A few years ago, John B. Swisher and his team at JBS United Inc. were putting together his first joint venture with a Chinese company and language and culture differences were creating significant obstacles for both sides.
Swisher, founder, chairman and CEO, was used to establishing lasting relationships built on communication and trust. One relationship with a feed and grain company has continued ever since he founded his now $480 million animal nutrition company 55 years ago.
But the Chinese joint venture was suffering from miscommunications. Swisher, meanwhile, was very concerned about his exploration into the burgeoning swine, poultry and livestock feed markets in the Asian giant.
“What they wanted was our research, our experience, and they want us to train that sales force to be a capital partner there,” Swisher says. “That market is just growing so rapidly.”
Already producing six times more hogs than the United States, the swine industry in China showed unparalleled growth.
“An American name means a big thing over there, so we were trying to capitalize on our name and the skills we have,” Swisher says.
He just wasn’t going to give up, and he set out to find a solution, even if it meant asking everyone who would listen. And soon, the right person was listening.
“I was at a 4-H Foundation committee meeting, and I was sitting next to this young lady,” he says. “She was an attorney with a law firm, and we were just talking about the difficulties in China ― and she said, ‘Do you know that we have attorneys in China? And that they’re Chinese?’”
Taken aback, Swisher said, no, but he sure would like to talk to one. And he did. What evolved was a solution built after dogged determination ― and that chance meeting.
“Within a month we had that thing completed,” Swisher says. “The attorney understood the language, he understood the people, and he had a law degree from China and the University of Indiana. He was just able to put that together so quickly once he could understand both sides. We are still using him. To be able to understand the language, I think, is crucial.”
International joint ventures can be lucrative undertakings. Teaming up with another company distributes the rewards ― as well as the risks, but the pairing may be the major factor in a successful endeavor, which might have not been a success by either of the companies alone. Both sides have opportunities for growth and a return stream for years.
“With the joint ventures, you have a strategy to grow and primarily to attract that skill that you do not have in-house and for all practical reasons could not afford to have in-house,” Swisher says.
For JBS United, its first Chinese joint venture was the United-Liuhe Co. Ltd., which manufactured and marketed nutritional products to poultry and livestock producers in China.
JBS United recently sold its interest in United-Liuhe for an excellent return ― nearly tripling its initial investment. It is now undertaking a second venture with the principal investor in that first partnership.
Here’s how Swisher helped blaze the trail for joint ventures on an international scale.
Find a good partner
In any joint business venture, it’s important to find a partner who is not just knowledgeable and has deep pockets. But what are some other key factors in a partnership?
“It’s people that you can work with, that are honest and reasonable, because no matter what contract you write, there are going to be exceptions and there are going to be other things that happen,” Swisher says. “Out of 13 domestic and international joint ventures, we’ve been really successful with 11. We had two absolute failures. I think we misjudged the partners in those two failures.”
The partner-judging process is not unlike that used in seeking a new employee. Proposals have to be examined, research has to be conducted into past history and risks have to be weighed to minimize possible mistakes.
“No matter how good that résumé looks, and how good the interviews go, you’re going to miss something,” Swisher says. “You cannot spend enough effort to avoid making some mistakes.
“I’ve read stories on American businesses going to China, and all they did was send money over to lose,” he says. “It’s like anything else. Ultimately, it boils down to the person that you are partnering with and the skills and character of those people.”
While you may find a different language and culture may make reference checking and other research a little challenging, it is an important part of the decision-making process.
“It is critical that you know the people who you are doing business with, that you trust them, they are aboveboard and they are doing things right.”
Once Swisher and his team realized that networking efforts might be fruitful, their search began to bear fruit.
“The partners here had gone to graduate school with a Chinese national, and he came to us and said this was a really good company; these are really good people,” Swisher says. You will find, however, that a good reference just opens the door, and you will need a comprehensive vetting process and face time. Likewise, a Chinese business has to approve of your company.
“We met with them and our conclusion was the same,” Swisher says. “We’ve really had a great relationship for 10 years. We have been really pleased with the outcomes.”
“You have to become trusted and be brought in ― sort of as a brother,” says Don Orr, JBS United president, who spent four years to find the right partner for the company. “Somebody’s got to vouch for you in China. Then you’ve got to spend the time over there to gain their trust, and then it will work. You can get through these differences or rough edges that you need to smooth out.”
Once JBS United made its decision, Swisher made it a point to keep the two-way communication alive through final negotiations and continuing on through the business enterprise.
“You’ve got to do your part,” he says. “You’ve got to hold up your end. They’ve got to be sure of you, too. I think it’s like any other relationship. You work with somebody for a period of time and you get to know what they do, what they can do and if what they tell you is right, and so forth.”
After his experience in the first venture opened his eyes a bit, Swisher put to work some of the lessons he learned for his second venture.
“No. 1 is you want to be a financial part of the company,” he says. “Although we had money over there in the first venture, what we had was just a small part of it and separate from the company. This time we are going to have ownership in the company.”
Another point applies to clearly defined roles for each party. Each should assess how they will go about completing their purpose and deciding with whom they need to interact.
“I think this time, there is an understanding with them and an understanding with us far more on what our roles are,” Swisher says.
Get the right people
It’s almost a given that your management for a joint venture overseas should include qualified, native-born talent. There is no shortcut to finding a suitable person; it takes determination and patience.
Swisher felt so strongly that the company needed this type of individual to deal with the Chinese partners that it took years of searching.
“We hired a Chinese man, born, raised and educated in China, who came to the United States and got master’s and doctorate degrees,” he says. “Our president, Don Orr, went searching and found him up in Canada. He is now literally the one responsible for the Chinese venture. Of course, he can read and write the language and is trained and educated in nutrition. No question, he has been unbelievably valuable.”
Some of the keys to a successful search?
“You really have to be agile and rally your resources and start communicating,” Orr says. “Use all your resources here, everyone you know here in the United States and the universities. Go to those people who are allied in your industry and say, ‘What’s your connection to those institutions or industries in Canada, the U.S. and China?’”
Once Orr learned that Chinese culture favors conversation between the top officers ― not vice presidents ― of both companies, it cemented his goal to find a native manager. Another advantage of such an employee is that he or she, once on board, is probably more likely to test the waters of business expansion than your employee who doesn’t have any local background.
“Don’t think too narrowly when you consider what is this person going to do because he or she may open up many, many doors for you, which you didn’t know you would be going through,” he says.
You may be talking and interacting with companies that you didn’t even know existed, and it may help to pave the way for future business relationships.
Also of value is the fact that once you have located and hired one highly skilled individual, he or she may lead you to another. The contacts that they developed during their school years or early employment years can be invaluable.
“They can pick up the telephone, call the schools and say, ‘Do you have any students up there that are going to graduate?’” Swisher says. “All these guys know each other and the good news is they can help advise the student.”
In effect, you will have an in-house recruiter ― and a marketing agent. Word-of-mouth is one of the most convincing tools, as most companies know.
“They will know your company and they will sort of know who’s going to fit, who’s not going to fit, and why,” Swisher says. “They can describe your company and your activities to the students. So it helps both sides.”
“If you have a good reputation with those people, you’ll likely get some recommendations.”
Deal with the lows
Sometimes the best-laid plans can go awry, as the poet Robert Burns once said. You’ve lined up someone to do business with, he or she is bilingual and everything looks like it will work. Then something happens and the project never gets off the ground.
While not technically a joint venture, Swisher’s company attempted to set up a distributorship in Ukraine, working with a local businessman who spoke English and Russian ― and it died on the vine.
“It blew up,” Swisher says. “There was no question part of the problem was language and part was culture. We offended them somehow, obviously not intentional, but all of a sudden it became an issue we couldn’t overcome.”
What Swisher took away from that experience was that American business practices may differ from those in Ukraine.
“There was another company in Ukraine that contacted us and basically in that conversation we agreed to meet with them,” Swisher says. “This really offended our prospective distributor. We thought we were being up front, and he basically said if you go around my back once, you’re going to do it again. We could not get over that hurdle.”
In a case like that, it is best for you to dissolve the relationship. Chalk it up to the differences in culture and as a learning experience.
“Do not violate the original opportunity, even if you think a third party is only remotely connected,” Orr says. “Inform your partner first.”
When it comes to going your separate ways, make a concerted effort to have an amiable parting.
“We left as friends; that’s the best way, with mutual respect, realizing that the arrangement just wasn’t the best fit at the time,” he says. “That’s why you never burn any bridges behind you ― you may do business with them down the road.”
Luckily, losses were minimized on the Ukraine project. But two joint ventures JBS United had in the United States with Indiana companies went sour also, and while not causing heavy losses, they were failures attributable to incorrect conclusions. As with the international joint ventures, you need to evaluate the domestic joint ventures with the same scrutiny.
“First of all, we misjudged their talent,” Swisher says. “They were not as skilled as we thought they were, and they were not as reasonable as we anticipated. Those two things just killed those partnerships.”
But if you take a philosophical outlook, it will help put it in perspective.
“But, you know, to some degree, if you say two out of 15 is not bad, it’s sort of like hiring people,” Swisher says. “If you could hire 13 really great people out of 15 hires, you’re damn good.”
The Swisher file
John B. Swisher
Chairman and CEO
JBS United Inc.
Born: Danville, Ill.
Education: University of Illinois, bachelor of science in animal science. Honorary doctorate from Purdue University in agriculture. That was a real treat for me to get an honorary from a university. Well, I did attend Purdue for one graduate course, but never got a diploma from Purdue. They felt that what I had done for them for agriculture was worthy. It sure as hell wasn’t the money that I had given them.
What was your first job?
Sacking a pancake mix in 5-pound bags. I was 14 years old. I was even driving trucks at 14. You have to understand, in the World War II years, manpower was hard to come by.
What was the best advice you ever received?
Whatever you promise, be sure that you fulfill it, no matter how hard, how badly it hurts you. You’ve got to be good for your word. That’s from a guy named Paul Kefauver. It was early in his business. He was a customer, a really large farm in Indiana named Fuller Farms. Mr. Fuller had a lumber business down south, a big lumber business. He owned a farm, I guess his wife inherited the farm, and it was like 1,000 acres; it had all kinds of cattle and pigs. Paul was a professional farm manager and was just sort of one of those wise old men that you are lucky enough to come in contact with.
Whom do you admire in business?
John Stadler has to be at the top of that list. His family had a packing business in Columbus, Ind. His adopted father hired him to save that company, and he did. Then he built a packing plant for an integrator down in Missouri. Then he had a series of things, which includes starting one of the largest hog farms in the United States, plus a packing plant, plus a sausage plant. He has a knack of taking desperate situations and turning them around. He does it so easily that it makes me envious. To do something that is so difficult and to do it with such ease is my definition of a pro.
What’s your definition of business success?
To be able to manage a company through the bad times successfully. There’s an old adage about anybody can be a captain in a calm sea. Not many people can be a captain, a good captain, in a rough sea. In these last three years, so many people in business have had it unbelievably tough. I think you’ve got to be able to manage through the changes and adapt successfully to change. I think that as much as anything else I see is a hallmark.
Swisher on what a joint venture means: What the joint ventures have done is for is to be able to take a medium-size company and expand particularly the technical intelligence, and in our joint ventures we have microbiologists, for example ― it would’ve been really difficult for us to be able to attract and employ that type of intelligence and experience. So with the joint ventures, we have a strategy in effect to grow and primarily to attract that skill that we do not have in-house and for all practical reasons, could not afford to have in-house.
How to reach: JBS United Inc., (317) 758-4495 or www.jbsunited.com