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Basic Conflict Resolution Skills: Business Partnership Conflict: PART I: Understanding the Problem

Business Partnership ConflictWhat You Might Be Feeling Right Now

If you own a business and are experiencing conflict with your business partner, you may be feeling a myriad of emotions such as suspicion, rejection, betrayal, anger, mistrust, or fear. You may be worried that the company’s finances will be jeopardized. You may be concerned that there is criminal conduct afoot such as embezzlement.

You may also be feeling great anxiety and stress about money, the company’s health, your physical health, and your family’s economic survival. You may have thoughts such as “how will I feed my kids this week?” or “how will I make payroll this month?” or “without my business partner who has expertise in X, this company can’t float”.

You may also be grappling with your business identity: your reputation with investors, banks, family, and friends. Possibly, the conflict may impact your self-esteem: your reputation with yourself. You may be feeling as if you have failed as a businessperson, or deeper, as a mother, father, daughter, son, woman, or man.

The Problem

Business partnership conflicts can include disputes over governance, either fundamental or in style, diverging goals, difference in risk tolerance, disagreements about how to spend and save money, or the direction of the company.

Through my mediation work, I have discovered that business conflicts, particularly as they relate to business partnerships, are strikingly similar to divorce-related conflicts. Like a divorce, when the business relationship becomes dysfunctional, it can become emotionally toxic. The parties have often known each other for quite some time, perhaps even a decade or more. But communication and trust have completely broken down.

Sometimes business partnership conflicts can create great work. Walt Disney and his brother Roy famously clashed as co-managers of the Disney enterprise. Roy held the purse strings and was the more pragmatic and grounded one of the two brothers. Walt was the risk-taker and dreamer. Arguably, without the tension of their collaboration, the world could have been deprived of their work. But the cost to their personal relationship was extremely high, with frequent shouting matches and communication breakdowns.

Recent studies in neuroscience have revealed that emotional pain stimulates the very same parts of the brain (the anterior insula and the anterior cingulated cortex) that light up when we experience physical pain. In one study, researchers measured how the feeling of rejection activated the same parts of the brain that respond to physical pain when a subject who had experienced a romantic break-up was shown an image of an ex-partner (Kross, et al., 2011).

This discovery is significant for those in business partnerships because it can mean that these feelings of rejection, mistrust, and anger in a conflict can be truly painful to us. The emotions that arise during conflict are literally causing us pain that is similar to that experienced when we are physically harmed. It could also partially explain why these conflicts are so physically draining.

When we are physically harmed, we are forced to accept the physical limitations that result, and the impairment of our abilities to reach our maximum potential. The emotional pain of conflict can similarly block access to our creativity—that which can unlock solutions to move the parties and the business forward.

Key Sources of Conflict in a Business Partnership

Through my mediation practice, I have observed that the key sources of conflict in a business partnership tend to focus on 3 areas: (1) Goals and Expectations (2) Values and (3) Perceived Scarcity of Resources (Greed).

Goals & Expectations

Sometimes there is a conflict between parties about what the expectations of the business should be. For instance, there may be conflict about what the purpose of the business even is. Perhaps one of the partners wants health benefits similar to those offered at a salaried job, even if the business is unable to afford this expense.

Perhaps one of the partners does not understand the inherent risk in an entrepreneurial enterprise. Sometimes the business has run its course or it is on the brink of (perceived) massive growth. And sometimes, business owners do not possess the skill, experience, or objectivity to recognize an untrustworthy person.

Values

Sometimes there is a clash in values between business partners. Perhaps, as in a relationship, the partners have grown older and one of them has had children. The partner who is a parent may suddenly become much more risk averse, and this could affect other business partners who are single, childless, and much more risk-tolerant. The partner who has become a parent and must provide for children may (appropriately) allow this to take precedence over the business endeavor, and it could be a source of conflict.

Scarcity of Resources (Greed)

A perceived scarcity of resources—such as time and/or money—is often a great source of conflict between business partners.

From a global perspective, as the human population continues to grow, particularly in larger urban centers, we can observe a rise in aggressive competitive behaviors. Perhaps this phenomenon occurs because there is a rising belief, both real and perceived, in the dwindling of resources. These resources range from food, water, energy, land, and a spot at the local gym to work out, to money, to the most precious of all commodities to the wise businessperson: time.

Greed may be a function of the times in which we live—with a rising human population and the perception of scarcity. Perhaps greed appears as a function of fear. We choose to hoard resources now because we are afraid we will not be able to get them later. A business partner may choose not to disclose certain business truths to their partner because they want more of the pie for themselves. Perhaps they have a deep fear of not being able to feed their family tomorrow. Perhaps they want to feel important.

Nevertheless, as humans, we are gifted with the ability to be resourceful. We have the innate capability to solve our problems and muster the will to take action. Business people often dismiss emotion as ‘irrelevant’ to their business. Or they choose to ignore it.

What I have discovered with business people in conflict who come to me after a decade of neglecting these emotions in their business partnership is that their choice to ignore conflict is destroying not only their friendship and families, but also their business.

Business people recognize the destruction that an outside conflict can inflict on an enterprise and resources are dedicated to managing “customer care”. But not much energy is dedicated to addressing the conflict from within that arguably inhibits business success.

The “Third Person” In the Room: The Business/Corporation

While conflict may be between two partners, when it comes to business conflict, there is always another “entity” in the room: the business itself. Business formation law creates the legal fiction of a business entity such as the Corporation, S-Corp, or LLC. Much like divorce where children are involved, in a business conflict there is another party who is not vocal in the discussion but whose fate hangs in the balance.

Granted, corporations are not people, much less children, and generally do not have the same rights as people, but the law allows for the creation of a non-negligible entity out of the business, and the analogy is apt because healthy business partnerships, like healthy marriages, can result in well adjusted offspring.

For many business people, their business is their life; it is their child and their reason for living. Therefore, the legal fiction of the corporation creates a legal and psychological entity that must be carefully considered as part of a conflict resolution.

A Vision of Healthy Partnerships

As you may know, in order to have a successful business enterprise, it can be helpful to have a concrete vision of what success would look like and how it might feel. Much like athletes who visualize their own success, you increase your chances of reaching your goals if you can envision what success will actually look like. Having a clear vision of how you want to operate your business with your partner is critical to its success.

The Value of Learning Healthy Conflict Resolution Skills

The skills you will learn here are powerful business success tools that you can implement now. They do require energy, but you may be pleasantly surprised at how effective and helpful they can be. Note that constantly hiring someone every time you have a problem is not a truly sustainable solution as it can drain your business’ precious resources (including time).

The Ingredients For a Healthy Partnership

The best partnerships are built on the following foundation: (1) Communication (2) Trust and (3) Respect.

Communication

Communication is perhaps the most important ingredient in the mix. With strong communication, course correction is possible. Without it, you could be running up against the shore.

Old Habits of Poor Communication

People who have poor personal relationships skills can bring these detrimental habits into the business relationship. As many seasoned entrepreneurs will attest, business is the transaction between need and convenience and the currency of business is trust—trust in a relationship.

Trust

Trust is what binds us to our tribe. Without it, we cannot function at our maximum potential and it can hinder our business potential. If you do not trust your business partner, there is potential being left on the table. Why? Because so much energy is being expended in managing your emotions and the business’s fate instead of focusing on the customer’s needs and delivering that convenience to them—the key to the business’ success.

Respect

Respect means not cheating or stealing from your partner and taking responsibility for your actions and inactions. Respect also means truly listening to and understanding your partner’s needs and interests.

To Be Continued…

A discussion of the tools and techniques for managing business conflict are continued in: Basic Conflict Resolution Skills: Business Partnership Conflict: PART II: 5 Steps to Resolving Business Partnership Conflict. Please click HERE to continue.

 

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