Partner Wars

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."