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The Price of Poor Partnerships
by Stephen M. Dent

 
   
 
   

Alliances fail at an alarming rate. Consider these statistics from Accenture, a worldwide management and technology services organization:

  • Only 10 percent of negotiated alliances actually reach an agreement.
  • Only 2 percent of alliances survive more than four years.
  • Only about half of the alliances left, or 1 percent, meet their sponsors' expectations.

Yet, despite these dismal statistics, many business leaders claim that they already know how to build successful partnerships! They remain convinced that partnering skills "come naturally" and that, therefore, there's no need to instill their organizations with partnering competency or a partnering infrastructure.

Such thinking is extremely shortsighted -- and costly. According to Accenture, the worldwide value of strong, successful business alliances will be between $24 and $40 trillion by 2004.

So failed partnerships -- both those that never get off the ground and those that don't survive -- are costing companies a staggering amount of money.

It doesn't have to be that way.

A Quality Lesson

Early in my business career, I helped companies understand and quantify the high cost of poor quality in their products and services. I showed them how they could increase their customer satisfaction scores -- and save money in the long run -- by investing up front in preventing quality-related problems.

Today, almost every savvy business leader understands the principles -- and value -- of total quality control. Such control has become a core business practice.

Smart business leaders know that alliance-building is another core business practice that requires deliberate and careful management. Unfortunately, far too many business managers continue to approach partnering as they once did quality control -- with blinders on.

Many CFOs think that the partnering process requires only one thing: An analysis of the potential partner's fiscal stability. A few may go a tiny step further and investigate the other business's reputation as a partner, perhaps by checking with other companies to see how well the business honors its word and fulfills agreements.

This is a lot like buying a used car after only kicking the vehicle's tires and looking for oil leaks. No wonder most business partnerships run into problems -- fatal ones, all too often -- a few miles down the road.

Costly Mistakes

Let's do a quick cost analysis to see how much is financially at stake in building a partnership. This example of the Price of Poor Partnerships is a conservative one. First, consider the time involved in a) understanding your own company's strategic objectives, b) finding and negotiating a deal with your potential partner, and c) project development. You must also take into account your company's equity stake in the partnership.

The cost to a mid-sized organization of about 500 people of forming a simple alliance with another organization might look like this:

  • Clarifying strategic objectives/finding a partner 3 people @ $125 per hour (with benefits) for 3 months: $180,000
  • Negotiating the alliance (including legal fees) 6 people @ $250 per hour (with benefits) for 5 days: $ 60,000
  • Project development 8 people @ $125 per hour (with benefits) for 1 month: $160,000
  • Equity stake (average) $100,000
  • Total start-up cost: $500,000

That's a lot of money to waste. Yet, that's exactly what often happens to companies who are not trained in using their partnering intelligence and the Six Partnering Attributes™ of successful business partnerships:

  1. Self-Disclosure and Feedback,
  2. A Win-Win Orientation,
  3. Ability to Trust,
  4. Comfort with Change,
  5. Comfort with Interdependence, and
  6. Past/Future Orientation

Of course, more than money is lost when partnerships fall apart. Companies also lose development, sales, production, and distribution opportunities. In addition, a company's reputation can suffer. So can employee morale. What is the value of these intangible costs?

Increasing your business's partnering intelligence before you enter into an alliance is a simple and sure way to minimize this type of failure. Amazingly, however, many business leaders still haven't figured this out. They don't understand that spending money and time up front on the development of partnering knowledge and skill can save hundreds of thousands of dollars over the long haul.

It Doesn't Come Naturally

Many business executives also operate under the false assumption that partnering skills are innate. Nothing could be further from the truth. Partnering is actually an unnatural act for most of us. The skills required for being a great partner are counter-intuitive to what we're taught, how we're socialized, and how we're rewarded both in our personal and professional lives.

Take a close look at the media, which constantly bombards us with messages that deride partnering for go-it-aloneness. (Think of your favorite movie hero. How much alliance-building did he — and such characters are almost always male — engage in to outsmart the bad guys? Not much, probably.)

So it's not surprising that the Western business model portrays business heroes and heroines as being strong, silent, independent, and competitive. According to this model, the "good guys" get the best of every deal, outsmart their partners as well as their competition, and ride roughshod over anybody who gets in their way. Winning is everything.

Such winner-take-all competitiveness may be necessary for a good movie plot or success on a football or soccer field (although a good argument could be made that it isn't). In the world of business alliances, however, this attitude is a sure path to failure.

The Bottom Line

Businesses that fail to invest up front in the development of partnering skills are making an unwise -- and potentially quite costly -- decision. Partnering doesn't come naturally, so it's quite easy, as the statistics only too clearly show, for mistakes to be made and for alliances to fail.

Smart partnerships -- those that thrive and reward both partners -- require smart planning. They also require a specific set of partnering skills -- ones that anyone can learn with the right training.

To learn more about how to build an alliance based on the Six Partnering Attributes™, a must for partnerships to truly work, goto www.partneringintelligence.com or call toll-free: 1-888-292-0323

The Accenture statistics cited in this article come from their report titled "Grasping the Capability: Successful Alliance Creation and Governance Through the 'Connected Corporation.'" The report appeared in The Point, Accenture's monthly thought publication.


     
   
     
   

The Author

 

Stephen M. Dent is founder of Partnership Continuum, Inc., a leadership coach, and author of books, automated online assessments, and other tools that build more effective relationships at www.partneringintelligence.com or at +1.612.375.0323.

     
   
     
   
Many more articles in Partnering & Alliances in The CEO Refresher Archives
     
   
     
   
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Copyright 2002 by Stephen M. Dent. All rights reserved.

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