Water Street Partners conducts large quarterly research initiatives, often involving quantitative benchmarking and best practices, to answer the most pressing questions of Joint Venture Advisory Group subscribers.

Rethinking Delegations of Authority and Effective Power in JVs

This study looks at what executive and operational powers the Board and shareholders delegate to the JV CEO vs. retain for themselves.

Water Street Partners has collected data from 98 joint ventures in North America, Asia, Europe, and the Middle East across a broad range of industries. Using interviews and an online survey instrument, we dimensioned how much power JV Boards have granted to JV CEOs – both formally and informally.

Need for a 360-perspective: Where do power and authority reside?

All in, our analysis looks at 50+ key indicators of Board delegations and management power and addresses some fundamental questions on the minds of JV Boards and CEOs

• How much independence should the JV CEO be given to run the business?
• Are there certain areas where the Board should play a heavier role?
• How much attention should we be paying to formal delegations of power as opposed to more informal policies, practices an behaviors outside of the scope of governance agreements?
• How often do JVs get out-of-synch on the delegation model? Are the costs meaningful?
• What should JV Boards and CEOs be doing to monitor and manage these issues?

Shaping Strategy in JVs

JV strategy is often not fully defined at the time of start-up, which results in strategy issues arising at startup, and every two to five years afterward. Navigating strategic events can deliver significant value to owners but many JVs get “stuck” – leading to lost opportunities and lower value delivered to shareholders.

Sample tool – Strategic gameboard

This study delivers a new set of perspectives, tools and practices to help address the unique issues and opportunities in developing strategy within a JV environment, including:

• A set of 9 new strategy development tools for JVs
• Examples of strategy processes and structures in several JVs
• A diagnostic tool – JV strategy readiness assessment
• Benchmarks on good strategy processes and approaches
• Practitioner guide to frame the challenges and approach, key questions – for new JV Directors, new CEO and senior JV management, and others

Succeeding as a JV CEO

The JV CEO role is arguably the toughest job in business – often far more complicated than a BU President due to the unique issues that arise from the multiple-parent company ownership structure.

Sample benchmarking findings – JV CEO factors and practices with highest correlations to performance

This benchmarking study of 31 JV CEOs provides a basis for comparing approaches and practices on five important topics:

• Nature and scope of the role
• Time allocation
• Authority levels
• Compensation structure
• Risk management approaches

Readers can use the insights from this research to aide in the negotiating and structuring of new JVs and the ongoing upgrades of other JVs.

JV Secondee Policies

While there are many good reasons to use secondees in JVs – e.g., quickly place high-calibre, trusted talent who know how to work with the shareholders – JV secondment remains a non-traditional staffing model that often brings inefficiencies and stresses not seen in the HR models of wholly-owned units.

Sample benchmarking finding – wide variance in partner / management role in secondee selection

Our client experience and benchmarking data show that suboptimal and/or unclear secondee policies can create real friction in JVs, and be a significant contributor to sustained financial and operational underperformance. This research compares how a set of JV-experienced global companies, primarily in asset intensive commodity businesses, handle important issues related to the selection, management, compensation, cost allocation, and incentives of secondees in their joint ventures.

JV Board Governance Practices and Performance

Joint venture governance differs from public company governance in key ways, introducing a distinct set of challenges that prevent JVs from fitting neatly into regular corporate review processes. This leads to less transparency and looser performance management of JVs than similar-sized wholly owned businesses.Our client experience and benchmarking data show that suboptimal and/or unclear governance can create real friction in JVs, and be a significant contributor to sustained financial and operational underperformance.

Sample benchmarking finding – Good governance has strong correlation with outcome performance

This studybenchmarks the board governance practices of 21 asset-intensive JVs, exploring the link between specific JV board governance practices, corporate JV review processes, and JV performance.

Benchmarking the CalPERS JV Governance Guidelines

This is a subset of analysis from our JV Board Governance Practices and Performance study and baselines the current state of JV practices against the CalPERS JV Governance Guidelines. CalPERS is the California Public Employees’ Retirement System – a major institutional investor and the largest pension fund in the US. These guidelines include 31 specific governance items – standards for JV Board composition and operations, and JV financial and compliance policies – and represent minimums for all material JVs of publicly-traded companies.

CalPERS JV Governance Guidelines – new governance standards against which to baseline comparisons

This study aims:

• To understand the degree to which JVs are operating under best practice standards
• To understand which Guidelines correlate most to strong JV performance (financial, operational, strategic) in order to help JVs prioritize Guideline adoption effort
• To provide a comparison point for individual JVs who wish to assess their own compliance against the Guidelines

Managing Shared Services in JVs

JVs often depend on their parents to provide administrative shared services (e.g., finance, HR, legal, IT, technical services) – a benefit to both the JV and the parents. However, these arrangements can create potential problems for both parties (e.g., for the JV, excessive cost of service, subpar quality; for the parents, stretch on parental resources, non-standard requests). Resolving these issues can amount to 10%-35% in savings or in shared service costs for a typcial JV.

Examples of shared service flare-ups in JVs

This benchmarking study of the shared services practices of 27 JVs provides independent data on shared service performance, pricing, and processes, and tools that can be used to enhance delivery of shared services.

Multi-Owner Ventures – Unlocking growth and efficiency

Multi-owner ventures are an increasingly important way for owners to drive efficiency by sharing costs and scale, but as a class these ventures often underperform relative to owners’ financial and strategic expectations.

Illustration of key dimensions of multi-owner ventures

This benchmarking study of 20 multi-owner JVs seeks:

• To understand the key challenges associated with running multi-owner ventures, and identify deal terms and management practices that correlate with performance among these ventures
• To dimension key choices in designing and managing such ventures – and the typical rationale for making different choices
• To provide specific practice illustrations and comparative data benchmarks across sample set of multi-owner ventures