Many ventures have ended in a complete break down. Creating and maintaining a joint venture can be a lot of work. You must use wisdom and street smarts in order to keep both parties happy.
A Profitable Marriage
Just like a marriage has give and takes, so must a joint venture. You must know both your own and your partner’s limits. There was a story about a Korean conglomerate which agreed to do a joint venture with an American company fifty-fifty. The vice president of the American company was asked if he could get their company 51%. He said yes and once he asked the Korean company about it all bets were off and the deal stopped cold turkey. Both the benefits to both companies and the vice presidents jobs went down the tubes. Do not promise impossible things, seek out possibilities and make decisions likewise.
National Dominant Traits
Koreans, like most others, are afraid that after becoming part of a joint venture that they will lose influence. You will need to have someone mature who is ready to deal with the partner so that they can resolve any concerns regarding this.
Expectations from a Foreign Partner
Position and Status
Every company is concerned with money, but other major concerns are company image, sustained growth, and “face.”
Sources of Conflict
Make sure to identify areas of potential conflict so that you are not baffled when they come (and they will come).
Priority Differences
The three most common priority differences with Korean companies are:
- Profit vs. market share
- dividend declaration and profit remittance
- Marketing strategy
Management Style
Some areas to watch out for are:
- Employment and promotion policies
- Salary increases
- Management information system
- Customer relations
- Marketing and selling practices
- Transfer pricing in rare cases is another source of conflict
Prevention of Conflict
At the start of a venture, both parties need to consult about how they can go about to resolve conflicts which will come up.
Procedure Formula
Many companies set plans to record minutes and have yearly meetings to decide whether it is in the companies best interests to continue in the venture. It is recommended for the non-Korean company to volunteer to keep minutes.
Communication Channels
Just like it has been iterated before, communication and building relationships of trust are very important.
Status Position
Great importance is places on ones status and ego. Make sure that you always give your partner a role that will keep him or her engaged in a cause that is worthy of fighting for. This shares the responsibility and gives them more reason to stay with you.
Extracurricular Activities
Take your partner out for tennis or golf, it is a great way to resolve conflict.
Mutual Family Interest
Share what you are dealing with your family. Your partner might have advice to share and in doing so will build the relationship.
Mutual Respect
If you want respect, give it. Unconditionally.
Resolving Conflicts
Personal Considerations
You must consider the other individual first. Don’t make him or her lose face. Take care of everything on a personal level.
Control Emotions
Don’t ever lose control of yourself. Once you do you have already lost. Also make sure to help others to control their emotions, try to control the situation and timing to help the other party be in a calm state when you discuss things.
Compromise Diplomacy
Again, use a give and take model. One example of this was one company who was given more than half of the control in the company but the Korean partner had veto rights over the representative to the company.
Home Office Support
One must create a balance between dealing with the home office and the local office. Getting support for what one intends to do is important. It is also important that the local authorities have enough power to make quick decisions that are needed.
Confidential Negotiations
Keep things under wraps until negotiations are finalized, you don’t want to ruin things before they actually happen.
Proper Protocol
Pay close attention to time, place and the general environment. Following correct form is very important.
Neutral Negotiator
Sometimes getting a third-party to help resolve conflicts can be very useful.
Expected Conflicts
There will be conflicts, you can be sure of that. The difference in how you handle it is the only thing you can choose.
Top 10 Pointers
- Keep control of the CFO position.
- The Korean CEO is a god in his employees’ eyes, don’t make him lose face but don’t be a pushover.
- There must be motivation for both companies to enter into a joint venture. Just doing out of necessity or ease will likely lead to issues.
- The expatriate director must have a clear-cut mission and complete backing from his company.
- Expect a 18 month period of trial and error before becoming competent foreign director.
- After switching foreign directors, the new director must come in with a game plan, clear objectives, and a defined role.
- Don’t ease into the role, take it it immediately or you may not ever receive the authority you assumed you would get.
- From the beginning, make it clear that you must receive all information, even bad news, but make sure everyone is comfortable being able to share it.
- Develop relationships and get networked. Spending time out of work with each other is the best way to accomplish this.
- Consider hiring a second-generation Korean totally on your payroll as a part of the joint venture. They can both contribute their business knowledge and report about what is happening beneath the surface.
Go to the next chapter, Hiring and Firing or select a chapter.
