How to Get New Partnerships Off on the Right Foot

How to Get New Partnerships Off on the Right Foot

In this article from the Program on Negotiation from the Harvard Law School Katie Shock offers some interesting ideas for consideration.   Her four key points are:

  1. The effect on outsiders
  2. A possible culture clash
  3. A high level of uncertainty
  4. A possible “winners curse” situation

I would like to expand on these from a broader perspective than mergers and acquisitions with large corporations and bring these back to other partnerships on a smaller scale.

The Effect on Outsiders

Her focus is on regulators, but she also indicates that decision makers need to consider customers and the public.  I would like to expand on this to include all stakeholders and customers.   Think about what this may mean in terms of vendors, suppliers, customers, competitors, and other stakeholders.   How will they view your partnership going forward?  This can be tricky at the micro level.    Be sure to think this through.  You may want to test the waters on this potential partnership with trusted mentors and close advisors.

A Possible Culture Clash

As a consultant that focuses on enhancing effectiveness and conflict resolution, I find this element to be very significant.   Having reviewed hundreds of mergers and acquisitions for some of the largest companies in the U.S. I can tell you that significant time is spent reviewing logistics, manufacturing, research and development, financing, tax, customers, vendors, marketing, assets, liabilities, environmental concerns and other intangibles.  I can also tell you that cultural clashes are often the biggest negative not fully understood by those involved with the transactions.   According to KPMG 83% of mergers and acquisitions actually fail.  Think about that.  This is after the best minds of both entities have made their best efforts. 

This implies to me that the parties need to sit down and discuss mission, vision, strategic planning and their approaches to employees, vendors, customers, and other stakeholders to see if the cultures of each are compatible with one another.  This is a major area of concern that requires true due diligence.

A High Level of Uncertainty

The author’s commentary relates to uncertainty of the long term success of the players in their industry. This may or may not be as significant of an issue with your new partner.  I would propose that consideration be made before the partnership is consummated to plan for the divorce. Hopefully there will not be a divorce, but if one is necessary has this been thought out and planned for going forward?   Is it necessary to have a buyout agreement?  If so how will it be determined?  Are covenant’s not to compete part of the process?   How can you mitigate risks in all of the areas identified above associated with the topic “A possible culture clash”?  Assumptions were made regarding revenues and expenses.   What other underlying assumptions need a sensitivity analysis in order to minimize risk?

A Possible “Winner’s Curse” Situation

In mergers and acquisitions several of the players have a keen interest in having the transaction materialize.  There is a lot riding on the success of the process in order to reap healthy financial rewards for certain participants.  These participants have a stake in the outcome.  They are not unbiased participants looking out for your best interests.  As such they are selling the positives and not always bringing to light the potential risks or negatives of the transaction.  

In any partnership, beware of being overly optimistic regarding the new partnership or participants. You can count on a “honeymoon” period, but as time proceeds, and realities set in, don’t be surprised that things are not as rosy as initially anticipated.  Knowing this surround yourself with realists that can provide you solid advice of potential concerns.  Add them to your negotiating team.  Seek out the experience of others, mentors and confidants that will provide you with their insight to address concerns that maybe you had not thought of from your perspective.

Helping firms with the topic of enhancing effectiveness and conflict resolution, I have developed a four hour work shop with a series of interactive sessions. In one communication exercise I ask participants to proceed to one of five areas and self-identify themselves as a box, rectangle, circle, triangle or squiggly line.  Then I provide a definition for each.  I ask if anyone would like to move.  Typically about 10% move to another shape area.  Each group is asked to say why their shape is best and what do they want to say to the other shapes.  It is a fun and humorous exercise. What’s the point?  The point is that we are all different, but we need all the shapes.   The boxes are the doers.  The rectangles include all of the shapes, but are going through transition.  The circles want everyone to get along with everyone else.  The triangles are strong personalities focused on completing the mission.  The squiggly lines are idea persons always innovating and ready to try new things.  A mix of all provides a good team with diverse outlooks.   Think of that in terms of your partnership.  Who can help you ensure you are looking at the partnership from different perspectives?  You can incorporate this same thinking into not only your next partnership, but into your other negotiations and tasks as well.

The four key points should be considered in any partnership, but I also encourage you to think about these related to not only the major mergers and acquisitions, but also to the micro level of bringing on a new partner in any venue and what considerations you may have going forward. 

Michael Gregory, ASA, CVA, MBA is an expert in conflict resolution and enhancing effectiveness who is dedicated to making individuals, organizations, thought-leading entrepreneurs and executives more successful. Michael’s books, including his NEWEST BOOK, now also available as an eBook, Peaceful Resolutions  are available at this link.  On point resources are available online at www.mikegreg.com and check out the blog.  Contact Mike directly at mg@mikegreg.com or call (651) 633-5311. 

About the author

Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at mg@mikegreg.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, MBA, Qualified Mediator with the Minnesota Supreme Court]