Can a business relationship become too personal?

In 1965 a Baltimore baker by the name of John Paterakis took a big leap of faith by sinking a small fortune into huge ovens that would enable his business to churn out millions of hamburger buns for a single new customer. Entrepreneurial lore has it that he did so based entirely on a handshake with Ray Kroc, who was then growing the young McDonald’s empire, and who was offering stock in lieu of money for the bun supply. Paterakis’ own lawyer tried to talk him out of the deal, or at least to get their agreement into a contract, but Paterakis trusted Kroc and built the ovens.

That commitment ultimately catapulted Paterakis’ business to the big time, where it remains to this day. And today we hear stories in every business magazine all the time about how networking, friendships and personal alliances often drive the birth and staggering growth of successful high-tech start-ups.

No wonder a lot of people believe that personal relationships are the key to successful business ventures. But I think it’s largely misunderstood and sometimes overblown aspect of business development. It certainly doesn’t hurt to develop and nurture connections, and to pursue other forms of networking, but there needs to be much more. Great business relationships are usually not based primarily on personal interactions, but on each organization’s ability and commitment to give the other one what it needs. It’s pretty simple: if the deal doesn’t consist of a rational transaction that clearly benefits both parties at an organizational level, it’s probably not a good deal.

Sure, trust, comfort, respect and even friendship between key players are a nice plus, and can serve as a useful catalyst to successful partnerships. But if that alone is what’s driving a partnership, it may very well be an arrangement heading for trouble. Paterakis wasn’t putting himself on the line to help out a guy he believed in, he was landing a massive, game-changing order from a business he could see would be generating even bigger orders down the road. And Kroc was getting a sure supply of discounted hamburger buns for very little cash.

I frequently see a mistaken reliance on personal interactions in my own industry, healthcare. Many healthcare systems are, for the first time, looking to expand nationally or even internationally by establishing partnerships. Often they haven’t developed their deal evaluation criteria and end up focusing on whoever happens to send out feelers to them, or on whom they can turn up in their network of contacts. That can be an important starting point, but the conversations about whether to proceed or not needs to be based on more than the sense they get of the people they’re dealing with. Any business relationship needs to be reinforced by the commitment to mutual goals.

It’s only human, of course, to like being approached by individuals we can see ourselves getting along with and trusting. But by itself it doesn’t make for a good partnership strategy. In any industry, partnerships are much too important to be left up to the happenstance and vagaries of personal interactions. Instead, organizations need to determine up front what they want to get out of a partnership, what they have to offer to a partner, and which organizations have needs and capabilities that compliment yours.

You may not know anyone at these organizations personally, but so what? They have what you want, and you have what they want, so you have the basis of a good discussion for a mutually beneficial partnership. That’s who you want to get in touch with. You certainly want to be personable and establish trust. But in the end it’s more important to clearly establish and focus on what each party expects to get out of the deal.

Good personal relationships are usually emotional products of serendipity and generosity. Good business relationships are usually transactional products of intention and clear benefits. I think people do better in both their personal and professional lives when they’re able to avoid confusing the two, and make sure they fit well together.

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Steven J. Thompson, a healthcare executive who currently serves as the Senior Vice President and Chief Business Development Officer at Brigham & Women’s Healthcare in Boston.

Image: A worker arrives at his office in the Canary Wharf business district in London. REUTERS/Eddie Keogh.