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Making Strategic Alliances Work

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November/December 2001 - Volume 80, Number 6

by Michael Hick

September 11, 2000 it hit the public. At last a press announcement of a strategic alliance that spells out the right reasons. See if you can figure out what they are:

According to David Curren, COO at Lender’s Service, Inc. (LSI), "increased coverage like we just announced in Arizona, benefits all of LSI’s customers from our national and electronic mortgage loan providers to our individual, local customers. The ability to work through a single source such as LSI for appraisal, title, and closing maximizes a lender’s time, cost and service efficiencies. That allows our customers to increase value to the consumer. It’s an important service step for us with all of our clients."

And then the comment from the other party,

Marty Althoff, CEO of First Southwestern Title Agency of Arizona explains, "By partnering with an established agency such as First Southwestern in Arizona, LSI brings ‘best of breed’ distribution to its customers courtesy of an integrated platform. The first clients to use services under this joint venture operation have been very pleased with the results."

Do they have it right? Yes, they do. Because in a short press release they mention the words "customer, consumer, or client" no less than seven times!

The joint venture deal put together between LSI and First Southwestern Title Agency, Inc. enables LSI to facilitate a full array of title and closing services in the state of Arizona. The alliance appears totally customer focused. If so, given good management, it will hopefully survive long term.

How many Affiliated Business Arrangements (ABAs) and alliances are born for the right reasons? How many will not celebrate their third birthday? Unfortunately the infant mortality rate is unacceptably high; some say 85% will not survive to the age of five. Why is this? What can we do to be sure they live an adult life?

Partnerships in business are a lot like marriages in life. Their success or failure has a lot to do with series of rules and principles. Let’s look at the five driving reasons why partnerships fail.

Immediate Gratification

"I thought we would have seen profit from this deal by now." "We’ve got to show some positive results from this arrangement this month, quarter or year, or else my head is on the block." "What has happened to all the pizzazz that used to be in their business? Since we got involved it has gone dead."

Failed expectations are the top cause for collapsed alliances. Few are constructed with properly drawn business plans, formed from truth, where the goals and aspirations of the parties are carefully studied and agreed beforehand. Is your overall objective for the long-term good of your customers, or has the alliance been put together just to capture that slippery, elusive eel called "market share"? "If we don’t do a deal with them, someone else will!"

Blind Dates

Getting into bed with a partner for the wrong reasons. Heading into the future with someone you hardly know, they just look good. Sometimes you can’t even remember their name! This marriage usually collapses after the honeymoon. The chemistry isn’t right. Partnerships, like marriages, are all about people and their interaction. The same standards, ethics, goals, and ambitions have to be present. You may have to live with them before you sign the register. A good alliance is like any other good marriage. It is based on a high degree of mutual respect. It is made in order to grow together (learn, nurture, improve); constantly assess mutual goals and aspirations; build a strong financial future and raise even more satisfied customers. Sound familiar?

Cash Cows

These fat bovines are the first ones to be slaughtered when they are milked dry. Cash cows cannot go on giving milk forever and when they cease to produce, everybody gets upset. They live or die by their ability to keep pumping. When the business dries up (which it usually does), there is no longer any need for them. Cash cows have often been created from an overdose of bull so they can never live up to their expectations. Those in the joint ownership of a cash cow often butt heads over the amount of time spent on the milking chore, each one thinking that the other doesn’t work hard enough at it. Any alliance put together for the sole benefit of the cash cow stands charged with missing the whole idea. It’s the customer you are milking. The good health of the customer is the only reason we are all standing out here in the pasture!

Ego Trips

Big egos will demolish anything, but even small egos will ruin a good alliance. A partnership is strictly what it says it is and both should leave their egos at the closing table. Dominant partners in an alliance, who attempt to overrule and command the venture, often lose sight of the original intention. This is not a competitive road race, a game to see who wins. Big ego is another form of low esteem. Ego likes to be competitive. Competitive attitudes are only relevant if your product and service is not unique. Does the business of the alliance separate itself from everything else around it? The venture is bigger than us. It is devoted to the increased well-being and high satisfaction of our customers.

Dumb Waiters

After the deal closes, you hear nothing. Is this the best-kept secret ever? How many wonderful works of business art have been sculptured only to have them locked away from public view? Lack of good integrated communication is one of the biggest problems of world business. Every alliance should include instruction, training, and information as part of the initial goals. A talking head should be appointed to the permanent role of planting the information into the hearts and minds of the people concerned on both sides. Everybody should understand the defining statement of the alliance, and should be totally customer benefit directed.

The Seven Golden Rules For Successful ABAs (after you have been to the lawyer and checked the law).

1. Both sides must have a strong desire to succeed in the venture. Commitment to win is absolutely vital.
2. Precise goals agreed by both sides. Hammering out the aspirations and intentions of the alliance is crucial. Focus on the goals like a laser. Review them regularly making certain that you are staying on track.
3. Outstanding communication. Leaders and operators of the venture should be outstanding communicators. Not just good talkers but excellent listeners. Once the deal is negotiated and running, it’s time for everybody to get to know each other better. Work to understand their business and how they operate. It will be of major importance in the long run.
4. Be flexible and responsive. Things happen on the way to your goals. Being involved with a partner who can roll with the punches and come up smiling is a major plus. The rate of change means that everything you compose today will have to be fine-tuned tomorrow and that there is no certainty in anything, except change. If your intentions are customer focused, then your customers tell you what to change.
5. Having the right personal chemistry with the other side is vital. Exercise your intuition, it will tell you if it’s right. Far too often in business we look at the practical issues rather than the intuitive. It’s advisable to quit if your head says yes, but your heart says no.
6. Install a culture of trust and integrity into the relationship and therefore into the venture. To be productive, trust is the bedrock of a successful partnership. Be sure that this ethic is part of the mission you announce together and that all associates and customers know it.
7. Partnering is a relationship of interdependence. No one is top dog. Each depends on the other for the achievement of the goals they have set and the welfare of the customers. Appreciate the synergy you both bring to the table.

The Wave of the Future

Creating alliances and partner-ships is the way ahead for millions of businesses, governments, organizations, and ventures throughout the world. The Ameri-can settlement service industry is no exception. As the title process becomes more seam-less with other service providers in the deliv-ery of realestate closings, ABAs will proliferate. The next five years will be intensely active in the process, deals will be done with entities not yet invented and alliances will be made on a global basis as the customers continue to operate overseas and the mobility of the world workforce accelerates.

Those who know the techniques for successful partnering will be ahead of the pack, and those who know that it’s not just about money but about customer connection will be the leaders.

Michael Hick is president of The Success Resource Center, Inc. in Houston, TX. He works with people in the land title industry who want to succeed and grow their business. He can be reached at (713) 465-9697 or Global@MichaelHick.com. This article is excerpted from Michael’s presentation during the 2000 ALTA® Annual Convention in Hawaii.



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