Partnership Risks and Pitfalls

Quick Summary: Partners require mutual benefits but are always subject to some level of friction.

Abstract:

Partnerships can provide some significant advantages to companies and, in fact, in today’s business climate, are mandatory for most businesses. Partnerships allow a company to leverage the capabilities of others while focusing on their core competencies.  There are, however, risks and pitfalls that can occur.  Knowing what they are can help to avoid their occurrence or minimize their impacts.

“Trust in God but keep your powder dry” is a paraphrased statement from a poem about Oliver Cromwell.  The concept can easily be applied to partnerships:  “Keep your faith in the partnership, but plan for mishaps and have contingencies.”  In any relationship involving two or more people or organizations, there will always be room for errors and misunderstandings.  Deviations and exceptions are standard and should be expected.  A jointly developed and detailed mutual expectations matrix that lists specific day-to-day interactive tasks and identifies which party has the fundamental responsibility will eliminate many of these risks and potential pitfalls that could be encountered.

Below is a list of some the risks and pitfalls that can occur.  There is a common thread linking these items.  It is human nature.  Furthermore, most of the items are a result of strong feelings about customers and who best can serve them.  The items are numbered for reference only and are not presented in any particular order.  The list is long, but by no means complete.  It is not intended to dissuade you from pursuing partnerships.  The intent of the list is to offer some issues to consider before finalizing an arrangement.

  1. Companies and individuals are often overly jealous about “their” customers.  They have built a relationship with them and do not want others involved.  In their opinion, someone else could not possibly serve them as well as they can.  Requiring sales teams to relinquish account control as a result of a partnership can be problematic.
  2. Asking another company (your partner) to develop a market or educate customers about problems that the customer does not know they have, but that your product or service can address is extremely difficult.  With few exceptions, the partner will never know the product or the application as well as you do.  Partners are far better equipped to serve a market with customers that already understand and embrace the need to solve a recognized problem.
  3. Sales reps must believe that their customers are more important than anyone else’s and their needs must always come first.  They will expect their customers be given priority over all others.  Although problematic for the organization, their attitude is correct and should be encouraged.  This issue can quickly sour a partnership while it is in its early stages.  A partner’s sales personnel may have a difficult time knowing all of the details and nuances regarding a new product or service.  Their initial calls for support can easily overwhelm the supporting organization, resulting in the feeling that the company is being unsupportive and insensitive to them and their customers, resulting in the sales rep deciding not to pursue the opportunity.
  4. Market and customer demands can change quickly.  To avoid costly delays in recognizing and responding to those changes both partners, independent of who has direct customer contact and control needs to stay in direct contact with some portion of the customer base.  Relying on second hand information from your partner can result in accidental distortions, focusing on symptoms, not root causes, anomalies, or widespread trends.
  5. There may be individuals within the partner’s organization that are not supportive of the partnership.  Reasons can vary, but it is common for individuals or departments to feel that they are better equipped to serving the customer than the partner.  They may be openly hostile but, more than likely, just will not be supportive of the partnership, which can cause inefficiencies or, perhaps, complete partnership failures.
  6. With a partnership, a company can no longer be self-focused. The needs and commitments to partners must be taken into account. No one likes surprises, so you must overly communicate. If a partner is negatively surprised, trust can quickly be broken, which will take a long time to mend.
  7. To paraphrase an old quotation originally applied to personal relationships, “There is only one thing worse than coming off of a broken partnership, and that is living in one.”  Despite the best initial intentions, for any number of reasons, a partnership may not end up providing the returns expected by either or both parties.  If that is the case, the question needs to be asked and appropriate actions to mend or terminate the arrangement need to be made.  There is no value in attempting to establish guilt or document failures.  Ending the relationship professionally, with the possibility of re-entering a relationship at some point in the future, should be the goal.
  8. Either partner may not be able to scale large enough or fast enough to meet the increased demand that may be created with the announcement of the new partnering arrangement.
  9. Although supported by the Goliath company’s management, employees may be reluctant to embrace the partnership out of fear that the David partner may go out of business or not be able to support “their” customers in the future.
  10. The new product or service offering may not “fit” into the partner’s standard methods of doing business, resulting in a reluctance to pursue opportunities or provide the required services.
  11. Your partner may be concerned that you will take the knowledge gained through the partnership and use it with their competitors resulting in less than open dialogue and interaction.
  12. After one of you become too reliant on the other partner, that partner may place undue demands, leveraging their relationship, knowing that you have no choice but to comply.
  13. A partner may make demands that you do not work with their real or presumed potential competitors independent of any contract language allowing such engagements.
  14. After changing plans and investing heavily in support activities for the partner, the partner may not deliver revenue or provide other committed results as forecasted.
  15. Goliath partners especially, may insist on you embracing their internal processes that may not make sense for you and can overwhelm your organization.  As an example, a Goliath may require you to apply for and obtain product certifications or meet certain quality standards for the sake of showing compliance that have little or nothing to do with the products or services that you will be providing to them.
  16. They may be very slow in paying you, which can cause cash flow problems for you.
  17. They may require unrealistic service delivery and support requirements of you.
  18. They may require you to not pursue direct sales activities, especially with any of their customers or prospects.
  19. You may be subject to “flow through” legal requirements from government agencies requiring EEOC and many other regulations or the use of specific union labor that should not apply to a company of your size.
  20. By working with them, you may limit your options in terms of working with other companies or obtaining strategic investments from others.
  21. Your reputation may suffer if they run into difficulties that may be totally independent of your partnering arrangement (“guilt by association”).
  22. Due to any number of reasons, your partner may lose interest in actively working with you, resulting in an effective but still “binding” relationship.
  23. A customer may insist on either of you not working with the other partner causing an internal conflict.
  24. For Goliath partners especially, internal employees may feel empowered to tell you what to do, how to do it, and when it is required.  This can cause you to be in the middle of internal conflicts within your partner’s organization.
  25. The partnership may have been created by one group, but another group, who may feel disenfranchised, may be asked to implement it and may provide less than enthusiastic support.

This list is long and scary but think of it as a map through a field of potential landmines.  The recommendation is to proceed carefully not to avoid the field entirely.  There may be a pot of gold at the other end that makes the trip worthwhile.

 

Article Number : 5.050204   

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