Every month, we sit down with an industry expert with years of experience to get insights and advice on a range of different topics. From improving your social media presence to scaling up during times of change, the practical guidance they offer can help add some real value to your operations.
Here, we talk to Jeremy Stern, chief executive of promotional compliance company PromoVeritas, about what companies should know about working with external partners, including qualities to look for, the screening process, and how to overcome the inherent challenges in partnering with another business. For those who've been going solo for a while and are looking to make the leap into a working relationship, Jeremy's words provide plenty of information on how to navigate the difficult but rewarding world of external partnerships.
What should a business do before it starts to look for potential external partners?
Firstly, are they really going to be a partner? A partner in my view is someone who shares the journey through good and bad times; they should be in it not just for the money, but because they share your goals and your purpose. Rarely will you find a commercial partner that fits the bill – they're generally going to be a simple ‘supplier’. You pay, you get. You don’t pay, you don’t get.
That said, your approach in looking for external partners will depend on what category this partner/supplier is going to be in, of which I feel there are three types:
Strategic: Tends to be more people-centric businesses, who help to shape and guide your business rather than just sell you a tangible product. Your accountant might fit into this category, so might your marketing agency. What you are looking for is chemistry, the ability to get on with the people, an understanding of your goals, and the intelligence and systems to deliver.
Core: These will be vital for your business, but they mainly supply products, your raw materials supplier, or they may be your internet provider. They could even be your bank. Here you are looking for reliability, solid performance, quality and responsiveness, but the vital thing is the service or product that they supply, not so much the people behind it.
Non-core: It’s always a good idea to get on well with your cleaner, but they aren't vital to your business, nor is your packaging supplier; there are many other people who can supply corrugated boxes. Most will be commodity services or products and price or value will be the key factor to look for here.
Particularly for core products or services, always ask yourself whether you could supply it yourself. It may mean recruiting new staff, or setting up a new team or office, but if something is truly core to the business, wouldn’t it be better if you were in full control of it?
In my business, we made the decision two years ago to set up a digital service team, one that creates websites for client projects as well as work on automating some of our internal processes and systems. It proved successful and now represents 15% of our total income, but we have kept it small as it's hard to predict workloads, and still use a couple of external preferred suppliers to cope with excess work.
When you outsource part of your company, some management decisions and control naturally pass to the partner which can be difficult for some people to accept – how can you ensure this doesn't become an issue?
There are so many competing priorities in your own company, and all of them double when you add on an external supplier. You may think that you're important to them and they may say you are important, but when push comes to shove, there is always a risk that you get sidelined by a big project from elsewhere or there are struggles within the supplier.
The key to success lies in having a one-page agreement – of course, there will be a huge complex contract between you and them, but what you really want is a mutual understanding that is simple for both sides to understand.
Make sure it covers the core essentials of price, quality, delivery and expectations, but then add in what to do if there is a delay or variation in service, and the obligations of both parts. Their delay could cost you dearly.
Then ensure that the key staff in both companies, ideally at board level, are aware of this one-pager. Every member of staff now knows about each others' respective company, they'll be made aware of their obligation, and possible penalties for deviating from it. If there is a problem, it might just sway them to let someone else down and not you!
When it comes to choosing a partner, what sort of screening process should a business use?
There are no hard and fast rules here. I've used companies based on excellent recommendations from people I trust, but they've ended up not working out. Equally, I have taken a chance with new entities and they are so keen and committed, it has worked brilliantly and we are still trading together. That said, some of the more obvious starting points are:
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Which do you prefer – decision making by committee or having one person responsible for making all the decisions?
My preference is always for speed. The ability to make decisions, implement them and review is in my opinion far better than long drawn out debates that tend to occur more with committees. Of course, doing it fast may mean that occasionally you get it wrong, but few decisions are irreversible or fatal, and in the time you saved chatting about it, you could rework the decision and still be where you would have been had you waited to deeply analyse everything.
Since a partner won't be working in the same office as you, how important is communication? What can businesses do to ensure strong communication is maintained in such business relationships?
The typical response would be to have regular weekly meetings or phone calls, where you run through an agreed-upon action or issues list. These tend to work well in the early days, but they become far less effective after a couple of months – people tend to drop out, they become very samey, and rather than being motivating and energising, they become dull and boring.
So, I prefer a different approach: a couple of meetings at the beginning to ensure both sides really understand what the other wants and needs, often cemented with lunch. Then open up a Dropbox folder, with a running status report that the partner keeps up to date on a regular basis. Then at any point I, or my team, can go in and see where we are at with a particular project, and if there appears to be an issue, then we can call the partner and discuss. Otherwise, we carry on.
We are also just beginning to use Jira, a Trello/Kanban-type system for running our digital projects, which allows us to see timelines, blockages, and resources.
Can you recommend any techniques and methods that can help to avoid conflict?
Conflict arises through a mismatch of goals. If we share a common goal, then there should be less conflict. Having a common goal with one’s staff is straightforward. The introduction of a partner or a supplier to the equation could lead to a set of different goals becoming apparent, with two teams playing to different rules. The solution is to go back to the definition of partner – get their remuneration to be aligned with yours. If you succeed, they succeed too.
What are the signs that an external partnership isn't working any longer? At which point do you go your separate ways?
The signs are the same as in any personal relationship because, essentially, it's people that create the best partnerships, not companies. So, look out for boredom setting in, for a lack of responsiveness, for a lack of innovation, have they stopped coming up with new ideas or bringing you the latest gadgets or theories? It probably means that they're placing their attention elsewhere, preparing to have an affair, so to speak.
Has working with partners changed the way you look at your own business? If so, how?
I have had a number of strategic, core and non-core partnerships over the years. The best have been with my non-execs; people who seem to really care for the business and for me, who are able to call me out on a bad decision, but have the interests of the business at heart, not themselves.
And along the way, there have been lots of good and mediocre companies that are more suppliers rather than partners. And that’s probably not a bad thing, because times change and staying competitive may require moving suppliers around – and getting divorced from a true partner can be difficult!
If you’ve enjoyed this article, don’t forget to read other Q&As in our Business Basics series at the following links:
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