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Management Accounting Research
j o ur n a l ho me p a g e :w w w . e l s e v i e r . c o m / l o c a te / m a r
A relational perspective on the contract-control-trust nexus in an interfirm relationship
Reinald A. Minnaar
a,∗, Ed Vosselman
a, Paula M.G. van Veen-Dirks
b, Muhammad Kaleem Zahir-ul-Hassan
caInstituteforManagementResearch,RadboudUniversity,Nijmegen,TheNetherlands
bDepartmentofAccounting,FacultyofEconomicsandBusiness,UniversityofGroningen,TheNetherlands
cCollegeofBusiness,ZayedUniversity,AbuDhabi,UnitedArabEmirates
a r t i c l e i n f o
Articlehistory:
Received10December2014 Receivedinrevisedform25May2016 Accepted17July2016
Availableonline25July2016 Keywords:
Trust Contracts Control
Relationalperspective Performativity
a b s t r a c t
Thispapermakessenseofthecontract-control-trustnexusininterfirmrelationshipsbyexposingthe performativityofacontractanditsincorporatedcontrolstructuresingeneratingtrust.Inourstudyof anoutsourcingrelationshipbetweenSemorg(aninternationalmanufacturerofsemi-conductors)and Fasorg(theprovideroffacilitymanagementservices),wefindthattrustisinteractivelyrelatedtocon- trolincomplexandoftenunpredictablewaysratherthaninlinearwaysthatresultfrommanagerial decision-making.Inthenetworkofassociationsthatconstitutestheinterfirmrelationship,trustisnot astablesolutionthatgeneratespredictability,butaquasi-actorthatismadetoactbythecontractand theincorporatedcontrolstructures.Asaquasi-actor,trustisfluentandperformative.Onceinexistence, itmobiliseshumanactorsandshapestherelationship.Thus,fromarelationalperspectivetrustisapos- sibleandtoalargeextentunpredictablenetworkeffect.Thisdiffersfromtherationalperspectivein whichtrustisanexpectationthat(inmultiplecategories)straightforwardlyemergesanddevelopsfrom managerialdecisions.
©2016ElsevierLtd.Allrightsreserved.
1. Introduction
Acontractismerelyastackoflegalpapers.IlearntthiswhenIwas doingbusinessinAsia.OneofmyChinesepartnerssaidtome:“The morepaperworkwehave,thelesstrustwehaveandthelessit works.”–CEOSemorg
Control and trust have a complex relationship and further researchintothis relationshipisneededtoenhanceourunder- standing,particularlyinthecontextofinterfirmrelationships(Van der Meer-Kooistraand Vosselman, 2006). Since most interfirm relationshipsare based on contracts, particularly the contract- control-trustnexusneedsfurtherexamination(Meiraetal.,2010;
Tsamenyietal.,2013).Thisstudyexaminesthisnexus,thuscon- tributing to the literature that investigates the governance of interfirmrelationshipsanditsrelationwithtrust(e.g.Dekker,2004;
EmsleyandKidon,2007;Free,2008,2007;Langfield-Smith and Smith,2003;LuiandNgo,2004;MahamaandChua,2016;Tomkins,
∗Correspondingauthorat:RadboudUniversity,P.O.Box9108,6500HKNijmegen, TheNetherlands.
E-mailaddress:[email protected](R.A.Minnaar).
2001;VanderMeer-KooistraandVosselman,2000;Vosselmanand VanderMeer-Kooistra,2009).
Muchoftheliteratureoncontrolandtrusttakesarationalper- spectivein which controland trustare consideredtobestable solutions tocontrolproblems.Lui and Ngo(2004, p.474)argue that“contractualsafeguardsandtrustareimportantcontrolmech- anismsthatreduceriskandfacilitatecooperationinapartnership.
These twomechanisms mayinteractwith each otherin deter- miningthe outcomesof cooperation. ¨Trust isincreasingly being viewedas a preconditionfor improvedperformance and com- petitivesuccessincomplexbusinessenvironments(Free,2008).
Fromarationalperspective,trustcanbeconceptualisedasasocial controlthatreducestheneedforformalcontrols(Dekker,2004).
Itisalsodefinedasacontrolpatterndistinctfrombureaucracy- basedormarket-based controlpatterns(Van derMeer-Kooistra andVosselman,2000).Furthermore,fromarationalperspectiveon theaccounting-control-trustnexusinthegovernanceofinterfirm relationshipsadistinction ismadebetweenthinandthicktrust (KleinWoolthuisetal.,2005;Nooteboom,2002,1996;Vosselman andVanderMeer-Kooistra,2009).Thintrustisproducedbythe contractsandtheirincorporatedformalcontrolstructures,which may,forexample,taketheformofbudgets,scorecardsorincentive
http://dx.doi.org/10.1016/j.mar.2016.07.003 1044-5005/©2016ElsevierLtd.Allrightsreserved.
schemes.Thicktrustisproducedinthecourseoftherelationship throughtherelationalsignalsensuingfromlocalrationaldecisions.
Alimitationoftherationalperspectiveisthatitignoresthatin realitytheshapeandchangeofbothcontrolandtrustareoftenthe
‘interactiveeffectsofcomplex,unpredictable,non-linearandless controllableassociationsofmultipleentities’(ChuaandMahama, 2012,p.79).Arelatedproblemisthattherationalperspectiveis merelybasedonassumptions frommainstreameconomic man- agementcontrolliterature,whichtendstoreduceorganisational membersto self-interested‘agents’ (Van derKolk etal., 2015).
Therefore,this paper’s objectiveis togobeyondrationalism by takingarelationalperspective.Fromthisperspective,contracts, controlstructuresandtrustareinteractivelyshapedandchanged throughtheassociationsbetweenactors,both humanandnon- human. They are not merely the result of the decisions made bymanagerswhoarerelativelyfarremovedfromthedoingsin theinterfirmrelationship.Contractsandtheirincorporatedcon- trolstructures may thus wellexceed the traditional functional propertiesespousedintherationalperspective.Apartfrompro- vidingstabilityandorder,theymayalsoproducedynamicsand change.Thatis,contractsandcontrolstructuresmaybeperforma- tive.Thenotionofperformativityallowsustoviewthecontract, controlstructuresandtrustnotsimplyastoolsusedbyrationally actinghumanbeingswho straightforwardlyinstrumentalisethe behaviourofotherhumansintherelationship,butasactorsthat activelyengagethepartiesinvolvedintherelationshiptobehavein acertainway.Contracts,controlstructuresandtrustcirculateina networkofassociationsandmaybeperformativeinthesensethat theyhelptocreate,maintainandmodifytherelationshipinunex- pectedways.1 Theyrelatetoeach otherthroughtheirpositions inthisnetworkofassociations,ratherthanonlythroughmanage- rialdecisions.Theyareactorsratherthaninstruments,mediators ratherthanintermediaries(Latour,2005).
Althoughextantresearch(e.g.Zahir-ul-Hassanetal.,2016)dis- cusses the contract and the incorporated control structures as mediatinginstruments(MillerandO’Leary,2007)intheconstruc- tionof a collaborative ortransactional relationship,it doesnot offeran interpretationofthe contract-control-trustnexusfrom a relationalperspective. Thispaperfills this gap.Theempirical siteisaspecificoutsourcingrelationshipbetweenaninternational industrialorganisation(Semorg)andamanagingagentforfacility services(Fasorg).Semorgisanexampleofaninternationalmanu- facturerthatoutsourcesitsfacilitymanagement,forcedbyglobal competitionandthethreatofhavingtomoveproductiontolow- wagecountries.TheSemorg-Fasorgcaseisinterestingasitprovides anopportunitytonotonlyexposecontractsandcontrolstructures asbeingpurposefullydesignedandnegotiatedbydistancedman- agers,butalsotorevealthattheyaregeneratingentitiesthatcan bringaboutunexpectedconsequences.Inthecasestudy,theorigi- nalcontractualsolutionasnegotiatedbytopmanagementproved tobeproblematic;theresultingcontractandincorporatedcontrol structuresinducedarecontractingprocessthateventuallychanged controlandtrustintherelationship.
Thepaperisstructuredasfollows.Section2providesthetheo- reticalanchorsforthestudy.Section3presentsthecasesettingand researchmethodology,followedbyapresentationofthecasestudy.
Thispresentationisaimedatmappingouthowcontractandcon- trolstructuresareperformativeinbuildingtrustandhowtheyare constitutiveoftherelationship.Finally,thediscussionandconclu-
1Theaccountingliteraturehasprovidednumerousexamplesofaccountingcalcu- lationsasgeneratingentities(AhrensandChapman,2007;BoedkerandChua,2013;
DambrinandRobson,2011;Ezzamel,1994;JordanandMessner,2012;Mouritsen, 1999;Mouritsenetal.,2009;QuandCooper,2011).
sionsectionshighlighthowthecasestudyaddstothemanagement accountingliterature.
2. Theoreticalanchors
2.1. Arelationalperspectiveversusarationalperspective
Inessence,thispaperexposeshowcontracts,controlstructures andtrustinteractivelyshapeandchangeaninterfirmrelationship.
Thepaperthereforetakesa relationalperspective ratherthana rationalperspectiveoninterfirmcontrol.2Essentialtoourresearch perspectiveisthatwedonotprioritisetheentities,buttheasso- ciationsorrelations amongtheentities.Therefore,labelling our researchperspectiveasrelationalisconsistentwithHassardand Cox(2013),whocategorisetheepistemologyinpost-structuralists researchasrelational.
Incontrastwiththerelationalperspective,therationalperspec- tivemainlyfocusesontheentitiesratherthanontheassociations.
Fromtherationalperspective,theentitiesareup-front.Contracts andtheirincorporatedcontrolstructuresareconsideredassub- ordinatetohumanbeings.Theyprovideorderandstability.They result from managerial decision making and as such form the solutions to coordinationproblems and appropriation concerns (Dekker,2004;VosselmanandVanderMeer-Kooistra,2009).In ordertoprovidesolutionstocoordinationproblemsandtopre- ventopportunisticbehaviourfromoccurringthecontractandthe controlstructuresarenegotiatedandrationallydecideduponby managersinsearchofefficiency.Oncedesigned,thecontractand controlstructuresserveastoolstocontroltherelationshipfroma distance.Incontrast,fromarelationalperspectivethecontractand controlstructuresareshapedandchangedinanetworkofasso- ciationsbetweenmultipleactors,bothhumanandnon-human.3 Althoughtheymaybeartefactsdesignedandnegotiateduponata certaindistancefromtheday-to-dayactivities,theyareenacted in a network of associations that make updaily practice. They arenotsimplesolutionsthatarestraightforwardlyimplemented, butmobilisingentitiesinspecificepisodesinpractice.Andinthis capacity they cangenerate unexpected and unpredictable con- sequences, which makes them constitutive of therelationship.
Moreover,theythemselvescanchange.
2.2. Thecontract-control-trustnexusininterfirmrelationships
In the management accounting discipline, the control-trust nexushasbeenaresearchtopicforseveralyearsnow.Somecon- tributionsareconceptual(Tomkins,2001;VosselmanandVander Meer-Kooistra,2009),someprovideareviewofpreviousresearch (Baldvinsdottiretal.,2011;CaglioandDitillo,2008,2012;Free, 2008; Meiraet al., 2010), others concerna studyof thegover- nanceand controlofand inspecificrelationships(Cäker,2008;
Dekker,2004;EmsleyandKidon,2007;Free,2008;Langfield-Smith andSmith,2003;ThraneandHald,2006;VanderMeer-Kooistra andScapens,2008;VanderMeer-KooistraandVosselman,2000;
2Intheliteraturetherationalperspectiveissometimesalsoreferredtoas(or partof)anostensiveapproach(Latour,2005,1986).Wepreferthetermrational asitbetteralignswiththemanagerialapproachusedinaccountingandcontrol research.Italsoalignswiththerationalinstrumentalismphilosophyofrational agentsineconomictheory(Williamson,1979).
3Asweparticularlytracethefootstepsofthecontractandthecontrolstruc- turesandexposehowthesefootstepsinteractwithtrust,ourapproachissimilarto Boedker’s(2010)performativeapproach.However,followingFeldmanandPentland (2003)andPentlandandFeldman(2008,2005),weratherprefertoassigntheadverb
‘performative’tothenon-humanactorsinthefieldthantotheresearchperspective.
Performativity,inourview,isnotacharacteristicoftheresearchapproach,butof non-humanactors.
Windolph and Moeller, 2012) and yet others study the gover- nanceofandinanetworkofrelations(ChuaandMahama,2007;
HåkanssonandLind,2004;MahamaandChua,2016;Mouritsen andThrane,2006;VanVeen-DirksandVerdaasdonk,2009).
Rationalandrelationalperspectivesoninterfirmrelationships differ in their conceptualisations of the contract-control-trust nexus.Fromarationalperspective,thecontractandcontrolstruc- turesmaybeeithersubstitutiveorcomplementarytotrust.For example,Dekker(2004)andVanderMeer-KooistraandVosselman (2000)primarilyviewtrust asa substituteforcontrol, whereas othersproposethattrustandcontrolmaybebothsupplements andcomplements(Tomkins,2001;VosselmanandVanderMeer- Kooistra,2009).To a certainextent,trust can beconsideredto beadirectresultofthenegotiationofacontract(Vosselmanand VanderMeer-Kooistra,2009).Becauseofa divergenceofinter- ests, parties in an interfirm relationship experience legitimate mistrust(Lindenberg,2000)ofeachother,withwhichtheycope bynegotiatingcrediblecontractualcommitments.Basedonthese crediblecommitments,partiesbuildthintrustwhichcompensates fornegativebehaviouralexpectations.Thintrustisthusembed- dedinthecontractthat,inturn,isembeddedintheinstitutional trust imported from the legal and social context of the inter- firmrelationship. However,theauthors warnagainstextensive contracting,whichmayovershoot thetarget of‘legitimatemis- trust’compensation.Thintrustmaylaythegroundforaformof self-regulatingcontrolthatpartiesdeemnecessarybecauseofthe incompletenessofthecontract;therealwaysremainsuncertainty.
Thisself-regulatingcontroltakestheformofrelationalsignalling andresultsinthicktrust.Similartothintrust,thicktrustalsostems frommanagerialdecisions; managersvoluntarilydecidetogive relationalsignals.
Alsofromarelationalperspective,thecontractandincorporated controlstructuresareimplicatedinthebuilding(ordestroying)of trust.Trustmaycirculateinthenetworkofassociationsinwhich thecontractandcontrolstructuresoperate.Theproblemis,how- ever,thattrustisnotamaterialobjectorthing.Asaconsequence, itcannotbeconceptualisedasadistinctactorthatinconcertwith otheractorsshapesandchangesinterfirmcontrol.Howthencanit berelatedtotheperformativityofacontractanditscontrolstruc- tures,andhowcanitbedistinctlyperformativeitself?Mouritsen andThrane(2006)addressthequestionastohowtrustismobilised inanetworkofassociations.ReferringtoBrown(2002)theysug- gestthat trust isa quasi-object.It isrelated toanobject inthe network,butitisnottheobjectitself.Itis“theprojectionofsenti- mentontotheobject,the‘desire’foritorthe‘passionate’relation withit,whichcharacterisesaquasi-object”(Schiermer,2011).Trust assuchaquasi-objectisforexamplesimilartoafetish.Acruci- fixmaybejustanobject,butitbecomesaquasi-objectofafetish onceputintocirculationasanobjectinthepractisingofreligion.
Quasi-objectsleavebehindtheobjectivestatusoftheobjectsthey relateto(Serres,1995).Itisthetrustingpropertiesassignedtothe objectbyhumanactorsinthenetworkthatmaketheobjectimpor- tant,nottheinherentqualitiesoftrustitself.Contractsandcontrol structuresmaybeobjectsthatinducetrustasaquasi-object.Inthe following,wewillconsistentlyrefertoactorsratherthantoobjects.
It is through its interactiveeffects that trust can become a quasi-actoronceit circulates inthe network.This isa possible andunpredictableconsequenceoftheinteractionsinthenetwork.
Thisviewprofoundlydiffersfromtheconceptualisationbasedon arationalperspective,wheretrustisthepredictableandstraight- forwardconsequenceof managerialdecisions.Fromarelational perspective,trustisa consequentialinteractiveprojectionofan emotionalvalueoraspiration.MouritsenandThrane(2006)claim thatitbecomesaproblemwhensuchvalueoraspirationnolonger existsinthenetwork.
Insum:trust,wepropose,isaconsequenceoftheinteractions ina networkthatconstitutes theinterfirmrelationship.It isan emotionalvalueoranaspirationthatcanbeexpressedandthat islinkedtoanactorortomultipleactors;itcanchangewhenthe actorisremovedfromthenetwork,orwhentheidentityofthe actorchanges.
2.3. Theoryasabasisforthecasestudy
Ourstudyisanchoredinarelationalperspectivelinkedwith thetheoreticalnotionsregardingthecontract-control-trustnexus asexpressedintheprevioussubsections.Itaimstofurthertheorise ontheperformativityofthecontractandcontrolstructures.Italso aimstoexposehowcontractandcontrolstructuresareperforma- tiveinthebuilding,maintenanceanddestroyingoftrust,andhow theyaresubjecttochangethemselves.
3. Casesettingandresearchmethodology
Thiscasestudyexaminestheinterfirmtransactionalrelation- ship between Semorg and Fasorg (pseudonyms). Semorg is a leadingsemiconductormanufacturingcompanyfoundedbyLecorg (pseudonym)morethan50yearsago.Semorgisamultinational company,which hasitsheadquartersintheNetherlands.Inthe Netherlands,itsproductionfacilitiesarelocatedattwositesindif- ferentcities.Semorgproducessemiconductors,systemsolutions andsoftwarewhichdeliverbettersensoryexperiencesinTVs,set- topboxes,identificationapplications,mobilephones,carsanda widerangeofotherelectronicdevices.
Fasorg is an Anglo-Dutch organisation, which has specialist knowledgeandexperienceintheprovisionofmanagementsolu- tionstofacilityservicesforbothpublicandprivatesectorclients.
Itwasfoundedin2002andcurrentlyithasvariousmulti-million euroongoingcontractswithinternationalcompanieslocatedinthe Netherlands.Fasorg’sfirstsubstantialcontractwaswithLecorg.
3.1. Thefacilitymanagementrelationship
Thefacility management relationshipcomprises Fasorg,sev- eraldepartmentsofSemorgandtheexternalsuppliersoffacility services.The focusofthisresearchhasbeenonthecontracting relationshipbetweenSemorgandFasorg.Howthepartiesrelate toeachotherisdepictedinFig.1.
WithinSemorg,afacilitymanagementdepartmentisrespon- sible for the so-called ‘building services’. The operational managementof thesebuildingservicesis outsourcedtoFasorg.
SemorgconcludesSLAs (servicelevelagreements)withinternal customerswhileFasorgcoordinatesthedeliveryofthefacilityser- vicestoitsinternalcustomersbythevarioussuppliers.However, notallmanagementtasksofthefacilityservicesareoutsourced.
Somecomplexandveryspecificmaintenanceservicesforthesemi- conductorfabricationplants(commonlycalled‘fabs’)aremanaged byaseparatein-housefacilitydepartment.Thisdepartmentalso buysservicesfromoutsidesuppliers,butmanagesthedeliveryof theservicesitself.Themanagersofthefacilitymanagementdepart- mentshaveadirectlineofresponsibilitytoSemorg’scorporate level.
3.2. ChangesinfacilitymanagementatSemorg
TheoriginsoftherelationshipbetweenSemorgandFasorglie inafouryearcontractthatwasestablishedbetweenLecorgand Fasorgatthebeginningof2006.Whenthecontractwassignedin 2006,Semorg wasabusinessunitofLecorg, butnotoneofthe negotiatingandcontractingparties;thecontractwasconcludedat Lecorg’scorporatelevel.Thiscorporatelevelwassomewhatremote
Semorg Netherlands Corporate level
Facility management (buildings)
Internalcustomers
Suppliers Fasorg
Facility management (fabs) Firm boundary
Semorg
Suppliers Contracts
contract
Managing relation
Services Contracts and services SLA’s
Fig.1.TheorganisationoffacilitymanagementatSemorg.
fromthenetworkthroughwhichtheoperationsintheoutsourc- ingrelationshipdeveloped.InSeptember2006Semorgwassold, andcontinuedasanindependentorganisation.Asaresultofdis- contentmentonthepartofSemorg’sfacilitymanagersaboutthe contract,anewfacilitymanagementdirectorwasemployedwho startedacontractreview.Thisreviewmarksthebeginningofour studyintotherelationshipdevelopments.Atthebeginningof2010, thefacilityservicedepartmentforthebuildings(softservices)and thatfor‘fabs’(hardservices,forexample,machinemaintenance) mergedintoonefacilitymanagementunit.Atthesametime,some changesinkeypersonneloccurred.Furthermore,in2010,nego- tiationsabout extendingthefacilitymanagement contract took place.
ThisdevelopmentisdepictedinFig.2.Ofparticularrelevance totheresearchaimsinthispaperistheperiodfrom2006to2009.
Itisduringthisperiodthattheoriginalandtherenewedcontract playedarole inthedevelopmentoftherelationship.Moreover, duringthisperiodtrustbecameimportant.
3.3. Researchmethodology
The aims of the paper make field research the appropriate approach.Inconductingthistypeofresearch,ourstudyrespondsto recentcallsforin-depthprocessstudiesofinterfirmrelationships (e.g.CaglioandDitillo,2008).Essentially,weconsiderfieldresearch tobeaformoftheorising(AhrensandChapman,2006;Chuaand Mahama,2012).Weanchorourtheorisinginpriorliteratureon controlandtrustininterfirmrelationshipsandinarelationalist paradigm.We make senseof anempirical researchproblemin theoreticaltermswithoutapplyingorsummarisingextanttheory (ChuaandMahama,2012).Therefore,weavoida‘heavytheoretical frontload’(Vaivio,2008).Weaimtodeliverasensibleandsensi- tiveaccountofthefieldandnotto‘wrap’atheoreticalexplanation aroundadescription(ChuaandMahama,2012).Inotherwords,the presentationofourcaseisnotadescription,butasense-making exercise.
Theresearchstartedin2008,whenafirstcontactwithSemorg’s RealEstateandFacilitymanageratthattime(inthiscasestudy
labelledFMdirector-1)wasmade.Therewerethreeinitialtalks withhimin2008;thesubsequentinterviewsstartedin2009.The researchencompassesthecontractperiodfromthebeginningof 2006untiltheend ofthecontract in2010.Theeventsofinter- estwereexaminedbothaftertheyhadtakenplace(expostfacto) andastheytookplace(real-time).Ouraimwastostudyhowthe contractandtheincorporatedcontrolstructurescameintobeing inthenetworkwestudied,andhowtheywereperformative.In particular,weaimedtostudyhowthecontractandincorporated controlstructureswereassociatedwiththebuilding,maintenance anddestroyingoftrust.Themomentwearrivedinthefield,the organisationshadjustrevisedthecontract,whiletherecontract- ingprocessandthereasonstoenterinsuchatrajectorywerestill verymuchonthemindsofthepeopleweinterviewed.Basedon documentsandinterviews,wecouldreconstructthecontracting phase,andwehadtheopportunitytoanalysehowthecontract andcontrolstructureshadcausedsuchunexpectedperformative effectsinthenetworkofassociations.
Themainsourcesofdataweresemi-structuredinterviews.The languageduringtheinterviewswasEnglish.TheEnglishlanguage skillsofthepersonnelwererathergood,astheorganisationoper- atedinternationally.Theinterviewswerealwaysconductedbytwo researcherswithatleastonenativeDutchspeaker.Iftheinter- vieweehaddifficultiesexpressinghimself,heorshecouldalways answerinDutch.Therefore,wehavenoreasontobelievethatthe intervieweesdisclosedlessbecauseofalanguagebarrier.
BasedontheinitialdiscussionswithFMdirector-1wemade alistofpotentialinterviewees.Fromthereweusedapurposive samplingapproachtoselecttheorganisationalmembersfromboth organisationstointerview.Theintervieweeswereselectedonthe basisoftheirinvolvementinmanagingthefacilitiesservices.Fig.3 depictsthehierarchicalpositionsoftheintervieweesandtheircon- nections.Thedottedlinesrepresentthecontactsatthedifferent levelsbetweenthetwoorganisations.
Given ourtheoretical anchors, thebroad themes during the interviewsincludedcontractsandcontracting,controlstructures andcontrolpractices,and(mis)trusting.Forexample,therewere questionsaboutthenature,purposeandroleofthecontractsand
2006 2007 2008 2009 2010
In house manage- mentof facilities
Outsourcing the management of facility services to
Fasorg.
Start of contract
Lecorgsells semorg
Change of FM management andcontract
review
Start of revised contract
Execution of new control structure andp racticesanddevelopmentof
relationship
Changes in FM department
andnew contract negotiations
Fig.2. TimelineoftherelationshipbetweenSemorgandFasorg.
Country Manager
FM Director Site Purchase
Manager
Purchase Manager
Manager FM-a and b
Account Director
Facility &
Contract Manager Senior Facility Manager
Semorg Fasorg
Controllers
Fig.3.HierarchicalpositionsofintervieweeswithinSemorgandFasorgandtheirconnections.
controlstructures.Manyquestionswererelatedtocontractingand controlpractices.Yet,duringtheinterviewssomenewandrele- vantissuesandinsightsemergedwhichprovedveryusefulinthe processoftheorising.
MostoftheinterviewstookplaceatSemorg’splant.Thedura- tionoftheinterviewswasbetween1and11/2h.onaverage.We conducted23interviewswith19 people(seeTable1).Thefirst twopreliminaryinterviews,in June and September2008,were aimedatgainingaccesstothecompany.Theconversationsduring theseinterviewswerenotrecorded,butnotesweremadeduring themeetings.Theadditional21interviewswereorganisedintwo roundsduringtheperiodDecember2008–November2010.From thepeopleweinterviewed,13 interviewswereconductedwith Semorgmanagersatdifferenthierarchicallevelsandindifferent departments,suchasFacilitiesManagement,Purchasing,Finance&
AccountingandManufacturing.Moreover,fourmanagersatFasorg andtwomanagersoftwodifferentsuppliersofthefacilityservices wereinterviewed.Twooftheinterviewswereorganisedasgeneral
‘feedbackmeetings’betweentheresearchteamandthekeyplayers atSemorg.Duringthefirstrecordedgeneral‘feedbackmeeting’all theauthorsofthispaperparticipatedingivingaformalintroduc- tiontotheresearchobjectives,plansandmethods.Inreturn,they
5 Firstcontactanddiscussionaboutresearchproject(notrecorded).
6 Thisistheheadofthefacilitymanagementorganisation.
7 Theaddition1and2isusedwhenduringthecasestudythepersonforthisposi- tionisreplacedbyanotherperson.Theadditionaorbmeansthattheinterviewees aredifferentpersonswiththesamepositions.
8 Informativemeeting(notrecorded).
9 Completeresearchteampresent.
10 AFabisaSemiconductorFabricationPlant.
11 Feedbackmeetingwithcompleteresearchteam.
12 ThiswastheoldmanagerFM-Fabs(#12).
Table1
Overviewofinterviews.
# Date
(yymmdd)
Organisation Position Duration
(min)
1 0806105 Semorg FMdirector6-17 60
2 0809298 Semorg FMdirector-1 70
Semorg PurchaseManager
3 0812089 Semorg FMdirector-1 75
4 090319 Semorg FMdirector-1 134
5 090324 Semorg DirectorFM-Fabs10 67
6 090330 Semorg PurchaseManager 98
7 090330 Semorg FMmanager-a 59
8 090406 Fasorg Accountdirector-1 97
9 090409 Semorg Countrymanager-1 63
10 090414 Semorg Controller-a 16
11 090414 Semorg Controller-a 90
Controller-b
12 090423 Semorg ManagerFM-Fabs 74
13 090429 Semorg SitePurchasingManager 92
14 090429 Semorg FMmanager-b 111
15 09091611 Semorg FMdirector-1 117
Semorg PurchaseManager
16 100618 Semorg PurchaseManager 61
17 100721 Fasorg Accountdirector-2 63
18 100726 Fasorg Seniorfacilitymanager 26
19 100726 Fasorg Contractmanager 58
20 100908 Semorg FMdirector-212 52
21 101014 Supplier Managermaintenance 97
22 101026 Semorg CountryManager-2 67
Semorg FMdirector-2
23 101110 Supplier Districtmanager-a 96
Supplier Districtmanager-b
Table2
Makingsenseofandtheorisingthecase.
PhaseSensemakingaccountofthecase Theorisation 1 Theoriginalcontract—negotiating
anddecisionmakingfroma distance
Theoriginalcontractdoesnot mobiliseactorstooperateas intended.Itisperformativeinthe sensethatitgeneratesa recontractingprocess.Thereisno circulationoftrust.
2 Contractreview—theemergenceof trustasaquasi-actor
Thecontractbecomesperformative ingeneratingtrustasaquasi-actor.
3 Furtherdevelopmentofthe relationshipandtheperformativity ofcontrolstructures
Controlstructuresareperformative ingeneratingrelationalsignals.
Trustcirculatesinthenetwork.
receivedusefulinformationaboutSemorg’soutsourcingstrategy.
Inthesecondgeneralmeetingtheresultsofthefirstroundofinter- viewswerepresentedanddiscussed.Alongwiththeresearchteam, theFacilityManagement(FM)DirectorandPurchaseManagerpar- ticipatedinthismeeting.
Othersourcesofinformationincludedservicelevelagreements (SLAs),roadmapdocumentsandquarterlyreports(seeAppendix A).Thedocumentsandinterviewtranscriptswereusedtocross- checkwhatwassaidduringtheinterviewsandwhatappearedin thedocuments.
Theprocessofdataanalysisconsistedofthreeconcurrentflows of activity: data reduction, data display, and conclusiondraw- ing/verification(Miles and Huberman,1994).Thesethree flows wereinterwovenbefore,duringandafterdatacollectioninparal- lelform.Anchoredinourtheoreticalnotions,westartedanalysing fromday one(Schwartz-Shea and Yanow, 2012).Allthe inter- viewsweretranscribedand,togetherwiththedocuments,analysed usingthequalitativedataanalysissoftwareATLAS.ti.Thissoftware helpedinreducingthedataandfacilitatedinrearrangingthecodes incategories,commentingonquotesandmemoingemergingideas.
4. Fieldstudy:developmentofafacilitymanagement relationship
Thestudyfocusesonthreephasesinthedevelopmentofthe relationship:(1)Theoriginalcontract–negotiatinganddecision makingfromadistance;(2)Contractreview–theemergenceof trustasaquasi-actor;(3)Furtherdevelopmentoftherelationship andtheperformativityofcontrolstructures.
Thefollowing subsectionsarestructuredaround thesethree phases(seeTable2).Althoughdividingaprocessinphasesisan arbitraryendeavour,itisanattempttodeliverasensibleandsen- sitiveaccountofthefield.Thestudyofthefirstphaseoffersinsight intotheperformativityoftheoriginalcontract.SinceSemorgdid notparticipateinthecontractingprocess,theoriginalcontractwas notsuccessfulincreatingthedesiredorderandpredictability.Yet, itsunexpectedperformancewasthatininteractionwithhuman actorsit induceda recontractingprocess.Thestudy ofthesec- ondphaseoffersaninsightintotherecontractingprocessresulting inarenewedcontract.Thestudyexposeshowtherecontracting processprovidedopportunitiesfortrusttobecomeaquasi-actor connectedtothenewcontractandmultiple(human)actors.We makesenseofathirdphaseoftherelationshipbyexposinghow controlstructuresareperformativeandhowtheychange,andhow trustasaquasi-actorrelatestothesecontrolstructures.
4.1. Phase1:theoriginalcontract–negotiatinganddecision makingfromadistance
Thefirstphaseintherelationshipischaracterisedbythewriting andsigningofthecontractbetweenFasorgandLecorginMay2006,
thesaleofSemorg(thesemi-conductordivisionofLecorg)atthe endof2006,andproblemswiththefunctionalityoftheoriginal contract.
ItwasLecorg’sstrategytooutsourceeverythingthatwasnot consideredtobecorebusiness.Thisstrategyalsoentailedthedeci- siontooutsourcefacilitymanagement,resultinginacontractwith Fasorg.WhenthefirstcontractwasestablishedbetweenFasorgand Lecorg,themanagersofSemorgwerenothappywiththiscontract.
TheyknewLecorgwasplanningtosellSemorg,andtheythought thiswouldbringtoomuchchangeatonetime.
In2006Lecorgsaiditwasagoodideathatwewouldoutsourcethe operationalpartoffacilitymanagement.Isayitspecificallylike thatbecausenoneofuswereveryenthusiasticaboutthat.Weall knewthatsomethingwasgoingtohappenwithSemorg,thatthey weregoingtosellit(#6,Purchasemanager,Semorg).
ThegeneralfeelingwasthatLecorgshouldhaveleftthedeci- siontooutsourcetoSemorg’smanagement.Intheaftermathofthe signingofthecontractbetweenLecorgandFasorgtherewasmuch resistanceto theoutsourcing project. Accordingtothe Semorg directorFM-Fabs(#5)theyalreadyhadabadexperiencewiththe outsourcingofthefacilitymanagement ofaLecorgplantin the CzechRepublic.Asaresult,Fasorg’saccountdirectordidnotreceive anysupportfromSemorg’sfacilitymanagers.Thislackofsupport waspartiallyrelatedtothetransformationofthefacilitymanager’s roleintothatofademandmanager.Thenewrolerequiredgiving upcontroltoFasorg.SincetheFacilityManagersdidnotlikethis changetheywerenotwillingtocooperate.
Nevertheless,Semorg’sfacilitymanagerhadtodealwithFasorg onaday-to-daybasis.Asthenextquotesuggests,themanagersat Semorgwerequitedemandingandnotverycooperative.
OkayFasorgyouarenowincontrol,youaremanagingthis.Iwant this,thisandthis.Andthesewereallkindsof elementsthathe himselfhadneverbeenabletodo(#4,FMdirector-1,Semorg).
Semorgwasnotverycooperative,andthiswasrelatedtothe delegationofmanyresponsibilitiestoFasorg.
Incorporatedinthecontractwerecontrolstructuressuchasa setofKeyPerformanceIndicators(KPIs)andincentivesforsavings.
However,thehumanactorsinvolvedinoperationsdidnotthink thecontractprovidedmuchclarityinwhatwastobeachievedand bywho.AsafacilitymanagerofSemorgsaid:
Iguessitwasnot clearfor everybodywhatshould bereached, whoshoulddoitandwhowasresponsibleforwhichactions(#7, ManagerFM-a,Semorg).
Moreover,Fasorgperceivedsomeclausesinthecontracttobe unfair. For example,ifFasorg would managetorealisesavings, thesesavingsweretobesplit:80%ofthosesavingswouldbenefit Semorgandonly20%wouldbenefitFasorg.
Thecontract and incorporatedcontrolstructureswerenot a sourceofstabilityandpredictability.Insteadofstabilisingtherela- tionship thecontract became a sourceof instability,becauseit generatedseveraldebatesandconflicts.FMdirector-1explained someproblemsrelatedtothecontract:
It[theoutsourcingcontract]waspushedfromLecorgcorporate,but therewasnoeuhitwasnotdefinedwhatwasexpected.Semorgat thattimewasnotabletodefinewhattoexpectfromthesupplier andwhatthefocuswas(#4,FMdirector-1,Semorg).
Andinaconflictwecouldsayokaywetakeanotherlookatthe contract.ThatiswhatIdidafewmonthsago,becausewehada discussionaboutwhatisasaving.Youcanhavealongdiscussion aboutwhatisasaving.Isitacostreductionorisitjustreducing theworkload?Forexample,closingabuilding,isthatasaving,or
ifyouletyouremployeespayforthecoffee,isthatasavingfor Semorg?Nothatisnotasaving,thatisachangeofservicelevel andnotasaving.Wehadaverylongdiscussionaboutthis(#4,FM director-1,Semorg)
Apparently,asmentionedearlier,theoriginalcontractdidnot provideclearanswers,ratheritgenerateddiscussionanddebate.
Therewasalsoa lack ofcommitmentand trust in therela- tionship,mainlyduetomanagers’discontentwithLecorg’ssenior management’sdecisiontooutsourcethemanagementofthefacil- ityservices.Itwasnottheirdecisiontooutsource,theyhadnot participatedinthecontractingprocessandtheyexperiencedthe startoftherelationshipasastruggle.
Weweren’ttherewhenthiscontractwassigned.Wedidnothavea lotofinfluenceonhowthecontractwasnegotiated(#6,Purchase manager,Semorg).
In9outof10casesitisamanagementdecisiononthehighestlevel.
MostofthetimeabovemylevelandinthecaseofFasorgbackthen everybodyinourdivisionwasagainstit,includingthemanaging director.Iwasagainstit,butthiswasthephilosophyofLecorgat large,sothishappened(#5,DirectorFM-fabs,Semorg).
FasorgexperiencedthatthefacilitydepartmentofSemorgwas notsupportingtheoutsourcingdecision.
ItwasnotsupportedbytheFacilityManagerthen.[...]Theydidnot believeitwastherighttimetoalsooutsourceimmediatelythesup- portofbuildingsandlabs.Butmanagementdecidedtooutsource anyway(#8,Accountdirector-1,Fasorg).
So,althoughtherewasanexplicitcontract,thepartiesdisplayed alackof commitmentandtrust. Theoriginalcontracting party, Lecorg,thoughtthattheyhadadequatelycopedwithinterestsand coordinationissues,buttheyfailedtodosointheeyesofthehuman actorsthatwereimplicatedintheoperations.Semorgdidnotpar- ticipateinselectionandnegotiationprocessthatbroughtLecorg andFasorgtogether.Semorg-managersdidnotfeelcommittedto theday-to-dayactivities.Thehumanactorsdidnotassigntrusting propertiestothecontractandincorporatedcontrolstructures;the contractdidnotmobilisetowardstheorderandstabilitytheorig- inalcontractorsaimedfor.Thecontractandincorporatedcontrol structureswerenotperformativeinthesensethattheyproduced trust.Onthecontrary,thecontractinducedconflictswithregardto theassignmentofresponsibilities,accountabilityissuesandincen- tivising. The contract in interaction withdisgruntled managers driftedtherelationshiptowardsanon-cooperativerelationship.As oneofthemanagerssaid:
Youarebuildingahouseonafundament,thecontract.Ifthefun- damentiswrongdon’tstartbuildingahouse,that’swhatwehave learned:don’tdothat”(#6,Purchasemanager,Semorg).
ExitingtherelationshipwasnotanoptiontoSemorg’stopman- agement.Theoriginalcontractperiodwasfouryears,andbreaking thecontractwouldhavedamaginglegalconsequences.Moreover, thebasicreasonsunderlyingtheoriginaldecisionmadebyLecorg tooutsource,whichweretoimproveflexibilityand(aboveall)to reducecostswereendorsedbySemorg’stopmanagement.Com- petitioninthesemiconductor industrywassevereanda yearly decreaseincostwasanecessaryconditionforsurvival.Although notall ofSemorg’s managerswereconvinced that cost savings wouldberealisedwithinthisalliance,theyalsofeltthatabandon- ingtherelationshipwouldnotbeawisedecision.
Insum, thecontractand theincorporatedcontrolstructures werenot astraightforwardand unproblematicsolutionforpre- existingpotentialproblemsintherelationship.Ininteractionwith theactorsinthenetworkofassociationsthathadtomakeupthe
operationstheydidnotperformasintended.Moreover,theywere definitelynotperformativeinthesensethattheyproducedtrustas aquasi-actor;otheractorsdidnotassignpropertiesoftrusttothe contractandcontrolstructures.Onthecontrary,thecontractand incorporatedcontrolstructuresinteractivelyproducedinstability andunpredictability.However,thecontractwasperformativein thesensethatitgeneratedthestartofanearlyrecontractingpro- cess.Thisunexpectedconsequenceoftheoriginalcontractresulted fromthelegalandeconomicconsequencesofapotentialexitfrom therelationshipforSemorg.Theseconsequencesweresimplytoo harmful.Inordertomake thebestout oftherelationshipwith Fasorg,Semorg hadtorenegotiate thecontract withFasorg. So, theexistenceof acontract and thelackof cooperativeinterac- tionsbetweenthemultipleactorsmadeSemorg’stopmanagement enterinto arecontractingprocess. Thisrecontracting processis addressedinSection4.2.
4.2. Phase2:contractreview–theemergenceoftrustasa quasi-actor
In2007,SemorgandFasorgstartedrenegotiatingthecontract andtheycameclosertoeachother.Anewcontractwassignedin July2007andbecameeffectiveinSeptember2007.
Duringthefirstmonthof2007anewdemandmanageratSemorg wasappointedandwetriedtomakeanewcontractandwesigned itonthefirstofJulyandthatwasforbothsitesofSemorg(#8, Accountdirector-1,Fasorg).
Fasorglauncheda pressrelease aboutitsnewcontract with Semorg whichstated that Fasorghad beenselectedtoperform allfacilitymanagementservicesforSemorg Semiconductorsfor atleastthreeyears.Italsomentionedthatthefacilitymanagers ofSemorgalreadyjoinedFasorgin2006andthatthecontractis acontinuationoftheactivitiesthatFasorgalreadyperformedfor Lecorg(Doc#4,0709).
ApotentialmisinterpretationofthispressreleaseisthatSemorg choseFasorgafteratender.However,anFMmanagercommented asfollows:
The(original)contractwassignedforfouryears.WhenIstarted here,westartedtorewritethecontract.Theperiodstood,butwe changedsomedetailsofit[...]webroughtsomenuancesinitto helpustocooperate,toworktogethertoone,uh...onegoal(#7, ManagerFM-a,Semorg).
Therecontracting process wasconsideredto beconstitutive of the development of the relationship. One Semorg-manager explained:
Theyneededtorevisethecontract,becausethecontractismaterial inhoworganisationsinteractandbehave(#6,Purchasemanager, Semorg).
Whenweaskedwhethertherelationshipcouldhaveimproved withoutanewcontract,anothermanageranswered:
Couldbe...butfinallyundertheline,ifyouaddeverythingup, thecontractdeterminestheinteractionandthebusinesswayof workingbetweentwocompanies.That’stheformalisedwayofhow youshouldwork.Inpractice,ofcoursemostofthetimethecontract remainsinthecupboard.Andyougoinyoureverydayworking(#5, DirectorFM-fabs,Semorg).
Accordingtothismanager,althoughacontractisinitselfanarte- fact,itisnotadeadthing.Itindeedmediatesininteractionwith otheractors.Itisfarmorethanadistancedsolutionfordivergence ininterests;farmorethanasafeguardagainstpotentialopportunis-
ticbehaviour.Apparently,thehumanactors(managers)werein needofsharingthings.
Sowhatwedidin2007,wehadareview,acontractreviewwith themanagementoverherewherewesaidweneedtosharethings;
weneedtoshareourthoughtsaboutthecontractandtheresultsof thecontract.Wewereverymuchinagreement,andwhatwedidis basedonthatreview.Weestablishedanewcontract.Despitethe factthatthe[old]contractwasstillvalid,bothpartiesagreedto enterarecontractingprocess(#6,Purchasemanager,Semorg) Throughinteractionsin therecontractingprocesstheparties soughttoimprovethepartnership.Thecontractthuswasanimpor- tantactorintherelationship.
AhurdleinthenewrelationshipwasSemorg’sFMdirectorwho haddifficultiesinchanginghisrolefromafacilitymanagertoa demandmanager.Asademandmanagerheonlyhadacoordinat- ingrole.Heisanintermediarybetweenthedemandsoftheinternal departmentsofSemorgandFasorg.Inordertoimprovethesit- uation,Semorg’stopmanagementdecidedtoappointanewFM director.Atthesametimeanewcountrymanagerwasappointed;
theybothcontributedtoarevitalisationoftherelationship.These newappointmentswereconsidered importantfor thedevelop- mentoftherelationship;itwasaclearandpurposefulsign(interms ofLindenberg(2000)arelationalsignal)toFasorgthatSemorgwas committedtotherelationshipandtrustedFasorg.
ThenewFMdirectorwasthoughttobetherightpersonforthe job.Hewassomeonewhobelievedintheideaofoutsourcingthe managementoffacilityservicesandwhowasclearlycommitted tothedemandmanagementfunction.Hewantedtobuildapart- nershipbasedonmutualrespectandtrust.Thefollowingquote expresseshiscooperativeattitudeanddemonstrateshowherela- tionallysignalssuchattitude.
Wehaveamutualagreement,frombothsidesweagreeonthis.It isnotthatwesay,okaywewanttohave500.000eurosavings,just go!No.Youneedtodothisinapartnership.Becausetheycomeup withideasanditiseasytosaythatitisabadidea.No,weboth havetheresponsibilityforgettingtherightsaving,definetheright savingopportunities(#4,FMdirector-1,Semorg).
Thecontractreviewwasdonebylocalmanagement.Through richinteractionssharedvaluesandambitionswerebuiltandown- ershipoftherelationshipwasachieved.Thus,thecontractbecame anactortowhichtrustwasassigned.Thisisnottosaythatthe functionalalignmentofinterestsdidnotplayanyfurtherrole.It did.
In2007werenegotiatedourcontractandinthecontractwehave bothincentivesandpenaltiesbecauseFasorghastobringthecosts downoveraperiodoftwoyears.Iftheycan’trealiseuscostsavings, theyhavetopayapenalty.Iftheydomore,thentheywillshare intheadditionalcostsavings.Thatisakindofincentivepenalty system(#9,Countrymanager-1,Semorg).
Wechangeditintoapartnership.Wewantedthisfrombothsides, butweneededtocomeupwiththerightincentivestoachievethe savings(#4,FMdirector-1,Semorg).
AlsoaFasorgmanageracknowledgedthattrustwasbuiltduring contractnegotiations:
Afterthecontractreviewwesawalotmoretrust,alotmorework- ingtogether.Forexample,inmyteamthereissomebodywhois responsibleforsavings,butwealsohaveanSemorgpartnerwhois responsibleforsavingsandtheyareworkingcloselytogether(#8, Accountdirector-1,Fasorg).
So,thecontractbecameasignificantactorintherelationship.In theprocessofreshaping,itinteractivelyproducedtrustasaquasi-
actoranditbecameconstitutiveoftherelationship.Itinteractively mobilisedhumanactorstocooperateinapartnership.Accordingto thepartiesinvolved,italsoproducedaproperalignmentofinter- ests,butthiswasembeddedinthenetworkofassociationsandit wasnotseparablefromtheprocessoftrustbuilding.Ofgreatsig- nificancewastheinteractionbetweenthecontractandsomenewly appointeddirectors.
4.3. Phase3:furtherdevelopmentoftherelationshipandthe performativityofcontrolstructures
After therecontracting period a third phase may be distin- guishedinwhich,againstthebackgroundoftherenewedcontract, facilitiesmanagementwaspracticedthroughday-to-dayinterac- tion.BothSemorgandFasorgaimedtofurtherbuildarelationship onthebasisoftherenegotiatedcontract.Thecontractwasassigned trust and parties felt committed tothe relationship. However, actorswereawarethattherelationshipwasstillyoungandfrag- ile.Toalargeextent,therecontractingwasdonebySemorg’sFM director-1andFasorg’saccountdirector-1.Fasorg’saccountdirec- torthoughtitimportanttoshowanunderstandingoftheclients’
needsandtodemonstratethecapabilitytotranslatetheseneeds into concrete plans.For example, Fasorg madea business plan which matchedSemorg’sbusiness plan.Thisdemonstrates that bothorganisationswereonthesamepage.
Youhavetoprovethatyouarewillingtodowhattheyexpect[...] sowhatwehavedone:forexampleforthisyearwemadeayear plan,abusinessplan,andwechallengeditwiththebusinessplan fromSemorgandthatwassimilarfor80–85%.Sothatmeansthat weunderstandwhattheywantandwehavethecapabilitiestodo whattheywant(#8,Accountdirector-1,Fasorg).
ThebusinesscasesweresignallingFasorg’scompetenceandan understandingofeachother’sneeds.Fasorgwasalsowillingtohelp whentheeconomicrecessionin2008severelyhitSemorg.Reor- ganisationstookplaceandSemorgemployeeswerefired.Semorg tried to transferone of theprojectmanagers toFasorg. Fasorg agreedand,inaddition,helpedSemorgbytakingoveractivities thattheycouldnothandlebecauseofanecessarydeclineinthe capacityofthedemandmanagementorganisation.
Theirdemand managementorganisationisgetting smaller and smallerandtheysaidwecan’tdoitbecausewedon’thaveany capacity.Canyoutakeover?Yeahwecantakeoverbutwewill makealist.Sowemakealistofactivitiesthatwetakeoverand sometimeswesaidthereisnoproblemandsometimeswesaidok, butyouhavetopayforit.Sowearepreparedtohelp,butwealso negotiate,workingtogetherontherelationshipandtakeoverthen newactivities(#8,Accountdirector-1,Fasorg)
Byshowingtheirwillingnesstotakeoverandtoopenupthe possibility thatthis would notentailadditionalfunding, Fasorg signalledtoSemorgthattheyvaluedthecontinuanceoftherela- tionship. From a rational perspective, this may be viewed as an attemptto buildthicktrust in the relationship.Against the backgroundoftheirlong-terminterestsFasorg’saccount-director rationallysignalleda willingnessandcapabilitytohelpwithout wantinganimmediatecontra-performanceforsuchhelp.Fasorg signalled trustworthiness;theyaimedtohavetrust assigned to themsothattherelationshipcouldreallyevolveintoapartnership.
Trustmoreandmorecirculatedintherelationship.
Igaveyoutheexamplehowtherelationshipmovedfromapaper contractandatop-downinitiative toamore cooperativerela- tionship,whereontheway trustwasbeingrestored(#13,Site PurchasingManager,Semorg).
Thediscussionswereopenandtheinteractionsgraduallyled tothesharedsettingupof ‘savingsprojects’.Bothpartieswere strongly motivated to participate in these projects. They also changedthestructureoftheworkmeetingsthatwerepartofthe controlstructures,achangethatbothpartiesexperiencedaspos- itive.Atfirst theyhada one hourmeeting oncea week.These meetingswereoftentooshorttoadequatelysolvetheproblems theyfaced.Thenewmeetingstructurehadalowerfrequency(once amonth),buttookafullafternoon.
Wehavedonethisnowfortwomonths,actuallyIamquitehappy withit.Becausethenyoufindthetime,togo,afullafternoon,very deeplyintotheservice,intotheoperationandhavetimetodiscuss realissues.Intheoldstructure,oftenthewholehourwasspenton operationalissuesandyounevercametotherealproblemsbehind theseissues(#4,FMdirector-1,Semorg).
AfterthecontractualrenegotiationsthediscussionswithFasorg about the control practices continued in a cooperative atmo- sphere.The interactively developed controlstructures included anincentive-penaltysystem,aperformancemanagementsystem withKey PerformanceIndicators (KPIs),monthly and quarterly reportsandmeetings.
AsshowninTable3,thecontrolstructuresincludedseveralKPIs thatcoveredthreeperformanceareas:Fasorg’sperformance,client satisfactionandqualityofsuppliers(seeAppendixBforanexam- ple).ThemonthlyreviewmeetingsandtheKPIswereimportant controlstructuresforgoverningdaytodayoperationsintherela- tionship.Inacooperativeway,newKPIsweredeveloped.Inturn, themeetingstructuresandtheKPIsmobilisedactorstotransform therelationshipintoapartnershipandtofurtherassigntrustto eachother.
Onaquarterlybasistheyreportusdirectlywhattheirperformance is. [...] We call this [laughter] our ‘feet-on-the-table-session’.
What’syourfeeling?Whatisyourproblem?Youhaveaproblem withme?Whatistheproblem?Let’sdiscussthis.Justworkingon therelation(#4,FMdirector-1,Semorg).
TheKPIswerenotdesignedandimplementedfromadistance, butwereinteractivelyshapedbyactorsintherelationalnetwork.
TheKPIsgenerateddebatesanddiscussions.Conflictsarosewhen managersstarted todoubttherepresentationalqualities ofthe KPIs.Asaconsequence,KPIswerechanged.Thepurchasemanager describeshowKPIswereperformativeintheassociationsofthe network:
BecauseiftheseKPIsarewrong,thenformallyyoudiscussthem onthemanagementlevelorareviewlevel.Youstarttalkingabout KPIs,peoplestartcomplaininganditaffectstheoperations.Oper- ationspeoplesaywellwedoagoodjob,managementsaysnoyou don’tbecauseyourKPIsarenotgood,soatsomepointitmustfrus- tratetheoperation.Soyouareforcedtochangethat(#6,Purchase manager,Semorg)
Discussions and debates concerning performance measures improvedthetrusttheactorsassignedtoeachother.Semorg’sFM manager-awasconvincedthatFasorgwouldproducethenumbers andfigureswithintegrity.
Despiteproblemsandpossiblepotentialimprovementsyouhaveto seethisasakindofapartnership.It’salongtermrelationship;you stepinandifyoudon’twanttodothat,don’tstartwithitatall.
FasorgshouldnotaimforthequickwinandneithershouldSemorg.
Youshouldhaveagoalforthelongtermandifyoustartwiththis manipulationsorfraud,thenyoucannevertrusteachotheragain (#7,FMmanager-a,Semorg)
Table3
Controlstructures.
Contract&Servicelevelagreementsandyearlytargetsavings
PerformanceManagementSystem(PMS)withKeyPerformanceIndicators(KPIs) Incentive-Penaltysystem(Gainsharingsystem)
MonthlyReviewmeeting(strategy,savings&control,operations,finance) Openbooksystem
Quarterlyreport
OneFMmanagerdescribedthestateoftherelationshipas‘act- ingas one department’.Thiswas reflected duringthemonthly meetingswherecontrolstructureswerediscussedtowhichalso theseniormanagersassignedtrust.Boththecountrymanagerand theFMdirectorexperiencedthemonthlymeetingsasa benefi- cialmutualinvestment.Everymonththepartiesdiscussedhowto achievetheagreedcostsavings.Thesediscussionsbecameintegral tothemonthlymeetings.
Thereisaveryopendiscussion.EverymonthFMdirector-1isdoing thatwithFasorg.Howmuchhelpdoyouneedwiththeprojects?So thediscussionishowwecanachieveallthesecostsavingstogether (#9,Countrymanager-1,Semorg).
ThecontrolstructuresalsomobilisedFasorg’saccountdirector- 1.Thestructuresencouragedhimtoimprovehisworkonadaily basis.
Whatwearedoinghere,whatIwilldohereeverydayisbetterthan thedaybefore.Forexamplewhenwestartedatthefirstdayatthe campusalmosttwoyearsago,Semorgsaidthatwemightscorea four.Nowtheygiveusaneight.(Researcher:Theyaresatisfied?) Theyaremorethansatisfied(#8,Accountdirector-1,Fasorg).
Fasorg’sperformance wasmeasured through a performance measurementsystemthatwasbasedonanopenbook.Semorg’s managershadopenaccesstothebooks.Fasorg’saccountdirector explainshowtheywerecreatingtransparencyforSemorgandhow suchavisibilityofnumbersconstitutedtrustinthenetworkofthe actorsintheinterfirmrelationship:
ThepurchasemanagerfromSemorghadafeelingthattheopen booksystemwasablackboxandsomethingwasgoinginandsome- thingwasgoingout,but(hedidnotknow)whatwasgoingoninthe blackbox.IsaidcomewithmeIwouldinvitesomepeoplefrommy company(fromfinance,fromperformanceandfromcompliance) andtheycangiveyouacompleteoverviewoftheblackbox.For instance,whatisinit?Howarefiguresmatchedwitheachother?
Wehadasessionof2handhewascompletelyhappy,yeah.Because itisopenitiscompletelytransparent.Itistheirmoneyandwehave tocarryit(#8,Accountdirector-1,Fasorg)
AttheotherSemorgsiteintheNetherlandstheFM-manager expressedasimilarinterpretationofthecooperationwithFasorg.
Atthissitetherewereonlyofficesandnofabs,andFasorgmanaged allthefacilitiesservices.ThelocalFM-managerhadtogetusedto thenewwaysofworkingbuthedidnotexperienceanyproblems:
Ithinkwechanged...uh...Ichangedintoademandmanagerand theydotheoperationsandtheydoitverygood.Wenowhavea one-to-oneorganisation(#14,FMmanager-b,Semorg).
Asthisphase reveals,thecontrolstructuresmediatedinthe constitutionof a partnership and in the generation of positive expectationsaboutthefurtherdevelopmentof therelationship.
Theyalsomediatedinthefurthercirculationoftrust.Ratherthan beingstaticand instrumental tothealignmentof interestsand themitigationofrisks,thecontrolstructurestransformedthem- selvesandtherelationshipintooneofapartnership.Thereviews (particularlythemonthlymeetings)andKPIswereperformative
inthesensethattheyinfluencedthedevelopmentofthepartner relationship.4
5. Discussion
Contractsandincorporatedcontrolstructuresareartefactsthat maybedesignedandnegotiatedinisolationfromtheorganisation’s day-to-dayactivities.Thiswasespeciallythecaseintherelation- shipbetweenFasorgandSemorg,wheretheoriginalcontractwas designed and negotiated at a large distance. It was negotiated betweentopmanagersofFasorgandLecorg,thelatterbeingthe prior‘mother’ofSemorg.TheSemorgmanagers,whowereinvolved intheday-to-dayoperationsandactivities,didnotparticipatein thepriornegotiations.TothedistancedmanagersofLecorgthecon- tractreflectedtheirwishesregarding theinterfirmrelationship, alignedtheinterestsoftheparties involvedand providedsolu- tionstopotentialcoordinationproblems.However,tothehuman actorswhowereinvolvedinday-to-dayactivities,thecontractand itsincorporatedcontrolstructureswerenotasolution.Especially inthebeginning,thecontractdidnotinanywaydescribetheir intentionsandtheirwaysofdoing.Therefore,theseactorsdidnot perceivethecontractasanenabler,andcertainlydidnotacceptit asaprescriptoroftheirintentionsandactions.Infact,thecontract didnotmobilisethem;thehumanactorsdidnotassigntrustto thecontract.Whathappenedwasthatthecontractdidperform, butinratherunexpectedways.Itsmereexistenceforcedtheman- agerstomaketherelationshipwork.Aninstantexitwouldcause anumberofharmfullegalconsequences,andthusexitingsimply wasnotanoption.However,recontractingwas.Sotheoriginalcon- tractprovedperformativeinthesensethatthepartiesfeltitwas necessarytoenterintoarecontractingprocess.Therecontracting processyieldedanadaptedcontract,whichcreatedthebasisfor anactor-networktowhichpropertiesoftrustwereassignedandin whichtherelationshipdeveloped.Now,trustbecameaquasi-actor attachedtotheactor-networkofthecontract.
In the course of the relationship, new control structures (amongstthemmeeting structures)developed interactivelyand becameconstitutiveofthetrustingrelationship.Controls,suchas incentive-penaltysystems,KPIs,openbooksystemsandmonthly and quarterly reports, became part of the relational network throughdiscussionsandareciprocalunderstandingof thetasks athand.Insteadofbeingdesignedandimplementedatadistance, theKPIswereshapedintherelationship.Theybecamemediators ingeneratingaspecificunderstandingoftherelationalnetwork.
Particularly,theymediatedinthedevelopmentofatrustingand collaborativerelationship.
Therelationalperspectivewetookinourpapergoesbeyond amereinterpretiveresearchapproach.We didnotaimtoshow how,atthelevelof theinterfirmrelationship,thecontract and controlstructureswereobjectifiedthroughdiscussingordebating theideasandinterpretationsofmultiplehumanactors,asisthe mainfocusininterpretiveresearch.Ouremphasiswasnotonhow thecontractandthecontrolstructuressubjectivelyemergedand werethenobjectifiedthroughinteractions(Chua,1986).Although touchinguponhowthecontractandthecontrolstructureswere shaped,thestudywasfocusedonhowtheseentitiesperformin andchangetheinterfirmrelationship,andonhowtheyarecon- stitutiveofthisrelationship.Morespecifically,throughfollowing themultiplefootstepsofthecontractandthecontrolstructureswe wantedtomakesense(ChuaandMahama,2012)ofthecontract- control-trust nexus in that relationship. Our methodology was reflexiveratherthaninterpretive(seeHassardandCox,2013).We
4Attheendofthecontractingperiodanewcontracthadtobenegotiatedagain andresultedinanewcontractforthreeyears.
reflectedonthecontract-control-trustnexusbymakingsenseof theinteractionsamongtheactorsinthefield.Theseactorswere both humansand non-humans.The contractand control struc- turesarenotconsideredtobesubordinatetohumanbeings:the humans arenot apriori,but arepulled toa symmetricallevel.
Thatis,thecontractsandcontrolstructuresarenotonlycreated byhumanactors,butthelatterarealsomobilisedbytheseenti- tiesincertaindirections.Theymediateinthedevelopmentofthe interfirmrelationship.Thisisconsistentwiththenotionofsym- metryasdeveloped byLatour(Latour,2005,1986).Incomplex interactions both humanactors and non-humans have agency;
theyhaveaninteractivecapacitytoperform.However,whereas humans mayintend toactrationally, non-humans cannot.It is thereforeimportanttonotethatourrelationalperspectivedoesnot excludethishumanrationality.Yet,fromarelationalperspective, rationality ofhumans is not aninherent and prior characteris- ticofindividuals,butanachievementrealisedbytheinteractions betweenhumansandnon-humans.Forexample,thetopmanagers ofSemorg andFasorgpurposefullyredesignedand renegotiated theoriginalcontract.GivennetworkdevelopmentsSemorgman- agerspurposefullyoptedfortheappointmentofanewcooperative manager;newincentivesinthecontractwereintentionallychosen.
Allthesedesignsandrationaldecisions,however,werenetwork effects.Theywerenotisolatedfromtheinteractionsinthenet- workandwerecertainlynotisolatedfromtrust.Interactionsinthe networkresultedintheassignmentoftrusttothenewcooperative managerofSemorg,particularlyduringtherecontractingprocess.
Duringtheprocessofrecontractingtrustwasalsoassignedtothe contract.
Inourrelationalstudy,trustisaconsequenceratherthanan ex ante category. Trustresultsfrom theassignment of proper- tiesoftrust toactors,afterwhich itbecomesa quasi-actorthat operatesinthenetworkaslongastheactorswiththeproperties assigned tothemremainactivein thenetwork.It isnot some- thingthatcanbedecideduponinisolation;itisnotamatterof simplyselectingpre-existingcategoriesoftrust(forexamplecon- tractualtrust,competencetrustorgoodwilltrust)followedbya straightforwardimplementationoftheselectedcategories.From arelationalperspective,trustfluidlycirculatesintherelationship, whileitisgenerallyneitherprogrammablenorpredictable.Ifthe identityoftheactortowhich(dis)trustingpropertiesareassigned changes,oriftheactorleavesorisremovedfromthenetwork,trust alsochanges.Ofcourse,trustisanimportantaspirationandits absenceisproblematic(MouritsenandThrane,2006).Responsible managersmaythereforerationallyrespondtosuchadevelopment bychangingtheidentityoftheactors(forexamplethecontract), orbyintroducingnewactors(cooperativemanagersatimportant positions)inthenetwork.
Our study has conceptual relevance to practitioners (Van derMeer-KooistraandVosselman,2012).Ratherthanproducing instrumentalknowledgeaboutmeans-endrelationships,ityields enactiveknowledge(ChuaandMahama,2012).Thisknowledge enablespractitioners tomodify the understandingof the deci- sionsituationtheyfindthemselvesinataparticularmomentin time.Specifically,itprovidesthemwiththeinsightthatcontrol and trust are network effects rather than consequences of iso- latedrationaldecisions.Therefore,insteadofconcentratingonthe individualactors,responsiblemanagersmight,asa result,focus onassociationsandinteractions.Theymightshifttheirattention fromcontrollingindividualstotryingtoregulatethenetworksof associations.Oncehavingacknowledgedthattherearenumerous non-programmable and unexpected effects, practitioners might strivetocreatesituationsinwhichtheycanrationallyrespondto thenetworkcirculations.Inthiscontext,theymightwanttoinflu- encetheperformativityofcontrolsratherthantheirfunctionality.
