Planning for Partnerships
For partnerships to be successful, they must be part of the company’s culture and way of doing business, not just a tool for interfacing with suppliers. Partnership is an attitude that begins at the executive level and permeates the entire organization. It is looking out for the other side’s best interests while achieving breakthrough results for yourself. It changes the way an organization thinks and behaves, especially in times of difficulty.
Successful partnerships require a strategy, which must itself be tied to the business strategy. Here are a few questions to ask as you create your partnership strategy:
What innovations will we need over the next several years to be successful?
What resources will those innovations require, and do we have those resources now?
What technical capabilities will we need to obtain or develop?
How much faster do our processes need to be?
Which of the needed resources will we develop in-house, and which should we partner to obtain?
Partnership strategy is a pull/push approach like a freight train with locomotives in both the front and back; the front engines pull the train, while the back engines, carefully synchronized with the front, push the train. Using both sets of engines reduces stress on the couplings between cars, reduces friction between the wheels and the track, and uses less energy to move the train. In partnerships, the operations pushes, while the strategy of the business pulls, reducing friction, improving performance, and providing great value to all involved.
Partnership strategy should address the need for speed. In today’s business world, speed makes all the difference in competitive situations. Many companies will pay more for products that are delivered faster, and speed is a core competency that partnering can help provide. Much of the philosophy of just-in-time (JIT) is founded on that principle. In the past, JIT was focused on inventory reduction, which would expose the problems and allow for problem solving and continuous improvement.
Asking questions such as “How can we speed things up?” and “What’s preventing us from going faster?” can help generate a list of problems that need solving and processes to which you can apply continuous improvement principles. The answers to those questions can also reveal opportunities to work with partners to increase speed.
Once you have your strategy, pick a place to start (e.g., a pilot project) to refine your process and demonstrate success. Rather than selecting the biggest challenge or even the project with the highest return, choose one that is visible and likely to succeed. This project can be internal or external. It is often helpful to prove to outside partners that you have worked on your internal partnerships first to demonstrate your dedication to this effort. They may be more willing to commit when they see you implementing internal partnerships successfully.
Develop an implementation team and create a project vision to share what your objectives are, how you will measure results, and the working environment within which the team will operate. Establish an executive sponsor for the process, usually someone high up who will reinforce the project priorities and resolve resource issues as they come up. Review progress at least every two weeks (the frequency demonstrates that the project is a high priority) and include executives in those reviews. When you can demonstrate success, roll it out more broadly both inside and outside of the organization.
Five Steps to the Altar
There are five steps to getting to the altar for partnerships.
Establish a clear vision
Identify and prioritize potential partners
Develop trust and relationship
Develop an agreement
Execute the partnership with discipline
The vision provides a clear picture of what you plan to achieve in three to five years. Planning further out than that can be counterproductive because so much can change that the vision becomes unrealistic and people begin to ignore it. Vision accomplishes the following:
Sets general direction for change
Provides a means to establish priorities and set goals
Puts the focus on the big picture: the “why” rather than the “how,” which allows for flexibility in the specific approaches used
Using your vision as a yardstick, you can effectively assess a decision, measure an action’s relevance and urgency, and apply appropriate resources.
Focus and discipline are required to implement the vision, as well as
Clarity of purpose and intended results
Metrics for success
Accountability to others who frequently review your progress
Tools and authority to overcome obstacles
Reward, recognition, and commitment
Let your business strategy lead the way as you develop your vision for partnerships. Why are you doing this? If your company is a low-cost producer, your goals for partnerships may be different than if your company focuses on customer service. Understanding who you are as a business will help solidify your vision.
What are the characteristics of a strong vision?
It provides focus—creating boundaries for change and clarifying what is included and what is not.
It highlights areas for change—it directs activities toward innovation, cost, quality, attractive workplaces, and more.
It provides measureable and subjective targets—it can include specific number-based or percentage goals as well as more subjective things such as empowerment and satisfaction.
It is ambitious—goals should be ambitious yet attainable.
It should be easily communicated—a strong vision can be explained in just a few minutes.
It focuses on strengths as opposed to correcting weaknesses.
It should motivate people—that’s what it’s all about!
Next, identify and prioritize potential partners. The first place to look is at current partners, especially outside the company, like suppliers and customers. In most cases, current relationships can become partnerships if they are structured properly and the potential partner is willing and has the culture to do so.
An important next step is to distill the candidate pool into a small, core number of candidates. For instance, many of my client companies have a bloated supplier list when we start the supplier partner program, and they often buy the same item from more than five different sources. Not only does this create extra costs in duplicate work, but it often introduces variability in quality. In Chapter 3, we discussed sole sourcing of parts and dual sourcing of technology, but in addition, you should rationalize the supplier base so you have a few, top-performing suppliers as your key partners. Often, 10 or fewer suppliers make up this group and account for 80 percent of your spend. Focus is key here. Spend the majority of your time developing partnerships with the companies that make up 80 percent of your purchasing dollar. Following the Pareto principle (also known as the 80/20 rule) can yield great benefits for your organization and your partners.
Once you have rationalized the potential partners, you can begin improving the relationships. Priorities for improving relationships can be based on a number of factors, such as
Dollar spend
Revenue
Number of units bought/sold
Relationship to your business strategy
Contribution to future growth
Focusing on the vital few will help accelerate the partnership. Move a few partnerships forward a mile rather than many forward an inch.
Third, develop trust and relationship through communication, spending time with the partner organization and understanding their goals and objectives. Whether you’re partnering with employees, customers, suppliers, or the community, you have to pay your dues by spending time with the potential partner. In Lean lexicon, this is referred to as going to the Gemba or point of work to learn about what is going on. You can do the same in partnerships.
As VP, Operations, I learned about our supplier partners by visiting them, touring their facilities, meeting their people, and having casual conversations over meals. The relationships I developed were worth their weight in gold, particularly if there were problems or unexpected opportunities where we needed their cooperation.
Develop an agreement that will guide the partnership. For external partnerships, this agreement should be in a legal format, but not the typical lawyer-generated contract. We covered the memo of understanding (MOU) in a previous chapter and there is a sample in the appendix. For internal partnerships, create an agreement that includes objectives and measures so that both partners will know what they are trying to accomplish and how they will know when it has been achieved.
The Project Vision is an excellent internal tool. It contains a paragraph explaining the vision, specific measures to assess progress, and a description of the working environment such as teams, process discipline, and continuous improvement. Reviewing the vision at the beginning of progress review meetings helps keep everyone on the same page.
The last step in making your partnership official is executing with discipline by having clear objectives, measuring results, and holding people accountable. Companies often make rules but fail to speak up when the rules aren’t being followed and, even worse, fail to hold the offenders accountable. Accountability, like company culture, starts at the top; management must enforce the rules quickly and fairly at all levels of the organization.
When I was VP, Operations, there was a bright, young buyer in our purchasing department who did well at his job with one giant exception: He was unbelievably disruptive to the team. I got many complaints about him, but because he seemed so good at buying, I let his behavior slip for months. Finally, I couldn’t let it go any further. After coordinating with HR, I called him into my office and fired him. It was ugly, which convinced me I had done the right thing, and after he was out of the building, people came into my office to thank me for taking action. I quickly realized I should have disciplined him months earlier. The team’s performance improved almost immediately, and the partnerships between teams strengthened beyond my expectations. If I’d taken action earlier, I could have improved performance and probably lessened the ugliness during the termination. I learned a great lesson.
Getting the Executives Involved
As I’ve mentioned in previous chapters, it is important to get company executives involved in partnerships for several reasons. First and foremost, since partnerships are really a culture issue and culture starts at the top, executives need to set the cultural tone for the company. Second, change management (Figure 10.1) demands executive sponsors to set the vision that will drive partnerships.
Change often doesn’t last long. While everyone begins a new initiative with the best intentions, often the pressures of daily demand divert management attention from the task at hand, and the change initiative begins to founder and eventually fails. Getting executives to be involved and support the initiative from the beginning helps avoid these kinds of failures.
Figure 10.1 Change management quadrant
Keeping It Going
One of my early career bosses used to frequently say, “The golden rule of business is let there be no surprises!” To maintain longevity in partnerships, you must measure progress, which boosts accountability and minimizes surprises. For supplier partners, an active feedback program of supplier scorecards helps them know how they are doing and where they can improve. These scorecards should be reviewed frequently with key suppliers so that there are no surprises.
For employees, give feedback frequently; don’t wait for the annual review. In many cases, daily feedback is great. I developed a “Five Minute Stand-up” for all of our production teams with this agenda:
Is everybody here?
How did we do yesterday?
What do we need to do today?
Are there any issues/problems that will keep us from reaching our goals?
The first step helped reinforce the team concept—it takes everyone’s presence and participation to get the job done. Particularly in Lean environments, work is designed around the team unit, or vice versa in some cases. If the process requires five people, it requires five people. If there are only four on a given day, either the team cannot work, the process will be out of balance, or quality will suffer. Management needs to supplement the team with cross-trained workers or temporary workers who have been adequately prepared to serve on the team. The five-minute stand-up uses peer pressure to encourage people to show up on time, since members have an obligation to be there for their team. Peer pressure is unmatched in establishing the discipline of showing up to work on time.
How they did yesterday and what is needed today tells them the score, which, in most cases, is based a level of expected output: units built, orders processed, or customer problems solved. Normally, a monthly plan can be broken down into weekly and daily buckets to make expectations very clear. In some cases, units of output vary; in most cases, the average provides a meaningful metric. Some companies empower teams to decide if they need to work overtime to meet weekly goals, and often they can tell early in the week if overtime will be needed to hit their numbers.
Asking if there are any issues that will prevent the team from reaching its goals allows the team to voice any concerns they may have. At Supra, managers were accountable for getting resources needed to solve the problem and upholding their side of the partnership. If they couldn’t solve it, we had a method to take the issue up the chain to get the resources, including taking it to the CEO if necessary.
Partnerships increase competitive advantage for all of the partners. Not only do financial benefits accrue (sometimes to an extraordinary degree), but working relationships improve and the culture and working environment become positive, enjoyable, and rewarding. Internal and external partnerships provide dramatic results and are the foundation for a long, successful marriage. In today’s highly competitive global environment, executives are seeking ways to innovate rapidly to stay on top, and partnerships can be a successful tool to help accelerate profit and growth.