By: Margie Brown, CIRI president and CEO
I am frequently asked, in my role as CIRI president and CEO, about CIRI’s success in partnering with other companies. I have learned firsthand during my more than 30 years at CIRI the value that good partnerships can add to any business venture, including Alaska Native corporations (ANC).
CIRI and the other ANCs were created by legislative mandate in 1971 to settle Alaska Natives’ aboriginal land claims. The Alaska Native Claims Settlement Act gave the ANCs some seed money, land entitlements and a mandate to benefit current and future generations of Alaska Native shareholders. It was an unusual way for companies to start business. In most cases the nascent companies did not have any product, idea or invention that they could develop or sell. Consequently, the early Alaska Native leaders were forced to develop their business acumen quickly.
We realized at CIRI that we could use the partnership model to find business opportunities and gain business experience. I am using the term “partnership” very precisely to refer to contractual relationships between parties to jointly pursue business ventures. CIRI’s greatest business successes have been achieved through strong partnerships with companies that have (had) both the ability and the incentive to make the venture succeed.
So how does CIRI build a strong partnership? We look for three things: economic alignment, clearly-defined decision-making processes and continuity in partner relations.
Economic alignment between the parties does not require a 50-50 splitting of the financial benefits. It means project decisions and actions benefit (or harm) all partners in proportion to their respective interests. Looking back, I see that the troubles with CIRI’s less-than-successful partnerships occurred because the parties’ interests were misaligned. For example, in the 1990s CIRI entered into a partnership to develop and operate a luxury resort at Lake Las Vegas, Nev. Our partners were also developing land surrounding the hotel, but CIRI was not. It quickly became evident that the parties had different economic interests. Our partner maximized their profitability by using the hotel to promote their land sales. CIRI’s financial interest, on the other hand, lay solely in enhancing the return on hotel operations. We exited the partnership and our investments in Lake Las Vegas in 2006.
Successful partnerships also require clearly-defined decision-making processes that enable all parties to influence decisions in proportion to their investment stakes. The process should be kept as simple as possible to streamline decision making while also respecting the partners’ respective corporate cultures and decision-making structures. CIRI works with many strong, innovative partners that are privately held and organized to enable a few key executives to make quick changes in corporate direction. CIRI has a more deliberative corporate decision process that requires Board of Directors approval for major decisions. Strong partnership agreements account for these differences in decision-making structures without hamstringing a project’s operational efficiencies.
Finally, strong partnerships require continuity in partner relations. Continuity does not necessarily mean that the same people must be involved with a project throughout its lifecycle. Instead, it means that corporate relationships and interests remain stable.
I have often heard from potential partners that they worry that ANCs are highly political entities and that their management positions cannot be counted on to be consistent over time. I agree that CIRI and other ANCs experience some interesting board politics, but good business transcends politics and we have stable management teams needed to maintain strong partnerships.
Years ago CIRI was negotiating an exploration agreement with Atlantic Richfield Co., also known as ARCO. During the negotiations, an ARCO official said he feared entering into an agreement because he was uncertain about CIRI’s corporate stability. We overcame this concern and entered into our ARCO 1 agreement, which led to a corporate relationship that lasted many years, during which time ARCO went through at least four top-management changes while CIRI management remained unchanged. ARCO no longer exists, but CIRI does.
CIRI has a reputation for building successful business ventures that are based upon strong, mutually-beneficial partnerships. These strategic relationships help our company leverage its assets while also spreading risk and opening new opportunities. I expect that partnering will remain a key CIRI business strategy for generations to come.
