Alliances in the social economy: advantages, risks and solutions

Alliances can enhance competitivity in the social economy, but they must be created with compatibility and clear expectations in mind.

The social economy is populated by organizations, cooperatives and foundations pushing social concerns to the center of economic life. In the words of the OECD, these associations are “driven by values of solidarity, the primacy of people over capital, and democratic and participative governance.” Despite the idealist ring to it, the social economy represents 8% of the GDP of the EU, rising to 10% in France and Spain. Strengthening the social economy could have important ramifications.

Alliances between organizations can bring many benefits, opening up resources and work areas that would be otherwise inaccessible, and improving performance, recognition and influence. In short, they allow partners to grow and be more competitive.

Despite these advantages, alliance partners in the social economy may face difficulties derived from their organizational or cultural differences. IESE professor Africa Ariño, who holds the Joaquim Molins Figueras Chair of Strategic Alliances, offers a framework for overcoming the challenges and establishing successful strategic alliances.

Identify potential conflicts in social alliances

When entering into an alliance or reinforcing one, partners need to be clear-eyed about their differences and work proactively to prevent them from becoming a stumbling block to development. Below are four areas that may cause conflict and ideas to work past them.

Strategic conflicts. Each party in an alliance needs to be clear about its objectives. When common and private goals are compatible and given equal weight, the alliance is likely to prove more fruitful than when private goals are more important to one or both partners. Some strategic conflicts also arise from differences over what each partner should contribute — it’s best to establish this early on. What are the shared goals and vision, and which tasks will fall to each party in the alliance?

Organizational conflicts. These are born from the structure, size and organizational culture of alliance partners. The more significant the differences between them, the more likely it is that conflict will arise. Avoiding and dealing with this requires cultural intelligence — understanding why the other party acts the way it does — and relationship building.

Operational conflicts. Combining resources can lead to more complications than expected. To avoid them, agree on the minimum requirements for working together, and decide which of your own procedures need to be adjusted.

Human conflicts. One of the greatest challenges in managing an alliance is overcoming lack of trust, especially when confidential information is exchanged. Minimum levels of trust need to be talked through and agreed, or otherwise-productive partnerships can rapidly fall apart.

Look for compatibility and set ground rules

Avoiding these conflicts can be achieved through a range of methods, from cultivating good interpersonal relationships to establishing formal mechanisms for decision-making. Rules make the game clear to everyone and will guide your collaboration.

Therefore, invest time and resources up front to check if your strategies, objectives, resources and capabilities are a good fit. Analyze, too, whether your potential alliance partner has the resources and skills to fulfill its obligations to the alliance. Check for operational compatibility. Then build a framework for working together.

Constructing a relationship

Creating an alliance has a number of steps, beginning with preparation, then the selection of partners, and then a negotiation. Establishing some ground rules facilitates the negotiation process. This requires empathy, leadership, transparency and good communication.

When this process is effectively carried out, the resulting alliance will be stronger and more vibrant. Remember, the negotiation serves not only to structure the alliance, but to build mutual understanding of your partner’s goals and expectations.

A partnership between social entities is a living thing, and will need to be reviewed at times to see what’s going well, what isn’t and if it makes sense to continue together. Terminating an alliance doesn’t necessarily mean it has failed: sometimes it has been created to address set objectives, and disbands when they are met. But all strategic partnerships, even those with a clear end date, can benefit from a good beginning.

About the report

This framework is based on interviews with leaders from 11 social alliances in Spain, as well as the president of the Spanish Confederation of Social Economy Enterprises (CEPES). The authors also contributed their own experience and expertise.

Source: “Cómo las alianzas fortalecen la economía social. Un marco para vencer las reticencias del sector en España,” by Africa Ariño, Teresa Buxeda, Jordi Carrillo, Xavier Lopez and Esperanza Molins, is available in Spanish.