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University of Massachusetts Amherst

Family Business Center

How to Make Partnerships Work

by Shel Horowitz

If you're in a family business, you're in a partnership. Your company may be incorporated, but you work with family members (and others) as partners.

David Gage, a mediator and psychologist, came to the Family Business Center November 16 to provide some strategies for making partnerships work. Successful partners, he said, have shared goals and ideas of how to achieve those goals, complementary skills or knowledge, and a willingness to tie their fortunes and futures together-to share risks as well as benefits. But notice what's absent from that list: shared ownership. In Gage's view, shared ownership is not a key ingredient for a successful partner, and you can be partners with someone even without an ownership interest.

Family ties alone, however, are not enough to forge workable partnerships. "Don't make decisions by blood alone. Look at what's good for the business. The more overlap and the fewer boundaries among family, owners, and managers, the more ripe for conflict." Also, if partners perceive their contributions as imbalanced, it can lead to trouble; each partner starts shirking, and the result can be failure.

Thus, Gage suggests taking great care to select the right partners. Look especially closely to make sure your values are aligned, and your goals are compatible (though not necessarily identical). And make sure you and your prospective partner have a high level of mutual trust; that's the real cornerstone of successful partner relationships. With enough trust, it should be simpler to work out the details-but spend some time on the specifics, and put everything in writing.

Gage suggests a tool he calls a "family partnership charter," which discusses, point by point, all the components of the partnership, including, for instance, employment and compensation, management, ownership, governance, dissolution agreements, personal styles, values, and expectations-where clarity is essential, Gage believes-fairness, handling unexpected situations, keeping communication open, and resolving disputes. Dealing up front with all these potential points of ambiguity and conflict, he says, builds the trust necessary to succeed. In fact, you can get all the various parties to agree retroactively on a charter, even after years of conflict-and sometimes, he admits, the way that works is through a buyout of one partner by the other.

The partnership charter can also be a key tool for succession planning. The adult children moving into leadership within the business "don't know how to figure it out either. The partnership charter provides the structure" to help them know their roles.

The charter also provides a framework for maximizing every partner's benefit from the partnership, and for keeping "interpersonal equity"-partners' perception of the workload as fair or unbalanced-at levels that feel fair. Even famous partnerships struggle with this issue. Gage recounted an anecdote about ice cream magnates Ben and Jerry, early in their career. Jerry was feeling resentful that he was stuck stirring cookies into ice cream mixes through the night, while Ben was home sleeping-until he remembered that Ben had to get up at 5 a.m. and drive the new flavor around.

Of course, the charter should create mechanisms to discuss these issues when they're still small, before they simmer for weeks or months and lead to major resentment. For instance, if the vice president for sales spends a lot of time romancing clients on the golf course, is that really work, or is it fun? How does each partner see it?

One helpful format: a short interpersonal equity exercise. List one thing you put in that deserves recognition, and then one thing your partner puts in that also should be recognized. Then look at your return: what would you like to take out of the partnership that you aren't currently getting-and what would your partner like? This analysis will help both of you get more satisfaction out of your arrangement.

Finally, remember that the charter is a document about intention. It's not written in stone, and can evolve as your business and personal needs change.

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