Business partnerships: How to handle conflict

When you're sharing a business, conflict is difficult to avoid

Although collaborative ventures may be more successful the study undertaken in East Anglia suggests that a high proportion of co-owning teams are likely to experience conflict leading to the departure of one or more of the original owning team.

The Incidence of Conflict

Two out of five have problems:

  • In 42% of the firms founded collaboratively by people who were not related or married to each other, the original owning team had fragmented leaving only one of the original co-owners.
  • Some 41% of the 106 co-owners taking part in the study reported that they had prior experience of an unsuccessful collaborative relationship.

The Effect of Conflict

In their accounts of failed relationships the co-owners described three main adverse effects of the conflict. Only three co-owners considered that the conflict had had no adverse effect on themselves, those involved of their firm and two of these felt that in the long term the outcome of the conflict had been beneficial for the firm. The majority, however, described a very different picture.

For nearly 40% the conflict had adverse effects on the firm:

On revenue

  • Loss of market share
  • Loss of direction
  • Failure to take advantage of market opportunites

In eight cases the ultimate coast of the conflict was the firm

On employees

  • Loss of morale
  • Divisions or factions
  • Hostility

Over one quarter described the effects on the working relationship between co-owners:

  • Lack of co-operation
  • Inability to work as a team
  • Suspicion

Over one-fifth described their sense of personal bitterness and the effects on themselves and their families:

  • Undermined their sense of self worth and ability to trust others
  • Considerable personal financial cost
  • Break-up of marriages

Some comments made:

Disharmony at board level led to unnecessary risk and confusion of direction

Challenged my reason to go on

Staff morale declined

The board was unable to make decisions about things that mattered – views were too diverse. Performance suffered through inertia and the company became loss making. The team collapsed and this came close to causing the collapse of the company

It caused an early sale of the company at the wrong time and at a disadvantageous price

The additional financial commitment was difficult to sustain

My marriage broke up shortly after the break up of the company

From the owners who had once collaborated but now found themselves in sole ownership came other stories of attempted suicides, nervous breakdowns, divorce, attempted assaults and one sad case of attempted murder.

What causes collaborations to fail?

A number of threads ran through the accounts the co-owners gave as to why collaboration had failed:

  • Differences in personal values
  • Differences in personal objectives
  • Differences in objectives and visions for the firm
  • Loss of respect for the competence of the other
  • Failure to communicate effectively
  • Failure to reward effort justly
  • Loss of trust in the other

In most case the collaboration failed when personal, individualistic or selfish goals started to take precedence over the collaborative, shared goals.

“One partner attempted to take control and focused on personal gain rather than long term growth of the business”

In one case during the course of the study both of the original founding partners left the firm resulting in considerable losses, the co-owners differed significantly in how they regarded 22 of the 30 personal values studied.

 

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