David and Goliath, Guillaume Courtois, c.1650 (Courtesy: Capitoline Museums, Rome)
Ideas for Leaders #721

Why Goliaths and Davids Are Poor Network Partners

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Key Concept

Can a Goliath company or business entity collaborate on equal terms with a network of Davids? A new case study shows that enforcing network rules might make such a collaboration an insurmountable management challenge. 

Idea Summary

Can organizations of vastly different sizes collaborate effectively? An intriguing case study based on 25 interviews with the actors involved offers a sobering answer: perhaps, but it will be a challenge.

The case study concerns a collaborative effort among SMEs in the U.S. to enable and market apprenticeships. The goal of the collaboration, pseudonymously called Apprentice Network in the research, was to introduce in the U.S. the apprenticeship programs common in Germany. The network’s program, launched in 1995, included theoretical instruction on the required skills, usually administered at a local college, followed by opportunities for practical experience in the partner firms. (Building a pipeline of skilled workers for the partner firms is one of the foundational goals of the network.) The size of the member firms included two companies with about 20 employees, two companies with about 90 employees, one company with 200 employees and the ‘Representing Partner Firm’ (RFP) with 300 employees.

The network operated under a shared governance structure based on quarterly meetings at which all major decisions were made, with every firm having one vote. The role of the Representing Partner Firm was simply to represent the other companies; it did not have more decision-making authority than any of the others. 

In 2011, the subsidiary of a major conglomerate, one of the largest companies in the world, asked to join the network. The subsidiary admired the work of the Apprentice Network and decided, in the words of one of its representatives, that there was no reason to ‘recreate the wheel.’ 

The size of this new member, with its 1,500 employees, was significantly larger than any of the other members of the network. The Apprentice Network members welcomed the new member (called EnergyCorp in the research) but emphasized that it would not have any more say than any other members despite its size, and that it would have to follow all of the rules and routines for marketing, recruiting and administering apprenticeship that the other members followed.

At first, the collaboration seemed beneficial. Because the new member was a subsidiary of a behemoth in its industry, it immediately brought much media attention to the network. Previously closed doors (in Washington, for example, or with key school districts) suddenly opened.

For its part, EnergyCorp kept its word to follow the formal and informal rules of the network. For example, it circumvented its internal rules requiring all apprentices to be 18 years old by hiring its apprentices through a temporary staff agency, thus allowing the firm to hire high school students as required by Apprentice Network.

Very quickly, however, EnergyCorp started to ‘break’ some of the rules required by its membership in Apprentice Network, such as the level of pay it was offering its apprentices. It also started a special training program for its apprentices with a different curriculum that that approved by Apprentice Network (a curriculum, EnergyCorp felt, that better matched its needs).

At first, perhaps because of this increased visibility and the positive by-products of this increased visibility, the original members of the network ignored these violations. This allowed them to maintain EnergyCorp’s participation in the network. 

By 2014, however, the smaller members of the network had had enough. It may have begun with irritation by the smaller companies, some of whom had been active in the network for 15 years, over the overwhelming focus of the media, officials and the general public on EnergyCorp. At any rate, the smaller members stopped looking the other way and re-emphasized the importance of the larger company abiding by the rules and routines that governed all members of the network. 

EnergyCorp was unwilling and to some extent unable, because of its size, to abide by these rules and routines, and eventually the company agreed to exit the network.

In interviews following the exit, executives from both the Apprentice Network companies and EnergyCorp agreed that the size of EnergyCorp was a factor in the failure of the collaboration. To begin with, EnergyCorp had external regulations and internal policies required to manage an operation its size that did not fit the networks rules and routines, which were essentially tailor made for SMEs. Nor did EnergyCorp enjoy the same flexibility as its smaller partners. In short, size proved to be the overwhelmingly barrier to a successful collaboration.

Business Application

Can large and small firms collaborate in an equal partnership? In this case, in order to sustain the partnership, the other partners were temporarily willing to look the other way in terms of the network-wide rules and routines that EnergyCorp was violating. This proved to be an unsustainable situation.

Although this particular collaboration was a failure, it also points to potential paths to success. Ironically, it is the rigidity of the network’s rules and routines that sunk the collaboration. In many ways, EnergyCorp’s size simply did not make it possible for it to follow the network rules. Thus, the collaboration could have succeeded if the network had been willing to relax some of its rules (for example, on pay) for the larger company, as long as the larger company operated in good faith. The bottom line is whether or not relaxing the rules for the exceptionally large partner would have compromised the integrity of the network.

This is the question that attempted collaborations between large and small companies will have to decide. If they decide that a large partner must replicate in all details the rules and routines of smaller partners, the collaboration is likely to fail.

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Authors

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Source

Idea conceived

  • July 2018

Idea posted

  • December 2018

DOI number

10.13007/721

Subject

Real Time Analytics