Partnering…

Many organizations and people claim to "Partner" with other organizations and people. BusinessDirectory.com defines "Partnering" as follows:

Establishing a long-term win-win relationship based on mutual trust and teamwork, and on sharing of both risks and rewards. Partnering arrangement can be between labor and management, subordinates and the executive, suppliers and customers, and suppliers and suppliers. The objective is to focus on what each party does best, by sharing financial and other resources, and establishing specific roles for each participant. See also joint venture and strategic alliance.

Key concepts in this definition are "win-win relationship," "mutual trust," and "teamwork."

Unfortunately, all too often I find myself interacting with prominent businessPartnering in Business people, often business leaders, who claim to partner but do so only on their specific terms, a win-lose interaction. This leads to breakage, short-term relationships and constant state of change in their business, distracting them from their core missions.

Example: some businesses are so price conscious in shopping for suppliers and professional services that they overlook or undervalue the benefits of long term relationships. When two organizations collaborate and get to know each other, interactions become smooth, straightforward, needing little background or explanation for transactions. The intimacy of a trust-based and experienced relationship allows each partner to focus on its particular area of expertise, eliminating redundancy and enabling organizations to move nimbly and efficiently.

A vendor or supplier or service provider who is constantly being price shopped and challenged will not feel trusted, and this will inevitably impact the level and speed of service and attention provided. Who does not treat their best customers with the best service? Organizations support and reward business partners for "staying in the saddle" through easy and hard times. How? More attention, new intelligence, greater access to professional advice and market and competitive data.

This is the basis for most of the loyalty programs we see in many industries. Organizations reward loyalty sometimes with better prices, sometimes with earlier access to new goods and services, and sometimes a higher class of service altogether, e.g. airline and hotel programs.

These same principles apply in dealing with suppliers, vendors, and professional service providers in business.

"Trust" is another concept vital to partnering. Employees who are constantly called out and challenged will inevitably fall back to a position of hostile compliance, whereby they will do only exactly what is requested and stick to that posture. This in turn places higher burden on the management team to think through every possibility, mine every opportunity, become the creative impetus, because the eyes and ears of the business are not "bought in" to the company success. This is a well-known and well-documented human phenomenon. Few service providers will admit it, but the same holds true for them. A challenging, untrusting customer is low on the priority list.

This is especially dangerous in turbulent economic times. Risk management businesses, i.e. insurance, are price shopped with ridiculous frequency. The cost of having a short term insurance relationship based solely on price becomes clear when a calamity or other claim issue arises, as well as at renewal time. I have seen risk managers "go to the mat" for long term clients, seeking creative ways to allow a claim or hold premiums down, and for short term price shoppers, stick to the letter of the policy and send it to the "closed" file.

Similarly, obtaining financing for a business is not a simple commodity; to the contrary, banks place high value on long-term relationships and shy away from serial price and rate shoppers. In fact, many banks and insurance companies, and other service providers, will refuse to even provide a proposal to entities and individuals who are short-term thinkers.

Further, the idea of mutual trust is voided when a company is in constant "re-pricing" mode. Lack of trust kills a relationship; companies who do in fact partner, and who do in fact establish mutual trust, find themselves able to call on the cavalry (i.e. their expert partners) when things go wrong.

Expanding this topic, no business owner or management team has all the answers. Professional expertise exists in many facets of running a business, be it marketing and advertising, IT services, legal and risk management services, accounting services, business planning, capital raising etc. True partnering with professionals in a variety of areas is key to success in most large business. The irony is that large entities recognize this and even though they may have on-staff resources, they understand and value the expertise of service providers who live and breathe a specific business specialty every single day. And smaller businesses are even more in need of such specialty services, but often fail to act accordingly. The fallacy here is that entrepreneurs can and do achieve high results in some areas, but often have only cursory knowledge in other areas. Business owners who fail to rely on experts, when warranted, often find themselves in very uncomfortable places and frequently seek short term "success" with longer-term negative consequences. Experience is an incredible teacher, and a professional with an abundance of experience can sow seeds of success where novices will not.

In earlier days as a CFO in a mid-sized company, I recognized a tax issue that seemed complex. While our board had a tax lawyer and a CPA, I felt that we collectively lacked sufficient understanding to enable optimization of our tax position. We sought out a professional tax firm, and they quoted a fee of $1 million to address this situation.

Six months later we enjoyed a $2 million tax reduction, and for the next three years the company saved $10 million vs the prior method of doing things. When I began the project, the CEO was livid. I gained his trust and the results speak for themselves. This opportunity had been overlooked, and consequently savings foregone, for several years prior to our retention of an expert.

Examples abound, but this topic warrants introspection for business owners. Are you an expert in all matters? Of course not. Are you willing to trust proven and reference-able experts in matters outside your expertise? Are you a partner or a win-lose autocrat? Are you able to trust those with whom you partner? Is your way always the right way? Businesses and people develop reputations for behavior, both good and bad. What reputation are you building for current and future partnering relationships?

For proof of how important these issues are, find someone whose business is either failing or has failed. Ask them what they would do differently next time around. You'll be amazed at how many times you'll hear an explanation that starts with "....if I had only known", or ".....I wish I had asked for help."

Businesses seeking to expand often want to know how to target the right acquisition.

Recurring revenues, a strong leadership team, and a differentiated service or product offering are critical attributes for an acquisition target.

Additionally, with due credit to authors Treacy and Wiersema in “The Discipline of Market Leaders”, you’ll want to find a company that is at the top of its competitive group in one of three categories: Operational Excellence, Product Superiority, or Customer Intimacy. Successful achievement of one or more of these attributes makes for a winning acquisition. Other critical attributes for the right acquisition candidate include cultural and philosophical compatibility, and complementary product and/or service offerings.

Of course, ensuring access to the proper amount of financial and human capital are prerequisites for any serious acquisition initiative. Once the candidate has been identified and all of the above are covered, doing the ‘deep dive’ into the books and records of the acquisition target is key to making sure the buyer gets value for which they have paid.