In most joint venture (JV) arrangements, there is one meeting a year in which the CEO has the opportunity for a more strategic conversation with his or her owners – a chance to step back from the quarterly quizzing on financial and operating performance, and the press of recurring topics such as annual budgeting and compensation, to talk about and secure owner commitment on larger, more strategic issues that can fundamentally change the JV’s direction and performance. This is your critical conversation.
Critical conversations are challenging for CEOs. JV CEOs expose themselves to risks in advancing critical conversations. The matter may be sensitive. The owners may not be aligned. Changes may risk undermining current operations or bringing added work to the JV management team. Or the conversation may entail confronting the owners with underperformance of the business.
Indeed, JV CEOs can be surprised that the owners have already discussed – and started to frame an answer for – a strategic issue during a meeting where the CEO was not present or even aware the meeting was occurring. When that happens, the JV CEO has lost control of the narrative and an ability to lead the business.
But JV CEOs themselves are not without culpability. Many lack self- awareness. Many are not as good in these meetings as they think they are. Materials presented to the Board are not well prepared, or do not meet the analytical or clarity bar that Board members have come to expect from their own, admittedly larger, organizations. This is especially true when it comes to strategy and business model conversations – as one of those relating to key enablers such as the operating model or governance – where JV CEOs and management teams lack distinctive skills, which is why it is so important to be ready for these conversations.
How can JV CEOs enter these crucial conversations with confidence, and get to yes? The best JV CEOs tend to get six things right leading up to, and through, a crucial conversation.
1. A realistic understanding of the “degree of readiness” to have the conversation. First, great JV CEOs have a clear sense of what the JV needs from the owners, and what the owners need and expect from the JV. Great JV CEOs understand how to quickly sift and sort a potentially long list of owner issues based on value, risk, feasibility, and other factors to determine what should be on this year’s “owner agenda”. They know how to bundle issues to optimize the time with the Board and other owner executives to secure the agreement they need. And they know which issues require a collective conversation, and which can be handled on a bilateral basis.
2. A “storyline strategy” and content for the conversation that reflects this degree of readiness. At its core, scoping a critical conversation in a JV is about deciding how to flow, and what to include in, the discussion.
“ In many ways, joint ventures are a ‘continuous negotiation’ – among the owners, and between the owners and management.”
3. An accurate and consistent view of JV performance and potential among the owners. Great JV CEOs earn the right to have crucial conversations by developing an analytically sound, visually compelling, and integrated picture of the JV’s performance, risks, and prospects. We think of this as JV equivalent of an Investor Presentation. Without this in place, JV CEOs should not be surprised if they encounter resistance to any material change proposed.
4. A basic process roadmap and tools to orchestrate the build-up to the conversation to ensure needed owner understanding and conceptual buy-in. Great JV CEOs know how to scope and orchestrate their way to a crucial conversation. This is process strategy of the highest order. Such orchestration skills include defining what warm-up or pre-conversations to have with whom, when, where, and about what in advance of the big conversation, including informally testing emerging solution sets.
5. An expertly prepared and run meeting, including an agenda design, attendee group, and facilitation strategy that allows for decisions to be made. Great JV CEOs know how to set up and run the big collective conversation. No matter whether this conversation occurs at a Board strategic offsite, a regular Board meeting, or other owner forum (e.g., CEO or Shareholder Summit), the basic principles are the same. The invite-list needs to be actively curated and limited in number. Left unmanaged, individual JV Board members tend to invite venture managers and functional experts – a move which swells attendance to levels that make an actual conversation difficult and opens the floor to a group that can be the most capable naysayers, nitpickers, and general derailers. At the same time, the pre-reading material needs to be limited in volume and thoughtfully designed, with the explicit aim of advancing the conversation.
6. Meeting follow-up that bottles the momentum and secures needed owner commitments. Finally, great JV CEOs maintain the momentum from the conversation to drive change. Superficially, this includes all the elements of classic meeting follow-up – summarizing agreement reached, defining clear next steps, assigning individual accountabilities, securing needed resources, and tracking progress against agreed milestones. But great CEOs know that the JV structure introduces some unique twists into the art of the follow-up. Because owner alignment can be fleeting – and the successful implementation usually entails some action from various parts of the owner organizations which, by the way, the JV CEO does not control – the best JV CEOs use various best practices to memorialize and take advantage of alignment reached.
Getting to yes in critical conversations is not a game for the impatient, distracted, disorganized, or politically unsavvy. Indeed, it is process strategy of the highest order, requiring JV CEOs to achieve advanced levels of understanding of owner and own readiness to have these conversations, and to take deliberate steps to set-up these conversations before they happen. In many ways, joint ventures are a “continuous negotiation” – among the owners, and between the owners and management. Getting the crucial conversations right requires approaching these conversations with similar levels of strategic preparedness as a commercial negotiation.
Are you ready for your critical conversation?