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Partner Wars

In a tough business environment, partners are crucial, but they always fight. Why?
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In a business environment that's ever more competitive, complicated, and costly, partners are crucial. but partners always fight. what goes wrong?

Like most cronies who go into business together, Paul and Jim launched their courier service with a pledge to share and share alike. And share they did -- except Jim's reading of "alike" proved more liberal than Paul's. An inveterate gambler, Jim assumed that ownership entitled him to help himself to cash whenever he was short. Paul put up with his partner's peccadillo until a couple of gentlemen camped out in the foyer and demanded $2,500 for Jim's failure to pick the Super Bowl winner. Paul locked the safe and hid the key. When Jim came back to work, he brought a guard dog, coaxed the peckish animal into Paul's pickup, and then had the receptionist ask Paul to move his truck.

Not every alienated partner hires a Doberman to put teeth into a rivalry. Modern infighting includes ploys like the business-meeting snub, the utter silence, the contract disavowal, the title grab-and-hold, the air-it-in-public revelation -- tactics of the corporate culture that trained many of today's partners.

Business-starting buddies don't necessarily come from one family or one neighborhood anymore. Forcibly retired by mass layoffs or voluntarily emancipated from cloistered positions in manufacturing, research and development, government, science, sales, and service, today's partner candidates constitute a mobile and unprecedented force of diverse and well-heeled talent. They're capable of supplying capital, spreading the workload, apportioning the risk of failure, and furnishing built-in expertise that their enterprise would otherwise have to buy. Then how can they miss?

The same ways as always, unfortunately. To catalog some of them, Inc. interviewed principals from scores of enterprises whose founders or owners shared -- financially and administratively -- their business's operation. These six accounts typify the patterns of stress. (Because we promised anonymity in return for frankness, names and other details have been disguised.)

* * *

1. "While I was out there working, they were in there plotting." A plastics fabricator was purchased as a going concern by three of its middle managers via a leveraged buyout in the late 1980s. Unexpectedly, the business returned more profit than the model had projected. Two partners contrived to gain larger shares of the bonanza by subtly pressuring out the third. They scheduled business meetings and didn't tell him. They took customers to lunch and didn't invite him. They hired assistants for themselves but none for him. They awarded themselves big raises and gave their partner only an extra week's vacation. "They threw every humiliation at me they could think of," the third now perceives, "but I was so absorbed with building the company that I didn't dream they weren't." He woke up the afternoon his partners announced, "John, after you go home tonight, don't come back." However, John did come back -- brandishing the exit instrument the three had signed. His partners conspired to shortchange him through that conveyance as well. "They used the noncompete part against me," John complains, "and everything that was designed to benefit me, they ignored or violated. If people's moral intentions are no good, the best legal document in the world is hooey."

* * *

2. "My partners were fabulous as friends; as partners they were revolting." A marketer for a large long-distance-telephone-service provider, Mark wanted to start his own telecommunications company but was too insecure to go it alone. He persuaded three pals to join him. "I was nave, and I didn't screen our business goals," he admits. From the start, his partners' expectations were the opposite of his. "They wanted the company to pay for their cars and to conduct meetings in the Bahamas. I wanted to plow the money back into the business." Outvoting him, his buddies kept finding ways to "draw off the fat," until the operation was rendered so lean that it collapsed. Now Mark doesn't even nod when he passes one of his ex-chums in the street. "I never thought a business relationship could overpower friendship, but this one did," he says with regret. "Where money's involved, people change."

* * *

3. "I made all the decisions; they made all the complaints." Insurance broker Henry combined with lawyer Charles and contractor Louis to acquire a small mall; each would put in the same capital and put out the same effort. Charles would handle the forms and filings, Louis the maintenance and construction, Henry the sales and support. But when it came to drafting a rental agreement, the lawyer told Henry, "I can't get to it for a few days; if you need it now, write it yourself." And when it came to painting, the contractor "couldn't get to it," and so on. Yet it wasn't that the others weren't doing their parts that ultimately unhinged Henry, so much as that his no-show partners griped about how he did their parts: colors were wrong; leases favored tenants. "Partners who aren't job doers," Henry concluded, "become job questioners." The last straw was when a pipe burst at midnight. Louis was out of town, so Henry hired a plumber. When Louis returned, he admonished Henry, saying, "You've got to learn to shop around. I could've found someone for half the price." Says Henry now that he's out: "I don't want to have any more to do with partners. Benevolent dictatorships are the way to run a business. You take everyone's opinion into consideration, but somebody has to be responsible in the end. That doesn't tend to happen among partners."

* * *

4. "I spent the time; my partner spent the dough." Constance and Carla pitched into CafÉ Latte Stores on a half-and-half basis. As their enterprise expanded past seven figures and 20 employees, Constance bore the brunt of the work, but Carla took home the same money. "You're more skilled at management and production than I am," is how Carla dismissed the inequity. "Well, I'm not going to carry you. However much I'm willing to do, I want you to be willing to do, too," Constance shot back -- in her head. She couldn't bring herself to challenge Carla out loud. "I have to walk on eggshells around her, or her emotions will explode." Constance's conundrum: "Carla won't work more, and it's not to my benefit to work less." Her consolation: "It's the different way we value things that's the problem. My reward isn't money -- it's doing a good job."

* * *

5. "My partner was a self helper -- to what was really mine." Bob was the leading biller at one corporate-design firm, Clarence the leader at its competitor. So, leaving their respective employers in a simultaneous lurch, they started their own company. Clarence argued that as the elder, with more experience, he risked more taking on Bob than Bob did taking on him. Therefore he, Clarence, claimed a majority. Bob acceded to a 49%-51% split and to a compensation arrangement by which, after divvying up expenses, each partner directly pocketed the fruits of his own sales. As expected, the first year Clarence earned more. The next year, though, Bob shot ahead as unexpected and requested reconsideration of the terms. "I urged Clarence to regard me not as a risk anymore but as an asset." Well, no asset's going to make more than I do, was Clarence's apparent response. He hired a support team -- for himself, not for Bob -- and stopped sending Bob the figures on which their take-home pay was based. Bob coaxed copies from the accounting department's computer and discovered that his partner had siphoned off more than $10,000. He went to Clarence and Perry-Masoned him. "OK, OK, I took it," his partner confessed. "But I deserved it; I had to manage that staff."

* * *

6. "What, me worry?" One day when Charles was in his partner's office, the phone rang. His partner pushed the speaker button. "Your lawyer called," the partner's secretary announced, "and said the name for your new corporation has been approved." So. He's dropping me, Charles rightly concluded. Let him. He'll have to buy me out according to the terms. But for how much? Charles got an arbitrator, his partner got an arbitrator, and the two arbitrators got an arbitrator. After months of bickering, all five got a judgment: the partner was to repay the capital that Charles put in 10 years back, plus 50%, parceled out over five years. Charles got the first parcel, but when the second was due, he received in its stead news that the partner had both thrown the company into Chapter 7 and declared personal bankruptcy.


TWENTY-FIVE ATTRIBUTES YOUR PARTNERS SHOULD POSSESS

(They Say the Same About You)

On the theory that combative partners blame others but are unaware of their own contributions to discord, business therapists Mardy Grothe and Peter Wylie ask coworkers in a business to evaluate one another on 25 critical leadership characteristics.

The anonymous tabulations divulge self-deceptions and usually motivate the offender to amend his or her ways. But for some, the returns are a red flag. In one instance, the companywide opinion on number 6 came out so overwhelmingly negative that the partner involved fired Wylie and Grothe on the spot. He then asked his wife, kids, and bridge club to rate him. The unanimous consensus: the partner's colleagues were right. The doctors were rehired.

Here are their benchmarks:

1) Is a good team player

2) Does his or her job competently and skillfully

3) Is a genuinely likable person

4) Is good at giving feedback to others

5) Is a good listener

6) Is open and receptive to feedback from others

7) Treats people with dignity and respect

8) Looks for "win-win" solutions to disagreements

9) Is good at facing up to tough problems

10) Is a person you can trust

11) Will "go to bat" for other people

12) Gets along well with almost everybody

13) Uses time efficiently and effectively

14) Will admit it or apologize when wrong

15) Has what it takes to be a good manager

16) Is a good problem solver

17) Speaks his or her mind, even when it's unpopular

18) Is well organized

19) Treats people fairly and equitably

20) Is good at giving compliments or positive feedback

21) Is enjoyable to be around

22) Is open to other people's ideas and opinions

23) Is levelheaded, even under stress

24) Presents ideas clearly and articulately

25) Has good people skills

© Peter Wylie and Mardy Grothe. All rights reserved.


TWO WHO MADE GOOD

Partners who make it work acknowledge one another's talents . . . and don't do one another's jobs

"Don't you tell me what to do. That's what we hired him for."
Not two, not three, but four brothers cofounded high-tech Scopus Technology Inc. in 1991 -- and they haven't argued yet. Their secret? The Sasson brothers have constituted a fiscal unit of sorts since their adolescence in London, during which their parents were often traveling on business. The youngest was clever at wheedling favors from the grocer; the oldest became good at passing for their father when officials demanded to see a parent. Another unifying factor, says CEO Ori Sasson, was their agreement to leave their salaried jobs at the same time. "We arranged it so that if the company went down, we'd go down with it together. It was do or die, so we put in incredible hours." Acknowledging their strong egos, they avoided overlap by each committing to a particular functionÑone to sales and marketing, another to operations, the third to technology, the fourth to financeÑand pledging to stay with it. Three years later the company reached $8 million and had 70 employees. The brothers didn't argue, but, admits youngest brother Ori, they did have "differences of opinion." Which reveals the real secret: "We went out and got a salaried president to act as referee."

"Which rules you more, (a) your head? or (b) your heart?"
A talented software program- mer in his own right, Jerry Fiddler didn't need a scientist for a partner. But when his landlord evicted him and his embryonic enterprise from a garage in 1983, Fiddler seized the moment to do some traveling. He paid an engineer friend to mind what was left of the store. On Fiddler's return, the friend announced that at the current salary, he no longer cared to work for him. Work with me then, Fiddler offered, and the two shook hands on a 50-50 share of, essentially, nothing. "There was no capital," Fiddler relates. "If we needed equipment, one or the other would spring for it." When they officially incorporated Wind River Systems, it was capitalized not in dollars but in the paraphernalia each owned. The union blossomed, and soon the partners had to decide who'd take engineering and who'd take operations. A personality-grading test revealed Fiddler's partner's insistence on detail and susceptibility to anxiety; it also revealed the laid-back Fiddler's diametric inclinations. "I hadn't thought of us as fragmented before," says Fiddler, "but it must be good to be opposite in those ways, since we've never had a fight." They're not apt to. Fiddler took the position of CEO; his partner took vice-president of engineering. On the day their company went public last year, its market value was $79 million.


THREE VIEWS FROM ABOVE

The professionals who counsel partners all agree that learning how to talk is the key. Learning how to listen helps, too

Jack Rosenblum
A management consultant for 25 years, Rosenblum joined the Atlanta Consulting Group in 1983 as one of four partners to train business teams to work together.

Jack Rosenblum: "We believe in a concept called 'working by agreement,' based on the notion that people who keep agreements build credibility, which eventually builds trust. Getting to trust is essential. We ask partners to make only agreements they fully intend to keep, give early notice when an agreement must be broken, and initiate the cleaning up of any broken agreements they've caused.

"There was a partner who was great at criticism but not at acknowledgment, so I got him to promise to do three acknowledgments a day. It became fun for his partners to be near him late in the afternoon, just when he remembered to start.

"Talking is scary. Partners are afraid that bringing up disagreements will ruin the relationship. So they ruin the relationship anyway by not talking. A solution is to make an 'I' statement instead of a 'you' statement. No one can challenge my views, my feelings, my opinions. I'd say to you, 'I feel I'm being treated unfairly in terms of compensation, given what we're each contributing' -- and you can't call me a liar, because I'm the sole authority on me. But if I say, 'You're incompetent,' it's a judgment defining someone else.

"I was lecturing in front of a group when one of my partners interrupted and said, 'Jack, give me all the change in your pocket.' I trust the guy, so I gave it to him and asked, 'OK, why?' He said, 'I can't stand your jingling change while you talk.' I had no idea I was doing it. A total blind spot. We all have them, and the bigger the blind spot, the bigger the danger. The antidote is regular feedback. But most people won't risk giving unasked-for feedback. You have to seek it by asking questions like, 'What am I doing that hinders you on this job?' People will tell the truth, because you've established a safety zone: 'I'm committed to listening. I want to know.' "

Mary Moore
Holding an M.B.A., with a specialty in executive behavior, Moore was a corporate manager for more than 15 years before she formed a consultancy that deals with technology companies.

Mary Moore: "My aim is to get the partners to hear the facts. I start by interviewing, observing, and testing. Then I sit down with each partner and give him the feedback. Maybe something like, 'You see yourself as a strong businessperson, but that isn't how you're perceived. Your long suit is extraordinary technical wizardry. It would be unusual to possess both skills, and I don't think you do. Nobody else here thinks so, either.'

"Then I bring the partners together, and we talk about what we've talked about behind closed doors. It's amazing how open they are about some very tough feedback. Somebody might say, 'I got a lot of response that says that while I'm not good at this, I am good at that.' That allows the rest to answer, 'You know, that's true.' That's something neither side would have been able to say before.

"If a partner retains more control than he can handle, problems manifest themselves in a dangerous way. Product liability might soar because no one has been paying attention to quality.

"A high level of trust is a positive dynamic, but it leads to problems when partners have developed such a standard of mutual support that they don't deal with each other strongly. Accommodating relationships feel good, so it's hard for people to say no to each other, but such relationships bring about dreadful inefficiencies.

"By keeping their doubts and grudges in check, partners think they're saving each other. But each remains troubled by the other, forcing colleagues to pick up the ball when one partner or the other isn't capable. Eventually, the problem surfaces at the bottom line. So actually, there's some benefit to being rancorous right out front -- the open discord is so evident to others that it forces the partners to get help sooner."

Peter Wylie, Mardy Grothe
In their own two-person partnership, psychologists Wylie and Grothe have spent the past 15 years counseling the principals both of family enterprises and of large corporations.

Peter Wylie and Mardy Grothe: "Many partnerships fail before they even begin because they go through the same 'snag' preliminaries a courtship does: before the union, the parties are on their best behavior. Once the partnership is achieved, the partners let their hair down and vent their held-back behavior. 'I don't have to play suitor anymore.'

"In some businesses, founders pass ownership to their children. But in doing that, they anoint the new owners with leadership -- they expect their kids to manage the business as well as own it. In most cases the kids aren't equipped to run an organization, and maybe they don't even want to; they accept it just to please Dad.

"We see a lot of partners who communicate only by memo -- actual stony silence! The partners assume the employees don't care, but the employees wonder, 'Is this place going to be here tomorrow? Did we do something to cause these problems?'

"Inevitably, there's conflict in any partnership. Fighting itself isn't bad, but inappropriate fighting is destructive. The biggest problem is holding in resentment.

"As counselors, we develop ways for one partner to draw another out and hear what he has to say without interrupting or telling him he's full of crap. 'If you want him to listen to you, you've got to listen to him.' Eventually, one partner learns how to consider what the other has to offer. Lo and behold, the second partner responds, 'Jeez, you really listened!' Then he shuts up for 20 minutes, which he's never done before, either.

"We get all the partners together to talk and listen to one another. This is no rope-climbing session on some island in Maine. Pain comes out, love comes out, deep resentment, embarrassment, guilt, angst -- it pours out because it's been waiting, sometimes for decades. Then each partner tells what he's going to work on. He makes a public commitment: 'I tend to be sarcastic, and I'm going to work on not hurling zingers at people.' If we don't schedule a follow-up in the next month, the partners aren't likely to live up to the pledges, which came out of a very intense experience. When they know that Wylie and Grothe are coming back, it keeps them honest."


THE SEVEN BEST WAYS TO PESTER YOUR PARTNER

1. Great minds think alike -- but it's your mind your partner should be thinking like. "A partner may feel, 'Not only do I wish you were more like me, you should be just like me -- after all, look at what I've accomplished.' " -- Mary Moore

2. Just because your partner tries to make a point doesn't mean you have to acknowledge it. Doodling and gazing out the window are effective diversions. "When one partner expresses a feeling or concern, the other needs to listen until that partner is done talking, and to summarize what the partner just said." -- Peter Wylie/Mardy Grothe

3. Why risk unpleasant encounters? If ignored long enough, conflicts settle themselves. "When partners lack the skills to confront issues in a manner by which they can get resolved, resentments fester and eventually blow up the partnership." -- Jack Rosenblum

4. Your partner sees your company as maturing and in need of broader talents. You see it as still your baby and in need only of you. "Roles change over time as a company succeeds. When partners are required to give up power, many can't bring themselves to." -- Mary Moore

5. Handing out positions to offspring is a prerogative of ownership, but must you put up with your partner's kid when yours is so much smarter? "Draft an understanding on nepotism from the outset, or it'll bring you down." -- Jack Rosenblum

6. The irksome shortcomings your partner exhibits can't have been inspired by you, insofar as you have no irksome shortcomings. "One per-son's not seeing that the other's allegedly deficient behavior may be in reaction to his own is a failure that applies in all important relationships. Often it's rival versus rival, acted out on a business stage." -- Peter Wylie/Mardy Grothe

7. Business is business. Admiration, respect, and loyalty your partner can get from a pet. "Partners are like plants: they need watering. A relationship withers without frequency of contact and positive expressions of appreciation." -- Jack Rosenblum

Last updated: Jun 1, 1994




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