What do you do when founders fall out ?
Feb 01, 2022This week Meghan Markle’s inflammatory Oprah interview was aired in the UK. I would have called her the Duchess of Sussex, but she may no longer hold that title by the time you read this. It was a spectacular example of family strife. A carefully calculated assault and emotional firestorm that will inflict lasting damage not just on her intended target, but also herself. It also communicated a deeper truth: that families often fall out. Emotions can run riot and destroy everything before them.
This happens more often than you think. A UK study showed that 20% British families have estranged relatives. In the US up to 40% people have experienced family estrangement at some point in their lives. 10% of mothers said they were estranged from at least one adult child. This makes this a societal problem on the same level as divorce.
Many co-founders have had similar issues in their firms. Research by Fuel Ventures in 2019 suggested that many start-ups were not the happiest of families. 43% of founders had been forced to buy out their partners. 71% attributed this to differences of opinion on the company’s direction and 18% cited poor value fit. 73% of founders who had experienced estrangement said they would never look for a co-founder again. Ouch. This can feel cruelly ironic if you founded a company to be your own boss and avoid office politics and power struggles.
This is all understandable. Founders are by their very nature full of ideas and confidence. You want to encourage creative tension and some friction to challenge group think. But the pressures of building a successful business are intense enough even if you agree on the direction of travel. If you can’t, those pressures are multiplied. The challenges are also more deeply personal, as they are coming from a co-founder whom you respected enough to go into business with, who is your equal, and who should damn well know better!
Breakdown is also foreseeable. In 92% cases the final breach came over ‘a single specific disagreement regarding decision-making, which was usually the culmination of a period of unrest among the founding team.’ There will be plenty of triggers, but the causes are more deep-rooted. A fundamental lack of alignment and compatibility.
Clearly the best thing is to make sure you are compatible from the start. We will write about that another time. This is about what to do when it does happen.
Firstly, spot the signs and do something about it. Bad situations will get worse unless they are resolved. If you find yourselves in fundamental disagreement over every issue, especially the unimportant ones, there will be an underlying cause. Do you know it? It might be strategic, but it could also be one of mindset, values or even personality. Don’t shy away from calling it out and talking about it in a neutral location. Resist the temptation to continue fighting and push for unconditional surrender. De-escalate rather than raising the DEFCON level. The problem with brinkmanship is it takes you to the brink. It makes open conflict much more likely, and open conflict is toxic in businesses. Employees, investors and customers run away at the first sign of it.
If de-escalation is not possible, then you have a simple decision to make. Are you going to continue in business together or go your separate ways? No one wants to be the one to leave, but someone must and it may have to be you. Not every fight can or should be won. Remember you must protect your mental well-being and the value you have created to date.
If you agree to (or must) continue to work together, then you are entering an entirely new phase. One where as well as working on the business, you must also actively manage your relationship. You are no longer active collaborators. You are rivals aspiring to be allies. This clarity can be useful and opne up new ways of working. Look at the success of Nato, the EU, or any other international alliance, where different and often hostile countries agree to unite in a common cause. It can help individual nations far more successful than if they tried to go it alone.
You can use these plays from the international relations handbook in your business:
· Phase 1: Détente: Focus on reducing tension and hostile behaviour. Be aware of what provokes the other and avoid it. Do not try to settle any underlying differences.
· Phase 2: Rapprochement: Express a desire for agreement . Agree a mechanism or process for doing this.
· Phase 3: Entente: Recognise where you are aligned and see agreement on specific, limited issues, to make participation easier.
· Phase 4: Alliance or appeasement: Either reduce tension by unilaterally removing all the main causes of conflict and disagreement. Or agree jointly to negotiate and reach agreement on the underlying causes of conflict. Here it makes sense to agree rules for potentially combustible future situations. This is a negotiation: expect give as well as take.
· Phase 5: Collaboration. You now have a productive way of working together.
These phases are sequential. You can’t expect rapprochement before détente. It will require a huge effort from all sides. It will require draining the emotional swamp. It may require coaching or a mediating role for your board. Perhaps even a subscription to a nearby rage room that you can destroy to express your true feelings. But there is a path forward, providing all parties need to want to make it work. It is in your common interests to succeed, and that should be enough.
If it isn’t, leave. Do the best deal you can. It is OK to be estranged and know that your old family is alive, well and even, dare you admit it, prospering. It is also preferable to pulling the temple down upon your own head. And when Oprah calls for that tell-all interview, make sure you are too busy to pick up.
UP AND TO THE RIGHT.
References:
https://www.bbc.com/future/article/20190328-family-estrangement-causes
GA Craig and AL George, Force and Statecraft (3rd edition).
