Not All Partnerships Are Equal

Dharmesh Shah on his startup focused blog talks about partnerships. For all of you who are contemplating startups, or working for organizations in merger/takeover talks, this is a must read.

A sample quote: PR Glow Lasts A Day, Lock-In Lasts Longer

The other points don’t hit you in the gut like the one above but are equally, if not more, valuable. I have seen the 4th point around what each company loses in a partnership play out.

The previous company I used to work for was a premium financial services consulting firm. With a set of blue chip clients, access to the C-level folks in the financial industry and consulting rates any services company would kill for it was a pleasure to work there. Not to say it was employee heaven though, shit happened but there was so much positive vibe and work happening that people generally got by without bitching too much.

And then they entered into a merger agreement with a much larger company. Right from the word go, regardless of what spin was attached to the partnership, it seemed doomed.

It has been 18+ months since I moved from the company and all of what I hear does nothing to make me want to go back. The larger firm brought as much strategic thinking to the table as a money lender would, was akin to a machine shop floor in its functioning, efficient but no finesse.  The smaller firm thrived on personal relationships, consulting deals won through intellectual rigor, contacts and old fashioned ear to the ground.

This was chalk and cheese in hindsight. But guess what, the larger organization barely skipped a beat. The smaller organization though got ripped, its value proposition gone and its best people jumped ship.

The most valuable lessons for me in this, as a humble foot soldier on the ground, was this –

  1. Balance sheets don’t tell the whole story – Not all aspects impacting a potential partnership can be deciphered through balance sheets and the counting beads of its accountants. Interact with the people at middle-management levels. This is typically hard to do when there is a blanket ban on talking to anyone but the official representatives on either side. But with so much of social media stuff happening, especially with blogs, facebook, twitter etc it should not be hard to get a sense of how the people at these levels think, how they work etc.
  2. Strategy is top-down, execution is bottom-up –  It is not enough if the C-level folks want the entities to merge, share infrastructure and gain operational efficiencies. Buy-in from the team on the ground is crucial. Or your ability to execute is going to be hampered. Like it or not a hundred processes that encodes the knowledge of your best people is useless. Unless you are a manufacturing outfit who will not change what you do for 10+years.
  3. Distrust yes masters – Do your trusted lieutenants agree with whatever you do? If so, fire them now. You do not have to share your thoughts with those who always agree with you. Get contrary view points. Also grow enough to know an opinion is not the person. Not directly relevant to any merger/partnership process but very necessary because the more number of heads spinning out perspectives the better your chance you have at making this work.
  4. Think very hard on the motivations of the other party – This one should be obvious 🙂

That is what I learnt. What else would you add to it?