When Partnerships Are Bad For Business

March 13, 2018 Leadership

I’m a fan of business partnerships.

One of my hobbies is reading biographies of successful businesspeople. There are many themes that come up in the stories and one common thread is the partnership.

Many successful leaders understand the power of teamwork and partnership.

One example is entertainment mogul David Geffen. His first job was working in the mailroom at the William Morris management agency. While there he met another aspiring talent agent and together they partnered to found their own agency. Then they formed their own record label in partnership with Atlantic Records. Later Geffen would start Geffen Records in partnership with Warner Bros.

Partnerships can come in many forms. In the case of Geffen’s record labels the crux of the arrangement was that Geffen would find and manage the artists while the partner would distribute the records through its sales channels. That type of partnership makes sense. You bring together the strengths of two or more parties to form something better than the competition.

In fact, that reminds me of Geffen’s arguably most famous venture, DreamWorks, which was a partnership with Jeffrey Katzenberg and Steven Spielberg.

But not all business partnerships are good situations. I recommend looking into business partnerships as a potential way to grow your company, but I also caution you to look for these potential red flags.

Red Flag #1. All Talk, No Results

This is a big one and I’ve fallen for it two or three times in my business career. You meet someone. Maybe they approach you with a suggestion for some kind of partnership. That’s what happened in my case.

If you’re like me you want to believe in people. And 99% of the time people usually come through, but it’s that 1% that really sticks with you.

When approaching a potential business partnership it’s important to put words aside. Words are cheap. People make promises. People can talk a big game. They can over-inflate their experience and results.

Look at what the person has actually done and don’t take their word for it.

You don’t necessarily need the person to have done the thing that you’ll do with them, but you want to see a history of success. Ahmet Ertegun, president of Atlantic Records, knew that David Geffen hadn’t run a record label, but he saw the work and success Geffen had in music artist management. He knew that the work ethic would translate into success in a related field.

Red Flag #2. Different Visions

In the DreamWorks partnership, it seems that all three partners shared the same vision for their studio. A certain number of movies each year. A certain type of movie. An accompanying record label with synergy of the artists creating some of the music for the films. And the ability for any of the partners to also pursue other projects including movie projects with other studios.

A simpler version of what may happen is that one partner may have a grand vision while the other has a more reserved vision. This will make just about every business decision difficult. While the first may want to dive headfirst into every opportunity the second may want to test the waters more methodically.

Both strategies can work, but if the partners are at odds the conflict will likely lead to failure.

Red Flag #3. Different Work Ethics

Kind of mentioned this one earlier. Another aspect of the DreamWorks partnership was that all three agreed that they were free to be home each night for dinner.

That may seem like a small thing, but it’s actually a genius move those three stalwarts of business. They set expectations for work ethic. This way it likely wouldn’t lead to conflict if one person was working late into the night while another was heading home “early” everyday.

Sometimes people get work done in different ways. If you’re not understanding of what you expect from your partner you’ll likely find disappointment.

Red Flag #4. Different Values

Another big one here. Values can seem like small things. It’s what you believe in. Your moral code. How you live your life. How you expect others to act or who you prefer to associate with.

Values can be little things or they can be grand things. In either case and in between they’re always important. The person that holds a value is almost always crushed when someone, especially a partner, doesn’t hold the same value.

One thing that bothers me in business is when leaders blame their team for mistakes. One value I hold is that the leader should always be the one to take the blame. Especially when speaking with others. Even if an employee makes a mistake the leader should take the responsibility for hiring the employee.

Red Flag #5. Misaligned Strengths

If two salespeople get together to start a business they may get a lot of sales, but the management and organization of the business will likely suffer.

If you don’t use the strengths of each person or each organization you’re putting the partnership on a likely path to failure. You want to find complementary partners whenever possible.

Know your own strengths and the strengths of others. It’s a subtle, but important skill to have. If you can assess strengths you’re in a really good position to form business partnerships.

Final Thought

Business partnerships have made many people successful in various ventures. People can accomplish great things on their own, but it’s often the partnerships that achieve the real greatness in life. Watch for the pitfalls above when entering into partnerships. A partnership won’t necessarily succeed just because it seems good on the surface.