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How to manage partnership contracts

Negotiating a good partnership contract is key to managing your relationship with a business. It is also important that you consider how you will govern the relationship in order to protect your interests and reputation. You should take account of the Charity Commission’s guidance on commercial partnerships.  If you are looking to develop commercial partnerships, then here are some things you need to consider.

1

Exchange non-disclosure agreements (NDAs) or confidentiality agreements

The ease with which this process can be carried out with the organisation can be indicative of how your working relationship will pan out. A counterpart in the organisation you are dealing with who doesn’t have the authority or power to push through the signing of an NDA does not bode well for how easy the final contract and deal will work out. This may also indicate a lack of legal resources in the business that could impact how you take the deal forward.

2

Find out who in the organisation you are dealing with – is it an in-house or out-sourced legal team?

There are advantages and disadvantages to this. Usually an out-sourced team will have plenty of resources and, potentially, contracts will be easier to finalise. However, an in-house team would have a better understanding of the nuances of the contracts. It is useful to know who you will be dealing with on the other side of the table at the outset.

3

Make sure you have break clauses

It can be a good idea to have break clauses in the contract. If you are looking at a long-term deal, say three–five years, you may want to consider having a 6–12 month break clause that allows you to end the contract early in case the relationship is not developing as you wish. 

4

Retain ownership and build an asset

It is imperative that you agree at the outset who will own the customer at the end of the contractual period. By owning the customer, you are building an asset for your organisation, and real value. It may not always be possible because of the type of product or service you are contracting for, but you must consider it at the outset.

5

Make sure the length of the contract is appropriate

The length of the contract will really depend on the type of products and propositions that you are contracting for. Where there will be large set up costs for the partner, it is understandable that they would want a longer term contract with no early break clause. In this case you may want to install various key performance indicators (KPIs), that if not met could ultimately allow you to end the contract. Most partners would seek contracts of three–five years.

6

Reduce future legal bills by having rolling one-year contracts

At the end of your initial contract period it is useful to have a rolling one-year contract clause. The theory being that you are now at the end of the contract, and to have got that far we hope things have gone well, so this allows you to continue unaffected and without the need for costly new contracts to be drawn up. You should include that you reserve the right to retender at this stage.

7

If you can’t measure it, you can’t manage it

It is vital to have meaningful KPIs within the contract. You need to be able to measure performance. You will also need to have recourse to action if those KPIs are not met. You should have a clear idea at the outset of what type of management information (MI) you will be receiving and how often, how it is generated, what system it runs from and how it is tracked. The MI will be the cornerstone of how you track the success of the relationship.

8

Make sure you agree a governance plan

To measure how the relationship is moving forward the contract will need to detail the governance plan. This should outline the annual meeting plan to review the various metrics that have been put in place. There may be monthly, quarterly and annual reviews. Depending on the products and services you are promoting the types of reviews you put in place may cover:

  • Pricing Review – benchmarking competition
  • Proposition Review – benchmarking market
  • Commission Review – reconciliation exercise
  • Marketing Review – performance review
  • Sales Review – business allocation
  • Compliance Review – review of complaints, regulatory requirements

Further information

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Page last edited Feb 21, 2017 History

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