandates contractor personnel has. In particular the project leader of a contractor organization may in general have more decision authority than his counterpart at the public organization.
24
The reason why this effect is not found in the reverse order, i.e. that the knowledge of a client team is related to the trust of a contractor team, may be due to the traditional hierarchical relationship. Traditionally, the contractor is expected to deliver what the client demands. Period. It would therefore be up to the wise contractor, to go the extra mile and inform himself thoroughly about the objectives, policies and procedures of the client, thereby gaining the trust of the client. In a PPP, it can however be considered a responsibility of the client too, to inform himself about the contractor’s objectives, policies and procedures. Only when both partners are willing to learn about one another, create optimum organizational alignment and collectively aim for synergy, one can speak about a true equality-based public private partnership. Instead of merely a public-private mix (e.g. Wettenhall, 2006). From this point of view, the client’s knowledge will in the future hopefully also be a source of the contractor’s trust.
Practical implications
According to Edelenbos & Klijn (2009), the literature on PPP’s distinguishes two forms of partnerships: the ‘innovative-contracting’-perspective and the ‘partnering’-perspective. The first perspective is characterized by an emphasis on the role of contracts, a clear distinction between the public and private party, and limited cooperation between both parties. Despite the innovative character of the contract, this perspective is by the author considered to refer to a traditional relationship as depicted in Figure 1. The second perspective emphasizes the role of mutual trust, continuous collaboration throughout the project, and joint action. This perspective on partnering clearly includes a cooperative philosophy, as depicted in Figure 1.
The practical implications of this study can contribute to the development of a cooperative philosophy among clients and contractors. This requires however a favorable breeding ground: the mindsets of the individuals involved, and the cultures of the organizations, should at least be open to the idea of working in line with the ‘partnering’-perspective. When the clients and contractors involved in a project, strongly favor contracts over trust, and prefer limited cooperation over continuous collaboration, the breeding ground for a cooperative philosophy can probably be regarded absent – and the following practical implications can be considered of little value.
25
behaviors and actions (Varvel, Adams, Pridie, & Ulloa, 2004). There is however more to gain. Attention could for example go out to the former projects people were involved in, individual ambitions concerning the current project, reward criteria, project team norms and values, and project team strategies. The better informed people are about these themes, the better they are able to comprehend each other’s expectations, wishes and demands. As mutual understanding increases, trust is bred and parties become better attuned towards each other. Manley et al. (2007) also emphasize the creation of group norms at the start of a project. By providing project personnel with the opportunity to get to know each other right from the start, norms such as ‘being interested in each other’ and ‘being open towards each other’ can also be accentuated. If this means that project personnel is required to display behavior that is initially inconsistent with their attitudes, their attitudes may subsequently change. This can be expected as people are in general highly motivated to resolve the cognitive dissonance springing from inconsistent attitudes and behaviors (e.g. Pettigrew, 1998).
When choosing to address the knowledge of project personnel about one another in order to increase trust, one should be aware of certain boundary conditions. In the realm of the contact hypothesis, Allport (1954) lists four conditions which should be met for prejudices and stereotyping to be reduced by intergroup contact: an equal group status within the contact situation, common goals, intergroup cooperative interaction and support of authorities. Even when these conditions are met and prejudices and stereotypes are reduced, the creation of trust remains a subtle process. This subtleness is for example described by Adobar (2005), who treats the creation of trust as a process of sense-making as put forward by Weick (1985):
“According to Weick (1985), sense-making is a process through which actors enlarge small cues as they try to ‘‘make sense’’ of an unfamiliar situation. Weick (1985) notes that an actor’s initial expectations become an important force in sense-making perhaps because under conditions of uncertainty - and trust building occurs under considerable risk and uncertainty - expectations provide a measure of certainty. Trust, viewed as a form of sense-making, makes initial expectations a force in the process because sense-sense-making, by definition, relies substantially on initial impressions.” (Adobar, 2005: 331)
26
Lastly, one should be aware that building trust through increasing knowledge is not a one-shot solution. Although knowledge may increase the initial levels of mutual understanding and trust, retaining good relations in the context of PPP’s requires continuous proactive relationship management (Smyth & Edkins, 2007). The author agrees with Lazar (1997), that key to successful managing a partnering relationship is the continuous identification, acknowledgement and reciprocation of the concessions or acts of good will of a partnering organization. The mindset that is needed of an individual actor to see and acknowledge these cooperative actions, may come into existence when people truly get to know and understand one another.
Limitations
The empirical study reported in this thesis is limited in several ways. The most profound limitation is the use of self-report measures of knowledge. It is possible that participants consistently overestimate or underestimate their knowledge. The reactions of chronic over estimators may however be compensated for by the reactions of chronic under estimators. One should therefore in particular refrain from making inter-individual comparisons based on the used measures, while the measures are considered appropriate for testing general relations between knowledge and trust.
A second limitation concerns the measures of trust in benevolence and trust in dedication. Both measures are specifically developed for the current study. Although the questionnaires are pilot-tested, extensive validation studies have not been conducted. One should therefore again be cautious when comparing individuals or groups, but using the measures for testing overall relations between knowledge and trust is considered justified.
A third limitation concerns the difference between the project phase addressed in the theory and the phase the research participants were in. While the theory focuses on starting a trust-cycle in the beginning of a project, the research participants were at the time of the study in the realization phase of their projects. As explained in the method section this was done to assure there would be difference in knowledge among the participants. Nonetheless, the effectiveness of building mutual knowledge during the initiation phase as a means to generate trust cannot truly be addressed.
Research implications
27
A first objective may be to investigate the causal effect of knowledge on trust during the start of a project. This could for example be done by using two different project start-up meeting programs for a number of comparable projects, whereby one program actively aims for the project personnel to get to know one another and each other’s organization. By measuring levels of trust in the weeks and months following, it can be investigated whether the two programs yield different results.
A second objective could be to make a detailed investigation into the sense-making processes occurring during the start of a project. For example by joining the meetings of the public and private parties, and interviewing the project personnel afterwards individually. By investigating the meaning project team members attach to situations, specific events, and the do’s and don’ts of the members of the partnering team, insights can be gained concerning the factors that facilitate or hinder the creation of a trust-based relationship. This research objective could be of particular interest, if combined with the abovementioned idea of altering between two kinds of project start-up programs.
A third objective would be to investigate how the attention for people getting to know one another should be implemented in the process of creating a PPP. During the tender phase, investing in mutual knowledge may for example be perceived of as being inappropriate and a disturbance to the objectivity of the bidding process. Should all investments in mutual knowledge therefore only start once the contractor is selected? Would this however not limit the utilization of private party creativity, exactly in the phase in which its added value is potentially the greatest?
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APPENDIX A: SCALES FOR MEASURING INTENTIONAL TRUST AND KNOWLEDGE
Items of ‘Trust in dedication’-scale (in Dutch):
De mensen van de projectorganisatie houden mij goed op de hoogte. Ik heb het idee dat ik kan bouwen op de mensen van de projectorganisatie.
De mensen van de projectorganisatie besteden weinig zorg aan hun werk. (Reversed) De mensen van de projectorganisatie houden rekening met mijn belangen.
De mensen van de projectorganisatie bekommeren zich alleen om zichzelf. (Reversed) De mensen van de projectorganisatie voeren hun taken met toewijding uit.
De mensen van de projectorganisatie houden zich aan hun woord.
Items of ‘Trust in benevolence’-scale (in Dutch):
Volgens mij houden de mensen van de projectorganisatie informatie achter. (Reversed)
De mensen van de projectorganisatie proberen onder hun toezeggingen uit te komen. (Reversed) Ik denk dat de mensen van de projectorganisatie de waarheid spreken.
De mensen van de projectorganisatie proberen voordeel te behalen te koste van anderen. (Reversed) Ik denk dat de mensen van de projectorganisatie ons proberen te misleiden. (Reversed)
Naar mijn mening zijn de mensen van de projectorganisatie onbetrouwbaar. (Reversed)
Items of ‘Knowledge about individual members’-scale (in Dutch):
Ik weet van de mensen van de projectorganisatie waardoor zij gedreven worden in hun werk (bijv. macht, plezier, zingeving, uitdaging, dienstvaardigheid, deskundigheid etc.). Ik weet wat de sterke eigenschappen zijn van de mensen van de projectorganisatie. Ik weet wat de zwakke eigenschappen zijn van de mensen van de projectorganisatie. Ik weet over welke kennis en ervaring de mensen van de projectorganisatie beschikken. Ik weet aan welke projecten de mensen van de projectorganisatie recent hebben meegewerkt. Ik weet waarom de mensen van de projectorganisatie op het huidige project zitten.
Ik weet wat de individuele ambities zijn van de mensen met dit project. Ik weet wat de gezamenlijke ambitie is die de mensen met dit project beogen. Ik weet waar de individuele ambities elkaar mogelijk kunnen bijten.
Ik weet welke taken en verantwoordelijkheden de mensen van de projectorganisatie hebben buiten het project om.
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Items of ‘Knowledge about project organization’-scale (in Dutch):
Ik weet welke doelstellingen (missie, visie) de projectorganisatie heeft.
Ik weet hoe de projectorganisatie haar doelstellingen wil realiseren (strategie, beleid). Ik weet hoe de organisatiestructuur van de projectorganisatie is opgebouwd.
Ik weet hoe de taken en verantwoordelijkheden verdeeld zijn binnen de projectorganisatie. Ik weet hoe de formele communicatielijnen lopen binnen de projectorganisatie.
Ik weet hoe besluitvormingsprocedures verlopen binnen de projectorganisatie.
Ik weet welke beslissingsbevoegdheden medewerkers van de projectorganisatie hebben. Ik weet wat de waarden en normen van de projectorganisatie zijn.
Ik weet hoe mensen van de projectorganisatie met elkaar omgaan.
Ik weet welke managementstijl ze binnen de projectorganisatie overwegend hanteren. Ik weet hoe de onderlinge verhoudingen zijn tussen de mensen van de projectorganisatie.
Items of ‘Knowledge about mother organization’-scale (in Dutch):
Ik weet hoe de organisatiestructuur van de moederorganisatie(s) is opgebouwd. Ik weet hoe de moederorganisatie(s) met deze en vergelijkbare projecten omgaan.
Ik weet welke prestaties de moederorganisatie(s) recent hebben geleverd bij vergelijkbare projecten.
Ik weet welke financiële resultaten de moederorganisatie(s) recent hebben behaald bij vergelijkbare projecten.
Ik weet wie degenen zijn in de moederorganisatie(s) die een belang hebben bij dit project. Ik weet wat die belangen zijn.
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APPENDIX B: ADDITIONAL STATISTICAL ANALYSES
Table B1: Analysis of variance statistics, of client and contractor organization participants, for knowledge about individual members, project organization and mother organization.
Variable and source SS MS F
Knowledge individual members
Between groups .349 .349 .305 (df 1,68)
Within groups 77.924 1.146
Knowledge project organization
Between groups .021 .021 .020 (df 1,75)
Within groups 79.047 1.054
Knowledge mother organization
Between groups 1.846 1.846 1.247 (df 1,74)
Within groups 109.498 1.480
* p < .05, ** p < .01
Table B2: Regression analysis of trust in dedication by contractor, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by contractor. Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 3.037 .874 3.477 .001
Knowledge about individual members .280 .244 .238 1.150 .258
Knowledge about project organization .274 .198 .275 1.387 .174
Knowledge about mother organization -.153 .167 -.170 -.920 .364
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Table B3: Regression analysis of trust in benevolence by contractor, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by contractor. Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 3.752 .986 3.804 .001
Knowledge about individual members .161 .275 .123 .584 .563
Knowledge about project organization .355 .223 .321 1.590 .121
Knowledge about mother organization -.171 .188 -.171 -.909 .370
R = .356 R² = .127 with F (3, 34) = 1.648, p = .197
Table B4: Regression analysis of trust in dedication by contractor, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by client (N = 12). Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 4.975 2.119 2.348 .047
Knowledge about individual members .289 .846 .338 .341 .742
Knowledge about project organization -.510 1.207 -.568 -.422 .684
Knowledge about mother organization .308 .550 .475 .561 .590
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Table B5: Regression analysis of trust in benevolence by contractor, on knowledge about individual members, knowledge about project organization and knowledge about mother organization by client (N = 12). Unstandardized coefficients Standardized coefficients B SE Beta t Sig Constant 8.333 2.047 4.070 .004
Knowledge about individual members .429 .817 .484 .525 .614
Knowledge about project organization -1.426 1.166 -1.528 -1.223 .256
Knowledge about mother organization .616 .531 .913 1.159 .280
