Creating healthy partnerships

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.

Real Life Leadership: When forming a partnership, make sure roles are clearly defined

My Real Life Leadership column for this week - When forming a partnership, make sure roles are clearly defined - is online.

Partnerships are like marriages. They require a great deal more sensitivity to the relationships that ordinary contractual arrangements do. Typically, in a partnership, the partners are dependent upon one another to make the partnership work.

I see this situations a lot, and most of the time they fall prey to poor communication, vague expectations, a lack of understand of what it means to be a partner, and, sadly, greed and selfishness.

Knowing the character of your partner is essential for long term success. Selfishness is a short-term strategy. It  is only countered by honesty, a clear vision of the long term up-side of the partnership, and a clear boundaries and expectations for the relationship. Someone has to take the lead to establsh these parameters. If not, they won't be there, and trouble awaits.

You can download a printable version of my column here.

31 Questions: partnerships, collaborations, coalitions

29. How is leadership developed in partnerships, collaborations, and coalitions?

The business world, and especially, the non-profit world are filled with organizations that are structures based on relationships between individuals or other organizations.

My experience has been that these are some of the most difficult, complex, problematic organizations in existence.

I've written about business partnerships needing both trust and confidence here and here.

Trust is a belief in the moral integrity of the person or business.

Confidence is the belief that they are competent to do the job.  In partnerships, collaborations and coalitions we need both.

Collaborations and coalitions have the added problematic dimension of each party representing their own group's interests. These are relationship filled with potential conflict.

Partnerships, collaborations and coalitions require a high level of clarity of purpose and expectation for participation, contribution and execution. They are high maintenance organizations. The benefit comes from the ability to leverage talent and resources to achieve goals that are beyond any one person or group's ability to meet.

There is a place for partnerships, collaborations and coalitions. They require a higher level of commitment than other organizations require.

Therefore, what kind of leadership is needed for these unique organizational structures? 

In an organization of equals, how should leadership be understood and conducted?

If, today, you and a group of people were to set out to establish a collaborative partnership, what would your first steps be in establishing the leadership structure of the group?

How would you measure the trust and confidence that you will need to be a healthy, successful group?

Real Life Leadership: In forming business partnerships, learn to identify trust, confidence

This week's Real Life Leadership column - In forming business partnerships, learn to identify trust, confidence - addresses what to look for in a business partner.  You need to both trust them and have confidence that they bring real strengths to the partnership.

There are a lot of people whom I like, enjoy their company, would trust them to live ethically. But I'm fairly certain they are not very good at what they do. They are average and mediocre, and worse, that is okay for them.

Personality doesn't make a leader, and trustworthiness doesn't make a competent business person. You also need competency.

How do find out about competency? You have to look, ask questions, and dig into those settings where they have worked.

Another business colleague of mine is in the midst of hiring some senior level people for his company. I was impressed when he told me that he'll spend about 90 minutes on the phone with a candidates references. His point is that it takes a while to get through the prepared responses to their real feelings.

I'm certain that by the time his company hires someone, they will know not only what this person is good at doing, but what they aren't and whether they can be trusted.

Trust and confidence. Important guides for how we measure ourselves.

Real Life Leadership: The truth can hurt, but honesty is the best policy in business partnerships

Here's my latest Real Life Leadership column published last week - The truth can hurt, but honesty is the best policy in business partnerships.

Quickly, the reason why we are not honest with our partners is that we are not honest with ourselves. When we aren't, we live in denial of our responsibility for the effect of our performance upon the business.

It this is an issue for you or your team, then let me recommend a very important book - Leadership and Self-Deception, by the Arbinger Institute. I've linked to it before. And I've said it is the most important leadership book that I've read in the past ten years.  If you don't deal with the core issue at the heart of this book, nothing else you read will have the kind of impact you desire.

I'm working on a couple charts that serve as a commentary this book. I'll post as soon as I'm satisfied they demonstrate what I see in the book.