How to stop a partnership turning toxic

Maybe a pub wasn’t the smartest choice for David Upton and three mates who decided to go into business together.

“Rather than putting a business plan together, we got together over a beer and thought, ‘Wouldn’t it be good to start a business?’,” the Naked Data co-founder says.

Six months later, the team had a serious problem.

“We had built a particular type of culture, a way we engaged with our clients . . . and it was much stronger in three out of the four partners,” he says. “It became clear [the partnership] wasn’t going to be viable in the long term.”

Individually, the team all had their concerns from the start. But amid the mayhem of a new business, management fixtures such as weekly meetings, monthly reviews and “open feedback loops” hadn’t been high on the priority list.

It took six months for the three partners to realise they harboured the same concerns.

They then unanimously decided it was in the company’s best interest to terminate their relationship with the fourth partner.

They called a meeting to break the news. It didn’t go smoothly.

There was a chance that the dispute could have escalated and lawyers brought in to sort it out.

It took over four months to settle on a termination package. “We definitely took a hit, it slowed us down,” Naked Data principal and co-founder Jordan Nikolovksy says of the event.

Conflict among partners in any venture is as inevitable as it is unpleasant to deal with. But strategies such as good forward planning, open lines of communication, frequent communication and the use of a business coach or an external review can help avoid the potential train wreck that is a conflict left unchecked. Conflict in itself needn’t always be a bad thing.

Australian Fresh Leaf Herb owner and co-founder Jan Vydrin says “knowing when to press a partner’s buttons and when to back off” is a key strategy in running a successful, sustainable business.

Brisbane based design outfit DC8 Studio co-founder Riccardo Rizzalli reckons conflict is a critical element in his work team’s process. “We’ve always referred to conflict as creative tension,” Rizzalli says. “And when it is harnessed well, it can be used to thoroughly test and move an idea forward.”

Frank conversations and keeping the dialogue running is just one way that some business partners keep the peace.

Norton Crumlin and Associates founding director Roger Norton says he hit a rough patch with his business partner Jack Crumlin “in the course of an incredibly busy year and extensive international travel . . . we had not invested sufficient time in each other”.

Norton and Crumlin engaged the help of a third party to help them through the issue.

“This was not going to be a case of physician heal thyself nor a plumber with a leaky tap at home,” he says. “The external party helped us test and reaffirm our business intent.”

Knowing when to ask for help and where to get it from can be crucial to the success of a business partnership.

Rizzalli acknowledges there is a fine line between creative tension and a destructive argument. For this reason he uses a business coach who his team has known since their time as senior designers and associates at Mirvac Design. He credits business coach Josephine Thompson as a major factor in the company’s success.

“We had that background with her from the Mirvac days and we always could see the power of what she does,” Rizzalli said. The team sought Thompson’s guidance from the outset to help it settle on a common vision and direction for the company.

Thompson then helped the team delve into the finer details of project execution – individual responsibilities, work flow and how the company operation would look and feel.

Rizzalli believes that outlining a concrete business plan and identifying an overarching vision for the company are the foundations of a solid partnership.

But there’s more to it.

Rizalli says nutting out the specifics is just as important as deciding on “above the line” issues like a company vision.

“You can’t just focus on the big picture,” Rizzalli says. “There has to be planning and agreement on how it’s all going to be delivered.”

Rizzalli says that in the past, company size has been a contentious issue.

The partners originally set out to become a 20-person studio. After moving premises twice, they now have a headcount of 20 and not a spare seat in the building earlier than anticipated. But the company is still growing.

“It’s starting to challenge the vision and the planning,” Rizzalli says. “And the first question that comes up is, ‘How do we manage growth?’ but getting into those details – how much is this going to cost and so on, means the discussion can quickly move to a problem, then a drama.”

In these sorts of situations, the company still uses Thompson’s assistance.

“It is about awareness,” Rizzalli says. “We can tie ourselves up to a point [in an argument] where we know it’s worth making that call to [Thompson] and saying, ‘We’re having a bit of trouble here, can you help us out?’”

For Australian Fresh Leaf Herbs founders and owners Vydrin and William Pham, “knowing how much to pay ourselves and how much to keep in the business” is a recurring issue.

Addressing the issue is compounded by the fact that Vydrin and Pham have vastly different approaches to conflict and confrontation.

“I’m the kind of person that just wants to sort it out and I’ll say ‘What’s wrong? How do we fix it?’ whereas [Pham will] shut off for a couple of days,” Vydrin says.

“We make a big point not to blow up in front of staff but everyone feels the tension in the organisation when we’re going for each other.”

Over time, the pair have worked out an approach to disagreements in which Pham usually contacts Vydrin within three days to outline why he’s not happy.

They have been in business together since 2008 and Vydrin reckons their partnership has profited thus far from their efforts to start off with a clear set of goals.

“We wanted a profitable business, we wanted to be identified by the consumer as a premium product and we wanted a happy workplace,” Vydrin says of the pair’s goals.

Many might say that these goals are too vague, that more of the finer issues need to be decided from the outset.

Vydrin might well agree. He and Pham are currently grappling with whether to licence their business system. They are also figuring out how big they want the business grow.

He is aware that complete alignment on the future direction of the company is needed if they are to be sustainable.

But like the team at Naked Data, the daily grind of running a business can get in the way of making these bigger, long-term decisions.

“When you spend every day inside the operation, it’s hard to get that sense of perspective on the business,” he says.

For this reason he has engaged a third party called Pyksis Consulting to review the business.

“We’re both committed to growth but we need the third party to tell us what the opportunities are, what the threats are and then we can define what we want and to make sure that there’s alignment there,” he says. Vydrin says the review will cover issues stretching out 20 years.

“You don’t want to head down the track and think I want to be here but my business partner doesn’t.”

After the review, there’s always another test that Vydrin and Pham can fall back on.

“We’ll bring it back to one thing,” Vydrin says.

“I’ll say, ‘William if you were doing this by yourself do you think you’d be as successful?’ and he’ll also say the same thing to me.”

Looking back, Upton and Nikolovsky of Naked Data reckon their experience with serious conflict strengthened the bond between the remaining partners. However, they could have avoided the situation if they had adequately planned their business before they started.

“You have to sort out those goals before you start,” Upton says.

“You’ve got to be aware that it’s going to change . . . but you need to be clear on everyone’s individual expectations.”

“And obviously, you need to have objectively discussed cultural fit,” he adds.

Nikolovsky advises companies to be disciplined in installing proper management function from the outset, no matter how pressing the other demands of the young business might seem.

“It’s easy to get your head stuck in the operations and for it to feel like there’s a cost to stopping and looking back and asking questions but doing that from the start would have saved us.”

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