Why Do Business Partnerships Fail?

Why Do Business Partnerships Fail?

Business partnerships are not unlike romantic relationships. In the beginning, there is nothing but excitement and optimism as they start their new venture together. Faults are overlooked, explained away, or otherwise ignored in an effort to focus on the larger goal of building something great together. When the partners move past the planning stage and decide to jump in with both feet and “tie the knot”, it often happens without a lot of thought given to how they will deal with conflicts that may arise along the way.

Some disputes between partners are small and fairly easy to deal with, while others can blow up into a major rift that threatens the future of the business. Here are five types of disputes that commonly cause business partnerships to fail:

1.  Disputes over Finances

During the first 18 months to two years a partnership is in business, there is a good chance that there will be some tough times. Sales may be slow in the beginning, startup capital may start to dwindle, and the time comes when you have to make difficult financial choices. When there is plenty of cash lying around, there is usually not much worry about where you are investing your capital. But when funds start to dry up, money can become a major source of conflict.

2.  Vaguely Defined Roles

When partnerships begin, the roles of the owners tend to overlap. This may be okay at the very start while you are getting the business off the ground and everyone is putting in 18-hour days. But if the partners do not clearly define their roles soon after, there may be confusion about who is in charge of what.

3.  Personality Conflicts

Some partners have a hard time getting along due to personality clashes. For example, one partner may be domineering and controlling, while another is more passive. This might be okay for a while, but when things start to get tough, the passive partner may start to resent the one who wants to control everything. This is not to say that partners need to have identical personalities; that might actually be worse. However, if the personality differences become too much to bear, it may be best to consider parting ways.

4.  Style Conflicts

What if one partner is a Type A personality who is focused intently on achieving goals and progressing step by step toward building the company, while the other goes from one big idea to another? The problem with the second partner is they are always coming up with these “amazing” ideas, but they never stay focused on one long enough to make it a reality. You can see how partners with these two styles can have some serious disputes.

5.  Values Conflicts

Your business should have a vision, mission statements, and a set of values that you operate by. But what if, in the midst of all the excitement starting your business, you later realize that you and your partner do not share the same values? You should be clear from the get-go about what principles you will operate by, how you will approach business development, how employees and customers should be treated, and how you will deliver your products or services. Make sure you are on the same page on this one.

Is there a Solution for Major Disputes Among Business Partners? 

Like marriages, there are some business partnerships that are simply doomed to fail. That may sound harsh, but it’s reality. There are others that can be saved if the partners take the right steps. In either case, one of the best ways to get a handle on conflicts between partners is through mediation.

Mediation is a form of dispute resolution that allows business partners to work out their differences in a cooperative setting. The process is facilitated by a neutral, third-party mediator whose job is to guide the discussion toward a workable and peaceful settlement. Through mediation, partners can identify and address the underlying issues that are causing the dispute.

At the end of the mediation process, partners typically have a much better idea where they stand. They either learn that the business can be saved and the steps they need to take to save it, or they learn that they are better off cutting their losses and dissolving the partnership. Either way, mediation helps partners move forward toward resolving the conflicts they are dealing with.

Dealing with Allegations of Bullying and Harassment in the Workplace

Dealing with Allegations of Bullying and Harassment in the Workplace

Bullying and harassment is a rapidly rising issue in the workplace. According to a 2016 study, about 47% of employees are bullied or harassed at some point during their career. Nearly one out of every two people experience bullying, whether through verbal slurs, nonverbal gestures, physical violence, or some other method. And while every case is unique, all cases should be handled with care and efficiency, or the company may lose valuable employees and even wind up in legal trouble.

Bullying and harassment can be a very sensitive issue. If not handled properly, the situation can become uncomfortable for the victim and for anyone who witnessed it. Unfortunately, bullying and harassment in the workplace is more complicated than the bullying that takes place on a school playground. It is not just about separating the bully and the victim, but about creating a cohesive environment where employees have a place they can excel in and use their talents and skills to make valuable contributions to the organization.

Bullying vs. Harassment and How Mediation Helps with Both

While bullying and harassment seem to be interchangeable terms, there is a distinction between the two, which significantly changes how they are dealt with in the workplace. Bullying is a form of aggression towards another person, creating a power imbalance. In the workplace, this could be anything from swearing or shouting at another coworker to resorting to physical violence.

Harassment can look the same as bullying, but has intent directed toward a person because of a certain characteristic they might have. This could mean that a coworker is being harassed because of their sex, gender, race, color, religion, disability, etc.

Mediators have the experience and background in dealing with many different types of disputes and conflicts, including those related to bullying and harassment. Sometimes, bullies are unaware that they are causing harm to their coworkers and would benefit from sessions with a mediator where they speak their mind about the other person and explain their actions. At the same time, the victim of the bullying can also speak to a mediator in a different room and express their feelings as well. By talking it out in a confidential setting, they may be able to see and understand their differences and begin to work cooperatively.

How Mediation Can Help Prevent Bullying and Harassment

Bullying does not have to be rampant in the workplace for mediators to step in. Mediation can help open the lines of communication among coworkers and help to alleviate tensions before the fireworks really start to fly. This can make your organization a more peaceful and enjoyable place to work.

The mediation process is guided by a neutral, third-party mediator who works closely with parties to bring them together toward a mutually agreeable resolution. The process is very flexible, and participants are able to offer ample input into whatever settlement is reached. In fact, the mediator has no power to impose anything on anyone, so it is up to participants to come to an agreement voluntarily.

There are several advantages to using mediation for resolving conflicts related to bullying and harassment. These include:

  • Time and Cost Savings: Legal battles are expensive and time-consuming. It is always in the best interests of everyone involved to avoid litigation if at all possible, and mediation provides a viable and cost-efficient alternative.
  • Confidential Process: Many employees are afraid to express their feelings in the workplace for fear of reprisal. With mediation, you work with a neutral mediator from outside the organization in a confidential process that allows participants to freely air their grievances. They are able to do this in a cooperative environment that is conducive to amicable resolutions.
  • Higher Rates of Compliance: Because participants control the outcome of the process and whatever agreement is reached, they feel more empowered and they are more likely to take ownership of it. This greatly increases the chances that parties will live up to whatever they commit to.
Perceived Discrimination and Cultural Conflicts in the Workplace

Perceived Discrimination and Cultural Conflicts in the Workplace

Organizations that want to survive and thrive in the 21st Century need culturally diverse workforces. There is little argument that having a workforce comprised of individuals from different backgrounds that approach the job from different perspectives fosters greater creativity. This is very important in today’s competitive environment, where sometimes just a small technical innovation can give a company a decided edge in the marketplace.

Cultural diversity in the workplace can be highly beneficial for organizations, but it can also lead to conflicts. While many federal, state, and local laws are in place to help reduce the occurrences of blatant discrimination in the workplace, perceived discrimination is still a major issue that often leads to employee disputes.

What is Perceived Discrimination?

There are two ways the perception of discrimination can play out in the workplace. The first is the belief among employees that they are being treated unfairly by co-workers or supervisors because of certain characteristics; such as race, ethnicity, age, gender, sexual orientation, gender transition, disability, physical characteristics, and religious or political beliefs. When an employee believes they are being discriminated against based on demographics, it can negatively impact work performance and cause tension with those they believe are mistreating them.

Another form of perceived discrimination is when employees buy into myths, stereotypes, or fears about a certain class of individuals and allow these perceptions to impact the way they relate to them. For example, a supervisor or employee may have a false perception that members of a certain ethnicity are lazy or otherwise not able to perform their job as well as others. This false perception alone can cause severe misunderstandings that often lead to conflicts.

The Negative Impact of Cultural Conflicts

Perceived discrimination leading to cultural conflicts is not only hard on those involved, but on the rest of the workforce as well. Studies show that just being exposed to inter-cultural disputes can create stress and tension on those observing the conflict, which lowers employee morale across the board.

This makes sense intuitively as well. We know from other settings (such as children who witness fighting among their parents) that people who are exposed to conflicts tend to be negatively affected by the conflict, even when they are not directly involved. This is why it makes sense to address cultural conflicts as soon as the organization is aware of a dispute and before the incident escalates into a legal matter.

The Benefits of Mediation for Resolving Cultural Conflicts 

One of the best ways to resolve cultural conflicts in an organizational setting is with workplace mediation. With mediation, the parties sit down with a neutral, third-party mediator in an attempt to work out their differences and come to an amicable and peaceful resolution.

Actually, participants do not even have to be in the same room. If there is too much tension for them to sit down together, they can be in separate rooms with the mediator shuffling back and forth between them. This is commonly known as “caucusing”. Mediation can also be conducted virtually with participants communicating from remote locations.

The mediation process is non-threatening and non-binding. Participants are in an informal setting that is kept private and confidential. This allows participants to openly express their feelings without fear that their words will be recorded, made part of the company record, and used against them later on. The use of a mediator who is neutral and outside the organization also reassures participants that the process is fair, and the mediator will not favor one side or the other.

Though the mediation process is guided by the mediator, participants ultimately control the outcome. The mediator has no authority to impose a resolution unless it is agreed upon by all participants.

The fact that participants have the final say in any agreement that is reached makes them feel more empowered and tends to foster greater respect for their employer. And since any resolution that is reached is agreed on voluntarily by participants, they are far more likely to comply with its terms and conditions. This vastly reduces the chances of a similar conflict flaring up in the future.

Negotiation vs. Mediation for Business Partnership Disputes

Negotiation vs. Mediation for Business Partnership Disputes

When a business partnership is formed, those involved are almost always optimistic that the venture will be successful. Much like a marriage, the parties tend to overlook the other’s faults at first, instead choosing to focus on the benefits the partnership has to offer.

After being in business for a while, things inevitably start to change. Conflicts develop between partners, and sometimes a dispute escalates to the point where it threatens the stability of the company.

When disputes arise, there are various methods that can be used to resolve them. Two of the most popular are negotiation and mediation. There are advantages to each of these approaches, and both can be used to successfully resolve conflicts among business partners.

Here is a closer look and each of these forms of dispute resolution:

Negotiation

When business partners are at odds, they can try to negotiate a workable settlement. Negotiation is a flexible and fairly unstructured process; participants can negotiate directly, through their attorneys, and/or with the help of other outside parties. There are no set procedures that must be followed, and you can negotiate in virtually any setting (e.g., in the conference room, your office, a restaurant, or any other location).

Negotiation occurs every day in the corporate world. Most partners also negotiate with each other on a regular basis to determine how to handle various issues that impact the business. When a dispute arises, negotiation is generally the first method used to attempt a resolution.

Some of the main characteristics of negotiation include:

  • Flexible, informal, and unstructured process;
  • The process is private, confidential, and voluntary;
  • The process can be fast and inexpensive;
  • The participants are in control of the process;
  • The process can lead to a mutually agreeable resolution.

Mediation

Business partnership mediation has many of the same characteristics as negotiation. In fact, mediation is a more structured type of negotiation that is facilitated by a neutral, third-party mediator. Like direct negotiation, the process is flexible and informal, and it is often used by disputing partners when they are unable to come to an agreement on their own.

During the mediation process, the participants and the mediator meet together to discuss the issues that are causing the conflict. The mediator guides the discussion between the parties toward an agreement that all parties will be happy with. The process is private and confidential, so participants are able to freely express their views and opinions.

Though an impartial mediator is in control of the process, the participants still control the outcome. The mediator will not impose a solution on anyone; the participants must be in full agreement for a settlement to be reached. If no agreement can be negotiated, the parties are free to pursue other forms of dispute resolution such as arbitration or litigation.

Partners may involve their attorneys at any time during the mediation process. They may choose to consult with attorneys to prepare for mediation sessions, and at the end of the process, it may be necessary for an attorney to draft and/or review an agreement to ensure that it is legally enforceable. For mediation to be successful, partners should agree to remain calm, not talk over each other, and be open to considering alternative viewpoints.

Some of the main characteristics of mediation include:

  • Flexible and informal process;
  • The process is voluntary, private, and confidential;
  • Faster and far less costly than litigation;
  • Participants are in control of the outcome;
  • The process can lead to a mutually agreeable and legally enforceable agreement.

Why Mediation? 

When direct negotiations break down, mediation is the next best option. Oftentimes, an impartial mediator, particularly one with extensive business experience, can bring a fresh perspective from someone on the outside. This can give partners creative options and customized solutions they may have never previously considered or even been aware of. And because the participants are the ones who ultimately create the agreement, they are much more likely to honor its terms and conditions.

 

Dissolving a Business Partnership with Mediation

Dissolving a Business Partnership with Mediation

When individuals go into business together, there are always high hopes that the partnership will continue indefinitely. During the course of operations, however, circumstances change and there may come a time when the partnership needs to be dissolved. Dissolving an entity is not a simple process, and it does not happen overnight.

Navigating the complexities of a business partnership dissolution is stressful for everyone involved. When partners do not agree on all the details of the process, it can lead to more delays and further stress. Mediation can be a great tool to help partners handle the business dissolution process.

With mediation, the parties work out the terms and conditions of the dissolution with the guidance of a neutral, third-party mediator. The mediator facilitates constructive dialogue between the parties toward an agreement that both sides will be satisfied with. The process is timely, cost-effective, and it allows partners to resolve any differences they may have in a collaborative rather than combative setting.

Common Issues to Resolve with Business Partnership Dissolutions

When partners decide to go their separate ways, there are several issues that need to be addressed before they can bring this chapter of their lives to a close. Here are some of the most important:

  • Reasons for the Dissolution: The first and most important issue to address is why you are dissolving the partnership. There are numerous potential reasons. Is the business insolvent? Does one (or more) of the partners need to withdraw from the business (for whatever reason)? Depending on why the partners are splitting up and the terms and conditions of the written agreements between them, it could be that the entity does not need to be dissolved. For example, if one (or more) partners wants to continue with the business, they could simply buy out the shares of the partner who wishes to withdraw.
  • Following Entity Dissolution Requirements: The steps to dissolving a partnership will depend largely on the type of entity and the requirements of its organizational documents and/or other written agreements. If you are a partnership without a written agreement, then the terms can be worked out between the partners at the time of the dissolution. However, if there is a written partnership agreement, articles of incorporation (for a corporation), or articles of organization (for an LLC), the rules for dissolution within the agreement must be followed.
  • Informing Stakeholders Regarding the Closure: During mediation, you must decide how you will inform those who have a vested interest in your business. These may include your landlord, employees, vendors, creditors, and clients/customers. You and your partner(s) must decide the appropriate time to inform each stakeholder. This will depend on what is stated in the written guidelines, as well as the specific circumstances of the business. You will also need to make arrangements to collect any accounts receivable, settle up with any creditors you owe money to, and resolve any outstanding issues with clients/customers.
  • Government Compliance: If you filed inception papers for your partnership or documents for an LLC or corporation with the state you are headquartered in, you will likely need to file a certificate of dissolution (also known as articles of dissolution) when you close the business. You will also need to cancel any business licenses or permits and settle up with the IRS and state and local tax authorities.
  • Sale and Distribution of Assets: Once all the paperwork has been filed, the accounts receivables have been collected, the creditors have been paid, and the customers have been satisfied, you need to decide how you will liquidate and distribute the remaining assets. In general, this should be done in accordance with the guidelines laid out in the inception documents as well as any applicable government laws and regulations.

Mediation Opens New Possibilities

Even if the partners generally agree on the steps in the dissolution process and how they will go about closing the business down, it may still be useful to consider mediation. Bringing in a third-party individual from the outside can provide a fresh look at the situation and bring up things you may not have previously considered.

For example, there could be a way for the business to remain solvent through some creative and unique approaches you were not previously familiar with. A skilled mediator who has worked with numerous other businesses can leverage his/her experience to provide partners with a whole new range of options, allowing them to make the most informed decision regarding the future of their company.