PARTNERING: BUSINESS COHABITATION IS IT FOR YOU? By Barbara A. Frantz, Esq. What happens when you have hired the ultimate consultant to refine your business, downsize to the max, optimize your cash flow and your customer asks for a 10 percent reduction in your price? This issue is facing businesses of all sizes in our present economic environment. As more and more companies are merging, the same supplier base is trying to compete for a downsized client base. If a business has reduced its profit margin to a bare minimum, where does it go to find further reductions? It goes to that grey area along the border between two businesses, both between the business and suppliers, and between the business and customers. What is required to accomplish reductions is a shift in thinking, a shift from “competing” to “partnering.” Women business owners are naturals for partnering, because they have a tendency to create rapport rather than hierarchy in their relationships. This means that when they are introduced to a new person, they don’t automatically assess that person as being above or below them. (See Deborah Tannen’s book, “You Just Don’t Understand” for details). Rapport building tends to create intimacy. Intimacy is the foundation of a good partnering relationship. Women tend to be more comfortable sharing and adapting their vision to those around them. Shared vision is a key element of good partnering. The trend towards “partnering” today is phenomenal. Although many would argue that it is an old concept, as old as having “Guilds” in the medieval times, it’s as if the concept was lost and is now rediscovered. Partnering is not restricted to mega-corporations. Examples of partnering include companies like United Parcel Service who used its core competence in logistics and fleet management to internally manage deliveries at a company with 22 delivery doors….or a company like the local NOW Messengers who provides its staff to be on-site at law offices to manage deliveries to courts, or who provides foot massagers with its advertisements to local chiropractor’s waiting rooms. The Huthwaite Group has authored an excellent book, “Getting Partnering Right,” which discusses in detail other examples and ingredients of a good partnering relationship. The key to understanding partnering is to understand that partnering is not necessarily “partnerships.” Partnering is like cohabitation, partnerships are like marriage. Partnering is like marriage without the paper. Lawyers tend to cringe at the thought of exposing intimate details of a company’s business profile to a supplier or customer without a detailed “Partnership” agreement. Partnership agreements require negotiation which usually requires an “adversarial” attitude. It’s important for attorneys to shift from that adversarial attitude when both parties are in partnering mode. Partnering is different. Partnering starts with a basis of trust, shared vision, loyalty, and some form of immediate impact to the bottom line of both companies. Although partnering usually starts at the business owner level and works its way through the other levels of management at both companies, each company at each level must understand and accept the ingredients. Partnering may involve partnership agreements or may not. More often they require guidelines, policies, procedures and systems to facilitate the interaction between partnering companies. Most often, partnering involves conducting a joint feasibility statement before commencing partnering activity. For partnering to work it is important for each company to identify supportable goals and conflicting goals for each of them. Supportable goals are fairly easy to identify, such as “together we can service this account and increase our share of business within that account” or “together, we can shorten delivery times by 3 days.” Conflicting goals are the dark side to partnering but also must be addressed. Examples of conflicting goals are one company wanting to close the deal with a customer within 3 days, although it would be better for the partnering company to close the deal in three weeks. Partnering should also not be confused with creating intimate business relationships to eke the last ounce of profit from a supplier or customer by having access to information from them you would not ordinarily have. The loyalty aspect of partnering requires that sometimes you won’t make as much profit as you could from other business deals. But the long term nature of the relationship cuts your marketing expense, and increases your accuracy in predicting labor requirements. For example, Bose Corporation, maker of audio systems, empowers their suppliers by giving them “insider status” which benefits Bose, its suppliers and their customer. The traps which have occurred in past partnering efforts include over-relying on any one success factor, such as the partnering companies’ abilities to form an intimate and loyal relationship, or to make a highly profitable first deal. Another trap is to create a “vision in a vacuum” in which you proceed on an exciting idea without first having built trust. Another trap is to create intimacy for intimacy’s sake without responding to the customer’s needs. It is always important to build loyalty with customers, especially when a product may not be very different from a competitor’s product. It is important to have a customer give the opportunity to match a competitor’s offer. It is important for a business to be ready to respond to that “we are now operating with a 55 percent reduction in our list of vendors, if you want to be on the list, please reduce your prices to us across the board by 10 percent.” Partnering affords continued competition. Tremendous opportunity is available now to create partnering relationships. There are consultants available who specialize in partnering. Areas of competitive advantage are harder and harder to find. Partnering is a quantum leap in maintaining the success of a company. Barbara Frantz is the past president of the National Association of Women Business Owners, Los Angeles Chapter (NAWBO-LA)