Why You Need to Cultivate Accountability in Your Business Partnerships

Hi, Brett Cenkus, the right-brained business lawyer and The Startup Shepherd, and in this video we’re going to tackle an extremely important component or attribute of every successful partnership. Throughout this series we’re going to get into some hardcore legal nuts and bolts, things like vesting shares, buy-sell agreements, structuring partnerships, 50/50 versus 51/49 – all decidedly legal issues and tools. These are things that you can put in your arsenal to make your business partnerships more effective, to have a better sort of negotiating position personally, things that the typical corporate lawyer might talk to you about.

We’re also going to tackle other things including how to simply be a great partner. And that’s what this video is about today. It’s about what you can do, in fact the number one thing that you can bring to your partnership to make it successful.

In 2001, I started a mortgage brokerage in Houston, Texas. I had a partner, in fact I had an excellent business partner that I hired to be my lead underwriter and he became a partner in the business. We were severely under-capitalized the venture really struggled for a while but then we started hit our stride in 2004. It was a great market and we were starting to figure out who we were in the world and, how to make the phone ring. It ended up being a very successful year.

Then we had a big exodus. One of our longtime sales managers left. He took a number of people with him. We had an exceedingly high degree of turnover. Actually, before that exodus that spanned a number of months, we still had our very first loan officer that we had hired, and we were really proud of that, you know. “We’re just such great managers. We have such a great system here.” Now we had a big exodus and we began a period where we were just kind of lost in the wilderness – turning people over constantly and that lasted the better part of a year.

And, I can remember being out at my business partner’s ranch and talking about and having a conversation that we must have had a couple dozen times between the start of that exodus and the day of this conversation. And, he would say “where can we find better, higher quality people.” And I was thinking “yeah, what are we going to do about that” when the light bulb went on that we already had hired plenty of high-caliber people. We had had hundreds of people work for us over the course of four years at that point. It wasn’t an issue of not finding the right people. Yeah sometimes it is, but overall there were plenty of people to build a business off of. But, they weren’t sticking around.

The light bulb went on that this isn’t an this isn’t a them problem, this is an us problem. And, that was the beginning of a conversation, a brainstorm that took place over a couple of weeks where we fundamentally shifted what we offered to our people. And that shift allowed us to recruit more quickly, retain better and absolutely blew away our previous highs you know in the next year. All that success was all from owning the issue. Recognizing our role in the issue, right. Taking accountability for it and saying that there’s just too much here for this to be all about them, clearly some of this, in fact in that case a lot of it, was our problem.

When I do partner/founder disputes, particularly early on and I’m asking questions about what’s going wrong here, right. I try to figure out what are the problems – how did this conflict begin? I’m trying to understand the relationship. Almost always I’ll hear from my client (regarding their partner) ‘he or she won’t do this, won’t do that, I’m pulling all the weight.” And, obviously that’s the perspective of the person coming to me with or they wouldn’t be hiring a lawyer to help them work through a partnership or founder dispute.

During that process, it’s often particularly difficult to get any sense of what the other side’s position will be. To the point where I’ll say “make their case for me. Pretend you’re your partner talking to their lawyer. What would your partner be saying? Make their case as well as you can.” And I will sometimes get a lot of resistance from my client. I don’t know if people think that they need to constantly make their case to me, but I’ll explain to them that “no I’m in your corner, but I have to understand where we’re weak and where we’re strong. And, I need you to understand that and to own it.”

Because the reality is in any interpersonal relationship – it could be a marriage, it can be as a parent, it can be in your business partnership, or any relationship that’s not working out well – you have a responsibility there, some responsibilities. There’s no question. Now, I’m not telling you you’re always the main crux of the problem, right. That’s not always the case, but there’s some there’s something you could do differently. Even if it was that you simply didn’t choose a good situation and you didn’t choose a good partner. But, a lot of times it’s more than that. It’s something in in your style or my style.

Essentially, what I’m talking about today is bringing accountability to the table and some self-awareness and owning your issues. In every successful business partnership, fundamentally, the partners get this, and they understand how to give and take a little bit. They understand that it’s not weakness to say “you’re right I can see that from your perspective” and to really see it from their perspective.

In future videos, we’re going to come back around to this again. We’re going to talk about a lot other stuff that’s much more legal nuts and bolts stuff. But, you’ll hear me come back to this issue a lot when we talk about 50/50 versus 51/49 partnerships I’ll give you the standard stuff any corporate lawyers should give you, but I’m also going to come at it with this perspective. Because there’s a piece of this always driving these relationships. They’re messy and they’re complex and to make them work well you’ve got to get into that mess and you have to roll around in it a little bit and own your issues and responsibilities in the mess.

So accountability is the single most important trait you can bring to any interpersonal relationship – business partnerships included. In the next video we are going to jump into one of those real nuts and bolts topics. We’re going to talk about a structure issue that absolutely every partnership needs to deal with at some point. It’s a high-level structure issue and it’s a little bit more of that legal maneuvering. I promise you there’s a piece about the accountability in there, but this one’s going to be more decidedly legal in nature.

Thanks for tuning in. If you’ve got a comment or question I would love to hear from you. Reach out!  That’s how I know what content to deliver in the future. Appreciate you listening today.