Partnerships

Now there is a word that is thrown around quite a bit….not just in business circles but in personal ones as well. With a 50% divorce rate and lawsuits in the business world a-plenty, it becomes difficult to understand what makes up a healthy partnership. From a personal standpoint, partnership is an area that I will leave to the likes of Dr. Phil and Oprah. Business Relationships?…Now that is something completely different.

In Looking at a partnership, it is much easier to understand what would work by looking at what doesn’t work. Partnerships that collapse tend to fall apart for some fundamental reasons.

Ground Rules. If you don’t set strict rules and parameters, you are doomed to failure. It is very silly to assume that in business someone knows “what you mean” in a partnership. As you know, it doesn’t work with your personal relationships, so why would it work in a business relationship. Clear rules and details make for a much more stable partnership. Interestingly enough, one the large Technology companies we represent has a real dichotomy of rules.

In the first case of becoming a partner with the company, there is an 18 page, and growing, contract of what is expected by both parties in terms of licensing, sales, reselling, where to buy and how you represent their products in the market place. In this very formal document, it is very clear what is expected on behalf of both parties. There is a time frame for this agreement and grounds for termination. While no one likes to deal with an 18 page document, it makes a very powerful statement as to the importance of the relationship to both parties. It also illustrates consequences for breaking the terms by both parties. It is predictable, consistent and offers measurements for continuing the relationship.

The dichotomy occurs in the way that it treats the day to day, or tactical relationships, with the organization's partnership with companies such as ours. For many years with this organization, they have preached about the “rules of engagement” with the client when both the vendor and reseller were involved with the end user. On a couple dozen occasions I have asked for a copy of these “rules” only to be greeted by a chorus of “well, there isn’t an actual document, it is more just how we try to do business”. Not surprising, this “rules of engagement” non written policy causes more problems in a week than any of the formal contracts do in a year. I recently had a meeting with the CEO of this multibillion dollar organization and asked the question about “the rules”. Turns out there aren’t any and no plans to create them.

It begs the question, “Why do companies do this, and what is the actual cost?”

Let’s start with the cost. To build a partnership, you need a relationship. Let me state that again. To build a partnership, you need a relationship. If you only have a relationship, you will never have a partnership. The partnership is formalization of the relationship. A partnership adds structure and formality to the relationship. The loss of trust and confidence our vendor absorbs every year is hard to imagine in terms of real dollars. Every time we engage with this companies sales force, we always keep our guard up. This is not good for them as a vendor, and it isn’t good for us as a reseller. However with no formal rules, and no consequences for breaking those rules, every single customer contact where we involve this vendor has to be treated with the possibility that anything can happen. From experience I can tell you that just when I think I have seen and heard everything, something new twist on bad behavior happens. I am not saying that the vendor is trying to behave badly, because they aren’t. What I am saying is that without rules and consequences for either party breaking those rules, no real partnership exists between the vendors sales representatives and our own, leaving it strictly to relationships.

The cost, while hard to calculate, is simple. Without partnerships, our company has to pick and choose our relationships with the vendor.  In other words our company will only deal with the vendors sales staff that, we already know.  Therefore any new sales representative that we deal with has to be treated with caution. For those representatives we know, most of the business flows through to them. The cost to the vendor is in lost potential business. If all the reps for both vendor and reseller had rules to follow which had consequences, there would be no reason not to deal with anyone inside the organization. Because the lack of rules exists, the potential loss in business would have to run into the billions of dollars.

What works? Rules that all parties understand and agree to up front eliminates any sort of “misunderstandings”. If it is written out, the rule exists. If it isn’t written out, anyone can do unilaterally what they would like.  If there are no consequences the ambiguity starts with the salesperson on either side saying “why not, the other party probably would understand, right”? Even writing down that statement makes me queasy. Many a relationship has gone down the drain because of similar questions and statements to that affect.

Until you have a partnership, you have a relationship and are just “dating”. Put it in writing, "slip the ring on" and create a partner. The relationship will turn to a partnership, and you’ll have much more productive business opportunities.