Managing culture in real estate joint venture partnership
Culture describes the ‘way of life’ of groups of people. It is the way they do things. Whereas genes are inherited, culture is learnt. Culture is reflected in people’s writing, religion, music, clothes, cooking, what they do and how they do it. Different groups may have different cultures.
The concept of culture is very complicated. The word ‘culture’ has many meanings and finds its most common use in three ways:
– The excellence of taste in the fine arts and humanities, also known as high culture.
– An integrated pattern of human knowledge, belief, and behaviour.
– The outlook, attitudes, values, morals, goals, and customs shared by a society.
Real estate culture therefore, is the way an individual or a group of people do real estate investing.
Real estate is perceived and defined in different ways by the various ethnicities or race of people around the world. And, these different definitions are evidenced in the way the different groups approach real estate investing.
If a group of people were drawn from various ethnic groups and placed within a defined location, each group will maintain and reflect their individual perception and definition of real estate. Even when bound by location, people do not default to a unified real estate culture.
There are groups of people, in some states in Nigeria, who situate burial sites within habitable areas such as having a tomb in a living room or close to a bedroom. Many people would find this absolutely unimaginable but, for such groups, this is a normal way of life. As a matter of fact, some people make personal investment in real estate for the purpose of owning a burial site.
Not only does culture impact on real estate investments, it also reflects in the way limited real estate resources are utilized through joint venture partnerships. Culture is what determines the success or failure of a joint venture project.
Joint Venture real estate projects leverage on the resources and strengths of the parties involved in the partnership to achieve a common goal. Often times, the real estate culture behind the strength of the parties and the accumulation of resources is not considered.
PWC, at a presentation in 2018, identified cultural differences as one of the threats to the success of joint venture real estate projects and, in many cases, its failure in Nigeria.
Since values are reflected as culture, misalignment of values in a real estate joint venture will impede the success of the venture. For instance, when a JV partner does not place a premium on the environmental impact of a project such that the effect of the project on the environment is factored in from the start, such project will, in the end, not deliver on expected goals.
When you enter into a JV arrangement with a group or individual whose way of doing things involves zero tolerance for safety issues, you can expect that such culture will reflect in how they approach the partnership.
A partner with high sentiments regarding their contribution to a project can be rigid on the actual value of their resources. That rigidity will definitely have an impact on the success of the project goal. How to spot culture.
For many investors, culture is already set. It is not a newly acquired skill. So, it is not safe for partners coming together for a joint venture project to be oblivious of the existence of a set culture.
The various possible culture in a group of people or individual plays out during conversations. It is important that partners intending to enter a real estate joint venture discuss as often as possible to observe and identify cultural traits that can either impede or enhance the project success.
Understanding why a partner is interested in a real estate project is a good way to begin to uncover such a partner’s culture or way of doing things. How to manage culture Culture reflecting in a real estate joint venture arrangement is not all bad. As a matter of fact, a strong positive culture enhances strategy.
To manage culture, the goal of a real estate joint venture project must be clearly defined by stakeholders and communicated as often as required. Every stakeholder wants the greatest financial reward from an investment but that does not eliminate the interference of culture.
Existing culture, if well understood, can be used as a reward system when there is an alignment. It can as well be used to get the buy-in of stakeholders.
A partner’s culture can become attractive to other stakeholders. Partners should always maintain a level of awareness of the other party’s culture to ensure alignment and re-alignment when necessary. Non-alignment at any point in time can negate the overall success of the project.