W7 RT2C Wald

Respond to at least two of your peers’ postings in one or more of the following ways: “See attachment for details”
APA citing
No plagiarism
See Colleague attachments
ATTACHED FILE(S)
Discussion: Importance of Communication in Partnerships
Assume Alpha Distributing has just hired Brown Staffing to take over the administration of all of its payroll and benefits matters. There are three distinct but all-important dyadic channels of communication that should be addressed in this situation: (1) Alpha to Alpha’s employees, (2) Alpha to Brown’s employees, and (3) Brown to Alpha’s employees. In this context, all are important. Effective communication can make the outsourcing transition incredibly smooth, but insufficient or ineffective communication can make it exceedingly difficult and painful.
Consider how the level, frequency, and direction of communication can be crucial to the real and perceived success of a business partnership.
To prepare for this Discussion
,
Review this week’s Learning Resources, especially:
· Case study of processing firm-distributor – See pdf
· How Good Are Service – See pdf
· Relationship Governance – See pdf
· Infighting unravels alliance– See pdf
· Outsourced Marketing – See pdf
· Creating an effective service level agreement – See pdf
Assignment:
Respond
totwo your colleagues’ postings in one or more of the following ways:
· Ask a probing question.
· Share an insight from having read your colleagues’ postings.
· Offer and support an opinion.
· Validate an idea with your own experience.
· Make a suggestion.
· Expand on your colleagues’ postings.
· No Plagiarism
· APA citing
1st Colleague – T West
Top of Form
Importance of communication in partnerships
In the context of communication, a channel is a means of transmitting information from one person to another. The smooth operation of a business relies on open lines of communication. The ability to communicate effectively amongst businesses is critical to the success of joint ventures. (Wieland et al., 2021)Communication is key to a successful outsourcing shift for all parties involved. On the other hand, a company’s smooth operation and outsourcing are hampered by a lack of or insufficient communication. As a result, effective communication is essential to achieving an organization’s goals.
A partnership communication plan needs at least five parts to help the two organizations reach their goals, especially when it comes to outsourcing. First, there are goals for how the two partners will talk to each other. In the communication plan, the communication goals should be written down. The communication goals between the executives should be made clear, and the communication should be geared toward reaching those goals. In the communication plan, you should also say how you will talk to the employees. Second, there should be a clear idea of whom the communication in the organization is meant for. The message should get to the right people without falling or getting messed up.
Third, the transmitted message is of tremendous importance in the communication plan. The message should be clear and exact to prevent misinterpretation or send multiple meanings to the listeners. Message constitutes the backbone of every communication plan. It is the stuff being transmitted from the executives to the younger staff. Fourth, a communication route has to be mentioned in the communication strategy. It is the medium for communication purposes in the organization, both the primary company and the outsourced firm. The channel must be specified to avoid delays or distortion of the information. Lastly, message placement incorporates the response obtained from the receivers of the information. It helps to know the firm’s trends in measuring the development of the collaboration taking place between the two companies.
For each organization, an exit strategy is essential. It is an exit strategy for any corporation that joins a joint venture. Before accepting outside financing, it is recommended that the company’s founders create and examine an exit strategy. By developing and following a solid plan for winding down, you may raise the likelihood of your company’s success and reduce your departure timeline while also increasing your exit valuation. When collaboration does not work out as envisioned, having an exit strategy will help the organization be ready for whatever comes next.
The company’s success and the success of each partnership it enters into depends on effective communication. It enables both parties to know the organization’s long-term performance better. (Bond-Barnard, 2018)Understanding is essential to the organization’s success. Communication relies on the power of persuasion and discussion to overcome obstacles. I do not think it is good to keep CEOs’ communications from reaching their subordinates. Any information that has to be passed along must be phrased and considered among executives before being given to employees. An organization’s activities dictate how often it communicates with its members. There is a need for constant communication in the course of the work. Lastly, creating time is an essential aspect in driving the frequency of planned communication; this results from giving employers and employees time to reflect on what they are supposed to do. This is vital because; employers and employees will be on the same page, and there will be practical activities within the organization.
Wieland, M. L., Asiedu, G. B., Lantz, K., Abbenyi, A., Njeru, J. W., Osman, A., … & Sia, I. G. (2021). Leveraging community-engaged research partnerships for crisis and emergency risk communication to vulnerable populations in the COVID-19 pandemic.Journal of clinical and translational science,5(1).
Lemley, M. A., & McCreary, A. (2021). Exit strategy.BUL Rev.,101, 1.
Bond-Barnard, T. J., Fletcher, L., & Steyn, H. (2018). Linking trust and collaboration in project teams to project management success.International Journal of Managing Projects in Business.
Bottom of Form
2ndColleague – Natasha Mills
Importance of Communication in Partnerships
Top of Form
Week 7 Discussion
Despite the high rates of failure in partnerships, many of those involved in their formation normally ignore the drawing of an exit strategy. As Gulati et al. (2007) posit, negotiating an exit strategy at the early stages of an alliance formation is considered awry and associated with a lack of faith in the success of the partnership. On the contrary, an exit strategy is a necessity during alliance negotiations and formation. Partnerships are like marriages, meaning that the probability of a break-up is high. When such occurs, the partnering companies would want to maintain their reputation and avoid offending their partners (Gulati et al., 2007). Alliance partners can include this exit strategy in a partnership communication plan. This paper will illustrate the importance of such a plan and what elements are included in it.
Key Elements in a Partnership Communication Plan and When to Include an Exit Strategy
The main purpose of a partnership communication plan is to allow continuous and effective information flow between those involved in an alliance, including suppliers, customers, employees, and other parties. The first key element that should be included in a communication plan is how information will be shared during the alliance. Gibbs & Humphries (2009) mention information impactedness as a human factor that leads to the break up of an alliance. This refers to misleading a partner, being economical with the truth, or deliberately withholding important information (Gibbs & Humphries, 2009).
Key performance indicators (KPIs) should also be included in a partnership communication plan. Gulati et al. (2007) argues that many partners create a plan of how to break up but not when. KPIs can be helpful with the when because they will show whether the alliance is achieving key milestones or failing, causing the partners to know when to break up. The last key element of a partnership communication plan is an exit strategy created by both partners. The exit strategy should have what would be considered as triggers of the exit, fair separation of assets, and details of the disengagement process (Gulati et al., 2007). Therefore, an exit strategy is a significant part of a partnership communication plan and should be included during the formation of the partnership.
Importance of Communication Plans in Partnership Success
Poor communication is one of the most profound causes of alliance failures (Bhaskaran & Jenkins, 2009). This is because it leads to poor collaboration and cooperation, which, in turn, affects the development trust. An alliance without trustworthiness is less likely to succeed. A communication plan addresses all these issues by clearly elucidating the strategic intent of a partnership (Bhaskaran & Jenkins, 2009). The outcomes usually are increased commitment, cooperation, and trust between the partners, thereby creating enduring alliances that are well positioned to achieve set milestones. For instance, a partnership communication plan will help the Alpha Distributing and Brown Staffing partnership become successful by elucidating the basis of the partnership, enabling effective information sharing, and increasing the process of building trust and commitment among the employees of both partners.
Key Factors that Drive the Level of Planned Communication in Partnerships
Commitment, trust, cooperation, and relationship satisfaction are the key driving factors of planned communication in partnerships. A communication plan clearly states the strategic intent of the partnership, methods of information sharing, realistic goals to be achieved, and how to track performance (Bhaskaran & Jenkins, 2009). These components help partners work together and achieve targeted outcomes as opposed to when the alliance lacks a communication plan, leading to the formation of an adversarial relationship due to the emergence of constant conflicts. It is essential to note that the working together of partners includes their employees. Hence, the employees need to be informed about issues concerning the partnership that affect them. Open communication creates a trustworthy environment that increases commitment and loyalty of the employees to the alliance. Further, the alliance will be characterized by communication satisfaction, which also fuels employee commitment levels to the alliance (Walker et al., 2009). However, it is not necessary for employees to be privy to the same information shared with the executives, unless the information involves them and could potentially affect their performance and commitment if not shared with them.
Key Factors that Drive the Frequency of Planned Communication
According to Gibbs & Humphries (2009), frequent communication, information sharing, and open dialogue are a part of the success spiral. Such communication cultivates the creation of value, reliability, synchronization, and quality. Therefore, the key factors that drive the frequency of planned communication can be summed up as performance and the realization of set milestones. From this perspective, the communication plan should address spontaneous demands for information as long as the demands have a positive impact on performance and the continuation of the alliance.
In conclusion, a communication plan is a significant determinant of the success of alliances. It is the lack of it that increases the risk of failure for many partnerships. Also, the areas addressed in a partnership communication plan are critical because they affect what and how issues are addressed during the alliance.
Bhaskaran, S., & Jenkins, H. (2009). Case study of processing firm‐distributor firm outsourcing alliance.Journal of Manufacturing Technology Management.
Gibbs, R., & Humphries, A. (2009).Strategic alliances and marketing partnerships: Gaining competitive advantage through collaboration and partnering. London, NI: Kogan Page Limited.
Gulati,R., Sytch,M., & Mehrotra,P. (2007). Business Insight (A Special Report); Preparing for the Exit: When forming a business alliance, don’t ignore one of the most crucial ingredients: how to break up.Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y], p.R.11.
Walker, M., Sartore, M., & Taylor, R. (2009). Outsourced marketing: it’s the communication that matters.Management Decision.
Bottom of Form

Business Insight (A Special Report); Preparing for
the Exit: When forming a business alliance, don’t
ignore one of the most crucial ingredients: how
to break up
Ranjay Gulati, Maxim Sytch and Parth Mehrotra . Wall Street Journal , Eastern edition; New York, N.Y.
[New York, N.Y].03 Mar 2007: R.11.

ProQuest document link

ABSTRACT (ABSTRACT)
The lack of an agreement is compounded by the fact that when tensions arise between partners, the alliance’s
managers may be reluctant to alert their superiors back at the partner companies. They fear they may be blamed
for the alliance’s failure, which would hurt their own careers. So instead, the managers focus their tensions on their
alliance counterparts. The typical outcome: a dysfunctional strategic alliance marked by deep animosity between
alliance managers. Any ensuing discussions about possible alliance termination are likely to be emotionally
charged and ineffective.
Second, a core team of disengagement managers should be formed, drawing on managers not only from the
parent companies but from the alliance itself. When a team comprises only managers from the parent companies,
attorneys get involved too early and negotiations tend to focus solely on the observance of rights to stocks; this
tends to alienate alliance managers and to hurt not only what remaining value the alliance has, but the flows of the
partner companies as well. Additionally, the smartest companies assign the supervision of disengagements to
senior corporate personnel at the parent companies who weren’t originally linked to the alliance. Such supervision
not only enforces clear accountability and allows for greater impartiality, it enables alliance managers to better
clear organizational and legal roadblocks during the disengagement process.
When a partnership has to be dissolved, a strong communication plan is key. In our view, a number of companies
have learned that mishandling communications during a break-up can damage a company’s reputation and
significantly hinder its chances of finding future partners. During disengagement, it’s important to avoid offending
partners and to maintain your own company’s reputation.

FULL TEXT
A WORD OF ADVICE for companies thinking about forming a business alliance: Before launching any partnership,
make sure both parties agree on how you’ll know, and what you’ll do, when it’s over.
There is no doubt this can be challenging. Like a prenuptial agreement, in which a couple discusses divorce
options on their way to the altar, negotiating exit options while still at the formation stage of an alliance seems
almost counter to human nature. For one thing, neither partner wants to admit that things could go awry. What’s
more, there’s an eagerness to get the deal done — and a fear that raising the worst-case scenario will undermine
the euphoria and trust that often accompany a new deal.
But partners ignore the issue at their own risk. Discussing the trigger points for exiting, as well as the
disengagement process itself, while still in the negotiation stage is paramount for an effective partnership. In
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many cases, exit planning may actually enhance the alliance’s performance and longevity.
Interviews with managers who have overseen alliances reveal a pattern that sometimes emerges when a
partnership with no adequate separation agreement becomes strained: Partner A grows dissatisfied with the
venture and seeks an exit, but can’t find any easy options; Partner A then attempts to covertly appropriate as much
value as possible from the alliance before the venture goes completely sour, while creating a paper and action trail
aimed at placing the blame for the failed venture on Partner B; an angry Partner B discovers the maneuvers, and
takes countermoves.
The lack of an agreement is compounded by the fact that when tensions arise between partners, the alliance’s
managers may be reluctant to alert their superiors back at the partner companies. They fear they may be blamed
for the alliance’s failure, which would hurt their own careers. So instead, the managers focus their tensions on their
alliance counterparts. The typical outcome: a dysfunctional strategic alliance marked by deep animosity between
alliance managers. Any ensuing discussions about possible alliance termination are likely to be emotionally
charged and ineffective.
So, what kind of exit-plan pact works best? One that clearly specifies the point of disengagement, tells both parties
what their subsequent rights and responsibilities are, and provides a clear and effective procedural map that
minimizes time and capital losses.
More specifically, a successful disengagement plan should comprise the following:
— Clear definitions of what both parties will consider as exit triggers, or events that will set off specific exit
provisions.
— A detailed description of each party’s rights in a fair separation of the partnership’s assets and products, as well
as a determination of rights and responsibilities with regard to third parties, such as customers, suppliers and
employees of the alliance.
— A detailed description of the disengagement process, including specific strategic options, guidelines for creating
the core disengagement team, and clear timelines.
— A communication plan for continuous flow of information to alliance partners, customers, suppliers and other
involved parties during the dissolution.
Not clearly stating when an alliance should end can be lethal, even when partners have agreed on how the alliance
should end. Partners’ perspectives on the timing of dissolution can differ, leading to lengthy and expensive
haggling.
This is why the first step in devising a successful exit strategy is to have clear trigger provisions. Triggers may
consist of such contingencies as the inability of the alliance to meet certain milestones, performance metrics or
service-level agreements; breaches of contract terms; or the insolvency or change in control of one of the partners.
When pharmaceutical and biotech companies team up to bring an experimental drug to market, the partners often
use milestones as exit triggers, such as whether the drug reaches a particular stage of a clinical trial.
For example, a large U.S. pharmaceutical company we talked to often sets a deadline by which patients must be
enrolled in Phase III clinical trials, typically the last round of tests before a drug is submitted to the Food and Drug
Administration for approval. Other milestone triggers used in this area include failing to successfully complete
Phase III trials, failing to attain approval from the Food and Drug Administration, or, for a drug that is already
approved, failing to meet specific sales targets.
In some cases, exit triggers are linked not to goals but to events, such as a change in control of one of the partner
companies. One large domestic dairy manufacturer we investigated, for example, when entering alliances, often
stipulates that it will end the partnership if its partner’s percentage of voting shares in its own company declines
without the dairy company’s prior consent. The dairy maker makes this requirement to avoid having an undesired
firm indirectly obtain a stake in the alliance by buying shares in the partner company.
Once an exit trigger is reached, the next step is dissolving the alliance. This raises the question of each partner’s
rights and responsibilities. What’s the fairest way to split everything up?
Partners can start by breaking things down into two broad categories: stocks, which we’ll define as the current
products or services sold by the alliance, as well as the physical and intellectual assets used in their production;
and flows, which are contractual commitments to third parties and to the partners.
Stocks include inventory of products and materials, any land and facilities, as well as intellectual property. The less
integration there has been between the partners, the easier it is to determine these rights. The difficulties increase
where joint ownership or joint operations are concerned, and even more when the alliance has grown to involve
multiple product lines with competing brands and geographically dispersed physical infrastructure.
If a partial or complete buyout is a possibility, one has to consider not only present but future value of stocks.
Certain contingencies can have huge effects on the alliance’s revenue streams and all manner of agreements
involving revenue sharing, royalties and licensing, and options to buy or sell products or services in the future.
A recent alliance between a U.S. software maker and a Japanese electronics company included an exit agreement
that paid particular attention to the assignment of intellectual property rights in case of certain contingencies. The
agreement between the pair, which teamed up to produce a color-management system for the software maker’s
new operating system, stated that if for any reason the operating system never made it to market, rights to
intellectual property developed by the alliance would default to the Japanese company.
Similarly, in many of the biotech-pharmaceutical alliances reviewed, the partners made it very clear at the outset
who would retain the rights to jointly produced intellectual property if the alliance ended.
After rights to stocks comes the question of fulfilling contractual commitments — the so-called flows of the
alliance. Big losses in an alliance’s value can arise from uncertainty about who is responsible for what.
Flows typically include contracts or other relationships with customers, suppliers, service providers, employees
and providers of capital. If such relationships are mishandled during a dissolution, profits and productivity can
suffer. Customers, for example, might switch to competitors in order to avoid service disruptions, or might seek to
modify payment terms. Suppliers and other service providers might stop treating the alliance organization as a
high priority. Employees, fearing uncertainty, might leave.
There’s a leading sports-apparel company that outsources almost all of its production in numerous small alliances
and yet maintains tight control over its supply chain — even when an alliance occasionally ends. The company tries
to manage the procurement processes of the suppliers in those alliances. This way, when terminating an alliance,
it can forecast exactly how much inventory it will need from that supplier right up until the termination point. It also
eliminates the risk of having the inventory go into brand-damaging outlets, such as discount stores.
A typical disengagement agreement can include various strategic options such as rights of first refusal to various
stocks and flows, or buyout clauses based on different conditions. The specifics of these are dictated by the
nature of the exit trigger, changing markets and partners’ shifting strategic priorities.
Some constants can be followed, however, and interviews with alliance managers suggest a three-step process
that can serve as a kind of roadmap to disengagement.
First, partners should agree to a mandatory unwind period. An unwind period gives each party enough time to
implement its exit strategy successfully, and ensures that the alliance organization is able to fulfill its obligations
and remain competitive in the marketplace until the time when it is dissolved.
Second, a core team of disengagement managers should be formed, drawing on managers not only from the
parent companies but from the alliance itself. When a team comprises only managers from the parent companies,
attorneys get involved too early and negotiations tend to focus solely on the observance of rights to stocks; this
tends to alienate alliance managers and to hurt not only what remaining value the alliance has, but the flows of the
partner companies as well. Additionally, the smartest companies assign the supervision of disengagements to
senior corporate personnel at the parent companies who weren’t originally linked to the alliance. Such supervision
not only enforces clear accountability and allows for greater impartiality, it enables alliance managers to better
clear organizational and legal roadblocks during the disengagement process.
Finally, there must be a clear timeline for achieving goals related to disengagement, and managers should
coordinate all related activities with relevant departments at the partner companies. If you’ve got plans to drop a
product or service, discontinue sales in certain territories or to certain customers, close a plant or renegotiate a
contract, you have to let the right people at both partner companies know.
When a partnership has to be dissolved, a strong communication plan is key. In our view, a number of companies
have learned that mishandling communications during a break-up can damage a company’s reputation and
significantly hinder its chances of finding future partners. During disengagement, it’s important to avoid offending
partners and to maintain your own company’s reputation.
Maintaining transparency with partners, customers, employees and even rivals helps to manage the impact of
news about the breakup on financial markets; it also helps maintain morale at the alliance, and helps to preserve
any value that remains in the alliance. Lack of transparency leads parties to focus on protecting their own interests
without regard for those of the partner, and eventually causes things to implode.

Prof. Gulati is the Michael Nemmers Distinguished Professor of Strategy and Organizations at the Kellogg School
of Management, Northwestern University. Mr. Sytch is a doctoral candidate at the Kellogg School of Management.
Mr. Mehrotra, a Kellogg M.B.A. graduate, is an investment-banking associate with Goldman, Sachs &Co. in New
York. The authors can be reached at reports@wsj.com.

DETAILS

Subject: Series &special reports; Alliances; Customer services; Corporate culture;
Pharmaceutical industry; Product lines; FDA approval; Employees; Capital losses;
Inventory; Partnerships; Revenue sharing; Biotechnology industry; Agreements;
Intellectual property
Business indexing term: Subject: Customer services Corporate culture Pharmaceutical industry Product lines
FDA approval Employees Capital losses Inventory Partnerships Revenue sharing
Biotechnology industry; Industry: 32541 : Pharmaceutical and Medicine
Manufacturing
Classification: 9190: United States; 2320: Organizational structure; 32541: Pharmaceutical and
Medicine Manufacturing
Publication title: Wall Street Journal, Eastern edition; New York, N.Y.
Pages: R.11
Publication year: 2007
Publication date: Mar 3, 2007
Publisher: Dow Jones &Company Inc
Place of publication: New York, N.Y.
Country of publication: United States, New York, N.Y.
Publication subject: Business And Economics–Banking And Finance
ISSN: 00999660
Source type: Newspaper
Language of publication: English
Document type: Feature
ProQuest document ID: 399031135
Document URL: https://www.proquest.com/newspapers/business-insight-special-report-preparing-
exit/docview/399031135/se-2?accountid=14872
Copyright: (c) 2007 Dow Jones &Company, Inc. Reproduced with permission of copyright owner.
Further reproduction or distribution is prohibited without permission.
Last updated: 2021-09-22
Database: ProQuest One Academic
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Business Insight (A Special Report); Preparing for the Exit: When forming a business alliance, don’t ignore one of the most crucial ingredients: how to break up
Case study of processing
firm-distributor firm
outsourcing alliance
Suku Bhaskaran
Food Marketing Research Unit, Victoria University, Melbourne, Australia, and
Helen Jenkins
Australian Prawn Farmers Association, Brisbane, Australia
Abstract
Purpose – The purpose of this paper is to review and discuss a distribution outsourcing alliance
between a small-to-medium scale food processor and a national distributor of frozen and chilled food
products. The paper discusses the influence of market dynamics, core and differentiated competencies
and strategic intents on alliance formation and operations in the small-to-medium scale food enterprise
sector.
Design/methodology/approach – The dyadic relationship of a small-to-medium scale food
processor and its distributor is investigated through reviewing past studies of processor-distributor
alliances, conducting in-depth face-to-face interviews with senior managers in both firms, and
reviewing documents and correspondence between the firms.
Findings – The partners do not complement their core and differentiate competencies to achieve greater
customer value creation through a joint enterprise business model. The alliance focuses pre-eminently on
short-term sales development and cost savings targets. Non-achievement of these targets adversely
influences partners’ trust and commitment to the alliance. A significant strength of the alliance is its
capacity to identify customer needs and use this knowledge to speedily develop and introduce new
products. In its present form this alliance is unsustainable. The partners should adopt a new philosophy
and vision to pursue an alliance that will use their core and differentiated competencies more effectively.
Research limitations/implications – To generalise the findings and inform theory building, the
research has to be replicated in other businesses and market environments. The findings are specific to
the market environment and strategies of a single small-to-medium scale food processor and a single
national distributor of frozen and chilled foods. Multi-case studies in multi-contexts (capturing varying
sizes of business, industry sectors, target market segments, competitive environments and market
environments) have to be completed to enable generalisation and theory building.
Practical implications – This paper demonstrates the disadvantages of pursuing distribution
outsourcing alliances with a short-term and enterprise level perspective. The case study provides real
life evidence of the benefits of pursuing distribution outsourcing alliances based on a joint enterprise
philosophy.
Originality/value – This paper contributes to knowledge on distribution outsourcing alliances, a
topic that several recent studies have identified as not having been explored in great detail in extant
supply chain studies.
Keywords Distribution management, Outsourcing, Strategic alliances, Joint ventures,
Small to medium-sized enterprises, Supply chain management
Paper type Case study
Introduction
In this paper, the term distribution outsourcing describes the exclusive multi-service
alliance that Z, a food processor, established with Y, a vendor. This alliance is much
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1741-038X.htm
JMTM
20,6
834
Journal of Manufacturing Technology
Management
Vol. 20 No. 6, 2009
pp. 834-852
q Emerald Group Publishing Limited
1741-038X
DOI 10.1108/17410380910975104
broader than a supplier-reseller engagement. The intent was for Y to provide all support
functions relating to Z’s business development initiatives in a defined market. Z’s function
was to produce the goods. Y was entrusted to develop the market for these products in food
catering and independent grocery outlets throughout Australia by providing appropriate
transport, warehousing, logistics, promotional and personal selling services. This
description of the term distribution outsourcing conforms to that used in several past
studies. Outsourcing alliances are strategic initiatives that enable individual firm’s to
concentrate on their core competencies while drawing on the resources and capabilities of
other supply chain partners to provide specialised functions that improve operating
efficiency and value propositions to customers (Rodriguez et al., 2006; Quinn, 1999;
Mattsson, 1989). Outsourcing alliances can potentially increase customer satisfaction,
reduce switching behaviour by customers and therefore strengthen the competitive
position of all partners in the alliance (Shaw and Gibbs, 1995; Williamson, 1991).
Notwithstanding that many studies have elucidated the benefits of outsourcing
alliances, research on such endeavours is very much in its infancy. Several studies in the
past decade (Mikkola, 2008; Brannemo, 2006; Rodriguez et al., 2006; Cante et al., 2004; Cox,
1999a, b; Razzaque and Sheng, 1998) have implicitly or tacitly discussed the need to
conduct more detailed inquiry on outsourcing alliances. This paper aims to add to the body
of knowledge on outsourcing alliances in a defined context, distribution outsourcing
by small to medium enterprises (SMEs) in Australia’s food industry. The context of the
study and the method of conducting the study have significant influence on study findings
and therefore this study advances knowledge on distribution outsourcing alliance.
This paper presents the experiences and knowledge from a distribution outsourcing
alliance between Z, a SME food processor, and Y, a national distributor of frozen and
chilled food products. Discussions with Z’s managers revealed that they recognised the
need to access new markets to address declining sales in its traditional markets.
The managers identified that one of the following would be the most logical way for Z
to address its problems:
(1) undertake all functions in-house through investing in logistics and warehouse
infrastructure and recruit sales personnel with appropriate expertise;
(2) use one third-party logistics and warehouse provider but handle all sales and
marketing functions in-house;
(3) use several logistics and warehousing providers in different areas throughout
Australia and handle all sales and marketing functions in-house; or
(4) use one exclusive provider of logistics, distribution and sales services with Z
focussing on production.
Z chose option 4 as this seemed the most cost efficient and least resource intensive
strategy. Z’s decision was influenced by Y having contacted Z expressing interest in
becoming Z’s national distributor. Y suggested that it could help Z achieve its business
objectives and revealed knowledge, expertise and resource capabilities in marketing to
small scale independently owned food service and grocery stores.
The decision to outsource transport, logistics, warehousing and personal selling to a
third party was a major departure from Z’s current strategy of servicing its existing
customers directly. Z decided that it will continue to provide transport, logistics,
warehousing and marketing support to its existing customers, Coles and Woolworths,
Firm-distributor
outsourcing
alliance
835
the large supermarket chains that dominate Australia’s grocery retailing. However,
it decided to use Y to provide all transport, logistics, warehousing and personal selling
support to access food service and independent grocery retail customers throughout
Australia.
Many factors influenced Z’s decision to enter into a distribution outsourcing alliance
with Y. Z recognised that it had to diversify and develop new markets. However, Z did
not have the knowledge and resource capabilities to successfully develop sales in
small-scale food service and retail grocery outlets. The independent grocery retail
sector accounted for only about 20 per cent of total retail grocery sales by value.
Compared to the large supermarket chains which Z currently serviced, the independent
grocery retail sector was not a major market. Substantial initiatives would be needed to
develop the new markets that Z was targeting.
The discussion in this paper is presented in four sections. The next section discusses
past studies as a means of elucidating the current state of knowledge on distribution
outsourcing alliances. Next, we discuss the methods used to conduct the case study. After
this, we present and discuss the case study including the motivations for establishing the
alliance and the strategic and relational issues that the partner’s experienced. The final
section of the paper presents the findings and conclusions of this paper.
Background
Market dynamics such as increasing levels of trade liberalisation including lowering of
tariffs, product-life cycle movements across markets and convergence in food
consumption behaviours have influenced firms to switch from strategies based on
competition to more cooperative modes of engagement (Vakoufaris et al., 2007;
Mikkola, 2008; Villalonga and McGahan, 2005; Caloghirou et al., 2003). A globalised
and increasingly competitive business environment often demands that firms pursue
collaborative initiatives to succeed. Some studies even contend that firms can
simultaneously pursue both competitive and collaborative actions (Luo et al., 2006;
Lado et al., 1997; Brandenburger and Nalebuff, 1996). Firms can compete in one sector,
for example in the retail market or the domestic market but can collaborate in another
market, for example the food service or export markets. Simultaneous competition and
co-operation is becoming an important strategy pursued by many large corporations
especially in the high technology and consumer electronics sectors (Cravens et al., 1993;
Barney, 1986, 1990). Thus, the debate is no longer centred on whether inter-firm
alliances are beneficial but rather on how to develop alliances that benefit all partners
(Logan, 2000; Menon et al., 1998).
Outsourcing alliance is a seller’s contractual arrangement with a vendor to provide
a number of closely linked functions as an agent of the seller (Fill and Visser, 2000;
Johnson and Schneider, 1995; Maltz, 1994; Lieb et al., 1993). Outsourcing alliances can
be cemented through simple informal word-of-mouth arrangements or through
contractually binding agreements (Min et al., 2005; Sporleder, 2006). Experiences with
diverse forms of arrangements reveal that the success of alliances is often determined
by how cohesively partners work together to achieve their objectives rather than by the
rigor of their contractual agreements.
Most outsourcing decisions are informed by resource based and transaction cost
economics theories of firms (Halldórsson and Skjøtt-Larsen, 2004; Bolumole, 2001;
Berglund et al., 1999; Dess et al., 1995; Jones and Hill, 1988). These theories assume that
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resources are heterogeneously distributed between firms and that these resources are
not readily transferable. Because of differences in resource endowments firms possess
unique core competencies and therefore differentiated competitive advantages (Logan,
2000; Dess et al., 1995). Beliefs regarding complementarities of the unique competencies
of supply chain partners often encourage firms to explore collaborative ventures.
Outsourcing alliances are predicated on partners’ desires to add-value and create
differentiated advantages, advantages that provide some level of uniqueness and
competitive strengths (Christopher and Towill, 2000; Mintzberg, 1994; Peters, 1990).
Increasing the value of propositions to customers helps engender customer satisfaction
and this could lead to greater customer loyalty and reduce the threat of customers
switching to competing suppliers (Rodriguez et al., 2006; Kurnia and Johnston, 2001;
Cox, 1999a). Customer value propositions are not only enhanced by providing physical
products that align with the quality, price and other product specific attributes but also
by increasing service quality (Bititci et al., 2004). Service quality is substantially
influenced by the architecture of the supply chain (Muller, 1991, 1993).
Firms tend to outsource functions that are not their core competency and consequently
believe that undertaking such services in-house will not add-value to customers
(Brannemo, 2006; Johnson and Schneider, 1995; Amaldoss et al., 2000). Outsourcing
enables firms to concentrate on functions at which they are best, simultaneously accessing
the capabilities and resources of other actors (Logan, 2000; Foster and Muller, 1990).
Specialist distributors often provide expertise and knowledge about customers that the
firm might not possess in-house or expertise and knowledge that is difficult or costly to
obtain from elsewhere (Sheehan, 1989). By sharing unique and scare resources and
capabilities, alliance partners are better positioned to increase customer value through
providing better quality and levels of service, generating greater productivity and
efficiency in the supply chain and creating enduring customer relationships (Min et al.,
2005; Cante et al., 2004; Smith et al., 1998; Probert, 1996; Shaw and Gibbs, 1995).
Cost saving is a major driver of outsourcing alliances. Cost savings can arise from
faster inventory turnover (Muller, 1991, 1993) and reducing capital investment in
facilities, equipment and human resources (Lacity et al., 1995; Sheffi, 1990). The rapid
development and adoption of advanced technology in all areas of business operation
including production, processing, information communication, logistics, warehousing,
transport and customer relationship management dictates continued and early
adoption of new technology in order to remain competitive in dynamic market
environments. Large capital investments are beyond the resource capabilities of most
businesses particularly SMEs. Outsourcing presents opportunities to share the cost of
investments with other supply chain actors. Firms specialising in providing transport,
warehousing, logistics and marketing services could potentially achieve greater
efficiencies through collaboration rather than by pursuing unilateral arrangements
with large numbers of suppliers and customers (Thron et al., 2006; Barratt, 2004;
Christopher and Towill, 2002).
Distribution outsourcing alliances enable suppliers to penetrate unfamiliar markets
by gaining better understanding of market needs and opportunities (Maltz and Ellram,
1997; Maltz, 1994; Bence, 1995). Where the distributor has greater market expertise;
customer service, including in-market sales activities, can be conducted more
efficiently by the distributor. Customer service is rapidly becoming a major outsourced
activity (Daugherty et al., 1996). Outsourcing to a firm that deals with many other firms
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often provides access to knowledge on performance within the industry and thus also
provides the opportunity to benchmark performance against other actors including
competitors. Outsourcing thus presents opportunities for alliance partners to engage in
joint learning and joint problem solving (Huber, 2004; Quinn, 1999; Kohli and Jaworski,
1990). Such joint initiatives provide knowledge exploitable in constantly improving
customer service, operating costs and market performance including new product
development initiatives (Lemke et al., 2003; Goffin et al., 2000; Monczka et al., 1995).
That new product introductions and early introduction of new products can provide
substantial competitive advantages is often overlooked. Review of extant studies on
new product development and constant quality improvement through supply chain
engagements reveal that past studies have focussed primarily on the high technology
and large business sector (Lemke et al., 2003; Goffin et al., 2000; Monczka et al., 1995).
There appear to be a significant gap in knowledge on supplier-reseller engagements in
new product development and introduction within the food SME sector.
The pursuit of greater integrity and cost savings in the supply chain has also
resulted in greater rationalisation with more and more firms forming alliances with
fewer, larger, technically efficient and innovative partners (Min et al., 2005; Christopher
and Towill, 2002). Using fewer alliance partners can achieve efficiency gains and
therefore greater commitment to the joint enterprise (Thron et al., 2006; Barratt, 2004).
For example, by using fewer distributors a processor can ensure greater volume
throughput for each of its distributors; this may mean greater commitment from
distributors which can generate better customer relationships and greater willingness
to share information. Limiting the number of alliance partners may therefore increase
the operational efficiency of the joint enterprise while simultaneously increasing the
satisfaction and commitment of alliance partners.
A major factor contributing to the success of outsourcing alliances is the willingness
of partners to adopt a common vision. The business must be conducted as a joint
enterprise with shared strategic vision and objectives (Brito, 2001; Fill and Visser,
2000; Reason, 1999). A common vision fosters joint learning and innovation, greater
efficiency in the use of interrelated resources; supports the efficient conduct of
interdependent activities; and increases the competency of all actors (Florén and Tell,
2004; Sadler-Smith et al., 2000; Håkansson et al., 1999). In effect, partner relationships
must be based on commitment to increase the profits of all partners through adopting
strategies that align with each partner’s objectives and that of the joint enterprise
(Bititci et al., 2004; Cox, 1999b; Mattsson, 1989).
In order to achieve targeted outcomes partners must work together closely and
cohesively (Brunetto and Farr-Wharton, 2007; Golann, 2006). Managers must clearly
understand the dynamics of the social systems in the alliance and the ways in which
authority and control work within relationships (O’Regan and Ghobadian, 2002; Cox,
1999b; Arndt, 1983). Managers need skills in conflict management, team building and
relationship development (O’Regan and Ghobadian, 2002; Hailen et al., 1991). If the
relationship is adversarial, productivity and other gains are unlikely to be achieved
(Brunetto and Farr-Wharton, 2007; Spekman, 1988).
Past studies have identified several obstacles to establishing successful outsourcing
alliances. These include fear that outsourcing could lead to loss of control or that, as a
generalist, the distributor may not appreciate the complexities of handling the processor’s
products (Lynch et al., 1994; Bardi and Tracey, 1991; Maltz, 1994). Frequent failures with
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collaborative ventures and inherent problems in sharing resources and coordinating
strategies suggest that the structure and architecture of alliances need to be customised to
the strategic intent of the joint enterprise (Mikkola, 2008; Powell, 1990; Evan and Olk,
1990).
In the SME sector, there is an additional conundrum. SMEs display strong
entrepreneurial orientations, engaging in creative, unusual or novel solutions through trial
and error rather than adopting a systematic process of inquiry and strategic planning
(Stokes, 2000; Morris and Sexton, 1996). The responses of SMEs to business issues are
influenced not only by structural and managerial constraints but also by the SME’s culture
(Schindehutte et al., 2008; Wolff and Pett, 2006) which is often highly entrepreneurial.
Many of these barriers to outsourcing alliances can be attributed to relational factors.
The most profound causes of failures in outsourcing alliances are unrealistic performance
expectations, lack of commitment to shared goals, poor communications and a lack of trust
between the partners (Brunetto and Farr-Wharton, 2007; Logan, 2000; Lambert et al.,
1999). Trust, commitment and co-operation between alliance partners engender
satisfaction with the relationship and create enduring alliances (Florén and Tell, 2004;
Sadler-Smith et al., 2000; Håkansson et al., 1999). Trust, commitment and co-operation are
often the outcome of clearly elucidating the strategic intent of the alliance, the alliance
being successful in achieving these strategic intents and the partners readily sharing
information that can be used to achieve the strategic intent of the joint enterprise (Brunetto
and Farr-Wharton, 2007; Geyskens et al., 1998). Several past studies recommend the
establishment of measurable and realistic goals and tracking performance against
these indicators so that alliance partners can constantly monitor the alliance’s tangible
outcomes (Rodriguez et al., 2006; Logan, 2000; Lambert et al., 1999).
Methodology
The case study is based on detailed analysis of the dyadic relationship of a SME food
processor and its exclusive national distributor to food service and independent grocery
retail customers. A single case study limits the potential to generalise the findings.
However, there is evidence that single case analysis using multiple techniques of inquiry
and data validation is rigorous enough to examine the dyadic relationships in new strategic
initiatives (Brannemo, 2006; Easton, 1998). Additionally, uniqueness such as the study
context, product-market life cycle stage and market growth strategies mean that a single
case is appropriate for this paper (Bhaskaran and Sukumaran, 2007). The research also
explores a contemporary phenomenon in its real life context; a situation in which a single
case is contended to be more informative than multiple cases (Rowley, 2002; Yin, 1994).
The information for the case study is based on a multi-method modes of inquiry
incorporating exploratory discussions with the marketing manager of Z, a literature
review, in-depth interviews with two senior managers in Z and Y using
semi-structured questions (based on prior theory informing the questions) and
unstructured probe questions, direct detailed observation of operations and activities
in Z and Y, and a review of documents such as company brochures, company accounts
and correspondence between Z and Y. In-depth interviews were conducted with the
marketing managers and chief executives of both Y and Z.
The inquiry combined inductive and deductive approaches, prior theory informing
the questions and new theory being inferred from probing the responses of the
participants (Perry, 1998). Prior theory based on knowledge gained through the process
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of interaction in the exploratory discussions informed the case study development and
critical review and deduction was the basis of the probe questions and observations
(Perry, 1998; Parkhe, 1993; Eisenhardt, 1991, 1989). The issues probed included Z’s core
competency, trends in Z’s market environment, motivations for targeting food service
and independent grocery retail customers, reasons for pursuing a distribution
outsourcing alliance rather than conducting this activity in-house, the criteria on
which Y was identified and selected, and satisfaction with the alliance. With the
managers of Y, we probed Y’s core competency, the motivations to introduce Z’s
product range, trends in Y’s market environment, the way in which Z was identified
and selected, and satisfaction with the alliance.
Because this is a single case study there are limitations to generalising the results
and thus theory building. To overcome this limitation we adopted the positivist and
embedded approach to establish analytic generalisation and thus support theory
building. Analytic generalisation attempts to gather evidence that supports the theory
without necessarily proving it definitively (Firestone, 1993). The positivist approach
offers greater scope to manage issues such as validity, reliability, structuring data
collection, analysis of data and generalisation and theory building (Rowley, 2002;
Riege, 2003). The results were triangulated by comparing the findings obtained from Z
with information obtained from Y and other sources such as archival records, field
observations and the findings in extant studies.
Case study: review and discussions
Company Z is a mid-sized seafood processor and marketer based in an Australian
regional town. It is a wholly owned subsidiary of a large Japanese corporation. The
parent company has seafood processing plants in South Vietnam, Thailand and Japan.
Z’s competency is in processing value-added Japanese style seafood products so as to
manufacture consumer products such as fish paste, seafood highlighter, seafood sticks,
formed calamari rings, formed squid rings, seafood bites, seafood balls, fish cake,
seafood parcels and crumbed fish fillets.
Z’s final customers are consumers of high value, ready-to-eat seafood products.
From Z’s first commencing its Australian operations in 1988, it reached its customers
through the major supermarket chains. Approximately, 85 per cent of Z’s current
sales are to the two large supermarket chains, Coles and Woolworths, the remaining
15 per cent of production is sold to a few wholesalers throughout Australia.
Z’s decision to focus on the major supermarket chains and a few wholesalers was
predicated by its strategy to build sales volume, optimise resource utilisation and
generate economies of scale in production and marketing. In order to control sales and
distribution costs Z only sells full pallet loads of products, an economic order size
determined on the basis of computing the cost of consolidating and servicing orders.
High transport and handling costs made it inefficient and unprofitable for Z to deliver
less than full pallet loads. Because Z has about 27 stock-keeping units, the
supermarkets are not saddled with high stock levels as individual stores, totalling
about 1,500 stores, are able to purchase mixed pallet loads and consequently minimum
order requirements do not constrain decisions to purchase. Supplying mixed carton
lots based on historical sales trends also enabled Z to maintain high service levels
while virtually eliminating losses from write-off of “out-of-date” or damaged stock.
Therefore, notwithstanding the market domination and potential coercive power of the
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supermarkets, this arrangement was an effective way of Z reaching consumers all over
Australia.
Y is a national distributor specialising in distributing to SMEs in the food service
and grocery retail sectors. Y has a national network of warehousing, distribution and
transport infrastructure, a large and experienced sales team with expertise in selling
high value foods, and a long history in the high-value food distribution business.
Y imports speciality frozen and chilled foods from more than 60 countries world-wide,
consolidates orders for a variety of products from its customers and then supplies these
orders within scheduled delivery lead times of about seven days. Because Y sells a
mixed consignment of products from different suppliers to each outlet, Y has the
capability to achieve transaction cost efficiencies even if individual stores only
purchase one or two cartons of each supplier’s products.
From about the 1990s, Australia experienced significant growth in disposable
incomes, unemployment decreased sharply, and many more Australian families became
double income families. These trends superimposed in an environment characterised by
increasing numbers of single households, attributable to an aging population and
greater number of people electing to remain single, meant that many more Australian
households were purchasing ready-to-cook meals. The changing demographic and food
consumption trends influenced Z’s sales and business performance. Z’s sales
progressively increased. From 1990 to 1998 Z recorded double digit growth with sales
of more than $15 million in 1998. During this high growth phase Z continually and
successfully expanded its product range. However, even during this peak sales phase Z
was only operating at near full capacity, on a one shift 8.5 hour production cycle. There
was therefore considerable scope to increase production and exploit economies of scale.
From 1998 to 2004 Z’s sales grew less rapidly and from 2005 sales progressively
declined This was because Z experienced intense competition from low-cost imports
from countries such as Vietnam and Thailand. Market liberalisation and reduced import
duties, the strengthening of the Australian dollar and the free flow of information
through the internet and therefore greater knowledge about sources of overseas supply
meant that competition from overseas suppliers became more intense. Importers became
more capable of efficiently servicing the two major supermarket chains. Customers were
also seeking out and trialling a greater variety of the ready-to-cook meals that were now
on offer in Australian supermarkets. Z saw these developments, not unique to Australia,
as potential threats to its business.
Research in the UK indicates that when market share for a product in the
supermarket segment reach 80 per cent (as is the case with Coles and Woolworths in
Australia) incremental sales are difficult to achieve (Fearne and Hughes, 1999).
According to Fearne and Hughes independently owned retail stores are better
positioned to service the remaining 20 per cent of the market because they can
customise services to the needs of this segment. This also appears to be the case in the
Australian grocery retail market. Because of factors such as personalised and
customised service and accessibility, about 15-20 per cent of retail sales for most foods
are still conducted through independently owned neighbourhood stores.
Notwithstanding the fact that Z’s new market development initiatives were not
informed by evidence in other countries, the strategies seem logical and timely.
However, Z experienced unexpected difficulties in penetrating the food service and
independent grocery retail markets. Under its present marketing model, Z sold full
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pallet loads to more than 1,500 stores belonging to the supermarket chains. The two
supermarket chains accounted for about 90 per cent of the retail market for
ready-to-cook foods. In contrast, most independent retail grocery stores and food
service outlets could only purchase a few cartons per transaction. Thus, customers in
these sectors did not have sufficient purchasing capacity for Z to service them directly.
If Z attempted to penetrate this market directly it would have needed to make
substantial investments in a network of regional warehouses, transport and
logistics infrastructure and sales personnel. Because warehousing, transport and
logistics infrastructure are expensive and because Z did not have sufficient knowledge
of this market, it was unlikely that Z could add value through conducting these
functions in-house. Z could not outsource these services from different providers across
Australia as it did not have the management and resource capabilities to handle
several service providers. Z recognised that by outsourcing these functions to
one vendor, it could access the vendor’s resources and competency and therefore add
value through offering efficient customer service at competitive prices.
Z also recognised that the market insights and relationships of a specialist distributor
could enable better understanding of the individualised demands of a wide variety (arising
from factors such as size, business culture and whether part of a franchise or voluntary
group) of new customers. Accurate and timely information about markets supports
efficient planning and management of production, inventory, promotions and
merchandising and this could potentially help Z achieve its objectives more efficiently.
A strong relationship between Z and a sole distributor could lower operating costs, lower
costs of replenishing stocks, create efficiencies in warehouse space utilisation, reduce
inventory levels, reduce handling and management of damaged and out-of-date stocks,
and increase efficiency in the use of transport facilities. These benefits are not unique to
this alliance and have been amply documented in the findings of several past studies
(Logan, 2000; Lambert et al., 1999; Lieb et al., 1993; Mattsson, 1989). Because Z has less
experience and competency than Y in marketing to food service and independent grocery
retail customers it seems logical that Z should outsource distribution functions to Y.
Because there is substantial alignment between the competencies and resources of Z
and Y this alliance seems a logical development. Y’s experience, knowledge,
warehousing and distribution network means that Z could sell even single carton lots
to its customers, something beyond Z’s resource capabilities and competencies. Y’s
existing strong customer base presented substantial opportunities for Z to increase its
portfolio of customers. Because of low volumes per order and resulting diseconomies, Z
could not efficiently meet the needs of SMEs in the food service and independent
grocery retail market through merely investing in infrastructure and facilities. Z’s
management team concluded that Z could piggyback on Y’s resource capabilities and
competencies to access food service and independent grocery stores throughout
Australia, markets that Z was could not cost efficiently service. The alliance with Y
was therefore a logical strategy. It provided Z the opportunity to develop new markets
and reduce Z’s dependence on the maturing supermarket segment while
simultaneously providing Y with the opportunity to increase sales per transaction
and therefore achieve transaction cost economies.
Notwithstanding the synergies in competencies and resource endowments, the
alliance between Y and Z was a chanced outcome and was not the outcome of
systematic and in-depth research and analysis of complementarities in the competency
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and culture of the two firms. In our opinion, a systematic evaluation of the
complementarities and business culture of Y and Z and the development of a joint
vision based on this knowledge would have resulted in a more effective alliance.
However, as evident in a large number of studies, trial and error strategic initiatives
and even opportunistic decision making are the reality in the SME sector particularly
amongst low technology food processing and marketing enterprises. The response of
Z and Y to business issues such as developing new markets, diversifying into new
markets, accessing new sources of supply, the supply chain architecture that they
developed and decisions to adopt an experimental alliance seems atypical of SMEs
(Schindehutte et al., 2008; Wolff and Pett, 2006; Golann, 2006; Bhaskaran, 2006;
Cante et al., 2004; Bence, 1995).
In 2003, Y contacted Z to ask whether it could distribute its products. Because of
increasing operating costs Y was expanding its product portfolio in order to increase
sales per transaction and increase scale economies and operating efficiencies. Y had
assessed Z’s product range to be a good fit to its current product range. Y believed that
Z’s products and brands enjoyed a premium positioning in major supermarkets. Y was
also aware that Z, experiencing declining sales, had rationalised its marketing
operations in 2002 through centralising these functions; an obvious opportunity.
Z had discontinued the positions of state-level sales managers in Victoria, Queensland,
New South Wales and South Australia. This rationalisation left Z with an Australian
marketing team comprising the national sales manager and the business development
manager. Coles and Woolworths had more than 400 stores in each state, more than
1,500 stores Australia-wide. Therefore, the state-level sales managers were critically
important to Z’s marketing initiatives. Rationalisation of the marketing operations
meant that the two-person marketing team now had to liaise with the head offices of
the two supermarket chains and with key customer personnel in more than 1,500 stores
throughout Australia. Z then began to experience difficulties in managing sales and
marketing initiatives in the supermarkets and this started to adversely affect its sales.
The decision to rationalise the marketing operations and thus reduce services to the
supermarkets demonstrates Z’s belief that growth opportunities in this segment had
matured.
The reduction in marketing resources meant that Z was not able to pursue market
development unaided. Z did not have the expertise or resource capabilities to service
efficiently the needs of the highly fragmented independent grocery retail and food
service customers. Unlike Coles and Woolworths which use a centralised buying
system, purchasing decisions in independent grocery retail and food service outlets are
made by the manager’s on each outlet. Y had been supplying small-scale food service
and grocery retailers for more than 50 years. Partly because of this long history, Z
believed that Y had competencies relevant to dealing with numerous small-scale food
service and independent grocery retail stores. Z believed that Y’s business model,
market knowledge, customer relationships and structural capabilities were critical to
its sales development strategy in this sector. Z’s management team believed that the
appointment of Y as a sole distributor could lower distribution costs because of
savings in costs of replenishing stocks, optimised warehouse space utilisation, reduced
inventory levels, and reduced costs of handling damaged goods and returns. The
decision to enter into a distribution outsourcing alliance with one partner therefore
seems logical as it could potentially help Z overcome its resource constraints and
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generate transaction cost efficiencies. This position is supported by findings in many
studies that alliances with fewer, larger, technically efficient and innovative partners
are more effective than alliances with a multitude of partners (Min et al., 2005; Fearne
and Hughes, 1999).
The alliance experienced major challenges. It was founded on assumptions about
each partner’s benefits. Y anticipated efficiency gains through greater utilisation of its
existing warehousing, transport, logistics and human resources. Y could only achieve
operating efficiencies through increasing total sales, sale of products sourced from all
its suppliers. There was no reason for Y to increase the sales of products from any one
supplier. Greater commitment to Z’s products could only result from establishing a
preferred supplier relationship with Z was and this may be detrimental to Y’s
relationship with its other suppliers. A special relationship can be fostered through
developing a common vision whereby supply chain partners pursue their activities as a
joint enterprise (Florén and Tell, 2004; Sadler-Smith et al., 2000; Håkansson et al., 1999).
The challenge is to identify the unique opportunities in the relationship between
Z and Y, not merely, as is the case with most supplier-reseller relationships, targeting
benefits that accrue from resource sharing and cost efficiencies.
Y and Z did not explore how their independent strategic objectives could be
achieved through widening the scope of this engagement from that of a seller-reseller
mode of engagement to a joint enterprise model. In order to do this, the partners would
need to develop a business model that is different to what exists between Y and its
other suppliers. Our discussions and observation of business practices suggest that the
foci of Y and Z were only on issues pertaining to resource utilisation and cost
efficiencies. The partners did not investigate the systems, structures and incentives
that are needed to develop business, satisfy and retain customers, develop their
competitive strengths and establish a sustainable long-term alliance.
Y agreed to enter into the alliance on a phased basis (state-by-state). The partners did
not discuss how customers with branches in different states will be serviced in the
interim. Z agreed to provide Y a 15 per cent discount on the sales price to offset sales and
distribution expenses. The senior managers of Y and Z agreed to meet at three monthly
intervals to review performance against targets and continually work on sales growth.
The partners did not explore how to develop and retain new customers. The alliance was
predicated by the belief that sales growth will be rapid because Y already had a large
customer base and the alliance primarily entailed the introduction of a range of new
products to Y’s existing customers. Y had recently established a distribution alliance
with another supplier of chilled meat products. Within six months of finalising that
arrangement, the supplier’s sales had increased by about 40 per cent. Based on this
evidence, Y and Z assumed that the same business model can be replicated.
However, in the past one and a half years Z only achieved about 5 per cent growth in
sales through its engagement with Y. Even though sales growth was substantially less
than what was forecast, cost of sales (discounts offered to Y, administering the sales,
providing samples and other promotional support) was much greater than what was
forecast. Z and Y did not carefully analyse whether their expense and sales were
realistic and what, if any, could be the implications of these targets not being achieved.
Past studies reveal that unrealistic expectations and poor communication between
partners tend to adversely affect trust and commitment to an alliance and account for
the failure of many alliances (Rodriguez et al., 2006; Logan, 2000; Lambert et al., 1999).
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The senior managers of both Y and Z acknowledge that their discussions and
negotiations should have been more far reaching and underpinned by a joint enterprise
philosophy rather than focussing on sales development and cost savings. The
relationship formation and strategies that Y and Z adopted are atypical of the nature and
process of engagements in the SME sector, entrepreneurial and trial and error
experimentations (Schindehutte et al., 2008; Wolff and Pett, 2006; Stokes, 2000; Morris
and Sexton, 1996). Because Y and Z focused on achieving their short-term goals and
entered into this alliance to overcome a compelling immediate problem, Z to arrest
declining sales and Y to increase capacity utilisation and thus reduce operating
expenses, the alliance did not focus on customer value creation. Disappointing sales and
cost of sales results have created uncertainties regarding the benefit of the relationship.
This appears to have diminished the partners’ trust and commitment to the venture.
The achievements within a few months of establishing the alliance reveals the scope
and potential of this alliance. Y became a conduit for good quality market intelligence
and speedy information on new product development opportunities. Within one year of
establishing the alliance Z successfully introduced three new products to food service
outlets, products developed by Z based on market intelligence provided by Y. The
importance of supplier-reseller relationships in new product design and constant
quality improvement is discussed in some studies focussing on the high technology
and large business context (Lemke et al., 2003; Goffin et al., 2000; Monczka et al., 1995).
Our review of extant studies suggests that knowledge sharing with the objective of
creating customer value through new product development is not a priority in SME
supply-chain engagements. This seems to be a unique capability that cannot be
achieved by Z and Y working independently and therefore is a significantly important
contribution of the alliance.
The findings in this paper reveal the importance of incorporating new product
development opportunities as a performance indicator in SME supply chain engagements.
The speed to market (the time between idea generation and commercialisation) was high
when benchmarked against projects such as the UK Heritage beef project. The UK
Heritage beef project took more than one and a half years from idea generation to product
launch (Shaw and Gibbs, 1995). In the food marketing industry, profit margins are low and
returns from new product introductions are dependent on first mover advantages, an
advantage which often dissipates quickly because low barriers to entry encourage
competitors to introduce “me too” products (Bhaskaran, 2006; Fearne and Hughes, 1999).
Constant innovation and rapid commercialisation is a critically important strategic
capability in the food SME sector. In our opinion, the capacity to quickly disseminate
market information and develop new products that match market needs is the unique
competitive advantage of this alliance. Prior to this alliance Z experienced barriers in
developing and introducing new products. New product introduction to supermarkets,
Z’s core market, was a slow and demanding process. The supermarkets practice
stringent procedures for evaluating new product proposals. New product are considered
on their strength to generate additional sales and profits in the product category,
refrigerated display space availability in stores and whether the new product could
potentially cannibalise the sales of existing products. Contrastingly, food service outlets
targeted by Y were constantly adopting novel products to interest their customers.
Introducing new products to SMEs presented Z with the opportunity to pilot new
products and then scale-up production of the successes and introduce these products to
Firm-distributor
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845
the independent grocery retail sector and potentially even to the supermarket chains.
The alliance also presented Z the opportunity to manufacture under contract some
products for Y which Y then marketed as its “private” labels to independent grocery
retailers.
Therefore, within one year, the alliance was revealing a new and potentially
profitable dimension. However, the alliance had not achieved targeted sales and profits
and this unfortunately adversely affected the trust, commitment and relationship
between the partners. The critical weakness of this alliance was the non-adoption of a
common vision and the failure to develop a joint enterprise philosophy based on
synergies that extended beyond immediate resource utilisation and cost efficiency
imperatives. While more efficient use of resources and cost savings are important, the
capacity of the partners to work together and speedily introduce differentiated
offerings is perhaps the unique capability of this alliance.
Findings and conclusions
The outsourcing alliance between Z and Y was predicated on beliefs regarding the unique
and non-transferable competencies of the partners. Z had competency in producing high
value Japanese-style seafood consumer goods. Y had competency in providing
warehousing, transport, logistics and personal selling functions to customers that can
purchase only small lots per transaction. Therefore, the alliance was driven by perceived
mutual benefits. Z decided to outsource distribution services to new target markets to Y
because it concluded that it did not have the knowledge, resource endowments, transaction
cost efficiencies and customer relationships to add value to offerings targeted at customers
in this new market. By outsourcing the distribution function, Z was implicitly making
decisions on the ownership and control of particular resources so as to appropriate the
maximum share of value through greater value-add to customers. The motivations for the
outsourcing alliances between Z and Y, discussed above, are consistent with past studies’
findings (Min et al., 2005; Kurnia and Johnston, 2001; Karonis, 1997).
This engagement between Y and Z reveals many issues that may affect the success
of distribution outsourcing alliances, particularly such engagements by SMEs
operating in a low technology and highly competitive environment. SMEs tend to
adopt a non-systematic and trial and error mode of decision making. Thus, unlike large
companies alliances between SMEs tend to be opportunistic and are targeted to
overcome immediate problems.
The alliance between Y and Z reveal many features that characterise business
development strategies by SMEs. Z’s motivation for the alliance was the downturn in
its existing markets, the imperative to develop new markets and its excess production
capacity. Y’s motivation was to increase sales and thus increase the utilisation of its
warehousing, transport, logistics and human resources and thus achieve scale
economies. Because of this pre-eminent focus on increasing resource utilisation and
achieving scale economies, the partners did not explore how the alliance could generate
customer value creation, increase customer satisfaction and loyalty, and build a
successful and sustainable joint enterprise. Additionally, the partners established
unrealistic sales and expense targets. Lack of success in achieving these targets
diminished the partners’ trust and commitment to the alliance. The alliance does not
seem to have much potential and appears to be unsustainable.
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In our opinion the partners need to revisit the basis on which this relationship was
founded. Z and Y should develop a common vision and create a business architecture
that would enable them to strengthen their position in the market through creating
value for their customers. Because of low barriers to market entry and low profit
margins, differentiation through constant innovation and speed-to-market is critically
important in marketing food products. The outsourcing alliance between Z and Y
revealed significant capability in constant innovation and speed-to-market. Y’s
competency in rapidly identifying market needs and Z’s competency in rapidly
developing novel products to satisfy these needs are unique capabilities. Within
one-and-a-half years of starting-up, the alliance successfully introduced three new
products to food service customers. This is a significant achievement when
benchmarked against successful new product introductions by other food supply chain
alliances. Concurrently, Y also identified opportunities for Z to contract manufacturing
private label products for independent grocery retail stores. These are new business
opportunities, opportunities that Z had not previously identified.
In order to capture these opportunities fully, the alliance has to adopt a common
vision and mission. This would entail substantial re-engineering of the business
philosophy, culture and systems by both Z and Y. Z and Y would have to adopt a
business model based on shared values. This could have implications on Y’s
relationships with other suppliers as it may have to model its relationship with Z
differently to that with other suppliers. These initiatives would also call for systematic
research, evaluation and development of business architecture and protocols. Past
studies on SMEs suggest that introducing such changes could be a major challenge.
SMEs tend to adopt an entrepreneurial approach to business development and may
therefore not have appropriate skills in conflict management, team building and
relationship development; critical skills in pursuing an alliance with a common vision
and mission.
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About the authors
Suku Bhaskaran is the Director of the Food Marketing Research Unit, a research, consultancy
and training services centre in Victoria University, Australia. He is an Associate Professor, has a
successful track record in tendering for and completing nationally competitive research grants
and contract research projects for food companies. He is published widely in refereed journals
such as the Journal of Small Business Management, Cross Cultural Management – An
International Journal, Journal of Consumer Marketing, Marketing Intelligence & Planning, and
The British Food Journal. Suku Bhaskaran is the corresponding author and can be contacted at:
suku.bhaskaran@vu.edu.au
Helen Jenkins was the Business Development Manager of Austrimi Foods. She is currently
the Executive Officer of the Australian Prawn Farmers Association.
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Outsourced marketing: it’s the
communication that matters
Matthew Walker
University of Florida, Gainesville, Florida, USA, and
Melanie Sartore and Robin Taylor
East Carolina University, Greenville, North Carolina, USA
Abstract
Purpose – Outsourcing has been promoted as one of the most powerful trends in the modernization
of marketing operations. The rationale for such an undertaking includes a variety of factors but is
generally predicated on fiduciary considerations. The purpose of this article is to examine the issues
with, and the empirical consequences of, outsourcing within the intercollegiate marketing context.
Design/methodology/approach – This is an exploratory mixed-methods study incorporating
qualitative and quantitative data to investigate outsourcing specifically related to the
communication-employee commitment relationship.
Findings – Results from study 1 reveal that marketing directors perceive outsourcing as critical but
also experience dissatisfaction with the level, frequency, and direction of communication. Results from
study 2 indicate that an explicit and positive relationship exists between employee satisfaction with
communication and their resultant commitment to the organization.
Research limitations/implications – Owing to the exploratory nature of the study and a
relatively small sample, the conclusions are tempered until subsequent studies have been performed.
As well, specific moderating variables (e.g. size, culture, budget) were not included in this initial
inquiry and as such may add considerable variance explained to the proposed relationship.
Practical implications – First, the authors suggest that managing the “right commitment” is
essential for marketing departments when working with an outsourcing agency. Second, the authors
call attention to the importance of certain contextual factors (e.g. shared knowledge, mutual
dependency, and organizational linkage) that may serve to improve the outsourcing partnership.
Originality/value – Few papers have explored the communication-commitment relationship,
particularly with regards to outsourcing. Consequently, this study adds to the research by examining
how intercollegiate marketing employees perceive and react to an outsourcing partnership. Building
on additional work in this area, the research focuses on several aspects of the
communication-commitment framework not previously examined.
Keywords Marketing, Outsourcing, Partnership, Universities
Paper type Research paper
Introduction
The idea of marketing a product or service to the public is a function so central to a
business that it requires careful nurturing and a considerable amount of personal
attention. Accordingly, businesses who wish to convey the salient aspects of their
product or service offerings may do so in a creative but sometimes costly manner. As a
more cost effective alternative, outsourcing has become an extremely popular modern
business development. Once thought of as an alternative for only large multinational
corporations (Sharpe, 1997), outsourcing has now evolved into a viable business
solution for any organization serious about improving its market position, reducing
costs, and improving overall quality (Burden et al., 2006). While many corporate
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Vol. 47 No. 6, 2009
pp. 895-918
q Emerald Group Publishing Limited
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DOI 10.1108/00251740910966640
activities such as information technology (IT) and human resource management
(HRM) have traditionally been performed “in-house”, advocacy for outsourcing the
bulk of these efforts is steadily increasing (Klaas et al., 2001) and more and more they
are becoming a global business trend (Leverett et al., 2004).
Outsourcing refers to a contractual relationship for the provision of business services by an
external provider [. . .] in other words – a company pays another company to do some work
for it (Belcourt, 2006, p. 269).
Simply put, outsourcing is turning over to a supplier those activities outside the
organization’s chosen core competencies (Sharpe, 1997). Advocates of outsourcing
argue that the practice can reduce costs, increase service quality by producing greater
economies of scale, increase incentives and accountability for service providers, and
increase access to experts in specialized areas (cf. Greaver, 1999; Hendry, 1995; Laugen
et al., 2005; Mowery et al., 1996; Rimmer, 1991; Uttley, 1993). Despite these suggested
benefits, others claim that hiring an outside agency to do the “right-brain” (McGovern
and Quelch, 2005, p. 1) work of internal employees may lead to disharmony, distrust,
and diminished employee commitment levels (e.g. Bhagwati et al., 2004; Cox, 1996;
Kessler et al., 1999; Lei and Hitt, 1995). A firm’s management must therefore be
cognizant of these potential tradeoffs when entertaining the idea of outsourcing. As
such, senior management must identify the best marketers with the best vision for the
product while simultaneously attending to any consequences that may result.
The purpose of this article was to explore the aforementioned idea within the
intercollegiate marketing context. Using a mixed-methods research design, the
researchers sought to examine the issues, antecedents, and empirical consequences
associated with outsourcing among university rights holders[1] and intercollegiate
marketing department employees. The following section discusses the antecedents,
theoretical underpinnings, and scope of the decision to outsource, in terms of both the
progression of collegiate marketing practice and strategic implementation approaches.
Subsequent sections discuss the consequences (based on the empirical findings), the
various implications, and boundary conditions of outsourcing for university athletic
departments.
Outsourced operations
As a reflection of outsourcing as the natural progression of business (see Embleton and
Wright, 1998), the outsourcing of sports marketing rights and operations is now
common practice among university athletic departments. According to Li and Burden
(2002), more than half of the NCAA Division I athletic programs have outsourced some
or all of their marketing efforts. The primary reason for this seemingly
“mass-undertaking” has been due to the increased complexity and dynamics of the
college athletic environment. Further, the various operational and strategic advantages
(e.g. core competency foci) that may accrue are particularly attractive to financially
struggling university athletic programs. From a general HRM perspective, there are
innumerable areas that can be outsourced (see Belcourt, 2006; Goldfarb and Naasz,
1995; Klaas et al., 2001). Within university athletic departments and equally large
number of their operations can also be outsourced. Radio game broadcast, call-in
shows, game day programs, website production/management, sale of media
advertising and venue signage, and sale of “official sponsorship” rights to
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corporations, for example, can all be performed by a qualified outside agency (Burden
and Li, 2002).
Outsourcing the aforementioned areas provides the athletic department with a
chance to work with experts who can offer a professional and objective viewpoint in
many areas (e.g. Belcourt, 2006; Burden and Li, 2002). Likewise, it allows them to gain
new knowledge, access new markets, establish traction in the industry, reduce the
threats and barriers of competition, enhance resource efficiency, and acquire new skills
(Klaas et al., 2001). Outsourcing can also free up valuable resources that, in turn, allow
for crucial resource reallocation toward core business activities to better serve
organizational goals (Burden and Li, 2005), while providing greater access to
leading-edge technology and limiting the focus to core competencies (Harris et al.,
1998). Informing this strategic management process is that of core competencies theory
(Prahalad and Hamel, 1990). This theory suggests that certain business activities
should be performed either in house or by suppliers. While some have sought to
operationalize the concept formally (e.g. Gallon et al., 1995; Henderson and Cockburn,
1994), for our purposes the most important aspect of core competence is its popular
encapsulation of an emerging and increasingly influential approach to strategic
management. Hence, we refer to core competencies as activities beyond the scope of the
marketing staff that should be considered for outsourcing, which, if performed to the
expected level, have the ability to deliver a competitive advantage to the athletic
department.
Hence, in this context, the key feature of core competencies is the focus on
organizational knowledge rather than decision-making processes as the engine of
competitive performance (Scarbrough, 1998). Therefore, the primary impetus for
outsourcing is strategic to build a competitive advantage based on financial
considerations and streamlining other operational areas (Belcourt, 2006). From a
human resources perspective, the potential for increasing staff size without adding new
individuals to the payroll is both financially attractive and operationally viable for
many athletic departments. Within this context, though, McKindra (2005) and Johnson
(2005) noted that the promise of considerable financial return may serve as the primary
thrust to outsource some component of the marketing department’s operations. Burden
and Li’s (2003, 2004) articles provided evidence for the importance of such factors as
annual operating budgets and total expenses for men’s teams, particularly amongst
programs with large budgets. Given all of the aforementioned positives for
outsourcing, it is clear that this decision is a critical tool for attaining and fostering
a competitive (albeit financial) edge amongst intercollegiate athletic departments.
In light of the evidence to support outsourcing (see Burden et al., 2006), many
researchers still question why institutions decide to formulate such partnerships. For
some organizations experienced with outsourcing, there are hints that the process is
not all that cost-effective or moreover problem-free (cf. Rochester and Douglas, 1990,
Lacity and Hirschheim, 1993). Research has indicated the majority of respondents
found it was more expensive to manage the outsourced activity than originally
expected and in several cases, service levels were not nearly as high as anticipated (cf.
Albertson, 2000; Lacity and Willcocks, 1996; Lacity et al., 1995). Thus, for some
institutions there are potential downfalls to outsourced operations. The degrading of
marketing services, biased business dealings, a lack of management input, loss of
departmental control, and problems related to selecting the right service provider have
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all been forwarded as consequences of the practice (Burden and Li, 2005). Ultimately,
by becoming dependent on the outsourcing agency, the existing marketing
department’s climate, skills, and relationships may become severely strained,
thereby leading to organizational disharmony. As Belcourt (2006) noted, outsourcing
alienates and “deskills” employees which can lead to the disintegration of an
organization’s culture through diminished employee commitment.
Agency theory and the communicative partnership
The partnership between an athletic program and a rights holder is the most crucial
factor in ensuring that the outsourced partnership will be successful (Burden and Li,
2002). A well-thought out strategic plan (long-term considerations) followed with the
support from the institutional hierarchy is critical to achieving desired outcomes
(Burden et al., 2006). Top managers (in the case of college athletics, the Athletic
Director) will decide what areas to concentrate on (based on what the department does
best – competencies), and contract everything else out to outside vendors (Belcourt,
2006). Therefore, core functions or competencies are in fact the real source of
competitive advantage as the administration’s ability to consolidate skills and
technologies allows for greater flexibility and improved organizational efficiency
(Prahalad and Hamel, 1990).
From an agency theory perspective, a problem occurs when two parties have
different goals and labor is divided (Eisenhardt, 1989). One party, the principal (i.e. the
customer or outsourcing user) delegates work to another, the agent (i.e. the provider)
who performs the work. Agency theory uses the “contract metaphor” to help describe
this relationship. Agency costs include the costs of structuring, monitoring, and
bonding a set of contracts among agents and principals with conflicting interests. They
also include the value of output lost when the cost of enforcing the contracts exceeds
the benefits of the contracts (Logan, 2000). Eisenhardt (1985) remarked that agency
theory is concerned with resolving two problems that can occur in agency
relationships. The first is when the desires or goals of the principal and agent conflict
and it is difficult or expensive for the principal to verify what the agent is actually
doing. The second is the problem of risk sharing that arises when the principal and
agent have different risk preferences. Thus, McKindra (2005) and Burden et al. (2006)
both posited that in order to properly facilitate this agency/provider relationship, a
strategic balance point between the university’s organizational mission and the rights
holder’s mission must be maintained. As such, many schools and rights holders have
worked to create various partnerships with other corporate sponsors that target
appealing experiences for the student-athletes, fans, and alumni. In order to
successfully implement these experiences, risk sharing, communication, and above all
verification of objectives between key all of the “key players” is paramount. Everyone
involved in the partnership needs to regularly and clearly communicate particularly in
terms of turnaround time, risk, and debt (cf. Fisher, 2003; Mohr and Spekman, 1994).
Given the difficulties of behavior-based contracts suggested by agency theory, it is
reasonable to assume that the overwhelming majority of clients would insist on
outcome-based contracts when acquiring marketing services. Such a strategy can only
succeed if the client can confidently specify current and future requirements (i.e.
communicate them accurately). As Embleton and Wright (1998) contended, there are
two main areas that have to be addressed when outsourcing – the foremost of which is
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communication. These authors found that nearly 80 percent of employees will initially
view outsourcing negatively. Hence, benefits to an outsourcing partnership will only
accrue if active planning and communication take precedent (cf. Fisher, 2003; Mohr and
Spekman, 1994), particularly in terms of specific marketing channels (Mohr and Nevin,
1990) but moreover, interfirm relationships (Mohr et al., 1996). Therefore, the AD, the
University President, the marketing employees, and the rights holders will need to
establish healthy communication lines for the partnership to be successful and more
importantly, implication free.
Study 1
As highlighted above, athletic programs are becoming increasingly reliant on external
providers for a number of services. The purpose of this article was to explore the
aforementioned idea within the intercollegiate marketing context. Using a
mixed-methods research design, the researchers sought to examine the issues,
antecedents, and empirical consequences associated with outsourcing among
university rights holders and intercollegiate marketing department employees. The
following section discusses the antecedents and scope of the decision to outsource, in
terms of both the progression of collegiate marketing practice and underpinning
reasons. Subsequent sections discuss the consequences (based on the empirical
findings), the various implications, and boundary conditions of outsourcing for
university athletic departments.
The working environment
For this initial phase of the study, the conference under examination consisted of
NCAA Division I-A institutions who have all fully embraced the outsourcing option.
Currently, there are numerous right holders who conduct (in part or all) of the
respective department’s marketing operations. Within this dynamic, the Marketing
Director serves as the facilitator, initiating the directives of the rights holder in addition
to providing valuable reciprocal input to the agency. However, the Marketing Director
also initiates his/her own programs based on what the outsourcing agency is or is not
contracted to do. The Marketing Director maintains a staff (sizes vary based on the
number of operations outsourced) composed of Assistant Marketing Directors,
graduate students, and interns who all serve the department in various capacities.
Thus, Marketing Directors are the “ring-masters” (McGovern and Quelch, 2005, p. 2)
who help to develop and monitor this integrated network of outside suppliers and
internal employees to create both immediate and long-term value for the athletic
department.
Methods
Procedure. As noted by Glesne (2006), focus group research is useful in studies that are
exploratory in nature. Consistent with the purpose of Study 1, the researchers
conducted semi-structured focus group interviews with marketing directors housed
within one Division I-A intercollegiate conference. Of this census sample, all 16
Marketing Directors (eight female, eight male) within the conference were contacted
prior to the interview date, informed of the purpose of our inquiry, and asked to
voluntarily participate. All 16 Marketing Directors agreed to take part and have their
discussion audio recorded. The focus group facilitator guided the conversation-style
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interviewing with “talking points” surrounding the topic of rights holders and
departmental marketing operations. Sample talking points included: “concerns of
working with rights holders”, “improving satisfaction in the relationship between
rights holders and the marketing department”, and “identifying/aligning the priorities
of the rights holders and the marketing department”. The focus group interview was
approximately one hour in length, was audio-recorded, and subsequently transcribed
verbatim.
Morgan and Spanish (1984) identify focus group as an advantageous research tool
well-suited to both precede and triangulate data collected using several other
methodologies. Operating from this rationale, we followed up our focus group
interview by sending a series of open-ended questions to each marketing director one
week after the initial focus group interview was conducted. These questions allowed
each Marketing Director to discuss the emergent themes from the focus group within
his or her respective athletic departments. Thus, coupled with the focus group data,
this latter stage was implemented as a means to sharpen the definitions and properties
of the emergent concepts. Sample questions included: “How long has your marketing
department been with the current rights holder?”, “How satisfied are you with the
relationship that your marketing department has with the rights holders?”, and “What
do you think could promote a better relationship with your rights holders?”. Responses
were compiled and analyzed as described below.
Analysis. The researchers adopted a “grounded, a posteriori, inductive,
context-sensitive scheme” (Schwandt, 2007, p. 32) approach to analyze all the data.
Specifically, two members of the research team utilized the method of constant
comparison, whereby the data were coded and analyzed simultaneously to develop an
understanding of emergent concepts and their relationships (Glaser, 1965). The
sequencing of the data collection led the researchers to first code the interview data for
the initial categories. Both researchers coded the transcripts individually and then met
to discuss any opposing or divergent views. Upon reconciling these discrepancies the
researchers then compared initial categories with the responses from the follow-up
questions. As with the focus group data, comparisons were first performed
individually and then jointly by two members of the research team as a means to
refine emergent themes.
Results and discussion
Two primary themes emerged from the focus group and interview data:
(1) control; and
(2) communication.
Firstly, however, and closely mirroring that of previous literature (Burden and Li, 2002,
2003), the data from Study 1 revealed that marketing directors perceived outsourcing
as crucial in providing revenue for the athletic department and allowed for enhanced
promotions and coverage of athletic events. Most marketing directors were generally
satisfied with their current rights holder and felt that it would be in the best interest of
the athletic department to continue the relationship. Despite these positive feelings, the
directors also expressed some frustration and dissatisfaction with their current rights
holders. Specifically, there emerged a perceived lack of control that prevented them
from fully addressing the needs of their respective programs. Subsequently, it was
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supposed that the needs of the rights holders were not always being met and the
majority of the directors felt that there existed an “us against them” dichotomy which
impeded departmental progress.
Overwhelmingly, the marketing directors felt that the primary “solution” to the
above-mentioned frustration was to improve the communication between the
marketing department and rights holders (see also Li and Burden, 2002). Therefore,
communication was selected as the factor most important to the analyses. Despite the
integral role of communication in this dynamic, most marketing directors expressed
dissatisfaction with the level, frequency, and direction of the existing communication –
a finding previously absent from the literature.
In line with this finding, research on the management of relationships has
increasingly focused on channel communication as a central tenet to effective
organizational functioning (cf. Gastpar et al., 2003; Mohr and Nevin, 1990). In
particular, these communicative behaviors between channel members have been linked
to trust (Anderson and Narus, 1990), coordination (Guiltinan et al., 1980), and especially
commitment (cf. Anderson and Weitz, 1986; Morgan and Hunt, 1994). Given this line of
research and the popularity of outsourcing in terms of the identifiable benefits (e.g.
additional revenue, streamlining HRM, and core competencies), this result led the
authors to ask some important additional questions:
. Could dissatisfaction with communication result in a level of frustration that
may lead to unintended outcomes among the internal employees?
. Could the employees’ commitment to their department/organization be affected
as result of outsourcing?
Study 2
Based on the initial exploratory results compiled in Study 1, a questionnaire was
constructed in order to examine whether the qualitative findings support the general
contention that lack of communication between rights holders and the collegiate
marketing department may result in unintended outcomes. Specifically, the authors
argue that communication satisfaction may likely be an inhibitor to the marketing
employees’ commitment (see Figure 1). These arguments are based on the
aforementioned “dichotomized” relationship and the literature suggesting negative
consequences of the practice (cf. Albertson, 2000; Bhagwati et al., 2004; Burden and Li,
2005; Cox, 1996; Lei and Hitt, 1995; Kessler et al., 1999). In addition, it has often been
Figure 1.
Hypothesized model of
communication
satisfaction and
commitment
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observed that communication creates the conditions for commitment, and hence should
be seen as one of its important antecedents (cf. Foy, 1994; Katz and Kahn, 1972; Meyer
and Allen, 1997). However, of more importance is what aspects of communication are
particularly good predictors of commitment. The authors propose that if the
communicative relationship is ongoing and structured, the result will yield general
positivity on the employee’s responses. To support testing these ideas, hypotheses
have been developed which are elucidated below.
Communication satisfaction
Most experts and researchers in the areas of management and leadership assert that
communication is the foundation for effectiveness in any type of organization (Church,
1994). Moreover, organizational communication is underscored by the importance of
several other concepts such as understanding, interpersonal warmth, trust, and
openness (Goldhaber et al., 1978), all of which may effect several organizational
outcomes, including job satisfaction and employee commitment (cf. van Vuuren et al.,
2006; Yadegar, 2006). How an employee perceives a supervisor’s communication style,
credibility, and content as well as the organization’s overall communication system
will, to some extent, influence the amount of satisfaction he/she receives from the job
(cf. Pettit et al., 1997; van Vuuren et al., 2006). It therefore stands to reason that the
employee must be satisfied, not only with an organization’s internal communication
environment, but also with the external communication lines that impact the
organization (e.g. outsourcing agencies, suppliers, other stakeholders, etc.). Hence, the
communication processes may impact the potential quality of relationships that may
develop between employees and outside agencies, as communication experiences are
the mechanisms from which trust develops (Mueller and Lee, 2002).
Exploring the extent to which employee satisfaction with organizational
communication is important because it encompasses communication channels with
external service providers. These communication channels have the potential to
seriously impact organizational outcomes; hence, this inquiry is particularly germane
for a number of reasons. First as previously mentioned, outsourcing is fast becoming a
common business practice having significant implications (both positive and negative)
for the organization (e.g. Burden et al., 2006; Klaas et al., 2001). Second, outsourcing can
create a competitive advantage within many industries including intercollegiate
athletic departments via cost reduction, profitability, productivity, and risk control (cf.
Anderson and Weitz, 1986; Burden and Li, 2005; Jiang and Qureshi, 2006; Perry, 1997;
Quinn, 1999; Roodhooft and Warlop, 1999). As such, the perceived financial necessity
to outsource is unlikely to subside thereby warranting research attention. Finally, what
little work that does exist has suggested that information sharing and employee
commitment are fundamental components to fostering a strong partnership between
an outsourcing agency and the organization (see Lee and Kim, 2005). Such a
partnership couched in sound communication is paramount for success (cf. Johnsen
et al., 2006; Lee and Kim, 2005).
Guided by the aforementioned reasons, we focused on communication satisfaction
(as it pertains to rights holders) and its impact on employee commitment. Consistent
with our rationale, we utilized the communication satisfaction construct, which is
highly regarded as a successful multidimensional research tool in organizational
communication (Varona, 1996). The researchers considered three important
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dimensions of the construct derived from Study 1 and inferences drawn from previous
research in this area (cf. Clampitt and Downs, 1993; Clampitt and Girard, 1993):
. supervisory communication (i.e. upward and downward communication
aspects);
. media quality (e.g. well-organized meetings, clear directives, and proper
communication); and
. personal feedback (i.e. an understanding of problems faced on the job).
Organizational commitment
Within the modern OB literature, substantial advances have been made in the
developments and applications of organizational commitment (Brooks, 2002). These
advancements have illustrated that employee commitment can be channeled in
multiple directions, is centered on a range of foci (e.g. the organization, management,
business sector, etc.), and is influenced by a number of antecedents (see Mowday, 1998).
As such, organizational commitment has emerged as a central concept in the study of
work attitudes and behavior amongst scholars (cf. Cohen, 1991; Mathieu and Zajac,
1990; Randall, 1990; Riketta, 2002; Wright and Bonett, 2002). The construct is generally
defined as a psychological link between the employee and their organization, making it
less likely that they will voluntarily leave (cf. Allen and Meyer, 1990, 1996; Meyer and
Allen, 1991). While early work on commitment was typified by various unidimensional
views (e.g. Angle and Perry, 1981; Mayer and Schoorman, 1992; Meyer and Allen, 1984;
Morrow, 1993), the construct is now widely recognized as a multidimensional work
attitude resulting in a three-component model (cf. Allen and Meyer, 1990; Meyer and
Allen, 1991). From this perspective, commitment is conceptualized in three ways:
(1) affective commitment (i.e. desire and emotional attachment);
(2) continuance commitment (i.e. need); and
(3) normative commitment (i.e. obligation).
Employee outcomes (e.g. increased morale, reduced stress, and improved productivity
Meyer and Allen, 1997) and organizational outcomes (e.g. decreased absenteeism,
lateness, and turnover) have been associated with increased organizational
commitment (cf. Brooks, 2002; Mathieu and Zajac, 1990; Meyer and Allen, 1997;
Mowday, 1998; Randall, 1987). Conversely, if employee commitment has waned,
dissatisfaction may result and deleterious employee behaviors may follow (cf. Ferris
and Aranya, 1983; Jaros et al., 1993; Stumpf and Hartman, 1984). Williams and Hazer
(1986) concluded that commitment has a more important effect on employee behavior
than does satisfaction. Cotton and Tuttle (1986) and Mathieu and Zajac (1990)
identified commitment as a highly significant correlate of negative employee behavior.
Some empirical work has identified organizational commitment as both a negative
consequence (e.g. Brockner et al., 1987; Knudsen et al., 2003) and an antecedent to
turnover (Tett and Meyer, 1993).
Research has also suggested that organizations that encourage communication may
indirectly enhance employee commitment by affecting the members’ felt responsibility
and role involvement within the organization (e.g. Salancik, 1977; Stumpf and
Hartman, 1984). If employees are satisfied with communication processes they are
likely to develop positive working relationships, increase their performance (Clampitt
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and Downs, 1993), and be more committed to the organization (Varona, 1996).
Relatively few studies have explored the relationship between communication and
commitment. However, those that exist have illustrated a positive relationship between
constructs (cf. Downs, 1991; Downs et al., 1995; Putti et al., 1990; Varona, 1996).
Therefore, higher levels of employee satisfaction with ongoing communication
processes may lead to increased levels of commitment to the organization.
H1. Overall communication satisfaction among the marketing employees will
positively influence their levels of continuance, affective, and normative
commitment.
H2. The marketing employees satisfaction with supervisory communication,
media quality, and personal feedback will positively influence their levels of
continuance, affective and normative commitment.
Measures
Communication satisfaction. Communication satisfaction was initially operationalized
by Downs and Hazen (1977), who subsequently developed the Communication
Satisfaction Questionnaire (CSQ). The CSQ served as the primary means of assessing
the level of communication satisfaction the marketing employees have with their rights
holders. The original questionnaire consisted of eight factors; however, only three were
utilized in this investigation (i.e. supervisory communication, media quality, and
personal feedback) due to the results obtained from Study 1 and the contextual nature
of the design (see the Appendix). Other areas such as “subordinate relations” and
“organizational integration” were simply not applicable to the current framework.
Several studies support the reliability and validity of this particular instrument (e.g.
Crino and White, 1981; Downs and Hazen, 1977; Mount and Back, 1999; Pettit et al.,
1997; Zwijze-Koning and de Jong, 2007). The three subscales all demonstrated
acceptable levels of internal consistency (supervisory communication a ¼ 0:93,
personal feedback a ¼ 0:84, media quality a ¼ 0:76) according to the 0.70 benchmark
posited by Nunnally and Bernstein (1994). Some items (six of 15) were slightly modified
so the respondents answered questions related to the communication between the
rights holder and employee, as opposed to internal organizational communication. For
example, the first item in the supervisory communication subscale, which originally
read “My superiors know and understand the problems faced by subordinates”, was
modified to read “The rights holders know and understand the problems faced by the
marketing staff”. The other items were modified in a similar unobtrusive manner.
Organizational commitment. Since Meyer and Allen (1984, 1997) and Allen and
Meyer (1990) published their commitment measures, referred to as affective,
continuance, and normative commitment, they have been used extensively (e.g.
Hackett et al., 1991; Kent and Chelladurai, 2001; Meyer et al., 2000; Somers, 1995),
resulting in considerable evidence regarding their psychometric properties (Allen and
Meyer, 1996). Internal consistency scores ranged from a ¼ 0:73 for continuance
commitment to a ¼ 0:76 for both normative and affective subscales (see the
Appendix). To avoid referent confounds (i.e. employees answering questions related to
their commitment with either the rights holders or their university), the researchers
instructed the respondents to answer regarding their commitment based on the
outsourcing partnership. All respondents used in the analyses were employed by a
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college or university and not an outsourcing agency (e.g. Nelligan Sports, Host
Communications, or International Sports Properties).
Sample and procedures
The data were collected via an online survey distribution system using the National
Association of Collegiate Marketing Administrators (NACMA) e-mail list-serv. A
caveat in the distributed email stated that the researchers were only interested in
colleges and universities who currently use rights holders and employees who work
within that dynamic. Hence, marketing directors and associated staff (e.g. associate
marketing directors and marketing assistants) who interact on a continual basis with
rights holders were targeted and utilized in the analyses. The e-mail was sent to
approximately 900 list-serve subscribers (National Association of Collegiate Marketing
Administrators, 2008), from which 167 responded, providing an initial response rate of
19 percent. Follow up contact (i.e. post-notification) has been reported as being one of
the most powerful techniques for increasing response rates for online surveys (cf.
Dillman, 2000; Turner and Jordan, 2008). Therefore, two follow-up e-mails were sent to
improve the responses. Following the post-notification, 30 additional questionnaires
were received, providing a final response rate of 22 percent. After the removal of
respondents whose college/university did not outsource, individuals who were
employed by an outside agency, and lower level employees (e.g. student assistants,
interns, etc.) who may only have limited contact with the outsourcing agency, 188 (131
male, 69 percent; 57 female, 31 percent) complete questionnaires were utilized in the
analyses.
While the low response rate could affect the generalizability of the study (Kerlinger
and Lee, 2000), the response rate for the current study is consistent with the majority of
web survey distributions, according to Sax et al. (2003). To ensure that sample size
would not affect the power of the regression analyses, an a priori power analysis was
performed. According to Cohen (1988) the sample sufficiently powered the analysis
(0.81), thereby reducing the probability of Type II errors and providing the ability to
detect small effects in the regressions. In terms of ethnicity, 89 percent identified
themselves as White/Caucasian, 5 percent as African-American, 3 percent as Hispanic,
1 percent as Asian, 1 percent as Hispanic, and ,1 percent as “other”. Respondent ages
ranged from 21 to 61 (21-31 ¼ 59 percent, 32-42 ¼ 26 percent, 43-53 ¼ 12 percent,
54-61 ¼ 3 percent) and their work experience ranged from one to 35 years (1-10 ¼ 93
percent, 11-20 ¼ 4 percent, 21-35 ¼ 3 percent).
Results
Descriptive statistics. The researchers first examined whether the communication
and commitment constructs borrowed from the OB literature revealed sound levels
of normality. Univariate normality of the data was examined with skewness and
kurtosis values. All of the skewness and kurtosis values were in the range of 21
and þ1, which indicated the data were normally distributed. Measuring the amount
of autocorrelation in the error terms of a regression model, the Durbin-Watson
statistics ranged from 1.983 to 2.027, informing the researchers that the assumption
of independent errors was met (Glass and Hopkins, 1996). A general summary of
means, standard deviations, and correlation coefficients is provided in Table I.
Inspection of the correlation matrix revealed the correlations between factors had
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little variance; only five potential relationships were not significant. At the
zero-order level, variables from two of the predictors correlate significantly with
both communication and commitment constructs. The highest zero-order correlation
with communication satisfaction is reported for media quality (0.64) and the highest
zero-order correlation with organizational commitment is reported for affective
commitment (0.53). Looking for signs of multicollinearity amongst the variables, the
authors found all the correlations to be well below 0.80, suggesting no
multicollinearity in the data (cf. Grewal et al., 2004; Kaplan, 1994). Looking at the
issue further, the R 2 values (at or above 0.80) also confirmed that multicollinearity
was not problematic (Hutcheson and Sofroniou, 1999).
Regression analyses. Since the goal of the current study was to predict the
relationship between communication satisfaction and organizational commitment,
multivariate multiple regression was employed. First, the researchers tested the overall
relationship between the composite communication satisfaction construct and the
individual organizational commitment factors. Second, the predictive power and
direction of the individual communication satisfaction factors on the same outcomes
were analyzed. The composite communication satisfaction variable revealed
significant main effects on the three outcomes for the multivariate regression model
(R 2 ¼ 0:35; DR 2 ¼ 0:33; F ¼ 11:384; p , 0:05). The analysis revealed significant
main effects for communication satisfaction on both normative and affective
commitment measures, while continuance commitment was not significantly
influenced (see Table II). It is notable that the effect sizes for the overall model were
quite large (R 2 ¼ 0:18, affective; R 2 ¼ 0:21, normative) indicating that a
communication satisfaction was an important predictor of a significant amount of
variance for two types of organizational commitment.
The results of the second regression analysis (where the individual factors were
regressed) are presented in Table III. These results showed that the three
communication satisfaction factors were important positive predictors of two
commitment outcomes in the multivariate model. Examination of the b coefficients
revealed the statistically significant effects on the three outcome measures:
(1) supervisory communication (bnorm ¼ 0:34, p , 0:01; baff ¼ 0:35, p , 0:01);
(2) media quality (bnorm ¼ 0:29, p , 0:01; baff ¼ 0:36, p , 0:01); and
(3) personal feedback (bnorm ¼ 0:20, p , 0:05; baff ¼ 0:30, p , 0:01).
Correlation matrix
Constructa Mean
Standard
deviation 1 2 3 4 5 6
1. Supervisory communication 3.92 0.83 1.00
2. Personal feedback 3.53 0.63 0.47 * * 1.00
3. Media quality 3.33 0.77 0.64 * * 0.49 * * 1.00
4. Continuance commitment 2.78 0.67 0.01 20.12 20.06 1.00
5. Normative commitment 3.09 0.69 0.37 * * 0.19 * * 0.19 * 0.16 1.00
6. Affective commitment 3.46 0.70 0.39 * * 0.27 * * 0.32 * * 0.12 0.53 * * 1.00
Notes:
a1 ¼ strongly agree and 5 ¼ strongly disagree. *p , 0:05; * *p , 0:01 (two-tailed). n ¼ 188
Table I.
Means, standard
deviations, and
correlation coefficients
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Examination of the R 2 values indicated that supervisory communication also
accounted for a great deal of the variance for both normative (R 2 ¼ 0:18) and affective
commitment (R 2 ¼ 0:14) outcome measures.
The signs associated with continuance commitment on media quality and personal
feedback indicated a negative relationship with this aspect of communication
satisfaction. Hence, the ratings of continuance commitment are uncorrelated with
communication satisfaction (0.01) and are negatively correlated with media quality
(20.12) and personal feedback (20.10). This finding indicates that respondents who
experience ambiguity about their continued membership with the organization rate the
downward dissemination of information and feedback negatively. This finding is not
indicative of any multiple regression assumption violation. Inspection of the residuals
revealed that they did not deviate from a normal distribution, were constant in
variance, and are not correlated with the independent variables (R 2 ¼ 0:35;
DR 2 ¼ 0:33; SD ¼ 0:62), thus indicating that the model was robust.
Discussion
Evidence in the extant literature is amassing that substandard organizational
communication may be negatively related to unintended employee outcomes (cf. Gray
Dependent variablesa
Independent variablea
Continuance
commitment
Normative
commitment
Affective
commitment
Communication satisfaction 0.063 0.339 * 0.363 *
R
2
0.273 0.410 0.432
Adjusted R
2
0.106 0.183 0.214
F statistic(degrees of freedom) 0.978(33,188) 1.809(33,188) 1.982(33,188)
p-value 0.053 0.015 0.006
Notes: Predictor ! communication satisfaction; full model ! R 2 ¼ 0:35, DR 2 ¼ 0:33, F ¼ 11:384;
a1 ¼ strongly agree and 5 ¼ strongly disagree; *p , 0:05 (two-tailed); n ¼ 188
Table II.
Regression analysis for
composite
communication
satisfaction
Dependent variablesa
Predictora
Continuance
commitment
Normative
commitment
Affective
commitment
Supervisory communication
b 0.08 0.34 * * 0.35 * *
R
2
0.01 0.18 0.14
Media quality
b 20.12 0.29 * * 0.36 * *
R
2
0.02 0.08 0.12
Personal feedback
b 20.10 0.20 * 0.30 * *
R
2 0.06 0.04 0.09
Notes:
a
1 ¼ strongly agree and 5 ¼ strongly disagree; *p , 0.05; * *p , 0.01 (two-tailed); n ¼ 188
Table III.
The effects of the
communication
satisfaction factors on the
dependent variables
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907
and Laidlaw, 2002; Johlke and Duhan, 2000, 2001). Thus, new business strategies that
could potentially affect employee commitment levels (such as outsourcing) should be
entered into carefully, as the results of such engagement may be impactful for the
organization. The current findings emphasized that the marketing employees’ general
perception of communication satisfaction towards an outsourcing agency was
positively related to their emotional attachment to the organization and their obligation
to remain a part of the organization. More interesting were the direct influences of
supervisory communication, media quality, and personal feedback relative to the
aforementioned commitment areas. In the first study the researchers found the
employees’ perception of communication (specifically, direction, frequency, and
duration) was necessary for them to perceive a positive working environment.
Interview excerpts reinforced this assertion in that the marketing directors generally
valued communication and view it as necessary for a successful partnership. Study 2
addressed this idea empirically resulting in positive relationships between three
communication variables which supported affective and normative attachments.
Hence, the researchers concluded that positively perceived communication may
underscore stronger feelings of affiliation and loyalty to the organization.
The results of this study provide general support for the hypotheses proposed,
although with some exceptions. First, in the present study, outsourcing, which was
designed to reduce costs and generally streamline the athletic department’s operations,
was shown to significantly influence the global communication-commitment
relationship. Overall, communication satisfaction demonstrated significant predictive
power for two types of organizational commitment. Second, all of the individual
communication satisfaction measures positively influenced employee commitment
levels. Specifically, the extent to which meetings are well organized, written directives
are clear, and the amount of communication is right; both the upward and downward
aspects of communication; and how the employees are judged and appraised, were
positive predictors of affective and normative commitment. Hence, the quality of
communication practices is likely to be associated with role clarity and performance
outcomes in terms of providing high quality service. Moreover, communication
mechanisms for establishing and sustaining organizational relationships affected
levels of trust and affective commitment, as Mayfield and Mayfield (2002) suggested.
However, the non-significant relationship between communication and continuance
commitment left the authors to speculate. Meyer et al. (1989) argued that the value of
commitment to an organization necessarily depends on the nature of that commitment.
The results from this study confirm the observation that positive communication is
associated with affective and normative outcomes but not continuance ones.
Continuance commitment is based on the costs employees associate with leaving the
organization. Therefore, due to the competitive nature of the collegiate work
environment the employees may be cognizant of a lack of alternatives. In addition,
research discussing the level of satisfaction employees receive from sport industry
positions adds further clarity to this argument (see Smucker and Kent, 2004).
Specifically, research in this area has posited that individuals choose sport jobs not for
pay or promotion (Parks and Parra, 1994) but rather for the emotional capital these jobs
intrinsically generate. Therefore, managing the “right commitment” is essential as
employees may experience commitment in varying ways, as illustrated here. The
careful understanding of commitment then, requires some knowledge by management
MD
47,6
908
of the effects different policies (such as outsourcing) can have on the various
dimensions of commitment.
It appears (at least in this case) that outsourcing had a considerable impact on
whether, and the extent to which, communication between the organization and rights
holders could potentially affect employee commitment levels. It should be noted that
the statistically significant relationships (i.e. variance explained) for the commitment
measures were not all that modest, in fact they were quite substantial; a pattern not
consistent with prior commitment research (cf. Mathieu and Zajac, 1990; Somers, 1995;
Randall, 1990). Consequently, there seems to be evidence here that the relationship
between communication satisfaction and organizational commitment is not a result of
an overly restricted model of commitment.
These findings suggest that the three levels of communication satisfaction add
substantial explained variance to both normative and affective outcomes. However,
since this is (to the authors’ knowledge) the only study to have examined such a
relationship in this context, the conclusions should be tempered until further testing is
carried out. Additionally, the specification of certain moderating variables in the
aforementioned relationship could add to these initial findings. For example, an
examination of the internal organizational culture, the impact of size of the university’s
marketing department, the budgetary constraints of the department, and the temporal
nature of the outsourcing relationship could all have considerable impacts on the
outcomes in the model. Given the initial variance explained, however, it is safe to say
there is merit in exploring this relationship further, perhaps with a less homogenous
sample and within different departments in intercollegiate athletics.
Implications
Taken together, the findings from Study 1 and 2 carry important implications for
university athletic departments. Specifically, they call attention to the importance of
the contextual factors that influence the relationship between organization and rights
holder. Lee and Kim’s (2005) integrated model of outsourcing partnerships identified
three behavioral factors that influence the quality of the relationship between the
service provider and receiver:
(1) shared knowledge;
(2) mutual dependency; and
(3) organizational linkage.
The current findings further buttress these contentions by identifying psychological
factors as crucial in fostering trust, mutual benefits, and commitment. These “process”
variables all possess characteristics necessary for user and overall business
satisfaction (Lee and Kim, 2005). The dissatisfaction expressed by the marketing
directors in Study 1 regarding communication, coupled with the positive relationship
between communication satisfaction and organizational commitment, highlights the
importance of addressing these factors within university athletic departments. As
such, the authors now empirically believe (as opposed to intuitively supposing) that
there is a need for fostering relationships rich in information sharing, joint efforts,
cooperation, and mutual benefits between athletic departments and rights holders.
As mentioned previously, the decision to outsource is not without potential risks
and some negative outcomes (see Belcourt, 2006; Burden and Li, 2005; Lacity and
Outsourced
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909
Willcocks, 1996). In an effort to circumvent such consequences, it is essential to
adequately identify and address any potential shortcomings when first entering into an
outsourcing partnership. Burden et al. (2006) suggested the most successful
outsourcing relationships are entered into when the university and athletic
department integrate their goals, strategic directions, and philosophy into the
decision-making process. Based on these results, the authors now believe that
considering the behavioral and psychological factors identified by Lee and Kim (2005)
in the decision-making process will further contribute to successful outsourcing
relationships by attending to both macro and micro aspects of the service
provider-athletic department relationship.
Conclusion
The results were consistent with the hypothesized expectation that communication
satisfaction may explain employee commitment within the collegiate marketing
environment. Three aspects of communication were significantly correlated with
organizational commitment, and did display a unique relationship with two aspects of
the commitment construct when entered into the model. In sum, the positive
relationship between specific areas of communication satisfaction and commitment
revealed that in the sport marketing arena, employees value the communicative efforts
of their outside agencies. Thus, this finding indicates that organizations such as this
need to explore ways to input communication channels into their often complex
organizational structures. Doing so should lead to a higher degree of commitment
amongst internal employees.
Note
1. The phrase “rights holder” is used to describe the entity that owns a set of rights on a given
content area. In the current study, this relates to ownership of some or all marketing
operations of the university athletic department.
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Appendix. Operational measures
Supervisory communication
. The rights holders know and understand the problems faced by the marketing staff.
. The rights holders listen and pay attention to me.
. The rights holders offer guidance for solving job-related problems.
. The rights holders trust me.
. The rights holder is open to ideas.
Media quality
. The rights holders publications are interesting and helpful.
. Our meetings with the rights holders are well-organized.
. The amount of direction given to me by the rights holders is about right.
. Written directives and reports from the rights holders are clear and concise.
Personal feedback
. I receive information from the rights holders about my progress in my job.
. I receive information from the rights holders about how I am being judged.
. I receive recognition from the rights holders of my efforts.
. The rights holders working alongside my organization have great ability as
communicators.
. I receive on-time information from the rights holders needed to do my job.
Continuance commitment
. It would be hard for me to leave my organization right now, even if I wanted to.
. One of the few negative consequences of leaving this organization would be the scarcity of
available alternatives.
. Right now, staying with my organization is a matter of necessity as much as desire.
. I feel I have too few options to consider leaving this or organization.
. If I had not already put so much of myself into this organization, I might consider working
elsewhere.
. Too much of my life would be disrupted if I decided I wanted to leave my organization
right now.
Affective commitment
. I would be very happy to spend the rest of my career with this organization.
. I really feel as if the organization’s problems are my own.
. I do not feel a strong sense of “belonging” to my organization.
. I do not feel “emotionally attached” to this organization.
. I do not feel like “part of the family” at my organization.
. This organization has a great deal of personal meaning to me.
Outsourced
marketing
917
Normative commitment
. I do not feel any obligation to remain with my current employer.
. Even if it were to my advantage, I do not feel it would be right to leave my organization
right now.
. I would feel guilty if I left this organization now.
. This organization deserves my loyalty.
. I would not leave my organization right now because I have a sense of obligation to the
people in it.
. I owe a great deal to my organization.
About the authors
Matthew Walker is an Assistant Professor of Sport Management at the University of Florida. His
research covers a variety of topics including corporate social responsibility, strategic
management, cognition and behavior of corporate stakeholders, and topics related to the
economics and finance of sport teams and leagues. Matthew Walker is the corresponding author
and can be contacted at: walkerma@hhp.ufl.edu
Melanie Sartore is an Assistant Professor of Sport Management at East Carolina University.
Her areas of research interest are diversity-related issues in sport, socio-cultural aspects of sport,
individual and group attitudes and behaviors, organizational behavior, and human resource
management.
Robin Taylor is the Director of Marketing at East Carolina University. She has worked in the
athletic department for three years and served as Marketing Director for two of them. She
recently completed her graduate degree in Sport Management and has aspirations to pursue her
PhD.
MD
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