WHAT DO PARTNERSHIPS HAVE IN COMMON WITH MARRIAGES?
The future looks bleak for many companies in this sunny land of the cedars. In fact, many companies must feel a bit like individuals who pretended that they never wanted to get married until they had gone well past their prime. Now, they may well settle for far less than they ever would have.
Many a company, much like celebrated prima donnas, basked in the pride and glory of past achievements; became so drunk on success that they did not anticipate the advent of a future that would lack the luster of present success. There they stood: heads firmly planted in the sand, while the most unthinking and vulnerable part of the anatomy waited like a blind and mindless sentry.
Time, however, waits for no one. As we stand poised at the turn of the century, new and unanticipated threats await us. These da ngers will be met by many innovative and creative solutions. But there is no doubt that the majority will turn to traditional solutions. The first place of refuge will be various forms of partnerships or alliances designed to enlarge or strengthen companies who need to face aggressive competition from regional or international giants.
Following through on the marriage analogy, let us look at the range of possibilities:
'Strange Bedfellows 1'
The groom is a large, brawny man with a strong taste for money and pretty, naive young girls.
The bride is very wealthy but neither pretty or naive or young. However, oddly enough, she also has a taste for handsome, naive young men. The fighting begins very early in the marriage. The three options are: outright divorce, the wealthy partner pays off the other and sends him on his way or they decide to produce a brood of children to bind themselves into marital commitment.
The business partnership that paralle ls this is when direct competitors try to unite. The three outcomes are dissolution, acquisition by one of the partners, or a merger.
'Strange Bedfellows 2'
The groom is poor and often unemployed. The bride has regular employment in a low-paying job.
The wife's family offers to provide two rooms. In a short time, this couple finds itself in serious trouble.
Although it is seems obvious that such a marriage has little hope of survival from the start, many business partnerships are based on the same shaky grounds: an "alliance of the weak".
When several weak companies try to join forces in order to survive, it usually turns out that they only multiply weaknesses, and such a partnership ends in dissolution or acquisition by a third party.
'Strange Bedfellows 3'
The groom is very wealthy, very powerful politically, is 60 years old and used to having 'his way or no way'. The bride is not wealthy or at all powerful, but is 25 years old, pr etty, very inexperienced and heavily influenced by a family who considers 'money' to be the most important thing in life. Five years after the marriage, not only the wife, but her entire family are totally indebted to the husband.
Business partnerships between a strong and a weak partner usually lead to the strong becoming stronger and the weak becoming weaker. If they are in the same line of business, they become direct competitors. The outcome is that the stronger company buys out the weaker for a much smaller price that would have been yielded by an outright sale from the start.
Another scenario for weak and strong companies partnering is when the weak company manages to acquire the expertise and market knowledge to compete on its own. Such partnerships usually end in a 'break-up' when the weaker partner gains the ability to compete independently.
"Strange Bedfellows 4"
It seemed like a perfect marriage between two intelligent, educated and sociall y skilled young adults. He is an architect, firm, capable but not very outgoing. She is an interior designer, flexible, persuasive and sociable. They truly complemented one another. However, they had no children and their careers became an all-consuming interest. Trouble began to develop when the wife received more business and earned larger sums of money. The complementarity turned into competition. The tensions generated were so great that the wife preferred to work with other architects and the husband with other interior designers. After about seven years, the more successful of the partners bought out the other.
The same story unfolds in business partnerships that appear to be complementary at first, but as time passes, competitive tensions develop. The original objectives of the alliance no longer hold and the internal strain on the relationship usually leads to one partner buying out the other. According to Joel Bleeke and David Ernst who have co-authored a book on strategic alliances, the lifetime of this kind of partnering relationship is seven years.
"Perfect Bedfellows"
In the rare cases where the partners are both strong, intelligent, complementary, and robust enough to remain strong, both the marriage and the business partnership flourish. Such relationships last longer than seven years.
In "Is Your Strategic Alliance Really a Sale?", Joel Bleeke and David Ernst (Jan.-Feb. 1995, HBR) suggest two important safeguards for negotiating more permanent business partnerships. These are well worth consideration by the many companies that will be looking towards some form of partnership as a way of increasing competitive leverage. Remember though that an outright sale will fetch a far better price for your company that a forced sale after partnering when the bargaining power is not in your favor.
Recommendation 1: FLEXIBILITY: build in a clause that makes periodic re-negotiation of the partnership agreement man datory every three to five years, depending on the growth and change rate in your sector or industry.
Recommendation 2: ASSESS RISKS: look at how the relative bargaining power of the partners will evolve in time based on the specific business strengths of the partners and which of those are most critical to business success; which partner controls the customers that will be served by the venture, and which company will fill more of the top management positions. Keeping these in mind write a clear exit-clause into the agreement from the start.
CONCLUSION: Unless partnerships are built on mutual and equal but complementary strengths, they won't last. And unless the agreements build in enough flexibility to account for the inevitable changes over time and the hedging of risks in case of dissolution, they will break up in the same way as unsatisfactory marriages often do.
Fay Niewiadomski founded ICTN (International Consulting & Training Network) in 1993. ICTN provides complete management services to its clients who are among the leading regional and multinational players. Furthermore, she has worked with CEOs, Board Members, Presidents and Ministers of Government and other Leaders to help them meet the challenges of change within their organizations through creative problem solving, management interventions and powerful communication strategies. Prior to founding ICTN, she researched the subject of "Managing Change through Needs-Based Assessment' in large Lebanese Organizations" for her doctoral work at the University of East Anglia in the UK. Additionally, she also held various university positions as a professor at AUB and LAU and as Dean of the Faculty of Humanities at NDU.
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