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:
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.
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.
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.
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.
Each year, tens of thousands of entrepreneurs decide to team up and form a partnership. For many individuals, having a business partner is very appealing. Most of us have various strengths and weaknesses, and it is great to find a partner who is strong in areas you are weak, so that the two of you can work together and build a successful business, one that would be much more difficult for either individual to build on their own.
Though forming a business partnership is an attractive option, it is not without its pitfalls. Both parties often go in with optimism and great expectations. Sure, there will be challenges along the way – all businesses have challenges. But the partners are confident they can work through them and overcome any issues that may arise on their road to success.
While it is important to be optimistic, you also need to be realistic. The fact is that numerous business partnerships are dissolved each year. Sometimes, businesses close for economic reasons (e.g., the business was not profitable), forced relocations, better opportunities, retirement, etc. These are all valid reasons wherein it usually makes sense to shut down the business.
There are many other cases, however, in which businesses are dissolved because of partnership disputes. Partners will inevitably have conflicts during the course of running a business, and many of these are minor and can be resolved fairly quickly. Other times, however, there are major disputes that are ultimately irreconcilable.
What Issues Can Be Addressed with Business Startup Mediation?
The fact that business partners inevitably have conflicts should not necessarily dissuade you from going into business with someone who you think you can get along with. The problem is not the dispute itself, the problem is usually the fact that the partners did sit down ahead of time and determine how they would handle situations in which they do not see eye to eye.
There are many areas of the business (where there is a potential for conflict) that can be addressed ahead of time through mediation. These include:
Ownership: If there are two individuals going into business together, it is usually a 50/50 partnership. This may not always be the case, however. And if you have three or more partners, the question of ownership can become even more complicated. The question of “who owns what percentage of the company?” should be clearly answered before you open for business. Because once you get some customers and sales, it will be much more difficult to resolve any misunderstandings over this issue.
Finances: The finances for a partnership that is just starting out can often be somewhat informal. One partner pays for the computer and office supplies on his personal credit card, the other uses his vehicle to make company deliveries. Before long, it becomes difficult to figure out how much money each partner has invested in the business. This can cause hard feelings when it comes time to distribute profits and/or take a salary. It is in everyone’s best interests to get a handle on the finances early on.
Responsibilities: This is a big one. Business partners often have vaguely defined roles and responsibilities. This can lead to clashes down the road over issues like what to spend money on, where to rent office space, which vendors to use, and which employees to hire. It is best to clearly define what roles and responsibilities each partner has ahead of time, so you know who has decision-making authority over what areas of the business.
Dispute Resolution: If a dispute arises that cannot be resolved between the partners, how should it be handled? If you agree ahead of time on some form of alternate dispute resolution (e.g., arbitration or partnership dispute mediation), you can avoid the need for costly and protracted litigation if/when a major dispute does come up.
Business Sale or Dissolution: Business partners rarely want to think about the end of the partnership before they have even begun. However, this is an area that should be dealt with sooner rather than later. For example, what happens if one of the partners dies or wants to sell their interest in the business? Will the other partner have the right of first refusal to buy them out? Another important question is under what circumstances should you consider dissolving the partnership? Make sure you are on the same page regarding these issues before you get started.
“Preventative” Mediation for Business Partnerships
Individuals often enter partnerships with rose-colored glasses. Much like a courtship and eventual marriage, they tend to overlook the faults of the other at first and focus instead on the potential success of the business. The reality is, business partners need mediation far sooner than they believe.
Starting a business partnership with mediation is similar to creating a prenuptial agreement before a couple gets married. During the mediation process, a neutral third-party mediator facilitates a discussion between the two parties toward mutually agreeable principles on which to operate the business. The mediator controls the process, but the parties are still in control of the outcome. Through mediation, business partners can take proactive steps to address important issues ahead of time, saving them untold amounts of money and countless headaches during the course of business operation.
Within any organization in which there are groups and teams that work together on an ongoing basis, there are bound to be conflicts. Individuals have different personalities and approaches to their work, and sooner or later, you are likely to have people working alongside each other that don’t get along.
Some amount of “spirited debate” within an organization is okay. It is healthy to receive different perspectives and viewpoints on various issues. When channeled constructively, this type of diversity can help foster a vibrant workplace that welcomes new ideas and “out of the box” thinking. There are other situations, however, when conflicts between team members become increasingly heated and begin to damage employee morale and productivity.
When is it Time to Mediate?
One of the most difficult jobs an employer has is managing people. When team members are not getting along, it is hard to know at what point you need to bring in outside intervention. Of course, employers prefer that employees resolve conflicts and disputes among themselves. But once it is clear that the issues are not going to be resolved on their own, it may be time to bring in outside help.
One of the best ways for groups and teams within an organization to resolve conflict is through mediation. A neutral, third-party mediator can help the parties identify the root causes of their differences and take the steps necessary to begin working amicably together. The question most employers ask is, “when is it time to start mediation?”
There are some signs that certain group or team members may require mediation. Some of the most common include:
- The issues between them are complicated
- These issues have gone on for an extended period of time
- Attempts to resolve these issues internally have been unsuccessful
- These issues are creating an increasingly toxic work environment
- There is a risk that one or more of those involved will take outside action.
It should be noted that workplace mediation is not appropriate in all circumstances. For example, if the conflict between team members involves serious allegations such as harassment or assault, then a formal process such as a workplace investigation may be a better course of action.
What Does Workplace Mediation Look Like?
Mediation is a voluntary and confidential discussion between participants facilitated by an impartial mediator. The goal of workplace mediation is for group or team members to reach a mutual agreement to resolve their differences and work together. The mediator guides the process, but has no authority to impose a certain outcome or force an agreement upon participants.
Workplace mediation provides several advantages, such as:
- The process is private and confidential, and statements made do not show up on employee records
- Mediation gives employees a safe environment in which to vent their frustrations, express their viewpoints, and clear the air without fear of repercussions
- The process empowers participants to take ownership of their part in the conflict and establish their own outcome. This makes them more invested in the outcome than if it was something that was imposed on them
- Mediation allows team members to deal with and resolve conflicts before they escalate and potentially cause severe damage to the organization
- Mediation sends a clear message to team members that your organization cares about the problems they are having (with other team members) and wants to maintain a healthy and productive work environment.
For workplace mediation to be successful, the participants must be willing to sit down together and work out their differences. They must believe that the process can work, be willing to listen to and consider other people’s opinions and be ready to put the dispute behind them and move forward. If group or team members enter the process with this mindset, then there is a very good chance that mediation will produce positive results.
Working in an environment with co-workers has many advantages over working by yourself. The opportunity to be part of a team can be very synergistic and enhance the productivity of the organization. Despite its many advantages, however, there are times when we run into a co-worker who we just don’t get along with. For whatever reason, personalities seem to clash, and you have a hard time working with that person.
Personality clashes are among the most difficult workplace disputes for employers to resolve. This is largely due to the nature of this type of conflict. When two co-workers say they have a “personality clash”, where do you begin addressing the problem? Are you supposed to ask one (or both) of them to change their personalities?
Rather than trying to resolve the problem, employers often use the term “personality clash” as a reason to sweep the conflict under the rug and pretend it doesn’t exist. They may try separating the two co-workers by moving them to different cubicles and/or assigning them to different projects where they do not have to work with each other directly.
While these measures might seem to work in the short-term, they really only put a band aid on the problem. At some point, the two co-workers are likely to butt heads again, you just don’t know when it will happen and what will set it off. In the meantime, the “cold war” beneath the surface creates tension among the rest of the staff, and productivity suffers greatly as a result.
Common Types of Personality Differences
There are several categories of personality differences that can cause conflict in the workplace. Some of the most common include:
- Background: Our unique backgrounds help shape our worldviews and the way we see others in the workplace. Differences such as gender, ethnicity, social status, age, education, political viewpoints, and our personal experiences give us different perspectives which greatly impact how we interact with each other at work.
- Attitude: Our backgrounds also have a lot to do with our attitudes about other people, the company we work for, and life in general. Some people are “glass half full” types who are naturally more optimistic. Others are “glass half empty” types who tend to complain, look for flaws, and be highly critical. Those who are on opposite ends of this spectrum tend to have a hard time working together.
- Work Style: Individuals have different ways they prefer to work. Some work faster, while others work more slowly and methodically. We also have different preferred learning styles. Some learn best by reading a manual and going straight to work. Others like to be shown how to do a particular task rather than reading about it in a book.
- Approach: The way someone approaches a job can be a major source of conflict. Some view the workplace as a team working cooperatively toward a common goal. Others see it as a competition where they are looking to gain an edge on their co-workers.
Workplace Mediation for Personality Conflicts
Personality clashes happen in the workplace. Though you cannot prevent them from occurring, there are ways for employers to minimize them. The first step is to determine the source of the conflict. If it is a minor issue, such as a difference of opinion on how to complete a particular project, you may be able to resolve it on your own.
If there is a deeper problem, however, it may be time to bring in a third-party mediator. Oftentimes, employers have a hard time mediating a dispute because one side or the other believes they are playing favorites. With third-party workplace mediation, the two sides tend to feel more comfortable expressing their true feelings and getting everything out in the open without fear of repercussions.
During the mediation process, the mediator guides the discussion between two or more co-workers toward a mutually agreeable resolution. The mediator is not there to judge the parties involved or tell either side they are right or wrong. They are simply there to facilitate the process and help the parties come to an agreement on their own.
There are several benefits of workplace mediation for personality clashes, including:
- Mediation reduces the chances of a formal grievance being filed, which can consume a lot of time and resources
- The mediation process is voluntary, and all proceedings are kept confidential
- Mediation can help reduce the amount of sick days employees take
- Mediation can help minimize employee turnover and the cost to train new staff
- Mediation can help repair employee relationships, thus boosting morale and productivity