Marriages of convenience

Businesses are too fearful of seeking partners that are different from them, finds Roger Trapp

WHEN the personal organiser maker Psion recently announced that it was planning to share technology with the highly-regarded telecommunications companies Ericsson, Nokia and Motorola, its share price trebled despite a warning on future earnings. Such is the power of partnerships in the modern business environment.

This is partly a matter of perception. Observers feel a partnership like that entered into by Psion is intrinsically "a good thing", even if they do not know the details. But it is also backed up by hard evidence. Research suggests that in certain sectors, at least, organisations deemed to be especially good at forming partnerships create more shareholder value than those that are not thought to excel in this area.

Nevertheless, not all partnerships are equal. According to Anne Deering of the management consultants AT Kearney, whether or not a partnership is successful can have a lot to do with why it was established in the first place and what the parties involved are hoping to get out of it.

Sometimes those involved in a partnership have much the same motivations as those taking part in a consolidatory merger. They want, as she puts it, to "reduce the negative" by forming a bulwark against the competition. As she relates in a new book she has written with colleague Anne Murphy, this is fine ... provided both parties feel the same way. But just as problems are likely to result if one party wants to behave cautiously when the professed aim is to use the partnership as a launching pad into new markets, so the aim of holding still will be undermined if one of those involved actually wants to be creative or bold.

As the title of the book, The Difference Engine, suggests, the authors see great potential for partnerships to become more powerful than traditional mergers and acquisitions if organisations set about linking with those that are different from them. Ms Deering points to her own company's link- up with EDS, the infor-mation technology outsourcing specialist, as evidence of how two very different organisations can come together and grow.

Ms Deering, the vice-president responsible for AT Kearney's "intellectual capital", or know-how, in Europe, acknowledges that companies are frequently held back from such ventures by what might be termed cultural issues. However, she says organisations might not be so fearful if they understood the differences between them better.

To this end, she and Ms Murphy, an associate consultant with the firm, have devised a "partnering grid" that uses the management consultant's favourite tool of the matrix to define and evaluate the different cultures behind partnerships.

Once this has been done, they maintain it is possible not only to identify those cultures that are compatible and incompatible, and the ease of moving from one culture to another, but also to isolate certain behaviours or issues and intervene to change them.

Accordingly, an outsider brought in to shake up a public-sector body might react to setbacks by slipping in to a "command and control" style of behaviour and saying to the civil servant partners that they just have to do something, when in fact the culture would require them to achieve that aim by building a consensus.

The importance of this lies in the finding by Ms Deering and her colleagues that partnerships tend not to break down over transactional and legal matters, but over so-called soft issues, such as trust and differences in ways of working. Moreover, there is, they say, no correlation between the time spent laying the groundwork for a partnership - such as the documentation of procedures and setting out of shared values - and the success of the venture.

In other words, the people involved in such situations should be encouraged to break out of concentrating on each other's characteristics and get on with the job of making the partnership work.

It is just like a marriage where instead of analysing why they are not getting on, a couple should get on with dealing with it, says Ms Deering, who adds that she and Ms Murphy started the project after pondering the rising failure rate among Western marriages.

And although - as with traditional mergers and acquisitions - many partnerships do fail to meet their objectives, there are "enough models out there" to suggest that this is in the right circumstances a workable alternative.

Acknowledging that if the concept is seen by executives as "pink and fluffy" it will not be credible, she argues that certain organisations are creating value in this way.

Not that she expects to make waves immediately. She tends to share a view that executives are, perhaps understandably, less interested in the long haul of changing people's behaviour than in achieving quick fixes through mergers, acquisitions and various types of alliance.

"There's too much machismo in business. They are going to keep on making deals even if they are eroding value," she says.