Supplier collaborations and partnerships – pitfalls and blueprint for success in oil and gas sector

The ever-growing Ghanaian supply chain market has driven organizations to increasingly rely on supplier collaborations and partnerships to enhance efficiency, drive innovation, and, most importantly, reduce costs. This trend is particularly pronounced in Ghana’s oil and gas sector, which plays a vital role in the country’s economy.

However, despite the potential benefits, many partnerships fail to deliver the expected results. Supplier Partnerships, just like marriages, begin, grow, develop or fail, similar to relationships between people. Partnerships are doomed to fail if both parties do not have aligned objectives and have not clearly negotiated and agreed a framework under which to operate.

According to the Harvard Business Review, 50-70percent of strategic partnerships fail and 40percent of partnerships terminate within two years (Partnership Experts). In the global economy, a well-developed strategic alliance or partnership can give an organisation a significant boost to its operations and enhance its overall profitability. It can shorten “routes to market” and allow organisations to make strategic leaps into new technological areas, making the organisation more agile.

This article will outline some of the common pitfalls in forming strategic partnerships and provide a strategic blueprint for success which can help organizations navigate this complex landscape effectively.

Common reasons why partnerships fail

1. Unclear objectives with partnerships

In the Ghanaian oil and gas industry, partnerships often suffer from vague or misaligned objectives. For instance, during the development of the Jubilee Oil Field, differing goals among stakeholders led to misunderstandings and inefficiencies. Ghanaian companies must establish a very clear mutual understanding of goals be it production targets, sustainability initiatives, or technological advancements to prevent such challenges. A consortium of local and international companies working on a pipeline project for example can benefit from a detailed agreement that outlines specific production milestones, environmental impact measures, and community engagement strategies.

Blueprint for success – define and establish clear goals & objectives

• Every partnership should begin with a comprehensive discussion to outline shared goals and expectations.
• These shared goals and objectives must be clearly defined, agreed and communicated to the partnering organisations. e.g. within oil and gas projects, this could mean aligning on local content targets, environmental sustainability, or technology transfers.

2. Lack of relationship development

Partnerships are built on trust and understanding. Many Ghanaian suppliers fail to fully understand each other’s strengths and weaknesses. For example, a local supplier might underestimate the capabilities of an international partner, missing opportunities for collaboration that could lead to better project outcomes. In supply chain and procurement, Multinational firms could host workshops to share expertise with local suppliers, fostering collaboration on technology and innovation, thus enhancing the overall project performance.

Blueprint for success – invest in relationship building

• Understanding your suppliers & partners business operations and culture is crucial for relationship building. Regular meetings, site visits, and collaborative projects can strengthen relationships. For instance, multinational companies can engage with local suppliers through mentorship programs to build trust and capacity.
• Training and mentoring exchange programs in partner organisations goes a long way in helping organisations understand each other’s culture and ways of working.
• Organizing joint partner events such as common CSR projects and annual appreciation days can also build camaraderie and loyalty among partners.

3. Ineffective communication

Communication is the backbone of any successful partnership. Infrequent and ineffective communication can result in misalignment of objectives, as seen in several joint ventures. Operating in different sites, geographic locations and in multiple languages can sometimes hinder effective communication. A conscious effort must be made to effectively communicate utilizing all channels available to the Procurement team.

Blueprint for success – enhance communication

• Implement structured communication channels, such as regular check-ins and progress reports.
• Utilizing local languages and cultural nuances in communication can improve understanding and engagement among partners.
• Regular updates, townhall meetings and discussions can help align expectations and foster collaboration.
• Implementing bi-weekly video conferences that include all stakeholders can facilitate ongoing dialogue, ensuring that all parties remain aligned on project goals and challenges.

4. Inflexible work schedules

A top-down approach to work schedules can stifle creativity and responsiveness. Encouraging a flexible approach, which considers partners peculiar circumstances, allows partners to adapt and respond to work schedule challenges more effectively. Creating a project timeline that incorporates buffer periods for unexpected delays can help manage risks better, especially when dealing with local regulatory approvals or logistical challenges.

Blueprint For Success – Embrace Flexibility

• Cultivate a flexible approach to work schedules and processes.
• Encourage input from partners to create adaptive timelines that accommodate unforeseen challenges, especially in projects prone to delays due to regulatory changes or logistical issues.

5. Inadequate feedback mechanisms

Without established feedback loops, partners may remain unaware of critical issues. Constructive feedback is essential for continuous improvement. Organisations that do not have formal review processes, feedback mechanisms and performance measurement techniques will not be enabled to take correct action and remain agile. This lack of transparency as a result can lead to partnership failures.

Blueprint for success – implement feedback mechanisms

• Create formal feedback loops for ongoing evaluation of partnerships. This can include surveys and performance reviews specific to the Ghanaian context, where local suppliers can express concerns and successes, fostering an environment of continuous improvement.
• Set clear performance targets and utilised and agreed methodology to review partnership performances and metrics on a regular basis.

6. Insufficient legal framework and documentation

In Ghana’s oil and gas sector, partnerships often begin informally, develop and sometimes fail because of an established regulatory framework. Lack of legal agreements which govern the stakeholders within the partnership can lead to confusion amongst partners.

Blueprint for success – develop a strong legal framework

• Invest time in creating comprehensive legal agreements that clearly outline the terms of engagement and roles and responsibilities within the partnership.
• Negotiate and agree the Terms and Conditions which govern the partnership.
• Ensure agreement covers breaches of the T&C’s, governing law, circumstances that constitute breaches, strategies for mediation, arbitration, and exit clause to maintain harmony between partners.

7. Poor conflict resolution strategies

Every partnership faces challenges. In Ghana, conflicts over resource allocation or contractual obligations have led to tensions between international firms and local stakeholders. The strategies chosen for conflict resolution—whether avoidance, escalation, or collaboration—can significantly impact partnership longevity. Establishing a conflict resolution committee with representatives from all partners can help address disputes effectively before they escalate, thereby maintaining a harmonious partnership.

Blueprint for success – define conflict resolution strategies

• Establish clear conflict resolution protocols that encourage collaborative problem-solving.
• Training teams in effective negotiation and mediation techniques can help address issues constructively, which is crucial in a sector where disagreements can halt projects.
• Utilise agreed mediation and arbitration guidelines as stipulated in the partnership agreement for effective conflict resolution
• An environment of mutual respect must be encouraged within the partnership to protect the sanctity of the relationship. Like all marriages, a partnership without mutual respect will fail. The contribution of each partner must be valued and appreciated, no matter the perceived value each partner brings to the table.

Conclusion

In conclusion, Supplier collaborations and partnerships hold tremendous potential for organizations in Ghana’s oil and gas sector. By recognizing common pitfalls and implementing a strategic approach to relationship management, companies can create strong, effective partnerships that drive innovation and contribute to long-term success.

Every partnership must be governed by mutual respect and a willingness to take corrective action when disagreement or conflict occurs. A commitment to clear communication, relationship building, and proactive problem-solving will ultimately pave the way for fruitful collaborations in today’s ever-evolving marketplace. Embracing these strategies can enhance Ghana’s oil and gas industry, promoting sustainable growth and local development.

>>>the writer is Senior Managing Partner, Fitzgerald-Bassey Consultancy Ltd