Private-Public Sector Partnerships

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The level of organizational cohesion and complexity is necessary to consider industry partnerships

The world is increasingly becoming a small global village. With this has come a serious competition as firms face off one another within the same market. In such a competitive market, it forces such a firm to come up with competitive strategies in order manage such competition. Partnerships form one of the most important strategies of managing such a competition.

Firms are coming together to form larger and more complex partnerships (Akintoye, 2008). In order to form a partnership, firms entering the partnership must have a legally binding cohesive factor that none of them can contravene. The cohesive factor should be intertwined in the overall goal that all the partners are seeking to achieve.

It is important to ensure that when determining the cohesiveness of the partners, the bar should not be set in a way that others will consider it as a punitive process. Each of the partners should appreciate that there is a shared goal and that for this to be a success such a binding factor should be determined in order to avoid any form of misunderstanding. It is also important to determine organizational complexity.

According to Yescombe (2007), organizational complexity can be looked at from various fronts. When forming partnerships, it is always imperative to ensure that all the involved parties have an understanding of the organizational complexity of each member. The complexity should be ‘simple’ enough to be understood by all the parties.

This is important because when not all the partners understand the organizational structure of the other party, it becomes easy to have cases where one acts in contrary to the principles of the other. The partners should not be too complex to be understood by others. On the other hand, such an organization should not be too simple in its structure that it creates the perception that it lacks a clear proper focus (Yong, 2010).

All the important structure of the organization should be clearly defined, with a clear definition of how they relate, and how they help achieve the overall organizational goals. This way, each partner will come into the partnership with a clear understanding of the other partners, and all the structures that are being brought into the partnership.

How partnerships affect organizational performance

Entering partnerships will have a direct effect on the performance of a firm. According to Urio (2010), when a firm operates independently as a unit, it will be liable to all the actions taken in the day-to-day activities of the firm. This will change when such a firm joins hands with other firms to form a unit.

The effect of partnership on the performance of an organization will vary depending on the terms of the partnership and the overall goal set to be achieved in the partnership. according to Kellerman (2009), there are some cases where organizations come together to form an umbrella that represents their mutual interest but leaves room for individual firm to determine how it wishes to operate.

Such a partnership may not have serious effects on the organization (Grimsey & Lewis, 2007). This scholar says that when a partnership has a limited authority over the general management of individual member firm, then every organization will be responsible for its performance.

In most partnerships, individual organization would be bound to operate within the confines of the law set within the partnership.

The senior officials of the partnership would make every strategic decision, and if a firm were to come up with a strategy that is new, the approval of these top officials would be needed. Such partnership would have heavy effect on the partners. The effect can be either positive or negative, depending on a number of factors.

Positive Effects

Partnerships have become very common in the near past. Organizations are forming partnerships, especially when they have similar interests in the market. This can only mean that it has a number of positive effects. The following are some of the benefits of partnerships.

When in partnerships, firms get opportunity to share a number of challenges that face the industry. When working as a large unit, it becomes very easy to take care of such challenges as increasingly power of the supplier. In the current market, suppliers are becoming very powerful.

With a powerful supplier, firms get to suffer because the supplier would dictate the price to sell their products. When working as a team, it gives individual members of the organization, through the partnership, power to control the suppliers (Geddes, 2005). They will be speaking with one voice when handling suppliers and this will increase their individual profitability.

Partnerships also create monopoly in the market when dealing with customers. Customers in the contemporary market have become increasingly complex. They are very demanding, and individual members of the organization always go extra miles in order to satisfy them. This may involve engaging in acts that may lead to reduced profits or even loss to the firm.

When these individual firms form a unit in the market, they will have a stronger bargaining power in the market. They will dictate the price at which their products should be sold (Hodge & Boardman, 2010).

This may not necessarily mean that they will have power to frustrate their customers. On the contrary, they will be forming a unit to serve them better, but in a way that will be avoiding any frustrations that may come from a section of the customers.

Partnerships may also improve the performance of the organizations because of a joined effort. When these organizations come together, they get the opportunity to share their resources in a manner that will enhance their performance. The partnership will have increased financial power.

This would mean that the firm would be in a position to generate all the needed finance internally without the need to source for it from such institution as commercial banks, which come with interests. This avoidance of the fine would increase the profitability of the firm (Pattberg, 2012).

It is also important to note that in partnerships, individual partners always come to the partnership with different skills and expertise. When such experiences are shared, the organization will emerge stronger and better positioned to meet market challenges.

Negative Effects

Although partnerships come with a number of advantages to the members, it has a number of negative effects that it carries with it. The first negative consequence of such partnerships is the increased duration of making decision. Unlike when operating individually, making decision in partnerships always take very long time because of the consultative nature of the process.

Different partners will have to be consulted in order to come up with a decision that is mutually accepted. This process is very tedious and time consuming (Hodge, 2005). In some of the cases, an opportunity may pass by without being tapped because the decision-making unit did not agree on the approach to be taken, or it took too long to reach a consensus.

In other cases, what one member of the partnership prefers in not what another prefers. This leads to compromises among the members where a group will feel obliged to take actions some of which may be against their principles.

Partnerships exist because of the value driven from them. From partnerships, organizations get to benefit from a number of fronts. There will be financial benefits from such organizations. Other than the direct financial benefits as discussed above, there is the cost sharing of some activities within the partnership. For instance, a firm may need to outsource IT services.

This may be a costly venture, especially if the services to be outsourced are expensive. However, when in a partnership, members of the partnership will be called upon to share the costs, reducing the weight that would have been felt by an individual firm (Endicott, 1993).

When operating as a single unit within the partnership, costs of expansion projects will be shared by the members as this will also offer financial relief to individual member of the organization. Partnerships also help in handling the market issues.

The market is varied as individuals within the society are. However, firms always categorize the market into three main segments based on the income. There is always the low class with limited purchasing power. There is the middle class with a higher purchasing power but not as high as that of the high class. Then the last class is made up of the rich. Each of these three classes has characteristics distinct to itself.

Targeting all the three market segments at a time may be very challenging. When in partnerships, this challenge can easily be eliminated because each partner can be instructed to target a specific market segment. The segmentation can be done further based on gender and age, and depending on the number of partners, each segment can be assigned to an individual partner.

This creates a situation where the presence of this firm is felt in every segment of the market. This will also reduce time taken by the organization to reach the market with its products. Each department will have a clear focus of the market segment targeted, and they will always be responsible for coming up with strategies to ensure speedy introduction of the firm’s product into the market.

A partnership also increases the availability of vital information within the partnership and with customers. Customers need constant information, especially about new products or on how to use products they buy (Levy, 2011).

To help disseminate such information, there is need to ensure that there is increased labor force that will be assigned such duties. This is what partnership offers. The large workforce can be assigned to take care of the customers. Such a workforce will also work well in ensuring that there is coordination among various departments.

References

Akintoye, A. (2008). Public-Private Partnerships: Managing Risks and Opportunities. Chichester: John Wiley & Sons.

Endicott, E. (1993). Land conservation through public/private partnerships. Washington: Island Press.

Geddes, M. (2005). Making public private partnerships work: Building relationships and understanding cultures. Burlington: Gower.

Grimsey, D., & Lewis, M. K. (2007). Public private partnerships: The worldwide revolution in infrastructure provision and project finance. Cheltenham: Elgar.

Hodge, G. (2005). The challenge of public private partnerships: Learning from international experience. Cheltenham: Elgar.

Hodge, G., & Boardman, A. (2010). International handbook on public-private partnerships. Cheltenham: Edward Elgar.

Kellerman, L. (2009). Public-private partnerships. New York: Nova Science.

Levy, S. (2011). Public-private partnerships: Case studies on infrastructure development. Reston: ASCE Press.

Pattberg, P. (2012). Public-private partnerships for sustainable development: Emergence, influence and legitimacy. Cheltenham: Edward Elgar.

Urio, P. (2010). Public-private partnerships: Success and failure factors for in-transition countries. Lanham: University Press of America.

Yescombe, E. (2007). Public-private partnerships: Principles of policy and finance. Amsterdam: Elsevier.

Yong, H. (2010). Public-private partnerships policy and practice: A reference guide. London: Commonwealth Secretarial.

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