I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
By JOHN MINAHAN
Never have more partners than you can fit in an elevator. It’s a comment that seems like a joke but is deadly serious when you’re starting a business. Too many partners will create conflicts you don’t need. Even the most bonded of partnerships will fray under the pressure of competing interests. While it is important to have partners who each bring skills to the table, these choices must be made carefully and with an eye toward keeping the group a manageable size. Every partner you add increases the possibility of an interest that will stray from the good of the company. What’s more, a big group of partners is simply difficult to manage.
Good communication is key to a successful partnership, and when the partner group is too large, that communication becomes more complicated. There is always the risk that one partner will hear important news last and be aggrieved as a result or that some other critical piece of information will get to some partners but not all. A big group is added complexity. Keep the partners group compact and manageable.
If you’ve run into problems, there are rules to follow to improve a partnership.
Rule 1: Schedule regular and open communication. A formal meeting once a month, either in person or at least by phone, is a must. Review the past month’s performance and talk to each other as owners, not as managers. Discuss matters in your common role as owners.
Rule 2: Clarify ownership versus executive. Owners own the company. Owners don’t run the company. When I go into the corner office of a company and I ask that individual what he or she does, nine times out of 10 I hear, “I’m the owner.” That’s the wrong answer. The owner might be who you are, but it’s not what you do. What you do is your job title: you are the CEO, the CFO, the VP of sales. That’s the phrase that tells people what you do all day. You can’t be an owner all day. If you take “owner” as your title, then you will be operating all day in your mental state as an owner. That might mean worrying about your investments, wondering whether you will make enough money to send your kids to college – all kinds of things that have no business being in the mind of a manager. A manager must work at all times for the good of the company. Owners must recognize that if they are going to be involved in the day-to-day experience of the company, they can’t operate as owners. They must operate as their job titles dictate. Otherwise, they may steer the company away from its best path forward.
Not only are owners hobbled by their own conflicted interests, but employees also are undermined. When they have a question, instead of respecting the clear management hierarchy, employees might shop around from owner to owner while looking for the answer they like. Owners need to know their management roles and respect them. If an employee comes to the owner/CEO with a payroll question, the CEO should respond, “That’s not for me. Take that to the CFO, and whatever the CFO says is your answer.”
Rule 3: Define roles and responsibilities. An offshoot of defining owners versus executives is defining roles and responsibilities. The most efficient way to run a company is to have employees assigned to specific tasks without overlap. This is true for partners and owners as well. The greater the definition of their roles, the less likely you are to have conflict. This is a key principle because when roles are allowed to overlap, it’s often a disaster.
For example, the U.S. military has a method of covering as much ground during an assault as possible. It’s called the “Buzz Saw,” and here’s how it works. If you have three professional snipers and their mission is to protect a certain area while under attack, how do they cover as much ground as possible? The answer is strict division of territory. Each is given an area to cover that does not overlap with the other two. That way they can cover as much ground as possible without waste.
Let’s take a look at what happens when their division of territories overlaps.
Because each sniper does not have a personal area of responsibility, the method of sharing risk will fail. Yes, certain areas are better covered, but each person is now stretched. Terms and phrases such as “bandwidth,” “stretched too thin,” and “scope of responsibility” all mean the same thing: you are stretching your resources.
Let’s look at this in the context of three business owners.
When owners do not have defined roles and they share duties, risks appear because there is overlap. That can create conflict. Who is in charge of the areas where there is overlap? That confusion can lead to paralysis or two individuals working at cross-purposes, neither of which is good for a business.
What’s more, not only do you have overlap but also you have gaps. You have the CEO and CFO worried about finance and the CFO and COO worried about accounting. So who is focusing on sales and delivery? When individuals are stretched over multiple areas of responsibility, key elements fall through the cracks. On the battlefield, that can mean defeat. It’s the “shoot everything that moves” method of attack. It wastes time and resources. It is far less likely to succeed than the “shoot only in a defined area” method. This concept is just as applicable in the business world.
Too often, we are conditioned to see sharing as a good thing, a frame of mind we should all strive for. That might be true in our personal lives, but it can have negative consequences in other settings. The battlefield is one. The business world is another.
John Minahan has 15 years of experience with both public and private companies. He is co-founder and owner of a successful and multimillion-dollar media company, which was named one of the fastest growing private companies by Inc. Magazine. Minahan is a trusted advisor to CEOs and executives, a certified public accountant, and author of “The Business Mechanic: 9 Simple Ways To Improve Your Business.” For more information, please visit, www.BusinessMechanicBook.com.