Establishing a Strong Partnership

                Many businesses today are formed with more than one investor who has an investment of time and/or money.  In either case, that vested interest often times infers both parties are accepting some role within the organization and jointly running the business.  The advantages for this type of arrangement is a presumed support structure the partnership brings as well as an ability to jointly discuss ideas for daily operations, current success, and future growth.  The disadvantages for this type of arrangement can result from tension and disagreement regarding daily operations, current success, and future growth.  Unfortunately the tension situation plays out every day with family run organizations, friendship run organizations, and even in those where investors are directly involved.  Anytime more than one person maintains ownership within and organization and is directly involved as managing leadership, communication becomes paramount to being successful and in stride with each other.  This situation is far different than simply being an employee in the organization due to the vested interest in from all parties with an ownership stake.

                For Business’s that are launched or ran by mutual friendship and or mutual investor interest, it is imperative all parties are educated in the overall direction the organization is heading.  Often times during the launch and initial growth stage, the immediate and short term goals are established.  Typically, subsequently, setting these goals is a collaborative effort and everyone agrees with no issues.  Once the business begins to reach a level of maturity, or certain levels market saturation, the mindset can change fairly dramatically.  This is especially true for those businesses which are extremely successful and whereas the vested parties grow farther apart due to a lack of established and agreed upon long term goals.  In some cases, throw into the mix a lack of legal documentation defining ownership parameters and replaced by the proverbial gentleman’s hand shake agreement, you end up with a very high potential risk for failure.  For folks that take this route, typically they either want to avoid the cost of legal guidance, or are simply ignore or consider the potential of things taking a turn for the worse and requiring separation.  If all vested parties have no intent of separation and feel they are fully committed to the organization, then the legal piece should not be an issue either.  Once the legalities are put behind them, then it becomes simply good business management communication, practices, and processes that drive current and future directions.  This includes separation of assigned roles as well as role expectations and goals.  I’ll go over this last statement in future writings.

                For Business’s that are launched or operated by family members, there exists a unique dynamic which adds to the complexity of the organization.  My reference here is different than simply hiring a family member as an employee.  I am referencing the situation where by more than one family member has an ownership stake in the business.  While very common, again without the legal paperwork in place, general operations and future direction can be a huge point of contention.  Typically the legality piece is overlooked due to a false presumption it will reflect a lack of trust between all vested members.  On the contrary however, if you truly care about the business and its employees, the legal documentation defining ownership should be in place first.  The second piece a family operated business often overlooks is good business management practices.  With this, I am referring to functioning in a role based environment where by each role has a defined job description as well as established expectations and goals.  Separation of emotional feelings and attachments due to the relationship is important.  The functions within the organization and within each role should be strictly objective and business like.  This is not to say be cold hearted and not have any family communication or compassion.  It is to infer all functions should be managed as just that…business functions which come with business expectations.

Often times, Businesses which are formed out of handshakes, gentlemen’s agreements, or even the collective family agreement, the only legal document that exists pertains to the legal business entity and not the vested partnerships that are created.  The cost avoidance up front is greatly overshadowed when complications arise later on.  Legal documented ownership papers should not be viewed as a sign of miss-trust.  On the contrary, with all vested partners involved, it is a sign on commitment to the success of the overall business.  This is even truer when more than one business is merged or sold to the other.  That one legal document defining the terms of the agreement can save both time and money in the long run, which usually costs more than what the original legal recording would have.

On top of simple ownership documentation, often times I see partnerships not clearly defined regarding the role each stakeholder has within the organization.  If this is not in place in your organization, it is not too late to get it established.  The hardest part is making the first step with the all the vested partners to collectively participate in this process.  Each role should be defined, expectations established, goals set, and reported on as a collaborative effort for the good of the business.  Personalities aside, even though there is good feelings for the personal achievement of a successful business, there is also great achievement in a successful and collective business model.  It isn’t an issue of miss-trust but more so of the confidence in knowing the commitment for success is a long term goal.  If this is a new way of thinking for your organization, get help from outside.  You might be surprised at the overall improvement in results.

O.M.E.M., LLC – Helping Businesses Improve

Stay Well

Scott B.