When partners start a company, corporate foundation documents require them define initial contributions, outline responsibilities, and determine how profit gets distributed between them. However, as the company grows and new responsibilities emerge, if the partners have not clearly defined expectations and responsibilities informally, conflict can arise from clashes over ownership of workstreams and feelings that some are doing more than others.
Without resolution, these minor disagreements can evolve into major problems. Figuring out how to fairly divide labor is crucial for your long-term growth as well as peace of mind. To try to minimize conflict along the way, understand how partner friction can arise and what steps proactive leaders can do to ease it.
Common Reasons for Conflict
Ray Parsons, president and CEO of financial automation company Transcepta, has found that arguments over dividing labor come from three common causes:
- Feelings of unequal contribution: Where one partners believes they do more than others or someone isn’t pulling their weight.
- Concern around resource limitations: Given limits on time, money and ability, it’s possible that partners disagree on where to focus, so one delays work that another considers essential for the company.
- Defensiveness in areas of under-performance: If a partner isn’t hitting their goals, chances are they already feel bad. Discussions about whether they are working hard enough could set them off even more.
“Feelings of unequal contribution are perhaps the toughest problem to face because they involve a lot of ego for all parties,” says Parsons. That’s why your business needs systems to take the emotion out of these discussions.
Creating an Organizational Chart
One way to minimize conflict is by setting up an official organizational chart, clearly laying out the titles and responsibilities for each business partner. That way, when a new task comes up, you have an idea who should be responsible: a technology issue goes to the CTO, something financial goes to the CFO, etc.
John Ross, president and CEO of Test Prep Insight, started his company with friends and they found that giving themselves formal titles was useful for getting organized. “Though we all started and equally founded the company, we all couldn't be the CEO,” he says.
And while the organizational chart helped, Ross found that it wasn’t always enough. In particular, he found that there were a number of tedious but necessary tasks that no one wanted to do and they didn’t clearly fall under any one title. This created some bad energy. “We went around and around, and passive aggressively suggested that one of the others take it,” he says.
Along with your organizational chart, consider making a list of all the jobs needed during the week as part of running your company that need to be handled by the partners. Then as a group, you can figure out how to share the responsibilities. Ross found that he and his co-founders preferred alternating the unpleasant tasks each week to split the labor without argument.
Another option is to assign tasks based on skills and interest, where partners volunteer for the jobs they like best. You could also set up an auction system where partners rank their preferred choices. That way everyone gets a mix of pleasant and unpleasant tasks. If someone agrees to a task, have them agree to it in writing to avoid confusion later on, like if they forget who was supposed to do what.
As you figure out how to divide labor, keep your compensation structure in mind and make sure that you’re assigning work fairly according to the split. In other words, partners with a larger ownership share should be taking on more work.
Feelings of unequal contribution are perhaps the toughest problem to face because they involve a lot of ego for all parties.
—Ray Parsons, president and CEO, Transcepta
One critical concept to keep in mind is that of sole ownership of tasks or workstreams. Keeping one person as the final decision-maker on key workstreams can help prevent conflict—if partners agree to and respect the decision-making of one person on projects instead of a by-consensus approach, they can avoid potential stalemate when disagreement arises over which direction is the right one for the team to follow.
The Impact of Business Structures
Your business's legal documents can also help establish the work expectations for different partners. These documents formally establish your job titles, ownership, legal liability, investment contributions and voting rights. Depending on the type of structure, here is what you would use:
- Partnerships = Partnership agreement
- LLC = Operating agreement
- C-Corp = Corporate bylaws
- S-Corp = Corporate bylaws
Lise Stewart, principal of the private business services practice at EisnerAmper, recommends using these legal documents as a process for setting compensation, managing performance and setting the strategic direction when appropriate. She also suggests setting up an advisory board, as these outside advisors can help sort out partner issues.
Even with these systems and documents in place, disagreements can still happen over dividing labor. Plan ahead on who will mediate these issues ahead of time. One option is to take the problem to the CEO or to a group vote from all the business partners.
Another option is to agree on an outside third party to mediate, like your advisory board or a business consultant. “Both parties make their statements and support them with as much data as possible and the respected third party arbitrates the dispute. Of course, both parties need to agree to abide by the resolution before the process starts,” says Parsons.
As you have these discussions, make sure to remind everyone about their long-term goals and their commitments to the company, as well as the potential rewards. Keep in mind that these tasks aren’t just busy work, but crucial steps towards making your company a success. By planning ahead, you can make sure to properly divide labor between partners, even the jobs no one is eager to do.
Photo: Getty Images
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