Never Have More Partners Than Fit In An Elevator

Never have more partners than you can fit in an elevator. That seems like a joke but it’s serious advice when starting a business. Having too many partners creates conflicts. Even the most bonded of partnerships will fray under the pressure of competing interests. While it is important to have partners each of whom brings skills to the table, the choices must be made carefully and with an eye toward keeping the group a manageable size. Every partner increases the possibility of an interest that will stray from the good of the company. Good communication is key to a successful partnership, and when the partner group is too large, communication becomes more complicated. There is always the risk that one partner will hear important news last and be aggrieved or that some other critical piece of information will get to some partners but not all. Keep the partners group compact and manageable.

If your business has run into problems, there are rules to follow to improve a partnership.

Rule 1: Schedule regular and open communication. A formal meeting once a month, in person or by phone, is a must. Review the past month’s performance and talk to each other as owners, not as managers.

Rule 2: Clarify ownership versus executive. Owners own the company; they don’t run the company. When I visit the corner office and ask that person what he or she does, nine times out of 10, I hear, “I’m the owner.” That’s the wrong answer. The owner might be who you are, but it’s not what you do. What you do is your job title; you are the CEO, the CFO, the VP of sales. That’s what you do all day. You can’t be an owner all day. If you take “owner” as your title, then all day you will operate in your mental state as an owner, and that might mean worrying about your investments, about making enough money to send your kids to college —things that should not preoccupy a manager. A manager must work at all times for the good of the company. If owners are going to be involved in the day-to-day of the company, they can’t operate as owners; they must operate as their job titles dictate. Otherwise, they might steer the company away from its best path.

Owners are not only hobbled by their own conflicted interests but they also undermine employees. When they have a question, employees might shop around from owner to owner while looking for the answer they like. Owners need to know and respect their management roles. If an employee comes to the owner/CEO with a payroll question, the CEO should respond, “That’s not for me. Take that to the CFO, and whatever the CFO says is your answer.”

Rule 3: Define roles and responsibilities. Employees should be assigned specific tasks without overlap. This is true for partners and owners as well. The greater the definition of roles, the less likely there will be conflict. Overlap often leads to disaster.

The U.S. military has a method of covering as much ground during an assault as possible called the Buzz Saw. If there are three professional snipers and their mission is to protect a certain area while under attack, how do they cover as much ground as possible? The answer is strict division of territory. Each is given an area to cover that does not overlap with that of other two snipers. That way they can cover as much ground as possible without waste.

This seems like a very simple concept: each sniper has a separate area. There are downsides to it, to be sure, especially if one sniper fails to achieve the goal. But consider what happens when their territories overlap. When each sniper does not have a personal area of responsibility, the method of sharing risk fails. Yes, certain areas are better covered, but each person is now stretched thin.

Now consider this in the context of three business owners. When owners do not have defined roles and instead share duties, there is overlap that can create conflict. Who is in charge of the areas where there is overlap? That confusion can lead to paralysis or two individuals working at cross-purposes, neither of which is good for a business.

Not only is there overlap but there are also gaps. The CEO and CFO are worried about finance and the CFO and COO are worried about accounting. So who is focusing on sales and delivery?

When individuals are stretched over multiple areas of responsibility, key elements fall through the cracks.

Too often, we are conditioned to see sharing as a good thing, a frame of mind in which we should all strive to be. That might be true in our personal lives, but it can have negative consequences in other settings. The battlefield is one. The business world is another.

Topics Mergers & Acquisitions