Business brief 3

Common types of partnership

Partnerships

The Longman Business English Dictionary defines a partnership as a relationship between two people, organisations or countries that work together. In business terms, it is usually an association of two or more people who go into partnership by pooling resources and sharing ownership, responsibility, control, profits,losses and liabilities of the business. Each person contributes something to the business, such as ideas, expertise, money or property. The partners define their management rights and personal liability in a legal contract. A silent partner is a person who invests in a company or partnership and shares in the profits or losses, but does not take part in management of the business. Another type of partnership is a strategic alliance between two or more companies to achieve a set of specific goals while remaining independent businesses. Strategic alliances come in many forms, including joint ventures and investments, and the development of common processes (e.g. supply chain) to increase the performance of both companies. A third form of partnership is a co-operative relationship between people or groups who agree to share responsibility for achieving some specific goal. For instance, a charity might collaborate with a local government department in order to co-ordinate services. In this case, there may not be any shared equity or formal legal contract.

Public private partnerships

A public private partnership (PPP) is an agreement between the public and private sector on the provision of public infrastructure projects. In a PPP, or P3, scheme elements of a service previously run solely by the public sector are now provided through a partnership between a government agency and one or more private-sector companies. Unlike full privatisation, when the service is expected to operate like a private business, the government continues to participate in a PPP in some way and may maintain ownership of the assets. When public and private sector try to work together, there is often a clash of cultures. However, there is a lot to be gained for both partners from working together. The public sector benefits from the expertise and resources of private business. The private sector offers better-quality services and responds more quickly to public demand. Then there are commercial benefits to the private sector of working on large, lucrative public contracts. A private company can also enhance its image and try to influence public policy-making. This private-sector involvement is not without its controversy: Why should governments turn to the private sector when they have traditionally provided these services themselves? Aren't private companies less accountable than governments to the public? Will private companies take short cuts in order to increase profits? Will the need for public private partnerships increase?

Private-sector provision in developing economies

In many developing countries, the business sector has virtually taken over the delivery of public services because these governments do not have the resources to undertake large infrastructure projects. Poor countries may be required to liberalise their industrial, service or agricultural sectors through trade negotiations at the World Trade Organisation. Critics of this approach argue that there must be government controls to ensure that business delivers fair services to people.

Partnerships and your students

Your in-work students will be able to talk about the strategic alliances and business partnerships formed by their companies. They may even work for a business that has public-sector clients. Both pre-work and inwork students will certainly have views on public versus private provision of services - get them to talk about their experiences. They may also have views on the privatisation of state monopolies and the quality of public versus private services in their country.

Read on
Helen Sullivan and Chris Sketcher: Working across boundaries, Palgrave Macmillan, 2002 Alan Taylor et al.: Partnership made painless, Russell House Publishing, 2003 Photocopiable Pearson Education Limited 2006