Business partners and founders may argue on the following:
-> The differences in time and energy each person puts into the business
-> The inability to agree on the business vision/next steps
-> Executing differently than your business partner on certain action items
-> Not meeting KPIs/OKR expectations
-> Personality differences that make doing business together hard
These disagreements are common, but it’s how you disagree about them that matters. That'll mean the difference between the conversation being productive versus not.
As a mediator and consultant, I speak with a lot of potential clients about their situations to see if I can help them. Recently, I spoke with Lauren. A first-time founder who had been working on her business for the last three years. She had achieved product-market fit. Except that Lauren was having a hard time working with her business partner.
She recounted frustration after frustration, and how things were getting worse after her co-founder, who had promised to quit by year three so Lauren could go at it alone, stayed on. Her business partner wasn’t pulling her weight, and now these broken promises were also weighing on the business relationship. It didn't help that Lauren also had a good deal of equity and Lauren didn't know what to do.
Lauren's situation is not unique. It’s common that by year two or three, disagreements between the founders pop up. Like any relationship, business partnerships also require that the people involved work to keep it high-functioning and trusting.
When you fear that your business partner may not be pulling his or her weight, diagnose the problem first. Then, come at it tactfully. This blog will set out the steps you should take that you can apply to your situation. Use the process below to get to the heart of the issue, discuss it openly, and brainstorm solutions if necessary.
Step #1: Diagnose the Problem
When to use this: When the problem you’re discussing is relatively new, you just noticed it, or you need to bring up the issue again.
Why use this: If you can’t diagnose a problem objectively, then you won't be able to discuss it with your business partner rationally. This step is a simple way of figuring out and naming the problem accurately.
How to do this: to diagnose the problem, observe the behavior and describe the impact on the business. Below is a formula for this:
Observation + Impact on Business = The Change You’ve Seen
An example of how this would work: “I am noticing that for the last several months you haven’t been putting in as much time as you use to [OBSERVATION] and that’s starting to affect our timelines with the product launch [IMPACT ON BUSINESS]. Why is that?”
The question at the end helps you understand the change in action, which is why your business partner isn’t pulling their weight, helping make the diagnosis of the problem collaborative.
This formula also helps you depersonalize the problem, which is when we start name-calling, yelling, or assuming the worst in another person when they're not pulling their weight. When we personalize issues, using the above example, it could sound like this:
“I’ve been noticing for the last several months that you’re not pulling your weight anymore. You’ve gotten lazy, and I seriously doubt you’re committed to building this company like I am [PERSONALIZATION]. It’s starting to affect our timelines with our product launch. Do better.”
See the difference?
The latter statement puts the person on the defensive while the former invites him or her to explain why they are not pulling their weight.
By accurately diagnosing the problem, observing what happened and how it impacted the business, you reinforce effective communication and also can check any misunderstands or assumptions you may have made on your part too.
Step #2: Have a Realignment Conversation
When to use this: After you have accurately diagnosed the problem, and started the conversation with your business partner, now it is time to get into a deeper realignment conversation. That is: what was once expected versus what is expected now. The goal is to give everyone some clarity on how to best move forward.
Why use this: This is another simple tool for making a difficult conversation easier by laying out a process for what needs to be changed. This way, everyone is clear on what they need to do going forward.
How to do this: I like to call these realignment conversations. I recommend business partners have these at least once a quarter so they can surface any issues that may need to be talked about. The below image shows you the parts you should discuss together while always having the business top of mind.
And it would sound a little like this:
An example of what this could sound like: “I know when we established our OKRs this past quarter we decided that a sales target conversation rate of 35% was doable [WHAT WAS ONCE EXPECTED]. We aren’t meeting that. I know you are putting in less time now because of COVID, and I get it. Everyone is burnt out. We still need to hit a measurable conversion rate so we don’t lose our momentum [WHAT IS NOW EXPECTED]. What would be doable in your mind?
Again, this ends with a question to help you establish a collaborative conversation space. You will decide together what the new target will be. Ensure that whatever is decided upon is written down – either as an email, Slack message, a Google doc, etc. – as you'll need to be able to reference it later on.
Realignment conversations can be powerful ways to work through a problem and reboot the business partnership, especially if things have gotten worse lately. After diagnosing the problem accurately, these conversations should be collaborative and business-focused, shifting the problem into an opportunity to be explored together.
Step #3: Renegotiate Roles/Responsibilities
When to use this: If your business partner is not pulling their weight, is consistently not meeting expectations, and you’ve had several conversations about it, then it’s time to renegotiate their role and responsibilities to the business.
Why use this: This can be seen as a drastic measure that may negatively impact the business partner’s relationship with the business, but it doesn’t have to be. It can be temporary until their performance improves or can be viable if the founder’s context changes (such as a drastic life experience shift).
How to use this: Get clear on what your business partner can commit to and if they need additional support. Questions to ask yourself and your founder include:
- Do we need to hire a coach to improve your performance?
- Do we need to hire other team members to cover some of their tasks in the interim?
- What Objectives and Key Results (OKRs) or Key Performance Indicators (KPIs) do we need to switch?
- How might the changing business environment have impacted the founder's performance?
- Are we objective and reasonable in what is expected from each other?
Rely on the tactics from Step 1 and 2 to help ground this conversation. Depersonalize the issue. And make it business-focused, lowering defensiveness, so you’re able to work through the problem together. Ensure that whatever you agree to has a timetable and evaluation metrics for their new roles or responsibilities.
Pro tip: If they need to permanently decrease the amount of work or time someone can commit to the partnership, make them an advisor. Whatever equity they have vested in that time is their’s, but decrease their equity too to compensate for this change.
Step #4: Restructure the Equity
When to use this: Step #4 and #5 should be considered last-resort steps after you’ve tried to talk things out, realigned expectations, and looked at their role duties in an earnest manner.
Why use this: This is a serious conversation that can have drastic consequences if done incorrectly. If you invoke this, you put the founder or business partner on notice that their continued bad performance or not putting in the time/energy has consequences.
How to use this: Approach the conversation strategically. Make it less about a reprimand, more about an opportunity to explore how you two can continue working together. Here’s a sample template for how you can approach this conversation with your business partner:
“Tom, look, after months of trying to get realigned and make things work between us, it seems like the problems keep occurring. We’re having a hard time working together. I want to have a conversation with you about our current equity split. Can we have a conversation about this?
You can keep it a bit vague while letting them know that the intention is to explore the equity structure. Remember, your business partner’s initial reaction will be that something will be taken away from them, which means they will work to fight for it. Your task is to overcome this initial reaction by asking questions and seeing if they agree with you that, combined with their lower work input and time into the business, they deserve a smaller equity stake.
Pro tip: involve a neutral third party to help facilitate the conversation. He or she can be a mediator, a trusted advisor, or someone from your board. You want someone to provide a neutral assessment and provide a safe space where you can have the conversation and discuss the issue openly.
Step #5: Dissolve the Business Partnership
When to use this: Again, this is the last resort option. And how you navigate the ending of the relationship will be just as important here. Evaluate the level of risk together, do it gracefully, and assess the different stakeholders that may need to be involved in the decision pre- and post breakup.
Why use this: When the relationship has gotten to the point that it is beyond repair, use this step.
How to use this: Here, you may want to reach out to an attorney, a business mediator, or someone with extensive knowledge of business dissolutions. If you have significant intellectual property and your partnership agreement does not say what happens to it in the event of a business breakup, you will need to negotiate on who gets what. For more information on what to consider when breaking up with your business partner, read the following article: How to Breakup with Your Co-Founder.
Special Consideration: Ask Your Board
When to use this: Not every company has one or if you're too early-stage. But it can be useful to have your board help you with an external assessment to negotiate next steps or be an objective third-party. They may even have contacts within their network that could help too.
Why use this: A board member has a fiduciary duty to the company. As such, they will bring a level of discernment and good judgment that’ll help ground any conversation.
How to use this: Ask. Hopefully, you have a good relationship with your board members and can bring this matter to their attention. Provide a history of the issues, either through an email or Google doc. That way, they know what is going on before they get involved.
Bottom line: a business partnership is like any relationship. And when you observe that your partner is not pulling his or her weight, talk to them. It’s when things have gotten bad and past the point of no repair that you should resort to more drastic measures like restructuring the equity or dissolving the business partnership.
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