As there are numerous good reasons both business wise and financial, to create a joint venture with a company that has a great complementary capabilities and resources, such as distribution channels, new technologies or finance, joint ventures are becoming an increasingly popular way for different companies to build strategic alliances.
In a Joint venture, two or more parent companies agrees to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared managerial power.
But before going into a joint venture, you should consider something first. We have gathered some information on what are the most important things to think about before going into a joint venture, here is the list:
Before going into a joint venture, be sure to first screen prospective partners. Make sure that you are on the same level of the industry. Also make a joint development of a detailed business plan and short listing a set of prospective partners based on their contribution to the development of the plans.
Check the credentials of the other party by doing interviews and research. Check their previous business and also the sales that they are getting. You may also want to check customer feedback regarding their services.
You should also develop an exit strategy and terms of dissolution of the joint venture in case things would go wrong. You should also try to think of the most appropriate structure for you joint ventures, for example most joint ventures involving fast growing companies are structured as strategic corporate partnership.
You should also take notice of the availability of appreciated or depreciated property being contributed to the joint venture; by misunderstanding the significance of appreciated property, companies can weaken the economics of the deal for themselves and their parties. You should also point out the different special allocations of income, gain, loss or deduction to be made among the partners and so with the compensation to the members that provide services.
You should also take note of the role of your business architect, this is a person that initiates new business ventures or leads business innovations, designs a winning business model and builds sustainable balanced business system for a lasting success.
Business architects can be found in multitude of business settings, be it in corporate change leaders,initiator of joint venture, and managers of different and radical company settings.
Human resources also plays a special role in joint ventures, here are some thing that a humanresource should look into to get good business ventures.
The business strategy should begin with a sound, well-articulated strategy. Before going into the first step, determine first and explain why you wish to enter into a joint venture, why you have chosen such partner or partners, and what the goal of the company is. You should put into word the involvement of the parent companies and define how long will the joint ventures last.
You should also describe strategies to define the managerial, accountability, decision-making process and conflict resolution procedures. Develop Human Resource strategies that align and support the goals of the JV. You should develop a distinct identity and culture for the newly form company. Communicate energetically to the employees and establish a distinct career goal,management, and a means of welcoming return to the employees transferred to the joint venture.
Create salary, bonuses and retention program that is in line with the success of the joint venture.
Maintain open communication between the companies that have been tied up. Define a process for leadership selection that is seen fair and credible and give credits to the top-tier leadership as soon as possible. Look for key indicators of leadership potentials such as behavior, past experience, and measurable outputs.
To engage and motivate your employees, communication should be frequent and used to create a common vision, establish a connection with leadership, explain the new rules, support the individual transition process, aid in retention, and ultimately, define the new organization in terms of “We” instead of an “It” or “They”. Share as much information as you can, and never sugar-coat or make false promises.
Conduct employee research to help the new organization determine what matters to employees and can serve as the foundation for all programs and incentives.