Partnerships seem to be breaking up faster than marriages these days. And it's not always happening behind closed doors.
Simon and Blanchard*, both in their seventies, have been in business together for 10 years. That is, if you can call it "together": The foyer of Kelso Chemical is no bed of roses. For example to avoid meeting Blanchard, Simon purposely doesn't get to his office until 9:30 a.m. Blanchard has been there since before 9:00, dictating a memo to Simon. This he gives to his secretary who delivers it to Simon's secretary. When Simon gets in and reads it, he will dictate one back to his secretary, who will pass it on to Blanchard's secretary. The two founders of Kelso haven't talked to each other for the past three years. The air is so thick with discord that even their secretaries, each siding with her own boss, barely pass the time of day.
Although many companies can operate smoothly despite the strain of bickering partners, Kelso has been buffeted as much as a business can, short of dissolution. And, in fact, even dissolution is in the offing, a prospect brought about by the partners' unwillingness to iron things out between themselves. A court-appointed receiver now oversees operations, officially protecting the assets of the company for creditors and employees while the parties are working out a reasonable plan of dispersal, but in practicality protecting each partner from being laid waste by the other.
Unfortunately, the receiver wasn't yet present when Simon threw a pot of water at Blanchard. In the successful plea for receivership before the Pennsylvania Supreme Court that describes the harmfulness of the bitter relationship to a profitable business, Blanchard claims the water was hot; Simon insists it was cold. Nor was the receiver there on a later occasion when one of Blanchard's sons insulted Simon and started a shouting match, rousing the older Blanchard himself from his desk, whereupon he threw a punch at Simon. Simon's glasses were broken and he was knocked out; this time it was cold. The next morning, Simon had his lawyer lodge assault charges in criminal court.
That exchange was but the last sour note in a sequence that has drawn the two erstwhile friends into a glissando of suspicion and distrust. It was a process that once begun, proved irresistible to both -- a common momentum among business associates who, for whatever reason, discover that they don't like each other but are helpless to resolve their differences.
One of Blanchard's early antagonisms, for instance, was to hire his son without asking Simon. Simon thereupon installed his own daughter on the payroll. Blanchard, the operating officer, took it upon himself to dilute some of the chemicals to save manufacturing costs. Then Simon, the financial brains of the partnership, decided that if Blanchard could effect such change without conferring with him, then, dammit, he would run the pension plan by himself. Blanchard claims that Simon made imprudent investments. In disgust, he altered the locks on all the office doors.
Lock changing, a traditional weapon of battling spouses, is representative of many other not-so-subtle tactics borrowed from conventional domestic warfare by disaffected business associates. Indeed, simmering business squabbles can flare up as vehemently as any bedroom dispute. In one case of premeditation on record at the American Arbitration Association in New York City (see "In Search of Help," page 48), a co-owner suddenly picked up his long-term counterpart in the midst of a conversation, heaved him out the door, threw his belongings after him, then barred the astounded business partner from the premises with a bolt he had installed that morning.
Observes attorney Steven B. Levy, whose Chicago practice is concentrated on resolving business disputes, "Locking out the other person happens every day. 'Partner, don't come back,' is the unmistakable message." Another lawyer newly involved in the business battleground sees lock changing as an effective instrument of leverage, calculated to convince the suddenly barred associate to acquiesce to settlement terms favorable to those remaining within. It takes several days for the locked-out partner to obtain a court hearing, and he then has to consult a lawyer at considerable expense. Meanwhile, the hours tick by frighteningly while the banished party can only imagine what unspeakable acts are transpiring inside.
But at Kelso, the hardened Simon was not dissuaded by simple locks: He broke his way in. Blanchard accused Simon of wanton destruction of property -- or at least of the half that was his. Not to be one-upped, Simon denied Blanchard access to Kelso's books. That being the case, Blanchard decided to sell off some of the company's inventory to retail outlets he still had interest in outside the business. He would leave it to Simon to figure out how to enter -- and live with -- the barely licit transaction.
And so it went. Eventually the partners agreed that Kelso wasn't big enough for both of them. One had to go. But which one? In a Solomanesque solution of which lawyers have devised several variations, the two partners decided that one would draw up a buy/sell proposal, and the other could accept it by either buying or selling. Through a coin flip, it fell to Simon to draft the conditions. These he submitted to Blanchard, and waited for the response. It never came. The intransigent Blanchard was torn, to acquiesce even now somehow would be to give in to Simon.
Such dilemmas have fueled the growth of a whole new service industry -- business-dispute resolution -- as more and more feudingpartners have turned to outside referees like attorney Levy for help. Levy himself found out just how strong the market was when he placed an ad in a local trade publication offering legal counsel to businesspeople involved in arguments. The illustration in the ad showed a neatly suited man reaching into the company till and another three-piecer with his hands around the ganef's neck. The caption read, "Partner Problem? When it Comes to Money, Sometimes Even Brothers Fight." A delighted Levy was inundated with responses.
Many referees rely on the buy/sell approach to resolving business disputes. In one version, aimed at effecting a reconciliation of sorts, business-distress specialist Ronald S. Itzler, senior partner at the law firm of Ballon, Stoll & Itzler of New York City, places the contenders in an auction situation in which each jockeys for the other's stock. One bids $100 a share, say, and the other answers, "No, I won't sell, but I'll buy yours for $110." Thinks the first, "Well, that's really too low." This tentative auction boosts the price little by little. As it rises, the reality will hit that this scheme isn't working and the partners had better try to resolve their animosity in another fashion.
What happens, essentially, is that the offerer invariably bids less than he would himself accept, creating sort of a game of chicken. "Each one wonders if the other will settle," explains Itzler, "and then he'll have to dig out all that cash he just bid. It dawns on them that they're going to have to spend hard cash. It's because the offerer never wants to be the offeree that I use this procedure. Inevitably, some other kind of settlement is reached."
But Itzler wasn't dealing with the likes of Blanchard and Simon, whom apparently no earthly device could scare. Last summer, an 82-year-old retired judge was assigned by the bench to work out a plan for distributing the company. At the end of 1983, the receiver was six months late in forging a plan, but he and his counsel weren't late with a bill for $355,000.
Kelso had come into being a decade before, after the two founders met in the course of doing business. Simon was a sales representative for an industrial-cleaning products distributor, and Blanchard was a financial officer for a local chain of retail supply stores. With such obvious potential to hit it off together, why not go into business and make the big time? As it turned out, there were plenty of reasons not to: Here were two seat-of-the-pants entrepreneurs who couldn't agree in dozens of areas; their personalities clashed; their sense of each one's relative importance to the business was at odds; one wanted more advertising and the other less; one wanted his brother-in-law as an accountant, the other wanted a Big Eight. But business can be just as blind as love, and as in divorce actions, often it is the law firms that make out the best. "Attorneys could keep a big fight going just to generate fees," warns attorney Levy. Over the past three years, legal fees in addition to receiver proceedings have cost the partners several hundred thousand dollars.
How can events have come to such a tortured pass between ostensibly rational humans? "Money," declares Levy. "People are always wondering what's happening to the money."
But not all observers agree that the reason is so exclusive. Psychologist Mardy Grothe, a pioneer, with his partner, Peter Wylie, in the fast-growing field of business therapy, offers other reasons. "One of the most common things in partnerships that have gone down the tubes is that they were very different people in personality and temperament, and they weren't able to resolve those differences." This is particularly true in family-run businesses, observes Grothe, a former marriage counselor. "A lot of times the only reason they're partners in the first place is because of blood ties. If it weren't for the fact that they were relatives, they'd never have taken up with each other."
The two psychologists were once brought in to counsel a 70-year-old father and 43-year-old son who were at each other's throats so constantly that other family members didn't talk to each other outside the business, either. Yet despite years of tension, neither had bothered to try to establish a rapprochement until the estranged relatives finally demanded it. "With men who are business partners," explains Grothe, "relationships are not a strong suit. One of the reasons they don't seek outside help until it's way too late is because they're not used to thinking in terms of human relationships. They never say things like, How are we doing as people who are working together? They often don't spend time focusing on their relationships with their spouses, either. But usually it's their spouses who see the problems more clearly- One of the things I've noticed as a marriage counselor is that it's almost always the women who get husbands into family therapy. Women are more relationship-oriented than men."
For that reason, Grothe and Wylie like to involve wives in business-partner counseling. Often the wives can exert pressure on the men. Moreover, they are experts in what has been going on, inasmuch as they have been party to it and directly have a lot at stake if the company fails. "We see guys who are not good relationship problemsolvers at work, then when we talk to their wives, we see the same exact pattern," Grothe notes.
Grothe's own partnership, Performance Improvement Associates of Lincoln, Mass., and Washington, D.C. -- which has existed in enviable togetherness for 14 years -- sometimes holds seminars on avoiding strained partnerships. Wives are frequently in the audience. "As soon as we start talking about how to be a better listener, for instance, the wives kick their husbands under the table and say, 'Pay attention. They're talking to you.' "
As difficult as it might be, the women usually remain loyal to their business-consumed spouses. Grothe calls it the Tammy Wynette "Stand By Your Man" Principle. "We try to take advantage of that bond, get [the partners] to pay attention to some of the more poignant sides of their wives' complaints, like, 'Whenever I ask you to do one thing for me, you make a big deal of it so I can't ask you again.' These guys sometimes say to us, 'Is that the way I am?' Then we make parallels to their business partnership, and maybe they get the point. 'I didn't realize I've been so blind.' They break down and cry -- and that's a problem, too. They're captains of the ship, and real men aren't supposed to do that. But we're introducing them to a new approach to life -- one of sensitivity and compassion -- and we've seen some partners who've actually turned around that way."
Most breakups involve men, simply because over 90% of businesses are male owned and male dominated. But as more women are establishing business relationships with one another, they are getting into trouble, too. In one instance, two women set up a successful fashion-boutique business. For more than a year one of them kept referring to the operation as "my" business, even in the presence of the other one. For fear of offending her, the affronted partner never could put it to the first that the business was hers as well. It took her mother, when the three were at dinner together, to beard the lioness in her den, demanding that her daughter get at least equal billing.
Commonly, problems beset partners when each feels the other should be more like him or her. It is a process that takes place after the honeymoon period, after the flush of being newly in business together fades. "Hey, this is fantastic!" one partner at first croons to the other. "I'm glad we went off on our own and told that sonofabitch to go bury himself." Their minds are focused entirely on getting customers, running the books, setting up marketing. As the operation starts to roll, says Grothe, the human dimension that hadn't been a factor earlier creeps in. "I'm aggressive and goal-oriented, and I've always been that way," thinks one partner defensively. "But you, you're too laid-back. I've always known that, but it's never surfaced as an issue. Now you're not busting your hump like I am."
Observes Grothe "There's almost a natural tendency to want the other person to be like you. The laid-back partner is only laggard from the point of view of the other guy. From his point of view, that's not the way he is at all. The other guy takes everything too seriously, has no personal life because he's 150% consumed by the business, is a Type-A personality who's going to have a heart attack in five years, and I don't want that for myself. It's not that one's the bad guy and the other is the good guy from an objective standpoint, but only in the relationship they have with each other.
"One of the most important things we do is help these partners learn how to listen to each other in a way they have not done before. The other is we help them to surface touchy subjects that they're often very reluctant to talk over -- feelings of hurt, resentment, betrayal -- that are difficult for them to speak about because it's hard for them to get in touch with those feelings. All they know is there's something wrong -- and it's his fault."
More difficult, perhaps, is the ability to take disparities and turu them into a positive business dynamic. "It's like a marriage: If you've got someone who's exactly like you as a marriage partner, it gets boring," says Grothe. In business, not only might it get boring, but also there is an operating danger in like-thinking management. Thus, concludes Grothe, "searching for someone who's different from you is a real good business idea."
Indeed, savvy investors these days are becoming increasingly aware of the possible lack of focused leadership and dynamism that alike partners can drape over a potentially vigorous business. Says Russell Pyne, venture capitalist with The Sprout Group of New York's Donaldson, Lufkin & Jenrette, "When two partners play an equal role in the company, I see that as a warning flag. It represents an opportunity for conflict. Our nightmare scenario is a company whose employees don't know who's in charge, don't know whose lead to follow, while the two owners are moving in different directions."
The flip side of that scenario unfolded recently in a Midwest engineering firm headed by three college chums who, as they grew older, moved in such different directions that their company flew apart. One, the operating officer, had gotten married and was settled down; the second, the financial officer, had earned a well-deserved reputation as a Lothario; the third, the research and development brains, remained single and shy and had taken to slovenly ways. Eventually the firm grew to 100 employees -- most of the females of which, two partners complained, were propositioned by the second partner. They asked him to stop seducing and start getting down to business, but he didn't.
At the same time, the sloppiness of the third partner became painful to the other two. He looked as if he had slept on an office rug, which, in fact, he often had. He kept his meager wardrobe in an anteroom closet, piling used shirts and underwear on the floor. The first partner began to think that he was the only one taking the business seriously. It became obvious to all of them that they weren't making it and that each would face huge legal costs if things got out of hand among them, so the partners sat down and carved up the business through a common attorney, to the satisfaction of each.
Partners at odds usually round up ranks of office mates as they vie for support within an organization. Like the calculating children in Lord of the Flies, occasionally a majority of partners bands together to banish a misfit. Lacking votes and support, the ousted individual is powerless to fight back, except by harassment, through which he hopes to salvage recompense, if not dignity.
Attorney Itzler tells of representing such a victim. The other two partners had held a surreptitious meeting of the board in which the third was unceremoniously voted out and fired. Maneuvering to make it as uncomfortable for the remaining partners as they had made it for his client, Itzler got a court injunction that allowed the third to examine the company's books whenever he wanted. "So we looked at those books every day, right in the middle of the day, interrupting the rhythm of the business. That destroyed everyone -- my guy and the two others. The whole thing vas self-destructive," Itzler reports. "It was a curse on both houses."
Itzler believes that in such situations, the apparent winner can always be made to lose something by a good lawyer. "The trick," he says, "is to [get the putative winner] to see that early on. The best settlement is when both parties walk away feeling dissatisfied."
But when it is the Grim Reaper who does the settling, one partner doesn't get to walk away. Death brings with it the opportunity for ascendancy among the living -- and many a partner is quick to seize the moment, legitimately or otherwise. In one case, a widow called on the surviving partner to act on an agreement that gave her valuable business rights. She had understood from her husband that the agreement was held by a trusted partner. But the surviving partner's memory conveniently failed, and he maintained that he had never heard of such a document. Instead, the woman was told she had one hour to gather her husband's personal effects and get out. In another case, three brothers ran a collection agency that employed the son of one of them. The day after his father's funeral, the two uncles informed the unfortunate orphan, whom they had always felt was an off-putting clod, that his services were no longer required. So the not-so-dumb nephew filled a suitcase with his business records and took off to start his own company -- with a battery of lawyers in pursuit.
And if death doesn't do them part, divorce might. Two partners in Delaware had enjoyed a reasonably stable, long-term relationship with each other into their mid-40s. Then one got divorced. The new bachelor began living The Life of Riley, coming in late, looking disheveled at work, and generally making a fool of himself in public. Once-close business affiliates began to keep their distance, and insoluble problems arose.
In most observers' eyes, inevitably, the dynamics of failing business partnerships are compared to failing marriages. And in many ways -- for example, loss of affection, inability to communicate -- the similarities are inescapable. Says Grothe, who for that very reason is thinking of calling his service Marriage Counseling for Business, "The problems in a marriage, as in business, develop very slowly. So slowly that they're almost imperceptible." It takes perhaps three years for the dawning to set in that being in business isn't what it used to be, and another year or two before the resentment starts to build. "Still," Grothe reflects, "there's no feeling that maybe they should get someone in to help resolve the problems. They just go on and on until finally there's a precipitating crisis -- the loss of a major client, or one partner goes into the other and says, 'I've been consulting with my lawyer and I'd like to talk buyout.' Then the other guy finally realizes, 'Jeez, this is serious.' It takes a shock to inspire their asking us in, but that's no different from any marriage. Except that the reason they finally get help is not to learn to love each other, but to do something to take away the pain."
There are other differences, too. A business is a body that can be measured by the financial success of the company. Often each offending partner can be seen to be affecting those profits, and solving a problem often can be brought down to the bottom line. Furthermore, in a marriage, one spouse sometimes meets someone and jumps ship. But in a business, says Itzler, "it's very rare that a partner wants to hook up with another business partner from somewhere else. Usually, the disputes center around the existing relationship."
One of Grothe and Wylie's finest hours occurred after several 10-hour-long sessions (the two psychologists' fees can run as high as $3,000 a day -- but itis apt to be a long day) with a feuding father and son. The father was about to bring public a 50-year-old family company, because to keep it private would have meant handing it over to his son, whom he felt would destroy all his hard work. One of the major disagreements of the farm-equipment maker centered on a line of tractors that had been a long-time favorite of the father. The son felt they were antiquated, gave the company an old-fashioned image, and should have been dropped long ago. The father argued that they could make money off them if they just tried to sell them a little harder. There the matter stood until the son asked for outside counseling, hoping to prevent the loss of the business.
"It took a long time," Grothe recalls of the marathon sessions, "because they really had to resolve some basic father-son issues before dad was willing to turn over control. After about the seventh or eighth day, the father finally said, I'm willing to make the move. But he reached over and shook his son's hand. They had never hugged in their entire life. I said, 'Will you two goddam guys hug each other, just once?' Well, they stood up, and they hugged each other. Tears were running down their cheeks. Tears were running down our cheeks."
They will still have their problems, Grothe admits, but he predicts that they will be able to handle them. "The son will reassure himself, Is it really going to harm the company that much if we continue to make these machines for a couple more years? And the father will stop pressing him so hard to conform to old ways. They were assuming these rigid stands because the most important problems weren't business at all -- they were emotional. It's fascinating stuff."