Interorganizational relationships between businesses or nonprofits are also known as strategic relationships. The philosophy behind forming an interorganizational relationship is the idea that both groups can benefit more from working with one another in some configuration than working independently. As such, there are several different configurations that suit a variety of business needs.
Frequently identified as a means to improve customer service and reduce costs, business alliances are created with an agreement between the two organizations. Both parties to the agreement generally work in tandem to achieve one or more of a series of different business goals: sales improvement, investment improvement, or embarking on a joint venture, for example.
A consortium is a group of businesses or organizations that are united by a common goal and choose to work together to reach that goal, often by pooling resources. Organizations that belong to a consortium usually have less formalized business-to-business interactions than relationships with a more restrictive agreement. Consortium members conduct their business in such a way that allows for dialog and communication, but that does not restrict or impinge on the movements of other members.
Sponsorship is a type of interorganizational relationship where one entity gives financial or other support to another for a set amount of time. A frequent example of sponsorship is corporate giving, in which large corporations donate money to nonprofits and charities with no strings attached, enabling the nonprofits to meet their goals more easily. In addition, a company may sponsor an art museum or other cultural center by donating money to make a particular exhibition possible.
A subsidiary interorganizational relationship is frequently found in the nonprofit world. Large nonprofit organizations, such as United Way, have hundreds of local chapters and smaller organizations that fall under the national organization's umbrella of funding and centralized administration. This means that all funding for the subsidiary, or member, organization must go through the umbrella organization in order to reach local groups and campaigns.
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