“A chain is only as strong as its weakest link.” Most business owners (if not all) are acutely aware of this universal truth. In reality, most humans are aware of it. The people we allow to influence us can have a positive or negative impact on our lives. As motivational speaker Jim Rohn said, “Show me your friends and I’ll show you your future.” With reference to a company, the quality and success of a business is deeply affected by who is on the team. A bad business partner can alter the trajectory in all the wrong ways – and it’s not always obvious when a partner is bad for business, but when it becomes obvious, it’s not always easy to motivate change.
I’ve been fortunate to have many businesses and partnerships, most of which went well; successfully exiting by restructuring or a sale of interests, or by mutually pursuing bigger or better opportunities. However, I’ve had one egregious partnership that caused me so much stress and anger, I probably lost a few years of my life to it!
What’s more, is that the prior business partnership haunted me for years after my exit. Even though I was no longer a functioning member of the company at any capacity, the business decisions of the remaining partner affected my name and reputation, to the extent of being named in legal sanctions against (their) company — years later.
Fortunately, these tangled messes can be unwound — unfortunately, it’s expensive, and at the high cost of retaining counsel, spending countless hours providing and reviewing information in discovery, and of course, the cost to address ‘damage control’ for reputational issues that can arise. In my businesses, the public opinion matters, and has a direct effect on our clients, our team members, and the hundreds of contractors and their families that our firm employs.
In light of that experience, I wanted to share a few lessons that I’ve learned about partnerships that anyone who’s contemplating entering into, or is currently in, should consider.
1) Know Who You’re Dealing With
Making the decision to go into business with someone is not a decision to take lightly. It has been likened to Getting Married, and I’ll make the argument that it is even more serious than that when it comes to problematic differences that result in a stalemate or deadlock situation. In this case, you can’t divorce your business partner.
Part of my painful partnership experience was from being unaware of the truth about the partner and their past; taking their testimony at face value. I don’t think I’m gullible, but I am trusting, and at times to a fault. I believe that trust is a critical element to any successful relationship or partnership, and must be given before earned, and earned to be retained. Unfortunately, honesty and transparency was taken advantage of, to the extent that I learned of their past criminal activity (counterfeiting) from a client over a year after I had sold my interests! Had I known more history of the partner, I would never had brought them into my company in the first place, 8 years prior to my exit. It would have saved a lot of time, money, and heartache.
Getting to know who you’re going to be working with should replicate digging for buried treasure — because it’s the same thing — you want to find a treasure in your potential business partner, not skeletons in the closet from a fraudulent pirate!
What Happens When They Refuse To Change?
So what do I do now? I found myself asking this question a couple years into the partnership, and the same question continued to resurface on an increasingly frequent scale from once a month, to weekly, then daily, then after work and into my personal life; I simply couldn’t stop asking myself the same question which resulted in a desire for a radical change, or a rapid exit.
Successful partnerships are based more on relationships than on systems, and are more reliant on communication than anything. While there may not be a ‘trick formula’ for successful partnerships, focusing on developing a partnership mindset creates a culture of cooperation, and sustains accountability that utilizes empathy and understanding.
When a partners behavior seems to be getting worse and not better, and revisiting the situation doesn’t seem to be working, I suggest bringing in a corporate coach, or business counselor. Even a healthy partnership can benefit from these outside influencers, and should be welcomed to maintain communication and clarity for the business partnership. In my case, I had suggested this methodology on many occasions, but was met with mockery and disdain, which just confirmed how much of a big of a deal the issue was that I was facing.
At this point, the next step may be to follow your Operating Agreement protocol for conflict resolution, Buy/Sell Execution Plan, and at a minimum, reach out to your personal counsel for advice.
2) Humility – A Critical Partnership Ingredient
Being flexible in relationships is a common prescription from counselors. When we are working with another human being, it is good to embrace diversity and differences of opinions — after all, we are all different! But being flexible and empathetic does not mean altering your moral standards and core values. Lying and mood swings are obvious signs of a bad business partner. But even things like taking a long time to respond to emails or phone calls, not answering questions directly or giving incomplete answers are all signs that your partner isn’t a good communicator, which could mean trouble for your business.
Criticism; Welcomed By The Wise
Taking criticism can be difficult when someone is a hypocrite. It can be painful even when the deliverer is nervous or does not express their ideas perfectly. Either way, it’s tough to take. Sometimes, we need to remind ourselves of the benefits of receiving constructive criticism—namely, to improve our skills, work ethic, and relationships, and to help meet the expectations that our partners and others have of us. Does your partner welcome criticism? Do they desire to grow and become better? If not, they (or you) may be in denial.
Nobody can grow beyond the level of their pride.
Biblical and historic words of wisdom still stand the test of time. We’ve heard the Proverbs, “Pride goes before destruction.” And “Plans fail for lack of counsel, but with many advisors they succeed.” This is true, was true, and always will be true. We must constantly be willing to refine ourselves as ‘iron sharpens iron.” Which means that sanding-off the rough edges can hurt.
There are many paths to innovation, and the best leaders look to others for advice on how to improve themselves and their company. A poor mentality pushes their own ideas ahead while downplaying others. Steve Jobs said it best, “It doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.”
3) All In Committment
This may seem obvious, but partners who are spinning plates with multiple side gigs, or seem to be distracted with shiny new opportunities, may be a warning flag. Growing the collective vision of the firm takes commitment and consistency. With genuine commitment comes structure.
If your partner won’t sign an agreement, or commit to Roles & Responsibilities, it could be an indication that they have something to hide or that they’re already thinking of ways to get out of the business. Accountability is a critical element in a successful operation. Identifying strengths and weaknesses can help your organization work more efficiently, and maintain the expectations within the partnership.
If your skills are balanced but the work ethic isn’t, that’s also a challenge. Your business partner may not be a workaholic, but if you’re putting in 12-hour days while they sleep in at home and roll into work late (or show up at all), that can be problematic. If one partner’s skills aren’t carrying the business or landing the majority of the clients, then this imbalance needs to be addressed immediately. These issues can breed resentment unless they are discussed and resolved with a clear plan of action that will be fully committed to.
I can’t recall the number of times the partner skipped meetings, or simply didn’t show up for days. It was frustrating, but I was so busy doing the majority of the work, that I didn’t have the bandwidth to commit time to act like a babysitter. Lesson learned: Make the Time!
4) Pay Attention To The Culture
Your teams attitude can be a thermometer of the health of your partnership. Are employees or other team members confiding in you about the other partner? Perhaps groups are forming around the water cooler that are exchanging less than constructive opinions or topics. This can become poisonous to the corporate culture very quickly. The team should have systematic ways of addressing concerns to their superiors so that any issue can be addressed quickly.
This is true for third-party contractors relationships as well. In my past experience, contractors were constantly calling, texting, and complaining about the other partners behavior. This may be a reflection of the partner-in-question’s character, but it is ultimately a reflection of the company to the contractor — of whom we were in contract with. Unfortunately for me, the only way to remedy the situation was to take on the roles of the absent partner and correct the issues at hand immediately in the field; adding to my already overflowing plate of responsibility.
5) Consider the Impact on Your Team
I’ve heard it said, “When Mom and Dad are fighting, the kids go into hiding.” I’m not suggesting that team members are children, far from it. Whether you subscribe to the Bottom Up, or Top Down management mantras, I believe that, “When there’s animosity within the leadership, the team will surely jump ship!” The importance of creating a safe, approachable, and accountable culture, should be the number one priority of every business.
6) Legal Implications
Partnering with someone that isn’t acting above board could be riskier than you might imagine. Consider this; whatever your partner does will effect (and affect) you. In most cases, you are legally liable for their business practices. You could face fines and other legal action because of shady practices they have carried out, even if you and your team haven’t personally done anything wrong, or were even aware of it!
This seems unfair, however, I learned this the hard way. I have a blanket expectation that what I’m being told is happening, or will indeed happen. Of course issues arise; there can be delays, mistakes, etc. and I can be flexible and understanding when there is pure intention, and open communication. But when there are blatant lies, manipulation, secrets, and other deceptions around assignments or productivity, there is a serious problem. Some of these issues can be catastrophic.
In my unfortunate experience, I had been told that certain regulatory filings had been submitted and completed, and that a new project was fully established and ready for development. Lamentably, this was a lie to cover their tracks. Resulting in major issues that effected me and others, years beyond the sale of my interests — and all without knowledge.
Lesson: Whatever is kept in the dark will eventually come to light.
7) Reputational Risk
Knowing who your partner is, and what they are doing is imperative in ensuring that the individual or business you’re partnering with won’t affect your reputation negatively. For instance, if they have been in the press for negative reasons or are under any investigations or lawsuits, it can make your customers think twice about dealing with you. Another way they might affect your reputation is by simply failing to meet the goals you set out with them.
One of the challenges I was faced with, was with regard to decisions made without my consent and knowledge during the partnership. Another was not verifying that certain tasks were completed while being told that they were (or weren’t). If there is trust within the partnership, following up may not be necessary. However, when trust has been broken or abused, following up with confirmation is crucial to regaining trust. Scheduling meetings to verify that certain tasks have been completed can take just a few minutes to confirm.
Lesson: When in doubt, find out.
Reputational risks can continue beyond your departure — it is important to inform past customers and the general business community of your transition. My experience has taught me that any involvement in a past company can have trailing ties to you in the future even when your fiduciary responsibility has been terminated. The remaining partner pursued a series of poor financial decisions, and fraudulent and unethical practices that resulted in a drastic downward spiral within their company. This behavior resulted in investigations, lawsuits, and loss of capital for their investors. Suprisingly, I was interviewed and brought into the discovery phases of findings for their statement of charges. While my defense has concluded favorably for me, it still brought on a litany of time, money, and discomfort to put it mildly — also affecting my reputation.
The take away here is not to avoid partnerships, but instead, learn how to do your research and understand the risk before you take on any partnerships. Establish trust, roles and responsibility, and create a culture of accountability.
Blake E. Robbins
This article is posted on Linkedin, and can be found here: https://www.linkedin.com/pulse/7-lessons-from-bad-business-partnership-blake-e-robbins