I’ve worked with hundreds of organizations to help them form partnerships— both internally and with other organizations. The two case studies I offer here reflect normal behavior and the common reactions I get from the people I work with. These partnerships were successful, but not perfect—which makes them especially valuable as case studies.We see real people in real situations acting and reacting the way we ourselves might.

Eric, the general manager of an eight-hundred-room convention hotel in Minneapolis (part of an international chain), asked me to help solve problems that two departments at the hotel were experiencing with one another. He wanted to know if the two departments couldn’t somehow start to work together and form a partnership to better serve the guests and each other. He invited me to a meeting along with the two heads of the departments, Marty and Jean. Marty was the supervisor of Maintenance and Jean headed Housekeeping.Marty had about forty house maintenance engineers on his staff, and they were responsible for all building maintenance. Their duties varied from changing lightbulbs to fixing the hotel’s heating and cooling systems. Jean managed a staff of about one hundred housekeepers, groomers, and laundry personnel. Marty and Jean were constantly at each other’s throats. More than once they’d had separate meetings with Eric, each complaining about the other. It seems that Housekeeping was constantly complaining about having to redo the room when Maintenance failed to clean up after themselves once they finished repairing something in the room.While this may sound like a minor dispute, it was the source of years of anger between the two departments and these two employees. To make matters worse, Marty and Jean did not like each other personally. Marty complained that Jean was overly sensitive and that her staff was lazy and whined constantly. Jean told me she thought Marty was a bigot and a bully.

Decide the discount factor: the percentage that will be deducted from each year’s cash flow. Determining this is central to the whole exercise. A higher discount factor will generate a lower overall valuation. Typically, two things influence the level of the discount factor. The first is the level of business risk. If the risk is high (and the investment is unlikely to meet its projections), the discount factor should also be high. Second, there is often a compromise between the cost of borrowed money (such as 5% interest) and the return expected by the investors (for example, 15%); in this case, the discount factor would be 10%. It may be desirable to select a range of discount factors, providing optimistic, realistic and worst-case scenarios.

Apply the discount factor to the net cash flow for each year of the projection and to the terminal value. The figures resulting from these calculations are the present value contribution of each year’s future cash flow; adding these values provides a total estimate for the value of the investment.