As Indigenous organisations manoeuvre into social enterprises, or commercial businesses, into a world that many of them do not have experience of, they take the logical step of setting up partnerships with more experienced organisations or businesses.
This partnership approach has many advantages - it allows one partner to mentor the other and allow the less experienced organisation to gain experience while mitigating risk. It reduces the cost of the investment, it allows the two partner organisations to bring different strengths to the table, and it scales the business or project beyond what one organisation alone is unable to do. There is one other major advantage to the Indigenous organisation, and that is that it allows that organisation to gradually buy out the partner thus giving time to build resources and experience.
However, not all partnerships end well!
Good partnerships start with good preparation!
As part of any partnership discussion, one of the preparatory steps is to analyse what are the pros and cons of working together before you even begin a discussion. You need to be clear that a partnership will meet your requirements before you disappoint the others in the middle of negotiations.
You should also make sure that you have internal approval in your own community or corporation to begin these partnership discussions. At this early stage, it’s more about how your group sees the partnership rather than a discussion of any detail. Again, it is important that your own group is fully informed, as surprises part-way through negotiations can only lead to disappointment and sometimes bad feelings.
Once you are clear that a partnership is endorsed withoin your own organisation and will be beneficial, there are three stages you need to go through in initiating a partnership: -
- Scoping;
- Negotiation; and
- Finalisation.
Scoping
The next step of preparation is to identify who should be involved in the partnership and whether you have included everybody who would be necessary. For example, if you are forming a partnership to work on Country, it would be poor preparation to discuss partnerships with only 3 out of the 4 Language Groups, Clans or Nations that might have a responsibility to that Country.
If you are initiating the idea of partnership with others, you would have the responsibility to first describe the idea to them so that they have some understanding of the opportunity. It is important you give them the opportunity to make their own preparations as above, and so that when you do begin discussions you are all on the same page. This may best be done individually at first, and then, if there is interest, to call an informal meeting to further discuss the idea.
If you are initiating the discussion, and you are preparing to describe the idea to them to initiate discussion, it is easy to fall into the trap of being so fully committed to the details of the idea so early that you become entrenched in your ideas. You should be aware of this natural tendency and continue to maintain an open mind, even though you have thought through all the details – the others have not had this opportunity and may have their own opinions and ideas to contribute.
Your initial joint discussions should focus on fleshing out the idea, discussing topics like: -
• The scope
• The viability
• The joint goals – what you will jointly achieve
• The benefits (joint and separate)
If you are on common ground on the basics of the idea, you should take the outcomes of the discussions back to your community or corporation to check that the discussions so far still fit within what your group wants. If they endorse the basics, then you need to work through what the group thinks about how the partnership will work across several topics, in readiness for you to begin detailed negotiations with the potential partners. You should work through what the group thinks, and wants, in relation to: -
• Governance
• Management
• Employment
• Operations
• Investment
• Returns or profits
The next preparatory step you need to take is to obtain legal advice and commercial business advice. Let your lawyer and/or accountant or auditor know what you have agreed to within your community or corporation and check what they think about commercial risks.
Take their advice on some of the things you have decided on to see that they are commercial and practical.
Negotiations
Once you have completed your preparations, you can then start negotiations with the potential partners. This is most efficiently done through joint meetings so that everyone can discuss the agenda items and agree together, rather than having separate meetings that must be tied together and reconciled later. However, sometimes, it may be necessary to take some discussions “off-line”, for example, if one party has a specific problem with what is proposed, or if one party needs to be caught up on the idea.
Negotiations are likely to take place over a series of meetings, starting informally, and gradually focusing down into more formal discussions about specific items. The goal of these negotiations is to end up with a common set of “Rules” of the partnership that can be provided as a brief to lawyers to draft an Agreement. So, make sure that proper notes or minutes are taken, which everyone should agree on.
Your initial, informal negotiations should focus on: -
• The idea, concept and scope in some detail
• Focus on what the idea is, what it will achieve, and if it is to everyone’s satisfaction
• The project goals and benefits, in some detail, to see if everyone is in agreement.
Once everyone is reasonably satisfied that the idea “has legs” the meetings can then focus on the same items as you discussed internally, plus adding a few openers about operational procedures: -
• Governance
o What will the Board or Committee governing the partnership comprise of?
o What will the Code of Conduct for the Board/Committee include?
o What are the roles and responsibilities of Directors/Committee Members as representatives?
o What will each partner bring to the partnership, and what are their roles and responsibilities?
o How will you create your purpose and strategy?
o How often will the Board/Committee meet and what will be discussed?
o What happens if you have a dispute between partners?
• Management
o Who will manage operations? Will it be someone from one of the partners or an independently sought employee?
o What will be their role and responsibilities?
o What are their financial delegations?
o What are their non-financial delegations?
o Who do they report to, and how?
o What is the Code of Conduct of partners engaging with the Manager?
o What happens when there is a dispute?
• Employment
o What will be the employment policies?
o How will employees be chosen?
o What will be the contractor policies? How will contractors be chosen?
o Who will have the delegation to “hire and fire”? What happens if partners “interfere” with the process?
• Operations
o Who do the workers report to?
o Who will work out operational procedures? How will they be recorded?
o What will be the asset-use policies? Where will moveable assets be kept?
o What Health & Safety policies will you have?
o Who will be the external Accountant? Auditor? Lawyer? Insurance Broker? How will they report and to who?
• Investment
o What funds will each partner invest? Where banked and when?
o Who will have account authority and what governance procedures will you exercise over payment authorities?
o Will partners be able to invest assets in lieu of cash? How will these assets be valued?
o Will you allow the partnership to borrow? Any caps? How will borrowing decisions be made?
o What will happen to spare funds? How and where will they be invested?
• Returns
o What will happen to any expected profits?
o How much will be retained for growth and how much will be distributed to partners?
o What will the partnership apportionment of profits be based on?
o What other measurements of returns would you like, other than cash? E.g., employment, training, healthy country, etc.
o How will you measure this?
o What is a “bad” return that then requires the Board/Committee to discuss mitigation?
• Cessation (and New Beginnings)
o When will the partnership end (either date or specified event)?
o What happens to assets and liabilities when the partnership ends as expected?
o What happens if a dispute between partners cannot be reconciled? What is the process to terminate the partnership and distribute assets and liabilities?
o What happens if another partner wishes to join?
As you can see, in complex partnerships, this list can take some time to negotiate and agree on.
Once you have an agreement, it is advisable to take the Minutes or notes to your own Board to obtain an endorsement. All the partners should do this. If your own Board has any issues it is best to resolve it now, rather than when you are asking them to sign a completed agreement.
Once all the partners have internal endorsement, the partners need to agree on an independent lawyer to seek advice about what has been discussed so far, and to proceed to draft the appropriate agreement.
It should be noted that the lawyer is likely to raise issues and “what-if” questions about your discussions. You should, therefore, be prepared to have the lawyer report to the negotiating committee so that they can explain their issues, and these can potentially be resolved one-by-one, there and then. This process may take a couple of goes.
Finalisation
Finally, once the lawyer has provided the final draft, it is advisable for all parties to read through together and then agree.
