Episode 001- David GageMediating Business Partner Disputes, and the Partnership Charter
In this episode, Susan interviews Dr. David Gage, a clinical psychologist, business mediator, entrepreneur and author. Twenty-five years ago, David founded what is still one of the only multidisciplinary mediation firms in the country that specializes in resolving conflicts among co-owners of businesses. Family and non-family closely held businesses make up the vast majority of the businesses globally, but until David wrote his book on partners, there was nothing written on the whole range of discussions, negotiations and agreements people need to have in order to lower the risks inherent in having partners. From resolving partner conflicts, David moved into conflict prevention with the publication of his book, The Partnership Charter: How To Start Out Right with Your New Business Partnership (or Fix the One You’re In). The Partnership Charter Workbook, based on the book, helps potential and existing partners plan their partnerships thoroughly, improve collaboration and reduce the risk of conflict.
In this episode, David describes how and why he founded his firm, gives some useful background on closely-held companies, and explains why mediation is such a perfect approach to resolve partner disputes. He also describes the Partnership Charter process, a kind of “collaborative pre-nup” for co-owners. With over two decades of resolving and preventing business partner disputes, David may be the most knowledgeable person on the planet on how to reduce conflict and promote collaboration in this niche population that controls so much of our global economic activity. If you are a mediator or someone who works in a co-owned business, this will be 45 minutes very well spent.
* Susan introduces David Gage who is a clinical psychologist, a business mediator who specializes in partnership, family and closely-held business mediation and preventative charters
* David has created a new model for resolving partnership disputes
* A real expert on all aspects of partnerships
* David and Susan met at Harvard University
* Susan is one of the associates with Business Mediation Associates
* David started this business because grew up in a family business, like many people. There are a lot of family businesses out there.
* Being a young kid and seeing how much family business can consume life – picking up on all the interpersonal things
* At an early age, probably 7-8, really convinced didn’t want to go into the family business
* Propelled David into going into clinical psychology and specializing in families
* Became really clear that people in family businesses or partnerships didn’t have a good place to turn if they got “sideways” with each other
* Mostly people would turn to their accountant or their lawyer, but attorneys and accountants are not really trained to resolve conflicts among their clients. And then the issue of them not really being neutral. And not trained in mediation and often would blow up.
* It’s hard for lawyers to play both an advocacy and intermediary role at the same time. And often would have a very strong relationship with one of the parties and couldn’t be even-handed.
* Susan asks about the world of partnerships in general.
* David responds. Ford, Marriott are huge family companies. In US, about 35% family-owed companies make up 80-90% are family controlled. And, if take outside of the US, it’s probably a higher percentage.
* In US about 35% of Fortune 500 are family-controlled.
* And then if look at US gross domestic product about 2/3 generated by family businesses
* And, in David’s business looking at closely-held businesses – those managed by a small group of people
* Why he focuses on closely-held. Certainly, plenty of conflicts in larger corporations but not the intimacy
* Family business have the dimension that hard to go home and leave the issue behind
* David started about 1990. Started by bringing mediation to closely-held companies. And later brought partnership charter processes
* Mediation not new — but still new
* What BMC does lends itself perfectly to mediation processes because of the intimacy
* What he means by partnership is not just a legal entity of partnership but simply people who come together to have some kind of business regardless of the corporate form
* In the past, if people had issues dispute resolution option would be to sue one another. And then came arbitration
* We support a 3-step. First, sit down and negotiate. Second, use mediation (assisted negotiation). People often ask, is mediation binding. Yes, if they reach an agreement and sign it. Mediation is voluntary. Any person can withdraw at any time. Then, third step is arbitration.
*A garden-variety business dispute resolved through litigation will probably be a $100-200K expenditure. Lawyers say I can help you. And suggest that don’t talk to your business partner. Communication goes through the lawyers. But very cumbersome and awkward process. Typically caustic and expensive and usually ruins relationships
* What consistently helps in a mediation process? Control of the outcome in litigation or arbitration passes away from the parties and judges and arbitrators never can fully understand the nuances of the business the way the parties do. Mediation works because it keeps control in the hands of business principles themselves
* Mediators control the process. The principles will control the outcome
* What are the skill sets that he brings. Working with co-owners is complicated – legal, psychological, business, law. David felt can’t do all these things. So, brought together a team with different types of expertise and also skilled with people in conflict
* We are one of the only multi-disciplinary teams in the country that focuses on this niche
* Gives an example of brother and sister of company that is doing well, but their relationship not doing well. We helped them really focus on their relationship and what their roles were and how they were working together. After 6 months they restructured. Now meeting regularly and much more aligned
* We were able to bring many tools to the table like personality styles assessments (uses Disc personal styles). They learned a lot from this even though they had known each other for a long time
* Also uses Thomas Kilman Conflict instrument
* Even though their stock prices have doubled they now feel that they are really understanding collaboration
* The partnership charter – really provides all the components about what it takes to partner together
* There are tons of books on running a business, there was almost nothing written about partnerships. Lots about teams, the dysfunctions of teams, etc. But nothing about partners. In law schools, nothing, just corporate forms
* It’s so easy to become partners. Can become partners just by acting like partners. There is no requirement to signing anything. If you call yourself partners and behave that way, then you are. And that can create legal obligations
* Very easy to get into partnerships. Not so easy to get out of them.
* People get rolling but don’t really talk about how going to do things with partners – parallel to getting married. Except spend more time with business partners
* Partnerships are totally business and totally personal
* People need to do planning of both the business and personal side
* People not taught how to be business partners
* Discussions, negotiations and agreements – The DNA of partners, which became the Partnernship Charter, as structure for people to use so that they make sure they are having the necessary difficult conversations
* Chunks of a partnership charter – there are business and interpersonal issues. Business issues include vision and strategic direction, who owns what, decision-making, roles and title, authority, governance, money and compensation. And then interpersonal topics – styles, values, expectations of each other, contributions and rewards
* Legal documents give people a false sense of security that they have had the conversations they need to have had
* Charters are living, breathing documents that are updated all the time
* Serious conflicts in family businesses can pass from one generation to the next. Very rewarding to resolve these conflicts
* And partnership issues impact employees, and sometime communities if whole business falls apart
* Very excited about making partnership charter more widely available
* There is some good research now about the business advantages of having partners. Can do better with partners than without them.
Resources Mentioned in the Podcast
The Partnership Charter: How to Start out Right with your New Business Partnership or Fix the one You are In by David Gage. Can get on Amazon or on bmcassociates.com where can download first chapters.
Thomas Kilman Conflict Mode Instrument
Personal Values Inventory (check with BMC)