Some people who are forming a partnership to run an operating business prefer to review the legal terms with counsel then immediately prepare a draft agreement. Lawyers who are going into partnership with each other often like this approach since it is the way they approach their own client work. Professional investors and others with extensive partnership experience may like a straightforward approach, too.
Others approach a business partnership with concerns that go beyond the need for a written agreement. Who is this person that might become my partner? What kind of partner do I want to have, and what kind of partner do I want to be? Do we get along well enough to deal with the inevitable disagreements? Do we generally agree on how the business is going to run? Can we share income and expenses without creating resentment? What do we want the firm to look like from the inside and the outside? These people can benefit from a wider range of partnership development services.
I work with people at both ends of the spectrum. The first group needs basic legal work. The second group needs something more complex:
- General Approach. One general approach to creating a business partnership is founded on the idea that a partnership agreement (or LLC operating agreement or shareholders agreement) is a combination of two things: a prenuptial agreement spelling out what happens at the end of the relationship, and framework for how the business operates. Often, if people agree on what the operations should look like, it drives the terms of the agreement, makes the business more solid and does not cost much more than focusing immediately on the legal terms, since the lawyers end up writing fewer drafts and the parties have less friction in their discussions. This “organizational development lite” approach has as one of its many aims reaching agreement on a legal structure.
- Theoretical Models at the Core of the Approach. There are many academic models for how an organization runs. One that often works well in this context looks at five main elements: firm culture, management and conflict skills, ability to work together as a team, the role of external stakeholders and the system of strategies, structures and rewards (which includes, among other things, business strategies and financial rewards). Partners may be tempted to focus mostly on the latter, but it is really deeply connected with all the others. If partners strengthen their agreement on the business as a whole, it helps answer difficult questions that arise in the operative document.
- No Typical Process. There is no truly typical process. Each one depends on the needs of the parties. Through a series of interviews, exercises and facilitated discussions about a number of aspects of the business and partnership, partners work together toward a set of common goals that includes agreement across the spectrum of business operations. Partners may also move toward more formal strategic and business planning goals. Different conversations require different degrees of active facilitation depending on the particular set of issues, our judgment about what will work best at the time and the need to control costs.
- Sample Development Tasks. Although not every partnership needs the to address the full range of organizational development issues, some important areas to consider may include:
- Setting the stagefor the process and identifying the right path forward.
- The kind of firm culture that partners want to create, and what elements partners might inadvertently be carrying over from past experiences.
- The conflict management skills that each partner brings to the table, the best ways to develop them further andhidden areas of potential friction in partners’ general approaches to practice and partnership.
- The overlap between personal and firm goals, and how to mesh partners’ firm goals together as a team to make them achievable.
- External stakeholder alignment, both personal and professional.
- Business operations, priorities and administration.
- Vision statements, mission statements and strategies: developing a shared understanding of the direction of the firm.
- Business planning.
- Partnership agreement terms and best practices.
- Traditional Legal Work. If the parties wish, I am also available to assist with legal drafting and document review.