Top 5 Reasons Business Relationships Fail
Have you ever had a business relationship you were excited about, or felt could be pivotal for your business, just outright FAIL? If you’re like me, you replay the sequence of events over and over again, trying to figure out what caused the unraveling. Postmortems can be an important source of insights. “Those who cannot learn from history are doomed to repeat it,” said George Santayana, and when it comes to business relationships, it couldn’t be truer.
In my mentoring of individual contributors and executives alike, I’ve had any number of opportunities to witness relationships good and bad. I’ve come to understand the top five reasons business relationships fail, and how with intention, they easily could be avoided.
- The desired outcome wasn’t something either side really cared about. Successful relationships emerge where there is opportunity for a mutually beneficial outcome. Relationships are an investment; you can’t afford to invest where there is no clear return. It’s amazing what lengths people will go to just to be nice, but don’t mistake that for a sustainable business relationship. If the desired outcome isn’t clear AND a priority with both parties in the relationship, either of you may be spending multiple cycles just to avoid acknowledging the truth — you’re only going through the motions. You don’t have a compelling, shared, desired outcome.
- The mechanics of the relationship were flawed. Consider a relationship you maintain with the expectation of mutual business referrals, but the cost of acquiring that additional business is higher than the Customer Lifetime Value of the clients acquired. Or consider a relationship where the flow of information, of empathy, of candor, of impact, is solely one-way. The two sides may have originally been well balanced, but something has shifted. In cases like this, the mechanics of the relationship are flawed.
- An external market threat changed the game. In my experience, “Startup plus startup equals zero.” In the early stage of startup lifecycle, firms must partner with others — it’s in their nature. Faced with demands to secure financing, create structure, and go to market, a startup can’t do it all. Even so, the outcome of each strategic relationship must be transformational, not just incremental. When an external threat appears, like a competitor lowering prices, or introducing a technological innovation, or getting to market faster — that’s an external threat that deals a new hand. After the initial honeymoon wears off, that relationship gets prioritized, nurtured, only when both partners are dramatically better off because of it. When the game changes, check your assumptions about relationship priorities.
- Poor execution doomed a strong start. A relationship may begin with a clear, mutually beneficial outcome in mind, good relational mechanics, and no external threat on the horizon. But if either side fails to build the right team, or gather the resources needed to see the relationship deliver results, it will fail. For a strategic relationship to come to fruition and meet the vision that brought both parties together, its desired outcomes must be supported by effective execution.
- Insufficient or incorrect metrics failed to create accountability. “You must inspect what you expect,” goes the management adage. When you see a business relationship failing, consider: could it be that you didn’t apply metrics toward the mutual desired outcomes? Perhaps you failed to hold people accountable for specific progress. You measure the performance of your business activities; don’t hesitate to do the same for your strategic relationships. Your “inspection” tells your relationships that this outcome is a priority for you. Inspection sets the expectation that this relationship will be nurtured and sustained.
Each of these five reasons is fundamentally a sign of misaligned expectations, a problem you will find at the heart of every relationship failure. At every opportunity, align expectations — especially at quality gates, those milestones between phases that are strongly dependent on the outcome of a previous phase.
To avoid business relationship failures, focus on deepening the relationship by learning and applying lessons along the way. What’s going well, what isn’t, what course correction could put it back on track?
Relationships almost never fail due to bad intent — they simply weaken from a lack of nurturing. If you sense a shift toward one of these reasons for failures, take yourself back to basics. How is your mastery of the Relationship Impact Moments I identified in this June 2013 article on Huff Post Business? Are you applying the lessons you learn from reflecting on your own role in your strategic relationships’ failure or success?
If you want to avoid repeating unpleasant history, hold yourself accountable for learning from your business relationship failures. Then apply those lessons by prioritizing mutually desirable outcomes, sustainable mechanics, recognizing game-changing external threats, executing well, and inspecting what you expect.
- Post mortems on your past business relationship failures will lead to insights that allow you to improve how you initiate, nurture and sustain future relationships.
- The five top reasons I’ve identified why business relationships fail can all be attributed to misaligned expectations.
- To keep your future performance in strategic relationships from being a repeat of the past, align expectations early and often, especially as critical milestones approach.
David Nour is an enterprise growth strategist and the thought leader on Relationship Economics® — the quantifiable value of business relationships. In a global economy that is becoming increasingly disconnected, The Nour Group, Inc. has attracted consulting engagements from over 100 marquee organizations in driving unprecedented growth through unique return on their strategic relationships. Nour has pioneered the phenomenon that relationships are the greatest off balance sheet asset any organizations possesses, large and small, public and private. He is the author of several books including the best selling Relationship Economics — Revised (Wiley), ConnectAbility (McGraw-Hill), The Entrepreneur’s Guide to Raising Capital (Praeger) and Return on Impact — Leadership Strategies for the age of Connected Relationships (ASAE). Learn more at www.NourGroup.com.