Find the right partners for collaboration, co-opetition

For years, collaboration has been a necessary evil in public accounting.

Larger firms farmed out extra work to smaller firms. Larger firms tolerated this because it meant getting help with an audit, or completing tax work for smaller, less significant clients. Smaller firms welcomed these relationship because they expanded their market reach.

Meanwhile, competition steadily became fiercer as assorted regulations and specialty niches populated the business landscape. Rapidly growing clients began to value attentive service more than extensive research capabilities and large quantities of junior staff.

Furthermore, mergers, spin-offs, joint ventures and expansions all contributed to a cooperative environment where competition became very fluid. Firms won business that was previously beyond their scope. Cooperative relationships are no longer a factor of capacity, but a competitive strategy to leverage valued skill sets in convincing prospects to become clients.

CO-OPETITION DEFINED

Co-opetition, a merger of cooperation and competition, is the result. It embraces an intentional approach for rival firms to come together to meet a client's needs.

Collaboration typically means two entities combining resources to meet a client's need through additional capacity, or with expertise beyond a single firm's resources. Co-opetition entails two entities overcoming their obstacles to gain more than they deserve alone. The prize can be larger engagements, more prominent clients, or work in specialty areas.

FINDING COMMON GROUND

So, who can you trust for this?

A straightforward way to find a cooperative relationship is through associations. Dozens of accounting associations come together formally in order to facilitate shared resources and encourage referrals. The best associations require common values, such as committing to impeccable client service. Another way to establish cooperative relationships is during conferences and external CPE training, where mutual admiration evolves during the learning process.

Collaboration implies working together because it is convenient. For instance, a big audit requires additional resources and a smaller, local firm can help. According to Doug Durrie, business development director of QA3 Financial, a leader in professional services collaboration, for more effective co-opetition to thrive, personal trust between firm leaders must exist: "The egos have to get out of the way." Only then can a heightened purpose emerge for joined forces to grab increased market share.

COLLABORATIVE PRACTICES

Co-opetition requires a specific business objective that supersedes firms' natural individuality. For example, cooperating with a competitor possessing minority- or women-owned business enterprise status potentially provides an advantage in winning engagements using supplier diversity preferences.

Similarly, cooperative local firms mirror the presence of a super-regional for an engagement involving multiple markets, and benefit from cost advantages through lower overhead. Furthermore, firms that share an international association membership can unite against a Big Four competitor and enjoy an advantage of higher-ranking professionals performing the work.

Beware of the heavy risk involved when competitors work together. Clients can be stolen, talent can be abducted, and shared resources can strengthen a known competitor for future engagements. Both must realize that the combination's purpose is to exploit a specific marketplace vulnerability. Like any type of structured aggression, rules of engagement must apply.

* Mutual trust. Both parties must respect each other's contribution and believe in each other's commitment to execute. Without cultural and operational transparency, the client will detect the dysfunction and any gains are doomed.

* Mutual need. Both parties must respect the joint benefits for the engagement. These gains include opportunities for new business, exposure to a larger client, and stretching the staff's development.

* Shared objectives. Both parties must demonstrate an unyielding commitment to the client. Although successfully executing a larger engagement provides financial rewards, greater rewards are available through the credibility gained by performing well.

* Exit strategies. Both parties must understand that the joint engagement is a singular project. The parties can come together again in the future if another situation is mutually beneficial. But the project does not necessarily suggest a prelude to a merger, unless that is explicitly part of the initial plan.

If client satisfaction suffers because of a poorly designed or poorly executed project, then both firms suffer. The execution must be culturally, technically and logistically seamless, or the client will know.

On the other hand, the goodwill established from success exponentially increases both reputations in the marketplace. Both firms win recognition and financial rewards on a bigger stage.

Glenn Hunter is the director of member development for The APA/Enterprise Worldwide, a division of FiveStar3 LLC. Reach him at glenn the-apa.com.

(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.

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