How to quarrel founders. Legal advice and mediation guide

While Founder #1 and Founder #2 sort things out, the product dies and the team falls apart. How to get out of the crisis? How to insure against future conflicts? Distribute responsibilities and set focus

Typical corporate conflict

Two founders. One is responsible for the product, the second for sales. At the start, we agreed on this, shook hands and started working like a kid. This is what the beginning of the story looks like for 9 out of 10 companies.

The continuation is as follows: the product is ready, but sales are not going on or sales are going on, but there is nowhere to develop the product and the second founder is just waiting for a profit. In both cases, tension builds up and that “kid” agreement fades into the background like a history book. Mutual reproaches are used, the division of assets, thinking over escape routes, but no one dares to spend money, because the work done keeps them together.

The beginning of such quarrels means that the mechanism of interaction has broken down and will not be repaired by itself. The situation is not good, but not terrible either. This signal should be caught by each project leader and respond in a timely manner.

The good news is that more often than not, stress comes from growth problems. And this means that the founders have achieved a certain result and should only reach a new level.

In order to adequately go through this situation, all project participants need to return to the beginning. As they say, “remember everything.” I propose to go through the key stages together and note the important points.

Project start

When people are at the idea stage, they are always emotionally charged, burning with the desire to create, drawing a future image in their head, fantasizing what their project will be like in a year or five. Without this, projects are not born and unicorns are not created.

Everyone knows how difficult it is to find like-minded people, to inspire them with a specific task, to charge them for creation, so that everyone would burn with a common idea, and everyone would feel like a single organism. This is a real team capable of lifting a big project high. It is desirable that the feeling of mutual understanding and “unanimity” last forever. This is a very important, but rather unstable state of team charm. Having found it, founders are often afraid to destroy it with rational, clear talk about personal responsibilities.

Most founders at the start agree only on the size of the shares in the project, but almost never fix in detail their obligations and the actions that they will have to take in order to receive such a share. More often, the agreements sound like this: we will do it, we will write an application / software, and then we will collect customers, and then we will sell. The key word is “we” (we will do, write, etc.). Who and what exactly should do, of course, is implied, but each participant in his own way.

And with such “agreements”, the team starts and begins to implement the idea that inspired everyone. But, sooner or later, the veil dissipates and working, busy everyday life, and often penniless ones, pose questions to each founder, for example: “where is the profit and why is it still missing?” And the main question: “Who is to blame?”.

Founders conflict

Quite a lot of time has passed since the start of work, and the initial verbal (as well as generally written) agreements are transformed in the head of each founder, regardless of their will, into forms that are far from the understanding of the partner.

It turns out that one of the co-founders all this time assumed that for such a share he expected more from a partner. Another thought that he was more involved in the process of creating a product and his contribution to the product is more significant, which means that his share should be larger. The number of possible variants of conclusions and arguments of the founders tends to infinity. The degree of nervousness is growing, and the dynamics of the project’s growth fades at this time.

The situation is very common: someone did not sign anything, some signed some kind of agreement, but with general phrases without indicating indicators for evaluating the actions of each participant or clear responsibilities of the founders, a few even invited a lawyer, but at a low cost, therefore, without relevant experience. The result of the lack of clear and precise formulations enshrined in a legally significant document is almost the same for everyone – a crisis.

Fixing the crisis

Relationship crises take place in any community: a family, a friendly company, a work team. The founders of the company are no exception. And, perhaps, this is your first crisis, but definitely not the last one, and you are given a chance to develop an algorithm for overcoming controversial situations.

There are different ways to get out of the crisis.

The simplest is the breakup. You can yell, blame everything on your partner, send him to hell or quit everything, become disillusioned with the project. An emotional outburst will give relaxation, but the project will die or you need to start all over again – look for a new partner, talk with the team (after all, this will not go unnoticed for her either) and further in a circle. At the same time, after a while you will again come to a crisis – this is how the world works.

Another way out of a conflict situation is to try to crush your partner with authority. The partner can accept such pressure. He will begin to adapt, follow your instructions, accept blame, in other words, avoid direct confrontation and give you total leadership in all tasks for the project. Will such a partner be able to take off on his own and pull your project high? Obviously not.

Decide what kind of partner you need and what tasks he will have

If you are ready to drag the project with full dedication, not counting on the same attitude towards the project from the co-founder or to raise it alone, then you can choose one of the above ways to get out of the conflict.

However, if you are interested in the rapid development of your business and intend to increase revenue to ten X, then you need to remember that one man is not a warrior, and compromises must be sought.

Without mastering the art of finding compromises, it is impossible to achieve success in business. But once you master it, you are able to create teams that in turn will be able to create cool products and achieve big profit goals. This skill is also essential in attracting investments and achieving good terms when negotiating with an investor.

Negotiability is the first condition for your business reputation and it must be confirmed by deeds.

Time to get out. Guide to repeat in every crisis

  1. Remember that your task is to maintain the partnership and achieve the goals of the project.
    Exhale, turn off the emotions and start an adult conversation with each other. Try to be objective. Dialogues like “you’re a fool – you’re a fool yourself” leave out. Your overall goal is to achieve profit.

  2. Work out the emotions. Do not neglect this rule, without it you can not be taken for the rest.
    The algorithm of actions is as follows: to postpone your own feelings of guilt and the program of self-flagellation for later. Do not blame your partner: you both did something wrong once you find yourself in this position and you can fix it together too.

  3. Jointly review the performance of each founder and key team members.
    Analyze the period of previous collaboration that led you to create a product. Find and formulate the mistakes of each partner. Recognize them.

  4. Develop new agreements and formalize them.
    Clearly and in as much detail as possible describe the areas of responsibility and the expected results of the work of partners, draw up a strategic plan with deadlines for achieving certain goals. Fix on paper.

  5. Only at this stage, if you have identified the skewed contributions of the founders to the project, clarify or correct the stakes in the company.
    At this point, making the right decision will be much easier and less emotional, precisely because you have just done a full analysis of the work done by each founder.

  6. Hire a good lawyer with experience in settling (rather than fomenting) corporate conflicts.
    Use it to make a smart agreement. Usually at this point, detailed job descriptions, labor contracts and various wage regulations are born. There is complete clarity in relations, friction disappears and the project makes a sharp leap in development.

And why even bother so much?

Conflicts will haunt you regardless of your efforts, desires, adequacy and negotiability. I guarantee you won’t get away from them. But if you find the strength in yourself to do the work I have described, each of your conflicts will not be a walk in a circle and a meeting in the old place, but a walk in a spiral and meetings at ever higher and higher quality levels, which means sustainable growth.

I wish you good luck, Lyubov Kalinovskaya, business lawyer, CEO of AW-LEGAL
Telgeram: Russian business | Real cases | Insights from lawyers

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