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9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

The 7 Potholes of Business Partnerships

PotholeI’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! You are in good shape. If you want to maintain that success, I suggest avoiding the potholes by reading this post.
  • No? Did you get along when you started out, but not anymore? What’s changed?

There are 7 reasons (7 Partner Potholes) 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 day-to-day operations of a company. Over the course of my business career, I have seen and/or worked with companies that have had ALL of the 7 Partner Potholes.

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.

In many of the situations I’ve witnessed about these seven, the stories fall into the ‘you can’t make this stuff up’, Stuck in the Ditch genre. No MBA textbook will cover this ground.

Presenting the 7 Partner Potholes:

1. Role Disparity

“Sally’s lack of skills is 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 meet the current needs of their role. Conflict then surfaces over proper roles and functional responsibilities in the senior management team. 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. That could be the best solution; however, maybe Jack’s skills, relationships and experience are valuable. Could Jack thrive in a new role? (see #1 above).

6. Weariness

This is similar to the stage of life, but different. People lose interest, even become bored.  They get weary of each other. One description I heard about 2 founding partners: “They 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 7 Partnership Potholes?  Here are a few suggestions:

  1. Business Advisor, Owner and Blogger Josh Patrick started me thinking about this topic a while back when he wrote “The Dangers and Benefits of Taking a Partner” in his regular business column in the New York Times.  Josh covered the pros and cons of teaming up with someone to lead and run the company. Please read his article for another perspective on the topic.
  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 among yourselves about how to resolve these issues.
  3. Enlist outside mediation help if you can’t do #2 without flying off 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 it was like years ago.  After this is complete, start dropping names into the best functional slots to fit the leadership team’s skills. 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 members of the management team feel insecure about their current roles in the company.  The goal with this type of analysis is to do what’s best for the company, the employees and the shareholders.
  5. Leadership styles. It’s hard to change who a person is. However, you can use a number of proven personality/psychological tests to make everyone aware of each person’s particular style of leadership.
  6. Weariness. Get over it, grow up, or leave the company.
  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 7 Partnership Potholes in your company?  Which of the 7 make up your particular mix?

How have you dealt with them? Please share any ideas and suggestions with the readers.