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by Tony Stein and David Gage
Morry Stein and his close friend Ben Appelbaum were not only well-regarded
camping professionals, but they were business partners in the early 1970s.
Ben, owner of Ivy League Day Camp and Morry, owner of Camp Echo Lake,
purchased a number of day camps and day schools together, forming KIDS
Corporation.
Together, they had some early successes, but before too long they found
themselves in a situation they had not anticipated — dangerously strapped
for cash. While Morry was consumed with worry, Ben went away on vacation.
Morry, a worrier by nature, could not believe that Ben had chosen this
critical time to enjoy a vacation. Ben, an eternal optimist, couldn’t
understand how Morry could be so concerned about a situation that they
clearly would rectify.
Not long after Ben returned from vacation, he and Morry decided to dissolve
their partnership. Though they remained the closest of friends for the
rest of their lives and, in fact, participated on their own in many other
successful partnership ventures with new partners, they were not able,
at that time, to be effective partners with each other.
Taking Care When Starting Up
It’s fascinating to wonder if Ben and Morry might have avoided their
crisis and dissolution had they approached their partnership differently.
The seeds of conflicts are almost always sown when partners are starting
up or when there is some type of partner transition. These are two critical
times for co-owners. Importantly, it’s when they have the best opportunity
for ensuring their long-term success.
The trouble is that very few business people understand the steps they
can take to strengthen their partnerships. What people can do isn’t rocket
science, but it isn’t taught in schools. Without knowing what precautionary
steps to take, people tend to dive in much too fast. Part of the reason
why partnerships can turn difficult is that people are not aware of the
many steps they can take to reduce the risks.
Going into business with a friend, as Morry and Ben did, provides some
comfort and protection because there is a history. Unfortunately, knowing
people socially is often not sufficient and sometimes downright misleading.
Many people are quite different in business and social environments. When
friends do go into business together, they need to be especially careful
not to skip steps. They need to appreciate the importance of operating
in a business-like way when at work and that includes writing down their
agreements.
Broadly speaking, there are three areas that are critical for potential
partners to attend to — the relationships among the partners, the business
arrangement, and the future of the partnership. (We use the term partnership,
not in the strict legal sense but to describe any type of co-ownership
arrangement.) People entering partnerships need to know with whom they
are getting involved, exactly what the deal is, and where they are going
down the road.
The Relationships
When you think about how much is riding on the quality of the relationships
among owners, it is truly amazing that more attention isn’t given to them.
Potential and existing partners will strengthen their relationships most
effectively by examining their personal values, their personal styles,
and the issue of fairness.
People who contemplate joining forces need to realistically determine
if their personal values are similar enough. Sharing similar values is
important because they form the basis for trust in relationships and because
they form the underpinnings of partners’ decisions. They play an important
role in decisions such as taking on debt, paying taxes, managing employees,
the rate of enrollment growth, and even the ultimate size of the camp.
Consider two partners debating the matter of a much needed capital improvement
at their camp. One partner wants to assume a debt to get the project done
immediately while the other wants to stagger the project so it can be
funded out of cash flow. The partners’ disparate appetites for risk are
very likely grounded in different values. When partners’ values are different,
sooner or later they are likely to butt heads.
Personality conflicts are a frequent cause of stress among partners.
By employing short but sophisticated personal style tests, psychologists
can help potential partners determine if there are any red flags that
suggest incompatibility. They can also help existing partners construct
agreements about how to work together more effectively given the similarities
and differences in their styles.
Another frequent problem in partner relationships is the matter of fairness.
The problem develops when someone gets the feeling that he or she is putting
more into the business than the partner, or that one partner “isn’t carrying
his or her weight.” In a nutshell, to ward off this problem, there needs
to be a thorough discussion about what each partner is going to put into
the business and what each wants to get out of it. And because circumstances
in the work and personal lives of partners continually change, these discussions
should be revisited periodically so that resentments do not have a chance
to build up.
The Business Arrangement
The business aspects of partnerships are the ones that are typically
dealt with the most by partners-to-be, but even these issues are rarely
dealt with thoroughly enough. It is sometimes shocking how people — even
seasoned business people — can enter into business partnerships without
clearing up the ambiguity around matters like ownership percentages, roles
and responsibilities of each partner, evaluating performance, hiring family
members, compensation, dividend policy, information sharing, and the way
decisions will be made.
Hidden in these seemingly straight-forward business issues are lurking
sensitive issues about money and power that come back to haunt partners
years later if left ambiguous. People say, “We’ll get to that later,”
but “later” keeps getting pushed back further and further.
Camp owners generally know the nature of the business they are in, but
sometimes questions arise over specific goals and how to best achieve
them. These issues regarding strategic direction can be near and dear
to camp owners’ hearts and therefore stir up a lot of emotion. Clarity
and agreement on the goals of owners, where the camp is going, and how
it will get there are extremely important to keep conflict in check.
The Future
The third and final set of issues that potential partners need to examine
and negotiate has to do with the future. Because new partners are so eager
to jump in and have so many urgent matters they must address, they usually
are not looking far down the road. But planning ahead — not just for the
business but for the partnership itself — can have huge payoffs over time.
People involved in or contemplating partnerships should consider four
critical areas for the partnership’s future: expectations, creating guidelines
to deal with the unexpected, dealing with differences, and planning for
the end.
Expectations
Unmet expectations are a common complaint among partners. In fact, a poll
of business people by Inc. magazine and Xerox a few years ago revealed
that unmet expectations was number two in a list of reasons to avoid having
partners. Interpersonal conflicts was number one.
One camp was in the process of making the transition from the second
to the third generation, and it hit very rough sailing when the son and
his wife began taking over the helm. After a period of almost a year,
when there were more flair-ups than talking going on, the mother, father,
son and daughter-in-law sat down with an outside person and got to the
bottom of the matter. Both parents had a clear expectation that their
son was going to continue to run the camp the way they and the father’s
parents had always run it. Perhaps the son should have been aware of their
expectations of him and that this was the source of the friction, but
he was not. Only after getting it out on the table were they able to negotiate
a resolution.
Even before such disappointments arise, we suggest a series of exercises
that uncover people’s expectations. Often people do not recognize the
expectations they carry around for others. They need a way to become clear
about what expectations they have of others and themselves, and have a
way to discuss expectations that are not being met.
Creating guidelines
Creating guidelines for the unexpected is an excellent vehicle for learning
more about a potential partner and for building confidence that the partner
team is ready to deal with challenges. For example, who is responsible
if the venture requires additional funding? What happens if one partner’s
interest in the camp dwindles dramatically? There are many circumstances
— hypothetical scenarios — that most partners never imagine, but the last
thing you want to be doing during a crisis or tragedy is figuring out
how to negotiate your way out of these situations. It is far better to
resolve them prior to becoming partners.
Dealing with differences
Differences and conflicts are an inevitable part of most every business
partnership. By talking ahead of time about the steps partners will take
to resolve conflicts, including the use of negotiation, mediation, and
if necessary, arbitration, partners effectively inoculate themselves against
the harmful effects of conflicts.
Planning for the end
Finally, potential co-owners need to closely examine all of the various
ways they can foresee their partnership ending. What’s the best possible
ending? What other endings are less desirous but possible? What can the
partners agree on about where they want to end up? Again, the discussion
itself has the potential to enlighten and strengthen everyone involved.
A Partner Charter
The relationship. The business. The future. There is a lot to deal with
and not everyone makes it through the process — nor should they. Not everyone
who talks about being partners is going to make a good partner.
Some siblings who contemplated becoming full partners and tried tackling
all of these issues came to the conclusion that becoming true business
partners was beyond them. They then came up with alternative paths. Usually
some stayed in the business and some left. Going through the process was
like a road test. When siblings struggling down the partner path fail
to sit down and try to negotiate the tough issues, they often gradually
slip into being partners with disastrous results — they never really figure
out where they are going.
Potential partners must sit down and hammer out all of the issues related
to their partnership. Because the challenge of addressing all of the issues
is a daunting one, it is sometimes helpful to have outside assistance,
such as a business mediator, who can facilitate the process. The mediator
works for all of the potential partners and is free to meet with the parties
both together and separately in order to facilitate the process. The mediator
will sometimes meet with spouses as well. The mediator has expertise in
fostering open communication and greater collaboration among complex groups
and has the twin goals of helping the parties set up the arrangement to
work for each individual and have it work for the group as a whole. The
end product of this process is what we call a Partner Charter document
that captures the intentions of the partners as it relates to the three
areas noted earlier — the relationship, the business, and the future.
Because it is comprehensive in scope and specific in detail, it can eliminate
the ambiguities that exist in most partnerships. If potential partners
go through this process on their own, it is nonetheless important to document,
even informally, the issues they have addressed and to which they have
agreed.
Know How To Use Attorneys
Once potential partners have completed a Partner Charter, or their own
version of it, they are ready to have an attorney (usually an attorney
representing the corporation) draw up legal documents for the partnership
or corporation. The Partner Charter does not take the place of the legal
documents; rather, the legal documents establish the existence of the
partnership or corporation as a legal entity and specify the legal rights
and obligations of the partners. Many people give their attorneys the
Partnership Charter because it contains all of their intentions and agreements
about how they want to own and run their company together.
In most cases, it also may be advisable for each partner to have his
or her own attorney review the legal documents to ensure they are in the
person’s best interests. In doing so, however, it is important to keep
in mind that the long-term success of any partnership depends on the partners
wanting each other to succeed and get as much as possible out of the partnership.
In contrast, attorneys are hired to represent only his or her client and
zealously advocate for that client’s interests.
There have been times when individual attorneys enter into partner start-up
situations before the partners-to-be have figured out exactly what their
arrangement is going to be. When the attorneys begin advocating for their
respective client’s interests, one person or another begins to experience
the negotiations as adversarial, i.e., it feels like the “other side”
is trying to get an upper hand on an issue. Rather than seeing this as
your potential partner trying to put one over on you, it’s best to see
it as his or her attorney doing his job, which is to protect his client.
Remember that a good attorney will find a way to resolve outstanding issues
and get a partnership consummated.
Ongoing Successful Partnerships
Like a well-run camp, partnerships have a greater chance of success when
they are set up properly at the very beginning. The “deal” among the partners
should be crystal clear — free of all ambiguity. The experience of talking,
exploring sensitive issues, negotiating openly and honestly, and creating
a shared record of agreements helps to build a bond among the partners.
It gives them greater confidence in their ability to handle situations
side-by-side.
A key to any successful partnership is the willingness and ability to
communicate honestly with your partner.
Demonstrating this ability when starting up is important. Then it is
necessary to periodically check to see how things change, as they inevitably
will. Changes in the lives of partners necessitate revisions of the charter
and the working relationships. By starting out strong, partners have the
best chance of riding out whatever stormy seas come their way.
Originally published in the 2002 July/August
issue of Camping
Magazine.
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