The perfect partnership: Alliances between insurers and distributors require precise design, based on four essential elements. (Life/Health).

Business partnerships, alliances, joint ventures and other collaborations are increasingly important to financial-services organizations intent on building competitive strength and sustaining profitable growth. Just as building productive and growing distribution is the most important challenge for most executives, so are the "partnerships" established between an insurance company and its distributors vital to their business success.

To a large degree, producers are independent-minded businesspeople who will do business with those who can best help them achieve their business goals. To succeed, product manufacturers-distributors must establish and develop many producer relationships with product and channel managers in other financial institutions, field/branch sales managers and individual producers. The durability of a distributor-producer business partnership depends on its productivity for all the parties involved, which, in turn, requires that each party's interests, capabilities, roles and performance be aligned.

As the insurance industry continues to mature and as the variety of financial-services organizations converge in the battle to acquire and support productive distribution, the definition of success also is changing. Through the 1980s, solid, loyal and productive partnerships were established with agents on the basis of personal relationships; investments by the career company, general agent or agency manager to help launch agents' careers; and a business of selling proprietary, fixed, permanent life insurance.

Much has happened since the mid- to late-1980s. For many producers and companies, the business has evolved into financial planning, asset accumulation and the sale of nonproprietary and proprietary variable life, annuities, mutual hinds and other products. Many career systems have downsized; alternative distribution channels have proliferated; independent marketing organizations and producer groups have prospered; and "independent distribution" has emerged as the trend for many companies.

So, what's a sales executive to do?

A mutually productive, sustainable distribution partnership requires a good personal relationship and competent execution of the basic tasks required to do business. It requires competitive products and compensation. But what makes a business relationship strong and sustainable in the face of competitor efforts to supplant it? For most companies, hot product or hot compensation alone is not an economically viable foundation for building a long-term partnership.

From our distribution work and significant research on trading partnerships, we believe that partnerships must be designed with precision. The potential partners must understand one another's goals, relevant strengths and weaknesses and preferred means of operating to determine exactly how they can work together most profitably

There are four elements to establishing a successful partnership, and they are described below.

Basic requirements or tenets must be understood and in alignment. Will the prospective relationship align with the business strategies of each partner? Will there be joint benefits realized by both parties? Will the business economics of the relationship justify and sustain the relationship?

The closeness and nature of the business relationship must be clearly defined. The following are examples:

* Independent relationship is at arm's length, such as a vendor relationship.

* Cooperative relationship may engage in a shared pilot as a means of gaining experience together and earning trust.

* Collaborative relationship requires a solid base of mutual trust, understanding and commitment, and the partners may engage in joint planning.

* Contractual relationship may have an outsourcing relationship in which one fully assigns responsibility to the other.

Areas of cooperation must be clearly defined. Two organizations may be close partners for certain functions, while they are fierce competitors in other functions.

Enables, or relationship characteristics, must be addressed. The following are examples:

* Willingness to share relevant information and plans while respecting confidentiality;

* Understanding of the costs and benefits for both parties;

* Clearly defined roles, authorities and responsibilities; and

* Commitment of resources with the right competencies and knowledge by both partners.

Winning companies will possess a disciplined approach to establishing and nourishing distribution partnerships. Clearly, competitive performance pressures oblige executives to go beyond good chemistry and competent "blocking and tackling."

Richard K. Berry is a principal in the New York office of Tillinghast-Towers Perrin and leader of Tillinghast's distribution consulting practice in North America.