Organization
An organization is formed when a group of people joins together intentionally, to accomplish a common goal or goals (McNamara, 2007). People composition in an organization ranges from two to thousands of people. In every organization, a policy must be put in place to define its conducts and relationship with other organizations which are either directly or indirectly involved in the course of executing their duties. Organizations in their strategic planning usually outline some aspects like vision, mission, values, strategic goal as well as measures, all geared towards governing and regulating their operations for the optimal realization and accomplishment of their tasks.
For optimal success of its operations, organizations should strive to be effective and efficient and this is usually achieved through harmonizing different organs to operate in unison as a system. An organization as a system entails that there must be inputs which are to be processed in order to give an output. This output is the optimal goal the organization strives to accomplish. Sometimes these goals seems to require much more effort of more than one organization, hence the need to partner or to form alliances with other organizations with a similar goal. This results to the formation of inter-organizational relationships so as to join up their efforts in unison for realization of the main goal (Aiken, 1968).
Inter-Organizational Relationships
In a conceptual approach, Oliver (1990) gave a succinct meaning of interorganizational relationships as the way organizations carry on their transactions, courses and also the connections that occurs between one organization with another one or more organization. Two or more organizations can join up on a voluntary basis with a common goal of pursuing a certain activity. For an effective interorganizational relationship to be realized, the organizations must factor in several conditions which are highly vital. Opportunity and motivation are among the most important factors to consider when organizations decide to form or enter into an inter-organizational relationship. These relationships are usually in terms of mutual collaborations between various organizations mainly aimed at providing a certain product or service more effectively and efficiently, while promoting their social welfare as well as that of all other stake holders in their environment (Aiken, 1968).
Conceptual Model of Inter-organizational Relationships
Alliances between organizations are strongly based on the perspective of information processing. The need for processing information arises from the possible uncertainties likely to arise in relationships. Levine and White (1961) noted that uncertainties posses the major challenge for organizations entering into a relationship, therefore necessary for partners to strategize on how to approach these uncertainties in their administrative processes. Levine and White (1961) Observed that when activities are conducted in presence of uncertainty, the realization of the set goals becomes harder and almost impossible to achieve. Among these uncertainties likely to occur are environmental, partnerships among others.
Environmental uncertainties are those challenges likely to arise due to environmental conditions surrounding the inter-organizational relationship. Environmental uncertainties can be viewed in three important dimensions, namely complexity, dynamism and capacity (Aiken, 1968).
Lasker, Weiss and Miller (2001) maintained that partnership uncertainties are challenges which manifest themselves in these relationships. They usually arise as a result of some organization’s perception of their partners’ uncertain behaviors likely to occur in the future. Task uncertainty comes along as a result of a partner not performing as per the set terms and conditions in the relationship (Knight, 2002).
After information processing need, the partners in the relationship analyses their capabilities in sustaining the relationship formed. These capabilities are mainly derived out of systems of coordination in the interorganizational relationship. Knight (2002) classified these systems in three categories, namely, structural systems, process systems and information technology systems.
The structural dimension involves the functions of controlling and coordinating all the activities to be undertaken in the relationship. The Process systems facet involves aspects like joint action, commitment of partners as well as means of resolving conflicts which may arise in the course of the inter-organizational relationship. The information technology dimension covers the scope and intensity of I.T. usage in the course of the relationship. Basically these are the conceptual frameworks within which inter-organizational relationships exist in (Knight, 2002).
Forms of Inter-Organizational Relationships
Inter-organizational relationships vary with different goals of the organizations as well as different needs in the society, which also differs from customer orientation, the environment, production or manufacturing processes, legal formalities among many other societal needs. These relationships can be in form of partnerships, coalitions or collaborations between two or more organization all aimed towards the accomplishment of a certain activity (Kanter, 1996). Mergers and acquisitions are other forms through which organizations join up in order to perform a certain activity as one entity. This is usually done when an organization becomes unable to compete effectively with its competitors in a certain field. Networking also counts as a form of inter-organizational relationship. It entails a system through which one organization makes use of other organization(s) in conducting its activities. Examples of networking relationships among organization are characterized in multilevel marketing and in organizations outsourcing through other organizations (Knight, 2002).
Reasons for the Formation of Inter-Organizational Relationships
Cost- Effectiveness
Different organizations usually embark on a mutual alliance with the aim of combating costs involved in their activities and increasing their efficiency and profitability. Cost pressures are usually caused by inefficiency within an organization as well as stiff competition in the market, thereby arousing the need for organizations to seek remedy in the formation of inter-organizational relationships (Miller et al, 1995). A good example is the formation of associations and coalitions to have a collective bargain and negotiation in a common issue. Partnerships as well as joint ventures can be used in acquiring certain assets, or lobbying for combined efforts which could be difficult and uneconomical if pursued by single individual organizations independently (Kogut, 1988).
Address Diverse Client Needs
Researchers have found that when majority of organizations increase or expand in their service provision activities, the likelihood of forming interorganizational relationships to cater for the interdependences becomes higher (Molnar, 1978). Lane, Salk and Lyles (200I) added to the argument that organizations enters into relationships with the aim of acquiring deeper knowledge about their clients, who usually have diverse backgrounds.
Organizational Affiliation
Pre-existing attachments and links between organizations plays a major role in the future possibilities of subsequent inter-organizational relationships from current existing relationships. Karthik (2002) argued that good existing ties and links between organizations are more likely to bring forth new relationships. Likewise the partner organizations could acquire cooperative skills from one another, hence becoming better among other more benefits likely to arise from the ties between organizations (Karthik, 2002).
Phases in Inter-Organizational Relationships
These are the stages through which a commitment evolves between two or more organizations. It is a process through which relationships are established, nurtured and progressed up to the achievement and realization of the goal aimed at during the formation of the relationship (Karthik, 2002). Lane et. al. (200I) in their extensive study on interorganizational relationships identified and developed four crucial stages through which organizations joining up efforts needed to go through. The stages were as follows:
Identification, Awareness and Selection of a Partner
This is a mutual process which requires organizations entering into a relationship, to learn about each other before making a decision to embark on a relationship (Fiol & Lyles, 1985). Organizations need to be aware of the existence and the activities of their partners to be, establish more socializations and sharing more information on joining efforts in the execution of a certain task in unity. At this stage, a stakeholder in different organizations recognize the need for entering in to relationship, and evaluates their organizations capacity and compatibility in sharing opportunities and resources, as well as establishing capacities to explore new opportunities in the environment. During the initial meetings, information should be passed on with clarity and in transparent manner to make sure that every stakeholder gets the correct information on the joint venture. Interdependence should exist in order to streamline their views harmoniously (Kanter, 1996).
This is the initial stage where organizations build their behavioral trust through mutual learning and understanding of each other. Explicit acquaintance and familiarity of relevant skills required for the relationship as possessed by the partners. In this phase the goals and intentions of the potential partners are discussed into depth and made known to each other clearly (Lane et. al., 200I).
Exploration
The second phase in the evolution of an interorganizational relationship is exploration where partners integrate their individual intentions and goals into one common goal. The phase is characterized by acquisition of capabilities and abilities, and organization’s combination capacity. At this stage, partners begin interacting as preparations are made to establish lasting relationships and engagements. The organizations involved therefore come up with rules and policies to govern and regulate their future relationships. Organizations then discover the relevance of external knowledge from the environment, acquire it and apply the information for their activities. In this phase, mutual learning should still be evident between organizations, as a result of new arising needs in acquisition of new information, which might be necessary for the progression of mutual benefit of partners in the relationship (Cohen & Levinthal, 1990).
Expansion
This is the third phase in the evolution process of inter-organizational relationships, whereby the organizations adopt all the viable initiatives explored in the latter stage. It is the stage at which structural trust starts to build up between the partner organizations. Managers of the partnering organizations now acquires independent learning, which usually leads to breaches on contracts as the selfish motive takes in some organizations aiming to benefit more from the relationship than other partners. Karthik (2002) noted that the stage was highly characterized by conflicts of interests, therefore managers and their organizations should strive to achieve joint learning from their unilateral learning.
Larsson et al (1998) argued that the structural facet of trust should encourage partners to have self motivation, and participate in cooperation so as to realize their goals successfully. Both the behavioral and structural dimension in these relationships should make the organizations concerned aim at focusing on executing and undertaking the optimistic initiatives and expectations dictated in the formation of the interorganizational relationship, while avoiding nay negative or opportunistic action. Larsson et al (1998) attributed these conflicts with organizations which joins the relationship later, after the cooperative relationships had been established during the initial stages in the formation of the partnership. Karthik (2002) noted that the importance of the internal environment in the realization of the common strategic goals of the relationship, and the conflicts and gaps partners compatibility emerging at this stage can minimized through mutual learning in the relationship.
Commitment to Relationship
This is the fourth phase in the evolution process of inter-organizational relationships and it’s quite crucial as all the necessary developments are implemented at this stage for the optimal realization of the set goals of the alliance or the partnership (Karthik, 2002). All elements of mutual and independent learning of the partner organizations involved in the alliance are involved. Much interdependence is evidenced between the partners in the alliance, as well as greater investment levels in trust among the parties involved in the relationship. Awareness on common goals and high levels of cooperation are evidenced in this phase, and all efforts are collectively aimed at developing the acquired abilities and capacity for the alliance formed.
Evaluation and revision of the strategic goals set for the alliance, in addition to continuous assessment to sustain the mutual benefit of the alliance is evident at this stage. These processes are aimed at achieving the effectiveness and efficiency for the realization of the main goal of the alliance. Mutual learning as well as structural trust between the partners is predominant at this level (karthik, 2002)
Factors Associated With Inter-Organizational Relationship
Motivation to Cooperate
Before the start of the real formation of an inter-organizational relationship, individual organizations should have the interest and urge to engage in a relationship with other partners. An organization must have a common aim of achieving the desired goal in mutual collaboration or alliance with another or other similar organizations with similar interest (Karthik, 2002)
Opportunities to Cooperate
After the idea of forming the interorganizational relationship arises, organizations should now embark on finding potential and suitable partners to pursue the common goal. Opportunity should also be evident in establishing and developing satisfactory mutual trust with these potential partners (Karthik, 2002). Eisenhardt and Schoonhoven (1996) went further on their argument that individuals in the quest for establishing an interorganizational relationship should be able to find some aspects like personal status, the reputation of the partner and their social relationships, to ascertain or predict possible interorganizational links external factors should offer an opportunity to lean more about their possible future partners.
Cooperation and Coordination
The ability of organizations to cooperate in relationships increases the effectiveness and efficiency in achieving their common strategic as well as learning goals. Where there is cooperation in pursuing certain activities, the costs incurred by individual partners are tremendously reduced (Sigglekow, 2007). Hendrix et al 2002 in the perspective of organizations in the healthcare service provision noted that cooperative arrangements between organizations led to improved quality of service delivered, improved access and costs involved in their inter-organizational relationships.
Case studies conducted by Lambrew, Ricketts & Morrissey (1993) indicated that there were increased benefits in the health care service provision as a result of inter-organizational co ordinations. Many partners in collaborations in the field of health care cited cooperation as the main attribute to cost-effectiveness in service delivery. The leveraging used by many organizations in had a substantial reduction of cost to their underserved clients (Miller et al1995).
Relationship Commitment
In every inter-organizational relationship formed, commitment of the partners is highly crucial if the goal is to be achieved successfully. Zeitz (1980) confirmed that commitments are among the most important aspects of interorganizational relationships, such that their absence literally means that the relationship is dead or it’s in the dying process. The commitments can range from voluntary ownership arrangements to management of a partner in the organization by another.
Setbacks to These Relationships
Various limitations manifest themselves in these relationships. For instance some organizations in the alliance may withdraw their commitment during the course before the attainment and realization of the main goal. This can be brought about by lack of cooperation and coordination of some partner organizations, or simply lack of motivation in the relationship due to some factors like unhealthy practices of their partners. The ever dynamic environment posses another challenge to the survival of inter-organizational relationship (Sigglekow, 2007).
Conclusion
Inter-organizational relationships are healthy practices which organizations should undergo, whenever necessary, for their mutual benefits as well as their success. These relationships should be approached in a systematic manner, aimed at making the management and performance of an organization more efficient and more effective than before. Reasons for its formation should be well outlined, and they should strive to fit well in the conceptual framework of inter-organizational relationships. The relationship should also evolve through the vital stages of identification, awareness and selection of a partner, exploration, expansion and commitment to the relationship. Partnering organizations should be in possession of the vital values and attributes required for a relationship such as cooperation, coordination and commitment. These reinforce organization in a relationship, in overcoming various internal and external setbacks evident in these relationships.
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