Criteria for a good partnership

Criteria for a good partnership

The prospect of plentiful, sustainable, cheap energy will transform what the world can do technically. Our technological developments are the process of us inventing science. There can be few more exciting things to do.

For economic, social and political reasons we can only do this in partnerships. It is ironic that the big issue of Brexit is not the divorce but how to stay together after it. In the end Brexit will be seen as the most trivial, pettifogging and pointless waste of time and money ever perpetrated on a continent.

Good partnerships are not just about money. Where capital is needed and when combined sales efforts make sense, money plays a big part. We are still human beings (just) and we still have instinctive, sometimes irrational, feelings about each other. We compete to survive and cooperate to thrive. We should be wary of losing the choice implicit in that behaviour. What comes in its place will be perfect obedience – “everything not compulsory is forbidden”.

In seeking partners we must weigh competition and cooperation. Challenge and support are a heady mixture but they work brilliantly when exercised sensibly. A good manager always encourages – and helps – his subordinates to compete with him. Those who don’t are self-declared failures. A good husband and wife team care to the point of suffering for each other but also compete to the point of sometimes winning and losing against each other.

Here are nine questions anyone contemplating partnership should ask:

[1] What is the purpose of the partnership for each party beyond making money? Money is never a purpose, always a consequence.

[2] What is the intended exit strategy? “Plans are for the birds but planning is essential” Dwight Eisenhower

[3] What are the fundamental, moral, cultural, ethical standards that partners must share? Never underestimate the problem of reconciling different cultures.

[4] What are the personal lifestyles each partner agrees for himself / herself as well as for the others? In the case of companies, practices of human rights.

[5] What do other partners understand by flexibility? If it is “what’s yours is mine and what’s mine is my own” don’t even start to partner.

[6] In drafting the Partners’ (or Shareholders’) Agreement are all parties willing
[a] to accept an agreement of intention rather than of legal correctness?
[b] to review it thoroughly once every six months for the first five years?
Those who seek legal niceties do so in order to challenge them later on.

[7] Which issues will require agreement only among those managing the business as opposed to which issues will be decided only by shareholder votes? Management must have some rights that shareholders cannot override. This is especially true in an era of private equity power.

[8] What are the rules for stock options and new share issuance? If the agreement doesn’t address this the share value will forever be manipulated.

[9] In the event of a serious dispute how will the partners handle the first stages of mediation? “Early fears prevent later tears”.

There are, of course, questions beyond these, too. These are just some of the questions that are seldom asked. Time spent on them now won’t avoid disputes arising. It will make their resolution more likely and easier.

I didn’t say answering these questions was easy; only that asking them is essential.