International Joint Ventures : Getting It Right

Like mergers, acquisitions and other forms of strategic alliances, international joint ventures (IJV’s) are growing fast. Like these other alliances, failure rates are high. And like in these other forms of market entry or growth, while the business must become global, management and people remain culture-bound, if not local.

It’s a new corporate culture

In an IJV, employees have to integrate into a new corporate culture, including in parts of the world that are culturally very different from the corporate headquarters, executive leaders and expatriate management. People practices and policies will differ from company to company within one national culture. But when you go international, legal obligations as well as cultural practices that have developed over decades are harder to understand, accept and bridge.

Involve HR early on

One way of accelerating this understanding is to involve HR early on in the due diligence process, rather than at the final stage as is usually the case. HR members of the due diligence team will probe things like the leadership structure, C&B issues, people policies, communications practices, recruitment, training and development processes as well as overall Talent Management policies. For one thing, this gives the IJV a better chance to be successful in three critical tasks: retaining key talent; optimizing communications as a tool to motivate and excite employees; and retain key managers, wherever they may be positioned in the organization. For another, this will allow leaders of the IJV to integrate these considerations into the final negotiations and go/no-go decision.

Another reason for integrating HR early on is that the HR member of the team can play a facilitating role as both companies strive to develop the required levels of trust and consensus. The high performance of an IJV will be determined by simple and clear principles that are mutually beneficial to each partner. The process for getting there will involve problem-solving and sometimes tough negotiations. Once again, the HR team member can help manage conflicts, encourage innovation and find solutions that will deliver higher performance together than each partner on their own.

Ensure you’re clear on what you’re after and how you’ll get there

Once the team is in place, the first steps in creating a high performing IJV is to articulate what each side is after and how you will get there together. Important issues arise right at the outset: do both partners want the same thing out of the IJV?  Are the non-negotiable factors as well as the “walk-away” point for each partner understood? Does each partner feel that they’re getting a faire share of the rewards given their contribution? Do both partners agree on how they will manage the different aspect of the IJV? What are the biggest risks for each partner and are there plans in place to limit these? What are the biggest prizes the future holds and how will these be shared?

And very important, what’s the feeling between the people on the team? Do they trust one another? Do they worry about hidden agendas? As the teams start to work their way through these first points, the identity of the IJV begin to take shape and will be difficult to change later on.

Getting started

The most important aspect to getting started is ensuring you have an on-going review process in place to evaluate how things are going; how well the partners are working together; and whether or not anything has to be changed or adjusted to take better advantages of opportunities that might be arising. This is where a good Cooperation Barometer is critical to put in place.

Appropriate systems and processes need to be developed and embedded, but what will make or break the IJV at this point is all about people. This is the moment to evaluate whether the critical people challenges have been met. HR has an important role to play in surveying IJV teams to provide feedback on degree of motivation, clarity of the project, commitment to objectives and generally engagement and satisfaction with management throughout the organization. It is also up to HR to drive a performance management process as well as the appropriate training and development to staff. Team leaders do well to hold regular team-building sessions, especially if teams are not geographically co-located in order to allow their team members to talk together about what they have learned about one another and how they want to move forward together. And the IJV steering committee should set up a process for resolving conflict both at the strategic and managerial levels.

A robust communications plan is essential at this point in sharing how the IJV is doing with all employees. It should answer questions like: are we reaching our targets? Are we delivering on our commitments to our JV partners? How are we positioned vs our competitors? What are we doing differently as we learn more? What are our stretch goals?

On-going operation

The more the “getting started” phase has met the challenges identified above, the smoother the on-going operations are likely to be. At this point, the IJV begins to resemble other types of organizations more and the challenges are those of all companies: are we delivering on our commitments? Are we seizing all opportunities? Are we minimizing all external threats and internal weaknesses? What do we have to adapt in order to reach our goals?

These questions occupy the executive committees of all companies. The only area where an IJV differs is in the area of internal relationships and trust, which take on bigger proportions because of the nature of the beast. This should be part of the HR role: to remain sensitive to the need to monitor the egos of the different partners; the degree of openness between partners; the quality of the relationships between critical people from the different partners.

The turnover issue in critical in an IJV: Whether people are joining or leaving; whether the IJV is seen to be an employer of choice; and whether people are focused on building relationships as well as on delivering the business. This last point holds for the boards and management committees of the partner companies as well and HR will play a key role to ensure that the relationship with other stakeholders, in particular the parent companies, is being equitably managed.

Indeed, equity is a key word for IJV’s. And the best test for equity in all these areas is to hope that whatever diagnostic process is deployed, employees from the two partner companies are well aligned and engaged on the IJV objectives, strategies and processes.




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  1. Interesting article.