Principles for managing complex business partnerships

  • RK 
Reading Time: 4 minutes

1. Build common ground

Many strategic partnerships begin without synthesising a shared understanding of success. For a business partnership to succeed for two or more parties, your partnership needs to define success in the same way. While many partnerships assume that profitability is the ultimate goal, it is still important for the partners to identify everyone’s vision and idea of success and then harmonise those visions as effectively as possible.

Partnerships between two or more individuals are difficult to manage; however, partnerships between organisations are infinitely more complex. Every organisation has its vision, goals and processes and getting those to align between two or more organisations is a very tall order. All parties have to be completely transparent and honest about their desired outcome and how they want to achieve it. It is important that you don’t make any assumptions about what each partner wants from the partnership.

You and your partners have to put systems in place to continuously build common ground between all of you by building a shared definition and vision of success for the partnership. Some of the ways you can harmonise your vision include having regular inter-team meetings, retreats and other team-building events.

2. Define the roles

No business partnership can succeed if the partners don’t feel like everyone is pulling their weight. No one wants to be the one doing all the work while everyone else sits back and waits to reap the rewards. This perceived inequality could easily become the reason your partnership fails in the long run.

To avoid this, the partners have to define their roles and what they bring to the table. You and your partners should all agree to the roles that everyone plays. Do your best to define the roles as specifically as possible, taking time to define the specific processes to be followed when executing the individual roles and duties assigned to each partner.  This will help you avoid unnecessary friction that would arise out of not having clearly defined roles.

As part of defining the roles, you should decide the penalties for one of the business partners neglecting their duties as per the partnership agreement. In a long-term partnership, you need your partners to stay committed to the partnership even during tough times. Even when it is not convenient, your partners have to respect the agreement’s terms and play their part. That’s why you need to define the penalties as you define the roles, so you have deterrents in place should one of your partners neglect to execute their duties.

3. Do your due diligence.

During the excitement of a new, potentially profitable strategic business partnership, it is easy to forget to do your proper due diligence on your soon-to-be partner. In case you are tempted to ignore your due diligence, perhaps it would help if you keep in mind that your partners are going to do their due diligence on you. So you might as well do yours.

The nature of the partnership would normally determine the kind of information you would need in your due diligence exercise. For instance, a financial partnership might require you investigate your business partner’s financial statements and credit, while a partnership to share intellectual property would require an investigation of the Intellectual Property assets, as well as their valuation and ownership.

We encourage you to be transparent about the procedures of your due diligence exercise, what you are examining and what your findings are. Due diligence is a regular business activity, so there is no need to be secretive about it. Your business partner will appreciate that you are not cutting any corners and will also share their findings with you about their due diligence on your organisation. This process could strengthen the trust and transparency between the partners, which is a good foundation for your relationship.

4. Set up ways to measure success

Once you have defined success and designated the roles in the partnership, the next thing you have to do is measure success. While it may seem obvious that success is more profits for the partners, profitability is hard to evaluate in the short term. Furthermore, profitability can be hard to track if you don’t have the systems to track the incremental gains attributed to the work done by the partnership.

To set up ways to measure success in your business partnership, you need to set up realistic, measurable goals that can be benchmarks when evaluating relative performance. These success measures will also help you decide on fair compensation in bonuses and incentives for the different partners in the partnership.

You should endeavour to get all your strategic partners to commit to the methods of measuring success that the partnership is to employ. This will help make sure that everyone is aware of their performance measures and is committed to them.

You should also put reliable indicators in place so you can identify underperforming partners before it’s too late. That means you also have to have protocols in place to systematically remedy underperformance from your partners without endangering the partnership.

5. Know when it’s over

All good things come to an end. Your partnership will also come to an end once it achieves its goals or if it is deemed that the partnership is no longer beneficial for both parties. It makes no sense to continue to waste time and resources, maintaining and managing a partnership that is no longer beneficial for all the parties involved.

The best time to have this conversation is before you get into the partnership. In a situation where the partnership is time sensitive, both parties should agree on when the partnership will expire and should have that in the contract. However, suppose the partnership is potentially indefinite. In that case, you can agree to clauses in the contract that allow the partners to meet every year to review the partnership’s terms and performance.  Based on the performance, the partners can decide to continue the partnership as is, make adjustments or end it if it no longer benefits both parties.

Ending strategic business partnerships and allegiances can be expensive, so your organisation should put contingencies in place if your strategic partner terminates the partnership. It would be best if you had a cost sharing policy in place that allows for the costs of termination to be shared in an equitable way that doesn’t threaten the existence of your respective organisations. 

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