Leveraging our businesses by collaborating with other businesses is one way not to get trapped by the pressure to commoditize our products and services. It is easier said than done. Yet, it needs to be done so we don't get priced out of the market.
A couple years ago, I received a question about how to organize a business partnership that address this question. Here's some of what I wrote then.First their question: Another company and ours are joining forces to provide services to a third company. Our two companies provide different services and do not ordinarily compete for the same projects. What advice could you offer about how we organized this partnership?
It is essential that the partners are clear about the scope and substance of the project. Included in this perspective is clarity about what is your companies’ responsibilities for the project.Clarity of understanding is a communication task, and communication is where most partnerships begin to fail. Your individual assumptions and perceptions of what constitutes the project and your roles and responsibilities are the where you need to begin.
One way to explore this is to ask: “Do I understand what is expected of us to complete this project?” If you have any doubts, then you then you need to talk some more.
Your project plan should identify the specifics about what is the timeframe, sequence of steps, expectations for performance and compensation. Do this and the more likely the project will be completed on-time and within budget.
The key is to an effective negotiation is for both of you to work toward what is mutually beneficial. If you or the other firm plays a game of cutthroat, you’ll both be sorry. When a partnership agreement is equitable for both sides, then many of the issues of conflict that plague partnerships can be alleviate.
Does having a mutually beneficial, equitable business relationship mean that everything is equal?
No. Equally is really an idealistic term that is rarely achieved in life or work.
Instead, approach your agreement from what is fair. This fairness needs to begin with what is fair to the client by answering the questions about the structure and responsibilities of project. Only then, can you identify more precisely what is fair compensation for the partners involved.
In addition, pay attention to these areas of potential conflict.
First, avoid being the nice guy and accepting responsibility for work that is the other company’s. Your division of responsibility should be clear, mutually acceptable, and fairly compensated.
Second, avoid basing your perception of progress on the assumption of that your partner will work as diligently as you. Unless you have worked together before, assume that you need more information on their company’s progress than you typically would get. This is an issue of communication and accountability.
In your negotiation to become partners, you need to discuss how you will be mutually accountable to one another.
In many partnerships and businesses, the word “accountability” incites passionately negative reactions. At issue is your ability to trust one another. If you can, then you can establish a mutually beneficial process for holding one another accountable for each other’s progress. It is important that you establish agreement before you begin. It will save you both headaches in the long run.
Third, avoid ambiguity; be clear about what must be done and who is responsible. Avoid making commitments where the conditions are ambiguous. Treat every “if-then” agreement – “If we are ahead on time and money, then …” – as a commitment that you will have to fulfill. Adding possible situations creates confusion, and adds to the project the temptation for the project to grow beyond its budget and time frame.
Fourth, make one person the project manager who is responsible for the project. If if there is a clear division of work, it is important to center accountability in one person whose job is to coordinate the contributions of the partners.
In negotiating any type of partnership agreement, make sure that you are absolutely clear about roles, responsibilities, compensation, and performance expectations. Get it in writing as well. Do this and you’ll find your partnership experience a successful one.