The small firm’s step-by-

step guide to partnering

The small firm’s step-by-step guide to partnering | 1

Foreword

Partnering is a commitment by a customer and supplier to a long-term relationship

based on clear, mutually-agreed objectives to strive for world-class capability and
competitiveness.

In recent years partnering has become established best practice among many
large UK firms. This guide looks at partnering for smaller firms, whether they
are partnering with another small firm or with a larger firm. The latter brings
particular difficulties, as the David and Goliath mindset can act as a barrier. This
guide shows not only that it can be done, but also that small firms have some
winning cards in their hand.

A partnering relationship develops when customer and supplier decide to work

together as partners, in a close and long-term relationship. The principle being
that teamwork is better than combat. If the end-customer is to be best served,
then the partners must work together, and both must win. Partnering works
because both parties have an interest in the other’s success. In short, partnering
can improve your competitive position by bringing down costs, enhancing quality
and making you more responsive to your customers’ needs.

It means rejecting the ‘master-servant’ syndrome where the supplier is merely told
what to supply and the customer is told the price. Instead the partners agree on
common goals and build the commitment, trust and mutual support necessary to
achieve them.

Partnering is not a one-off solution. It is a culture that is applied continuously.

Nor is it the complete answer to business success. But in your company’s battle
for survival, it can play a vital role.

The small firm’s step-by-step guide to partnering | Foreword 2

Introduction

The European Union defines a small firm as one with up to  employees, and a
medium-sized firm as one with between  and  employees. It is thought that
together these companies make up  per cent of British business.

Power in purchasing
Relationships between small/medium companies and much larger customers
have traditionally revolved around the use (or frequently abuse) of power. Power
has been a way for the large customer to treat the small supplier as subordinate, by
focusing on price and prompt delivery alone. Many compile an extensive supplier
base, indirectly pressuring their suppliers into staying price-competitive or running
the risk of being replaced by another one. This power game is short-term and
antagonistic, and nurtures neither the security needed to work well together nor
the incentive to do better.

Partnering marks a shift from this traditional practice towards a situation where
the supplier is treated as an equal of the buying organisation. Power is altered
into co-operation, and quality, innovation and shared values and ambitions
complement price-competitiveness. The focus is long-term, based on trust and
mutual support.

If you are in a power-based relationship, you need to persuade your customer of

these benefits. This is not always easy, but this guide gives you the information
you need.

If you succeed, your customer will grow to regard you as an integral part of the
business, will see your performance as a key element of consumer satisfaction
and will involve you in the total purchasing decision. This does not lead to a cosy
relationship, free from the competitive pressures of the marketplace, but rather
integrates both firms in a close commercial relationship, where joint strengths
create new opportunities. Nor does it mean that you relinquish power and are
taken over by the larger customer. There are substantial benefits for both sides.

Partnering will not bring about a miraculous overnight transformation in buying

behaviour, but, taken as a long-term business decision, small companies can use
it to develop strategies that create opportunities. It is not a quick fix. It is a culture-
based process that takes time and effort, and reaches into every part of your
business.

The partnering approach

The partnering approach has been adopted by many of the UK’s world-class
companies, which believe that customers and smaller suppliers should work
together for mutual benefit. Working together can improve responsiveness,
reduce costs and directly improve the competitiveness of both companies. It
does this by bringing together the specialist skills of the small supplier with the
valuable resources of the larger customer.

The partnering approach is a valuable strategy for small and medium-sized

enterprises. It complements many other business strategies such as Just-In-Time

The small firm’s step-by-step guide to partnering | Introduction 3

production, Quick Response logistics, Total Quality Management, Total Cost of
Ownership and proactive purchasing.

The philosophy of partnering involves recognising that ‘what was achieved

yesterday, must be improved on today’. This may mean redefining many of your
business practices, because a partnering relationship:
■ Is a long-term commitment
■ Brings about a change in emphasis from purchase price to total acquisition cost
or total cost of ownership
■ Needs an absolute commitment to the quality of the product or service.

The small firm’s step-by-step guide to partnering | Introduction 4

The three key objectives

Minimise the costs of doing business together

This includes the financial savings to be had from removing duplicated effort,
eliminating wasted time and bureaucracy in the system, and removing practices
that do not add value. There are also financial benefits that can be added as part
of a partnering relationship. For a small or medium-sized manufacturer, for
example, this could be a joint policy to store stock at the customer’s warehouses
where it adds value.

Gain competitive advantage

By focusing on the key business issues, both companies can work together to
differentiate and improve products and services. This could include removing
unnecessary costs to compete on price, redesigning products so they contain
fewer materials or are easier to produce, or entering new markets. Larger
business volumes for both firms can result.

Delight your customer

A partnering relationship should create a spirit and provide an opportunity for
both companies to get better at everything they do for each other. Joint teams
can identify improvements, and ideas can be piloted, monitored and assessed
with greatly reduced risk.

Additional objectives are:

■ Efficient product and service development through combined strengths and
resources. Exchanging ideas and concerns helps translate market needs into
new products and services that will satisfy the end-user, and fosters an
environment of continuous improvement in both organisations
■ Achievement of world-class quality standards, by creating a streamlined and
efficient service between the partners
■ Provision of better management information on which to run the businesses over
the long term
■ Reduction in the time taken to get a product or service from the drawing board to
the marketplace
■ Reduction of the buffer stocks between companies and an increase in the
accuracy of forecasted levels of sales and market trends
■ Sharing the resources of both companies to become informed and prepared for
new business.

A partnering relationship is therefore a combination of good business sense and

an opportunity to develop long-term gains. Many suppliers and customers have
already built a trusting relationship through a history of trading together, but have
failed to formalise the agreement, therefore missing some of these benefits. A
conscious strategy and long-term focus on end-customer satisfaction are the key
to even greater levels of success.

In short, partnering is not an end in itself, but a means of strategically and

continuously managing the business relationship to mutual advantage.

The small firm’s step-by-step guide to partnering | The three key objectives 5
 Building a partnering relationship

Use this chart as an overview of how to build a partnering relationship. Whether

you are approaching partnering as a customer or a supplier, the steps are the same
(though the details are different).

Identify your Identify & rank Identify & rank Develop Which
company products & markets for action plan markets
strategy services for their suitability and which
the start of a for developing products/
partnering partnering services?
relationship relationships

Sell to Sell the Sell the Sell to the

management idea idea to rest of your
potential organisation
partners

Identify the How have Define the Is their Understand Choose

candidates they criteria for management their your first
performed selecting interested in strategy partners
to date? partners partnering?

Agree the Define what Agree Agree Commit to

style of you both want tangible continuous partnering
relationship from the objectives improvement
partnering measures
relationship

Start work & Agree Build the Continuously Make your Tell everyone
build joint monitoring & relationship monitor first about what
review & measuring results against partnering you are doing
management systems objectives relationship "Success
teams work breeds
success"

Review & Extend the Develop new Refine and

audit programme partners for develop
the future

The small firm’s step-by-step guide to partnering | Building a partnering relationship 6

 Is a partnering relationship right for you?

Identify your company strategy

What are your business goals?

What sort of customers and suppliers do you need to support the growth of your
business?

Who are your key customers and suppliers?

Know yourself

What strengths could your company offer to a partnering relationship?

Identify the role of partnering for your business

What is the role of a partnering relationship for your business?

What weaknesses do you need to combat?

What are the opportunities that partnering can offer you?

What obstacles threaten your path to partnering relationship?

What should result?

■ The kind of customers with whom you prefer to deal
■ The type of relationship that you will need with these customers
■ The key needs customers have from your business
■ The needs of your suppliers in the future.

Target areas
■ An in-depth analysis of your business and the strengths and opportunities that
can be maximised by partnering
■ An understanding of the issues that could hinder the progress of the partnering
relationship.

Know your company

You cannot offer yourself as a potential partner to anyone unless you fully know
yourself. Before you start to prepare for a partnering relationship, you should
first carry out a simple self-analysis technique, such as ‘swot’. This involves
several people from within your company getting together and drawing up full
and truthful lists of the firm’s strengths, weaknesses, opportunities and threats.

Partnering relies on honesty and openness, so you should be willing to share

your swot analysis with customer/supplier partners in the future. The possible
strengths, weaknesses, opportunities and threats that might be particularly
relevant to partnering are set out in the next pages.

When you start to put a partnering relationship into place, you should refer back
to your swot analysis. Remember that a partnering relationship should
■ Maximise the strengths and opportunities
■ Minimise the weaknesses and threats, and take countermeasures to understand
and eradicate them.

The small firm’s step-by-step guide to partnering | Is a partnering relationship right for you? 7
 Strengths Yes or No

good trading relationship over the past few years

stable management team

good knowledge of your customers’ business

investment in your company (new equipment, training etc.)

competitive and stable on costs

a quality management system, such as BS EN ISO 9000

reliable delivery performance

responsive to change and committed to continuous improvement

local to customer (if that is important)

financial soundness

Weaknesses Yes or No

lack of awareness of customer market strategies

low investment in new equipment or training

high prices compared to competitors

ignorance of your customers’ future requirements

frequent changes to orders between placement and delivery

little feedback from customers on your performance and product/service quality

not enough people to spare for partnering project teams

customer demands that are difficult to meet

Opportunities Yes or No

a series of visits to each partner to discuss the demands of the partnering and future
trading schemes

joint trading schemes involving people from both your and your customers’ firms

identifying the customer companies use your product/service

getting involved in product design or service development with the customer

delivering direct, or allowing customers to collect direct, removing the need for third
party involvement

exchanging forecast information with your customers/suppliers

introducing bar-coding and Electronic Data Interchange (EDI) to products

longer-term contracts

The small firm’s step-by-step guide to partnering | Is a partnering relationship right for you? 8
 more (and new) business from customers

for product/service quality, customers are happy to rely on your quality systems rather
than their inspection

open book accounting

Threats Yes or No

people are unaware or uninformed about the partnering approach

you and your customers are not exchanging information, meaning that you have to
rely on guessing

fears that constant changes in orders will cause production problems

lack of security for future business, and the fear that you could be replaced by
another company

you are not involved in developing new products/services

cheap competition

all business dealings have to be kept confidential

no ways of sharing the benefits of continuous improvement

The small firm’s step-by-step guide to partnering | Is a partnering relationship right for you? 9
Preparing for partnering

Sell the idea

What are the issues that both companies need to address in the partnering
relationship?

What is the level of resources (financial, technological and human) that may be
required to support the partnering relationship in the short and medium term?

Individual departments within the company should contribute to the definition

and development of the partnering relationship.

What should result?

■ Peoples’ commitment and changed attitudes
■ Key personnel or a working group that will act as ‘partnering representatives’
in the different parts of the business.

Once you have audited your own company you need to prepare yourself for
partnering. The measures explained here should eliminate any fear of change,
and most of the sources of frustration, before you approach your customer with
a proposal to partner. During this stage you must listen to peoples’ worries – they
are a healthy sign that they have understood the partnering approach and are
testing what it means for them. Analyse this information to help target and refine
areas where your partner could help.

Get your people on board

Spend time with the people who will be involved in the day-to-day management
of the partnering relationship. Market the concept to them, and build up their trust
and understanding of what the approach could bring to them.

The first step is to raise awareness of the partnering approach among the owners
and senior managers of your business. (The Director’s guide to partnering will
help.) Gaining their commitment will lead to a greater understanding and support
for the initiative. It will also identify areas that will need to be fine-tuned or changed.
You may also need to alter peoples’ attitudes, for instance if they have traditionally
dealt with the customer as an opponent rather than as a partner.

In large firms this can be a major undertaking, but in small and medium enterprises
there are probably fewer owners/senior managers to convince. In fact, it is often
the case in a smaller firm that the move to partnering is initiated by the owner or
managing director. Similarly, lines of responsibility or hierarchies may be less rigid
and formal in smaller firms. All these factors can reduce the effort needed to gain
top-level support.

Next, you will need to spread awareness of partnering throughout the company.
You will need to integrate it into everyone’s operations and attitudes. This is
particularly important in small and medium-sized enterprises. The commitment,
flexibility and innovation of the personnel are often the reasons why customers
like small firms and your people rather than your systems may be central to your
operations. Indeed, this is an area where small firms have an advantage: the
attitudes of teamwork and closeness, plus feelings of responsibility and

The small firm’s step-by-step guide to partnering | Preparing for partnering 10

 identification with the company are often more prevalent in small firms. These are
essential factors in selling partnering within your own company, and you should
emphasise them to potential partners to demonstrate how enthusiastic and
prepared you are.

There is some merit in waiting till the partnering relationship has reached a pilot
stage before involving everybody. The only reason for this is that some people may
find it easier to work on a specific project with actual goals rather than take on new
concepts and attitude changes. But it is usually best to involve your colleagues
right from the start.

Put the structures in place

The next step is to identify and develop the communication channels that will
support the partnering approach. These will be used to exchange viewpoints,
expectations, problems and new ideas.

You could nominate a ‘champion’ or a working group within your company to

oversee these channels and ensure that everyone has ownership and a voice in
the direction of the partnering relationship. This may need to be on a part-time or
shared basis if your company is too small to devote someone to the task full time.

These measures will take up management and staff time. Although there are no
direct costs, such as certificates, assessments or manuals, there are hidden costs that
you should be prepared for and honest about throughout your move to partnering.
The most obvious is the time required from people within your organisation:
initially, to develop improved communication with both your own employees and
those of your partner, and training in both the concept of partnering and revised
procedures. These should be monitored and offset against the savings and
increased sales that a partnering relationship should bring in the long term.

Choosing your first partner

Review the achievements Are they financially stable?
of the customer
Do they have good quality systems?

Will they be at the forefront of their market and new product/service

development?

Do they manage change well?

Find out their future strategies What are their long-term priorities? Do they match yours?
and needs
Will the company actively help you develop if partnering will support their
business needs?

Are they ready and willing to partner?

Assess the most appropriate What kind of relationship would suit the customer best?
form of relationship
How can this be best managed?

Assess the tangible objectives Agree an internal action plan and partnering proposal.
for the partnering relationship

The small firm’s step-by-step guide to partnering | Preparing for partnering 11

What should result?
■ A list of the areas of specialisation and competitive advantage
■ An outline of the strengths of your relationship with the customer in the past
■ A list of the key target areas for your business as seen by the customer
■ A list of customer strategies that are close enough to your business mission to
ensure compatibility
■ An outline of relationship styles and guidelines
■ An audit of internal structures to support the customer
■ A partnering proposal.

How many partnering relationships?

Small and medium-sized enterprises sometimes have just a few customers, and
may concentrate all their efforts on them and not be interested in finding new
or more customers. In such cases, the number of potential partners is obviously
limited. But even if your potential partner is effectively already chosen, this
profiling exercise is still useful as a way of identifying possible strengths and
weaknesses.

It is advisable to go for only one or two pilot partners at this stage. Don’t jeopardise
your success by over-extending yourself. Remember the golden rule: "Do few but
do them well".

Finally, remember to look at things from the partner’s point of view before you
approach them. Be honest about whether they will want a partnering relationship
with you. Make sure there will be sufficient benefits for them.

Exit strategy
Partnering agreements should specify breakpoints when the operation of the
partnering agreement should be reviewed. This is particularly important where
the partnering relationship is focused on a specific project’s duration. An exit
strategy will specify under what circumstances you will want to withdraw from
the partnering relationship and should be thoroughly discussed with your
partners, who should have their own exit strategy.

Lost causes?
Even customers who want to wield power and demand price reduction after
price reduction can be picked as potential partners, if you are able to address
their individual needs. If a customer places great value in price reductions, then
a partnering relationship should concentrate on reducing your costs (e.g. enabling
you to lower your margins by offers of guaranteed orders, over a set period of time).

Companies that purchase in the old, combative, power-based way will require more
effort if you pick them as a potential partner. Look for areas that excite them. And,
finally, there will be companies that do not respond and who do not want to enter
partnering relationships. In such cases, you have three choices: either maintain the
business in the face of power-based buying, or develop other existing customers,
or look for completely new customers.

The small firm’s step-by-step guide to partnering | Preparing for partnering 12

 Launching the partnering relationship

Formalise the partnering What are the goals of the partnering relationship?
proposal
What are the rules of the partnering relationship?

What are the responsibilities of the partnering relationship?

Approach the potential Who are the key decision-makers?

partner

Agree the partnering Jointly refine the strategy and relationship.

relationship guidelines

Build the relationship, monitor Agree the measurement criteria for the relationship and refine the working
and audit agreements.

Monitor whether the business What needs to be added to the partnering relationship?
objectives are being achieved
What lessons can be learnt for other partnering relationships in the future?

What should result?

■ A presentation to senior managers and staff involved in the partnering
relationship
■ A strategy for long-term development with mutual benefits
■ An outline agreement
■ A list of agreed targets and timescales
■ Appropriate measures of performance
■ Problem solving
■ Trust building
■ Regular meetings and feedback sessions
■ New partnering objectives
■ An extension of the partnering relationship approach
■ An exit strategy.

Make a formal launch of your partnering relationship

The best way to introduce your proposal to the prospective partner is through a
formal presentation. This should outline the partnering approach and how it will
benefit both companies but, especially, your prospective partner.

You may have informally discussed the partnering relationship with your partner
but there is considerable merit in holding a formal, full-scale presentation.

At this meeting you will have to display:

■ A sound knowledge of your customer’s market and their recent trading history
■ An understanding of and empathy with their working methods, long-term plans
and direction.

It is also an opportunity to remind them of your own strengths and explain your
strategies for the future. To the customer, a presentation reinforces the point that
you are serious and professional about the partnering relationship. Bring in help

The small firm’s step-by-step guide to partnering | Launching the partnering relationship 13
 from appropriate organisations if necessary. This is an important message: once
appreciated by the partner, you will have removed one of the biggest barriers that
small firms face.

It is important the presentation is made to genuine decision-makers. Even the

most thorough and impressive presentation can be undermined if you present
it only to relatively junior people who are not empowered to make decisions.

A best-practice tip is to run through the presentation in your company first, so

that everyone who will be involved understands what the partnering relationship
involves and how the customer will benefit. Amend and polish up the presentation
so that you convey the right messages and their importance.

It is important that both you and your partner come away from the meeting
completely clear about what you want and what you understand the other to want.
Any grey areas , misunderstandings or issues taken for granted will only result in
problems further down the line.

The beginning
Once you and your partner have agreed a set of guidelines that the partnering
relationship will follow, set an initial period of trust building and information
exchange, during which the relationship can find its feet. At the end of this period
you should hold a major review.

To begin with, you should concentrate on clear, simple and achievable targets.
Some typical areas where partnering can help are explained in the next section.
Check them with measurements that are fairly easy to record and track. You should
concentrate on improvement rather than the bureaucracy of monitoring. And
remember that partnering is more about long-term personal relations than fussing
over the figures for order numbers and delivery schedules.

Three areas you should pay attention to during the early stages of the partnering
relationship are:
■ Making sure that everyone in both companies is fully aware of what is happening,
what will happen, and what part they have to play. Communicate progress and
listen to feedback
■ Setting up a joint management and review team to monitor progress. Identify key
areas for them, such as cost, waste-avoidance and processes that are not adding
value. Encourage both the airing of problems and their resolution
■ Looking to the future. Even if the launch and initial period go well don’t let people
relax and start thinking that the partnering relationship is in place and everything
is done.

Finally, remember not to over-extend yourself or to expect too much from the
partnering relationship to begin with. It will undoubtedly take time, and trial and
error, to build and fine-tune the relationship.

The small firm’s step-by-step guide to partnering | Launching the partnering relationship 14
 What makes a partnering relationship work?

Though this list gives you some basic guidance, it does not guarantee your
partnering relationship will work. You must apply each of these qualities (or as
many as you can) in ways that suit you and your partner.

Commitment There must be commitment, both to the concept of partnering and to the day-to-
day running of the relationship. This commitment must exist in both partners, and
at all levels.

Honesty Be honest with yourself and your partner. You must both appreciate the complexity
of working together, and the problems that each company receives from and
causes for the other.

Integrity Integrity must exist between the partners if companies are to change their
behaviour towards one another. Each company must believe that the other will
help them through change, if change is required.

Trust You must build up trust in one another. If you don’t, then you will soon slip back
into short-term thinking.

Openness Openness will help you to set and meet new objectives. No supplier can ever know
enough about a customer, nor a customer about a supplier.

Shared values Finding shared values or strategies should appeal to the customer and will allow
the partnering relationship to develop depth and a focused direction. Look to forge
mutual plans for the future. Shared values may also lead to better management
decisions and a healthy state of preparation for future developments in the
marketplace.

Monitoring and improvement Constantly monitor and make improvements.

Share information and Share information and resources to help co-ordinate and develop the relationship.
resources

Effort Partnering does not just happen: it requires effort, which must be maintained even
through difficult periods. When trading conditions in the market begin to decline,
both partners must work harder at exploiting the benefits of working together.

Creativity Creativity and innovation will benefit both companies. Always look for new areas
where your partnering relationship can have an impact.

Flexibility Flexibility is an important feature of a partnering relationship. Sometimes it is

better to compromise with your partner for the benefit of both businesses over
the long term.

Being different Being different can enthuse the customer company, reinforcing the enthusiasm
that you have for the partnering approach. Have fun – hold joint corporate events,
throw a party to commemorate the anniversary of the partnering agreement.

Keep working at it!

The small firm’s step-by-step guide to partnering | What makes a partnering relationship work? 15
 Refine and develop
Your partnering relationship can develop into as many areas as you want.
Innovation is the key to the success of many of the partnering relationships
featured in this guide and our case studies – make it central to your plans. Here
are some ideas you might consider.

Statements and certificates Some companies like to have a framework of principles, a non-binding agreement,
or a simple mission statement that:
■ Determines the aims, objectives and long-term goals of the relationship
■ Identifies the benefits to both the customer and supplier.

These are often proudly displayed in reception areas in the same way that quality
awards are displayed. You could reward your partner with certificates when new
steps are taken, standards achieved or anniversaries reached. An award/ recognition
scheme could be set up for those members of the staff who contribute ideas to the
partnering relationship.

Dedicated resources Where possible, you should commit staff and machinery to the customer product
or service range full-time, so that they become dedicated to the partner.

Cost savings Most partnering relationships attempt to save money by eliminating waste and
duplicated effort, and controlling costs between the two partners. Inevitably,
the long-term nature of the relationship encompasses the need to reduce total
acquisition costs over the life of the partnering agreement to mutual benefit.
Look into tangible costs such as using less material, and intangible costs such
as reducing the amount of paperwork in the system.

Service and performance Don’t always stick to the same performance measures. Look for new areas to
criteria measure, such as timeliness of deliveries, percentage quality levels, stock
availability, etc. But do ensure that you are able to make genuine comparisons.

Joint forecasting Jointly study your and your partner’s markets, and build an element of forecasting
into your dealings. For manufacturing companies, this could include forecast sales
and production volumes that are confirmed, provisional and tentative. It may also
include the regular update of stocks held or the messages that will be traded
through an electronic data interchange (EDI) system.

Technology improvement and
other investment
Technology development, improvement and innovation are other areas that the
partnering relationship could develop. These show the willingness of each company
to improve process capabilities so that performance criteria can be met or surpassed.
These are often mutually agreed and include discussing the latest technological
innovation in materials, machinery or processes.

Try to suggest special arrangements – for example, you could promise your
customer that you would buy a new machine to guarantee faster delivery of
products. In return the customer could guarantee a level of work that would help
you recoup your outlay.

Alternatively there may, for example, be a need to transfer capital between the
organisations so that the supplier can invest in new technology. Usually the
procedures for this are written into the partnering agreement, covering issues
such as payback and return on investment, before the capital consideration is
transferred to the supplier.

The small firm’s step-by-step guide to partnering | What makes a partnering relationship work? 16
 Hardship assistance There will be times when one of the partners is experiencing difficulties. Set up
contingency plans and teams to help resolve the problem jointly or to relieve the
hardship immediately by directly assisting your partner.

Materials Work together to find ways of reducing purchasing costs. These could include
specifications that allow more effective substitutes by the supplier.

Confidentiality As the partnering relationship develops, commercially sensitive information may

need to be transferred between the companies. Formalise the ways this happens,
so that it becomes a way to keep each partner aware of the operations of the other
and informed management decisions can be taken. Inevitably, this information
has commercial value, so you should draw up agreements not to use the
information outside the relationship.

Cost structure An agreed open book cost relationship should be established, so that the
breakdown of costs can be exchanged between the partners.

This will identify areas where improvement programmes can aim to reduce costs
and maintain profit levels for both companies.

Exclusivity Where the partnering relationship includes the transfer of specialist tooling or
technology, or confidential information between the customer and supplier,
partners may feel more comfortable by formally protecting this investment. You
can draw up an agreement that restricts the use of the resources to you and your
partner only, and forbids them being used for a different customer.

Training and development It will be necessary to train staff within the organisations so that new working
practices can be established. You and your partner should agree on how to split
the costs of outside training, or the amount of time that will be devoted to training,
if it is to be undertaken by one of the partners. To encourage a feeling of teamwork,
staff from each of the partnering companies should be encouraged to go on the
same courses together.

Conflict resolution The joint review and management team should meet frequently to ensure that
problems are addressed quickly and that solutions are recommended, and agreed,
by all parties to the agreement. A defined ladder for escalating the resolution of
problems ensures that responsibility falls at the appropriate level of management.

The small firm’s step-by-step guide to partnering | What makes a partnering relationship work? 17
 The potential pitfalls of a partnering

Companies may experience apprehension and confusion as a partnering relationship

begins. And it is inevitable that, during the relationship, there will be problems,
mistakes and obstacles. A partnering agreement only becomes a partnering
relationship when you and your partner can sit down and say what you really
think, without fear of reprisal but with confidence of an improving business
relationship.

Some of the pitfalls you may need to negotiate on your way to building a successful
relationship are listed below. These can be overcome by integrating people into the
partnering philosophy, showing commitment from the most senior levels in the
business and keeping people informed about progress.

If these vital ingredients are missing, then it is all too easy to slip back into bad
habits and negative attitudes.

In short, you must ensure that partnering means something to everyone, and that
everybody will benefit from the new way of working.

Fear of the unknown Partnering relationships are often a foreign concept and considered a threat by
some people. Listen to their concerns and spread the message. This will help
overcome any apprehension and uncertainty.

Starting too soon Before you launch the partnering relationship, make sure that all the potential
partners have the information they need, the parameters are set and the processes
clear. Any initial lack of detail on the partnering relationship’s direction and focus
can cause uncertainty. People need to be consulted about and integrated into the
relationship as soon as possible. Even those not directly involved should be in the
know and, as a result, supportive.

Poor communication Ensure that there is a programme of frequent and regular meetings with known
agendas. Set up communication channels. Use any existing channels such as
notice boards, employee newspapers, team briefings and so on.

Impatience Realistic targets, with realistic timescales, must be established at the outset. Many
companies are so keen to demonstrate the benefits of partnering that they expect
to see immediate improvements. This will not be the case. Successful partnering
takes time. All decisions on the direction of the relationship should be taken jointly
and individuals should clearly understand why certain projects have a higher
priority.

Complacency and arrogance
There may be times when one partner takes the other for granted. Many small
firms worry that they will, in effect, be taken over by the larger customer and just
become an extension of that customer’s operations. This must not be the case.
Clearly set out your aims and the performance measures from the start. This will
prevent any confusion about what is wanted and what is expected. Make sure the
partner has measures that they must meet as well. Maintain good personal contacts
with the partner and ensure that they, too, are fully committed to the relationship.
The belief that it is impossible to improve will only slow the progress of the
relationship. If one partner has more work to do to improve than the other, then
it should be a question of help and support, not blame or criticism.

The small firm’s step-by-step guide to partnering | The potential pitfalls of a partnering 18
 Over-dependency Some small and medium-sized businesses may worry about depending on a single
account. Formally agree a level of business volume with your partner that does
not endanger you. Agree contingency plans. For example, temporary increases in
customer volume above the agreed level will be given to another company on a
short-term sub-contracting basis.

Time and resources The level of human resource and time involved in establishing and developing a
partnering relationship can be a major stumbling block for small and medium-
sized enterprises. Initially the workload will be great for managerial staff as the
partnering relationship becomes defined and begins to gain acceptance across
the organisation. As the system begins to unfold, time spent directing and co-
ordinating efforts will decrease, allowing managers to concentrate on the strategic
and operational performance measures needed to support the relationship.

Separation The fact that the two companies are separated geographically means that the
customer may not always be visible. Regular meetings held at each other’s sites are
a valuable way of understanding and remaining close. But if these are not possible,
so are videoconferences and, to a lesser extent, e-mails and telephone calls.

Points of contact Appoint ‘partnering champions’ with clear responsibilities and reporting lines.
These champions should establish central co-ordinating mechanisms between
the two companies, especially where there are numerous points of contact.

Confidentiality Commercial sensitivity is another area that needs a formal agreement since a
successful partnering relationship depends on the exchange of cost data through
open book accounting. Trust and a long-term attitude are vital to making this work.

The small firm’s step-by-step guide to partnering | The potential pitfalls of a partnering 19
Some final recommendations

The more effort spent developing the plans and practices that go into the partnering
relationship, the better the result.

Time and the logical use of effort will never be wasted in the early stages of the
partnering approach. This includes time and effort marketing the concept internally,
all the way from the senior executive to the employees who deal with the partner
every day – delivering van-loads of goods, taking orders over the phone and so on.

Time is a precious resource to small businesses and represents an investment in

the customer relationship. However, having to spend time in preparation should
never be a reason to put you off partnering, or an excuse to cut corners. No supplier
can ever know enough factual and incidental information about the customer.

Another fundamental requirement is the need to embrace the ideals of quality

management. These should cover all areas of the new business relationship. The
attention to quality is important in redefining the goals of both the customer and
the supplier, and also the scope of the partnering relationship itself. If quality
management is not translated into practices to control the two businesses, then
little has been gained. However if quality is adopted wholeheartedly then plans
can be made for the future development and direction of the relationship.

It is vitally important to identify the key performance indicators of a partnering

relationship, which may include quality, cost and delivery measures. Failing to
underpin the relationship with the commercial needs of the two organisations will
eventually create tension and cause a rift. In parallel to performance requirements,
both companies need to develop strategic capabilities over the long term, so that
they can integrate other areas of the business that can add value to the partnering
relationship. Such capabilities could include the ability to design and test products,
the training of the workforce to National Vocational Qualification (NVQ) levels or
even implementing strategies to maintain equipment so that it supports the drive
to new levels of performance.

Partnering is a journey without end. It is an excellent means of transforming the

organisation and aligning the goals of the company with the consumer of the
product/service, allowing even greater levels of value to be added. In short,
partnering makes straightforward business sense for the supplier and the
customer alike.

The advantages of partnering to your relationship with

the customer
Partnering:
■ Removes waste from the customer-supplier relationship and beyond
■ Sustains the drive towards long-term business between the two companies
■ Closely aligns the strategies of the companies by integrating the supplier
■ Identifies the areas of strength and weakness in the commercial relationship,
optimising the opportunities and minimising business risks to both companies
■ Reinforces common goals that reflect the demands of the consumer

The small firm’s step-by-step guide to partnering | Some final recommendations 20

■ Provides a protection to both companies by allowing each business to trust and
build plans over the long term
■ Enhances mutual development and the generation of skills needed to satisfy the
consumer over the long term
■ Permits mutual co-ordination by the exchange of valuable information and
intelligence, allowing both companies to synthesise their efforts.

The advantages of partnering for you

Partnering:
■ Creates a stable trading relationship
■ Allows the development of strategies that are focused on customer satisfaction
■ Creates trust between the two companies and allows for informal interaction.
Understanding will also increase as you and your partner work more and more
closely together
■ Allows the supplier to participate in the removal of waste by integration in the
design process
■ Allows the use of pooled or shared resources to which, if they were on their own,
neither company could gain access
■ Creates an environment where doing business is made easier and can be
streamlined to the demands of the customer business.

Case studies

One of the best ways to learn about partnering is from other companies. Do read
the case studies attached to this guide. They show that partnering does work and
provide examples of the types of problems that can be encountered and resolved
on the way to success. Most of them involve small and medium-sized companies.

The small firm’s step-by-step guide to partnering | Some final recommendations 21