The Seven Deadly Sins of Business Partnerships

I’ve been contacted a number of times this year by business partners who are bickering with each other and/or struggling over the condition of their business.  It seems like there have been more of these calls than in the past…maybe my blogging is the little nudge that pushed the business owners to either phone or email me.

Do you and your business partners get along?

Yes? That’s great.  A suggestion to maintain the good relations…read below about what to avoid.

No? Did you get along when you started out, but not anymore? What’s changed?

I’ve seen 7 reasons (The Seven Partner Sins) why conflict creeps into ‘partner’ type businesses and causes successful companies to fray or even break up after many fruitful years of existence. Conflict among business partners can become burdensome, intrusive, even crippling to the company. Like mold left untreated, it can permeate all aspects of the day-to-day operations.

How can these situations be fixed or avoided? Are there some partner conflicts that can’t be fixed?

For purposes of this article, I define a ‘partner’ type organization rather broadly. Some of my business partner examples include, but are not limited to:

• A company with 2 or more shareholders
• A company founded or acquired by one or more entrepreneurs and who subsequently allowed others to become shareholders over time (the equity mechanism is not relevant for this article)
• A professional services firm (e.g. consulting, engineering/environmental, medical practice, accounting, financial advisory, wealth management, investment banking, law etc.)
• A group of managing partners of a venture capital or private equity firm
• There are obviously more examples…

Note: Excluded from this discussion are 1) family-owned companies and 2) companies with substantive, outside investments from venture capital/private equity groups (i.e. no institutional money to muddy the water). These two types of companies can have their own unique set of leadership issues that are different from the business partner dynamics discussed below.

I have seen, worked with or have direct experience with ALL of the Seven Partner Sins over the course of my business career. To cite an oft used cliche, for many of the situations I’ve witnessed about these categories, ‘you can’t make this stuff up’. There is no MBA textbook that will cover this ground. It’s the personal, Stuck in the Ditch, ‘in your face’ variety. Here is the list of 7:

1. Role Disparity

“Sally’s lack of skills are becoming a big problem.” A person’s role may be a bit fuzzy at the start of the business relationship, but as the company’s needs and leadership requirements evolve over time, that same person’s skills may no longer fit their role. Conflict then surfaces over proper roles and functional responsibilities. Are the right people in the boat and in the right seats?

2. Strategy Disagreement

Stage left, stage right, stand still, do a backflip…what will it be. You would expect partners to have different opinions about long term strategic direction when companies are in trouble, but I’ve also seen serious conflict when companies are doing very well. There is no ‘typical’ business environment where strategic disagreement flourishes. Generally, the source of the stress in good times has its roots in #3, # 4, and #5 below.  Personal needs and desires easily infiltrate strategic thinking.

3. Money/Greed

Gordon Gekko is alive and well in many partnerships.

“The better we did, the worse it got” was a quote from one partner in a company that was rife with conflict over compensation. The ‘who sourced the business’ vs. ‘who delivered the work’ was a constant tug of war. Notice the use of ‘vs.’!  Note to rainmakers…delivery and execution help the cash flow.

4. Leadership Style

As partners work together over time, different styles and personalities become more prominent. Consider what happens if the company has a mix of partners where some are control freaks, others are consensus seekers and even others are laissez faire about everything. Sort of like Attila the Hun meets Que Sera, Sera. Related to leadership style are individual personality traits. “How can someone with an ego that huge be so insecure?” Ego and insecurity is a tough mix in a business partnership.

5. Stage of life, career

A partner’s personal interests may change (i.e. their commitment to the business can wane). “Jack has gotten lazy about business development.” (heard this from some law firms…). Some of the younger partners might want to simply toss Jack out on the sidewalk and that could be the best solution; however, maybe Jack’s skills, relationships and experience are valuable. Maybe Jack could thrive in a new role – see #1 above.

6. Weariness

This is similar to the stage of life, but it can be very different. People lose interest, they get bored.  They get weary of each other. One description I heard about 2 founding partners: “They just bicker all the time about everything”. Great for employee morale…

7. The Human Condition

“Oh what a tangled web we weave, when first we practice to deceive.” (Sir Walter Scott).

Fraud/Embezzlement; Ethics/Character; Personal Hijinks/ Boorish Behavior; Sex, Drugs, Rock n’ Roll. Again, I’ve seen ALL of these over the years. Not pretty and very destructive.  Let your mind wander.

What can be done to fix or simply improve the Partner 7? Here are a few suggestions:

1. Business advisor and Blogger Josh Patrick started me thinking of this topic a while back when he wrote “The Dangers and Benefits of Taking a Partner” in his regular column in the New York Times.  Josh covered the pro’s and con’s of teaming up with someone to lead and run the company. Read his article for another perspective on the topic:

https://boss.blogs.nytimes.com/2013/06/20/the-dangers-and-benefits-of-taking-a-partner/

2. Make a list of the all the issues that are really bothering you and eroding the business. Even include what may seem trivial. Attempt to have a series of open and honest conversations amongst yourselves about how to resolve these issues.

3. Get outside mediation help if you can’t do #2 without flying off at the handle or if you feel you want to start the process with an objective listener and sounding board.  Don’t look for a silver bullet from the outside mediator.

4. With respect to roles and responsibilities, toss out the current organization chart and complete what I call a Functional Analysis of the company. Develop a list of functions and necessary roles for the business TODAY, not what is was like years ago.  After this is complete, then start dropping names into the best functional slots for their skills. Only then draw a new organizational chart. Form follows function. I’ve done this type of analysis many times. It can be a bit intimidating, especially if some in the management team feel insecure about their current roles in the company.  The goal with this type of analysis is do what’s best for the company, the employees and the shareholders.

5. Leadership styles. It’a hard to change who a person is; however, you can use a number of proven personality/psychological tests to make all more aware each person’s particular style of leadership.

6. Weariness. Get over it.  Grow up.

7. For the items in The Human Condition category, terminate the offender and, if appropriate sue and/or prosecute.

Have you experienced any of the Partner 7 in your company?  Which of the 7 are in your particular mix? How have you dealt with them?

Please share any ideas and suggestions to the readers.

image credit: onstartups.com

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  Jim McHugh has extensive experience working with emerging growth and middle market companies as an executive coach, strategic/ performance improvement consultant and director. Creator of the 9Stucks business diagnostic tool.