Probably not surprisingly having to expand this extra effort takes a toll on your satisfaction with the relationship and your partner. So the more your partner cheats you, the lower your satisfaction as you can see here in this graph. This is why I say that being nice or tolerating your partner's cheating behavior will cost you, it creates more work and it erodes your satisfaction. So what should you do? Well, say something. Once you see cheating, you need to nip it in the bud early on. Don't let it grow in an effort to be nice. Let me give you something else to chew on. This is the idea that the presence of a relationship itself can justify cheating, you heard that. Simply knowing that there is a relationship in place creates opportunities for justifying your own bad behavior. So let me give you an example. Have you ever known people, again, not you of course, who have rationalized their behavior by saying things like, "Oh, my partner wouldn't ever know if I did this" or "My partner does this to me, so why shouldn't I do it to him or her". Or even better "Well, I might take advantage of him or her today but I'll make it up to them next time". Or the converse, "Well, they've cheated me last time so it's my turn now". In other research, my colleagues and I have discovered that this is in fact, what's happening when a relationship is in place. So we saw and witnessed all sorts of justifications for why business people cheated their partners. This happens because people and firms will adjust their timeframes and evaluate their outcomes over a longer time horizon. Wait minute, isn't this exactly why we created business relationships in the first place? The idea being I may not win on this deal, but any loss I experience with this transaction might be made up on the next transaction, and over time I expect that I'll win more than I lose making all my transactions with this partner worthwhile as a whole. This is what economists call the shadow of the future, and it explains why we are willing to accept a short-term loss for longer-term game. So forming and having relationships is not a bad thing, it enables a lot of really good and worthwhile business. But a smart and strategic skeptic will also recognize that it can enable a lot of bad behavior too and this is what you need to keep in mind. So what do we do about this? Well, there are several things. The first thing you can do is to not hesitate to change your partner if you can. If you have alternatives you are better off switching away from a partner who is not trustworthy than staying in the relationship and trying to make it work but monitoring them more. Realize too that partnerships are not lifetime commitments, there are no prizes for those who stay together the longest. This is why in the high-tech industry where the circumstances and opportunities change rapidly, partnerships are formed and reformed often but only for as long as it makes sense. When the value is no longer there, you move on. Now, this raises a difficult skill and that is the need to say goodbye. Now, many firms and executives don't know how to do this well. It's much easier and more fun to announce the start of a glorious new partnership, let's throw a party, let's shout it from the rooftops. But when we part ways, let's do it quietly. Now, quietly is fine, but you also want to be sure you do it with as little disturbance as possible. Suppliers, channel partners, and customers are impacted when firms and their activities together. But there is a process that works. The first thing to do when you realize that you need to say goodbye is to talk to the partner. Chances are they might be thinking that it's time as well. It will surprise you but they usually feel it too. Having mutually agreed to part ways both of you need to sit down and work out its impact on channel members, suppliers, and especially customers. How will the stakeholders be approached and what is the story that they're told? Is there a future for them? If customers receive important services as a result of the alliance, will that be disrupted? How can it be successfully continued? Now you may be too young to remember this, but a number of years ago Dale Carnegie once wrote a very famous book called How to Win Friends and Influence People. What I'm telling you here, is that you need to learn to lose friends without influencing people. What else can we do? Well, when you sense your partner is cheating you speak up. Again, this is hard because most of us are not trained to handle difficult conversations and confrontations, and this is another thing they don't teach you in B school. But now you know the consequences of not speaking up sooner, it will grind in you and you will pay for not doing it. Finally, if there's anything I really get on my soapbox about, it's that you need to stop using the marriage metaphor in your business relationship speak. So stop referring to your partners as your marriage partner. Business relationships were never meant to be monogamous commitments for the life of the firms. Good business involves multiple partners and last only while benefits are there. If you must use relationship language, think of business partnerships as long-term dating relationships, not marriages. You are only together for as long as it's worthwhile for both partners. Now, one of the difficulties with using a marriage metaphor is that when it comes to saying goodbye, and it will come, it will be very difficult to do so because you will think of this process as equivalent to a divorce which is never easy or painless. Again, this is the wrong way to think about business relationships so please do me a favor and think about it differently. Of course, there are many more solutions and tools in my book to improve your relationship successively we won't have time to cover here in this course. But there are tools like relationship maps, techniques for developing useful networks, and learning from goodbyes through postmortem audits and so on. Good relationship management is a skill that can be taught and learned. Now, as we close out our time together, let me leave you with some parting thoughts about relationship management. I'm often asked if there's a golden bullet that solves all problems when it comes to relationship management. The answer is no. It's many things that come together at the right place and time that matters, but let me tell you what comes close to a golden bullet. There is something called credible commitments or what economists refer to as a mutual tying of the hands, and you can also think of this as skin in the game. Now, much of my research and that of others has shown empirical evidence for what I like to refer to as dedicated or idiosyncratic investments. So these might be things like specific capital equipment, dedicated personnel, strategic processes, and specific learnings or implicit understandings that make a partnership work. Now, there are two important conditions here; number 1, both partners have to make these investments in a way that is comparable or matching. Both have to have equal skin in the game. Number 2, these investments must be unique and dedicated to the specific partner. Now, economists use the term non-fungible to refer to the fact that the capital equipment and dedicated people and strategies cannot be easily redeployed elsewhere to another channel partner. This is why money and equity are not good matching investments. Money is fungible, it can be easily withdrawn and redeployed elsewhere. As an example, many car makers are working with 3D printing companies on specific processes and technologies that optimize a particular car model. These efforts can't be observed by competitors making them difficult to replicate, but they also can't be simply taken from GM and used directly at Ford without a lot of costs and effort. There's a huge amount of research that has shown that when both partners have enough skin in the game that their risks are real, then they are unlikely to terminate the partnership prematurely and they are less likely to cheat their partner since both parties have a lot to lose. Mutual credible commitments reduces the chances that one partner is left holding the bag having made lots of investments whose value has not been fully realized while the other partner walks away with no scars. These credible commitments are extremely powerful for motivating partners to work together to truly grow the pie of benefits between them. In fact, these investments are the most powerful motivators for long-term strategic relationships and partnerships. Much of my research and that of others have shown that these mutual investments are, in fact, more effective at making partnerships work than trust, culture, contracts or any other form of relationship building activity that you can think of. That my dear friend is how to be a strategic skeptic.
