When partnerships first develop, partners should share power. If one partner dominates the process, the dynamics of the alliance may become unbalanced. And stakeholders—everyone who will be affected by the partnership including production staff, clerical workers, salespeople, accountants, and others—should participate all the way through the process. If the organization is unionized, a representative from the union organization must be included as well.

Moreover, the partnership must be voluntary. If a critical person or group chooses not to participate, that should not prevent the partnership from forming. It simply means that some elements have not moved along the Partnership Continuum at the same rate as others. In the case involving the U.S. Postal Service, one of the largest unions refused to partner with management in its effort to improve the workplace environment. But that didn’t stop managers from creating a partnership with others who shared a mutual interest. Like the Postal Service, you may want to keep the door open to potential partners who declined the initial offer. They may still have valuable insight and contribute to the overall success of the partnership.

In organizational partnerships, the partners who initiated the alliance should be responsible to all the stakeholders who must make it work. The leaders who put together a merger of two companies, for instance, should keep selling the benefits of the partnership to their companies. They can do this by cheerleading, by providing financial resources for the transitions required, and by ensuring communication to the rest of the stakeholders.Most of all, leaders can send a supportive message by continuing their personal participation in efforts to ensure the success of the merger. Their participation must be visible so that everyone in the partnership understands that the leaders support the changes they are asking others to make.

I once consulted with an organization in which the top executives only paid lip service to the partnership. Although they spent no energy on developing it, they did stage a public relations campaign and received recognition for being innovative. What they didn’t do was show support for and participate in the changes they had instituted. Consequently, the partnership dissolved. Leadership’s enthusiasm must be authentic; otherwise, people will feel exploited and withdraw their support.

The commitment we make to a full partnership is to continue to respect each other and honor the partnership as a special relationship. The evolving partnership has a life of its own and requires all of the same life-sustaining efforts and energies as any other enterprise. The special power of the partnership derives from the fact that it is created by design, sustained by conscious diligence, and flourishes as a result of renewed commitment by the partners. Following are the key components of making a partnership work.

Active support of leaders. Appropriate team membership with equal participation. Common objectives. Clear boundaries and scope. Consensus and openness. Trust and mutual benefits.

A partnership isn’t valuable merely because it has the potential to be valuable. We err if we assume potential is destiny. In fact, most of a partnership’s success is based on our own human efforts—our combined vision, made real by our mutual inputs and nurtured by our human relationships. It’s a process of giving, investing, contributing, and combining what we have to create synergistic results.

Over the years we have come to understand why some partnerships flourish and some wither and die on the vine. This final article summarizes some of the “shoulds” and “should-nots” of forming an alliance. Let’s start with the should-nots.

MOST COMMON REASONS PARTNERSHIPS FAIL:Inappropriate team membership. Failure to address internal/external partnership issues. Inability to create a Win-Win Orientation in building common platforms. Failure of internal departments to support organizational partnership due to self-interest. Lack of internal partnerships, resulting in poor crossfunctional coordination.

Easier lending standards signal lower default rates in future. Banks will usually ease their lending standards only when an upturn in the economy is in sight and companies have greater prospects for profits. During an economic slowdown the net percentage of banks tightening their standards will rise. This could be observed in 1990/91, and then during 1998 with the Asian crisis and LTCM. The last period of tight lending standards was seen between August 2000 and November 2001 when the US economy went through a recession. Since then, with improving macroeconomic data, banks started to ease their lending standards and companies’ demand for loans started to increase at the same time. Ahigh correlation of 0.79 exists between the net percentage of creditors reporting tighter standards for Commercial and Industrial loans and high-yield spreads for the period May 1990–August 2003. For the period November 1991–August 2003 the correlation between high-yield spreads and the reported demand for Commercial and Industrial loans by large and medium-sized companies is at -0.84.

Industrial production (IP) is another lagging indicator. Arobust relationship between high-yield spreads and industrial production is found at 0.76 with a 5–6 month lag. This means that a spread tightening in the high-yield market will induce an improvement in industrial production in a couple of months and give high-yield investors some comfort that spreads will be supported further in the future by better macroeconomic data like industrial production.

Industrial production is compared with default rates. A better IP is associated with increased profitability and cash flow situation of companies. This implies a better access to the capital markets and therefore lowers liquidity risk. As a result default rates will fall when IP rises and this translates directly into tighter spreads.

A robust negative correlation of around 0.75 exists between Moody’s trailing 12-month issuer-based default rate and the US year-over-year production for the period 1988–2003.

Technical analysts get hot streaks. Famous analysts appear on all the business TV shows. They attract a large following of believers. Their pronouncements often move markets. Then, after a series of bad calls, they are considered buffoons. They still appear on the TV shows but are abused by interviewers for their bad calls.

Investors who seek certainty are attracted to these investment gurus. The gurus sell expensive newsletters and give expensive seminars. Investors who cannot handle the unmanageability and powerlessness in stock investing are willing to pay guru fees. Besides fees, technical analysis usually requires much buying and selling that incurs commissions and spreads.

Usually, followers find the gurus at the height of their popularity. This is when they are receiving the most publicity and are near the end of their hot streak. New converts then plunge into the inevitable cold streak and lose large sums of money.Emotion cannot be avoided in investing. We are all attached to our money. When values soar, our egos soar. Huge losses plummet all of us into anxiety, depression, regrets, resentments, and free-floating fear. No investment system will ever take all the emotion out of investing. The trick is to find investments within your emotional comfort zone. If you find technical analysis fun, despite recurring losses, then it is in your comfort zone. If you find the losses depress you too much, technical analysis is not within your comfort zone.

Seeking to take emotion out of investing, stock analysts have invented many systems of technical analysis. Technical analysts look only at numbers.

Most believe a thorough study of stock price and volume patterns alone should allow the prediction of future prices. Some technical analysts study more factors than price and volume. All build elaborate charts and read them for clues to the future. Often, extensive computer modeling and game playing systems are employed. Economic factors, stockbroker pressure, the brother-in-law’s inside information, the CEO’s cold, and other factors are ignored.

Technical analysis is great for number people. You can play with endless formulas to analyze past trends hoping to predict the future. However, technical analysis is best employed on other people’s money. Then you can remain objective and emotionless. All the studies of technical analysis show that it is ineffective. Used on your own money, you are likely to have strong feelings as losses mount.

Before coming to market, initial public offerings (IPOs) must issue a  prospectus describing the company and its risks. Virtually every prospectus  I’ve ever seen is written in unreadable legalese. I doubt any analysts not  associated with the investment banks that wrote them bother to even glance  at them. The investment banks are paid unbelievable sums to underwrite  IPOs. Underwriters can make as much as $20 billion a year issuing IPOs.

After reading the prospectus, the analyst produces reports promoting the  issue. The report gets picked up in the chat rooms and the hype is on.  IPO prices can be manipulated in many ways by the issuers and the  underwriters. In addition to analyst reports, popular IPOs are sold by allocation  only to those willing to either buy additional shares after the IPO or  give additional business to the underwriters. With buyers in place before the  initial offering, the offering price can be raised increasing returns to the  issuer and the underwriter. When the price pops on the opening, insiders are  given the opportunity to unload shares at tremendous profits.

The only non-insiders who are happy with IPOs are volatility junkies. In  a bull market, many IPOs double and triple in price the day of the offering.  When their popularity wanes, they drop back to the initial price or lower. In  a bear market, new IPOs are rare. The few that come to market often  collapse below the IPO price. However, the investment bankers retain their  billions of profits.

IPOs can be thrilling and depressing. The winners make great chat on  the Internet and conversation at parties. Every once in a while, a winner  will grow into a great company such as Microsoft. The losers are just part  of the gamble for real speculators. Most investors will find IPOs outside  their comfort zone.

You must also think about unmanageability. A sense of unmanageability is common with investments. The causes of unmanageability are many but usually center around investment professionals and investment institutions.

Insurance salespeople may manipulate investors into high-commission, highsurrender fee, and inappropriate variable annuities. The chosen mutual fund might have huge loads and high minimums. The online brokerage Web site may freeze during the market crash.

Unmanageability can also be subtle. For example, savers want to own money market funds in their 401(k) accounts. Often the company will only match their savings with company stock and will encourage them to convert their money market funds into more company stock. Then office politics dictate that anyone wishing to be promoted buy company stock in the 401(k) and accept options on company stock as compensation.