Posts Tagged vision

An Opportunity for Small Business Collaboration in Global Markets


Today small businesses find it tough enough to survive let alone expand in the global markets. Opportunity does exist, however, in the global markets through making alliances with strategic partners. The partners to alliances look at alliances as temporary or until considered no longer necessary and the alliance has served its need (Grosse, 2000).

The idea behind strategic alliances is to co-create value, but often businesses find it difficult because of the unwillingness to share or a lack of common values. The small business alliance depends on trust and openness to work toward a common value. The parties to a strategic alliance have to negotiate to fill in their strategic weaknesses and improve the competency of the alliance (Grosse, 2000; Mockler & Gartenfeld, 2001). Mockler and Gartenfeld argued effective negotiation at the start of the alliance cements the likelihood of a successful partnership.

Liu (2009) asserted international alliances should collaborate to find critical technology and knowledge in a strategic alliance and negotiate learning activities leading to competitive advantage. The partners to an alliance should structure the alliance so it becomes a “race to learn” by mixing competition in with cooperation, but this structure leads to instability. Grosse (2000) argued a one-sided alliance leads to unstable relations and the objective should seek to strengthen weaknesses in the competencies of the alliance partners.

Grosse (2000) claimed the strategic alliance partners need to find a strategic fit by settling the cooperation level, the effectiveness of the cooperation level, and molding the culture of the alliance. Partners should seek a significant understanding of each other to form an effective alliance. An understanding will help foster a successful work relation and avoid failure. A successful partnership will promote value creation through knowledge gathering. Planning has a critical role in forming successful strategic alliances.

Do you have what it takes to expand through inter-firm alliances to succeed into global markets? If you need help planning for global expansion contact us to learn more.

References

Grosse, R. E. (2000). Thunderbird on global business strategy. New York: John Wiley & Sons.

Liu, W. K. (2009). Advantage competition of inter-partner learning in international strategic alliance. Journal of Global Business Issues, 3(2), 123-128. Retrieved from http://search.proquest.com/docview/223750245?accountid=35812

Mockler, R. J., & Gartenfeld, M. E. (2001). Using multinational strategic alliance negotiations to help ensure alliance success: An entrepreneurial orientation. Strategic Change, 10(4), 215-215. doi: 10.1002/jsc.536

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Business Culture: Groupthink vs. “Teamthink”


Gibb and Schwartz (1999) argued groupthink paralyzes companies creating a culture that dismisses all social issues as unsuitable for management consideration. Gibb on and Schwartz claimed the best employees in the future will not tolerate a stifling top-down culture because better educated and networked employees will demand more participation. Chen, Lawson, Gordon, and McIntosh (1996) argued good decisions come from leaders who encourage an open decision-making process. Maharaj (2008) argued strict adherence to rules masks open decision-making and evaluation of alternatives and corporate boards should seek diverse skills and avoid groupthink. A well-rounded board leads to improved decision-making that considers its members knowledge and skills instead of perpetuating the good old boys club.

Solomon (2006) challenged the idea that dissent is undesirable and rational deliberation and consensus results in group decision-making. Neck and Manz (1994) explained “teamthink” as an alternative to groupthink as characterized by highly cohesive and conforming groups. “Teamthink” offers encouragement of divergent views, open idea expression, recognizing threats and limitations, valuing unique members’ views, and discussion of doubts. Neck and Manz argued self-managing teams can promote these values to encourage better decision making.

I believe companies still encourage groupthink at top echelons of an organization, but promote “teamthink” at lower levels. I believe this allows an organization to create a double standard to preserve top-down management culture, while promoting improved production from lower levels. The idea is that ultimately “the buck stops here” at the C-level. Does this double standard help or hinder building trust to make the right decisions?

Gibb and Schwartz (1999) suggested without improved participation good employees will leave a company they do not trust and seek employment elsewhere where they can use their education and experience. What do you think? Please leave a comment with your thoughts. If you need help organizing your company more productively I encourage you to learn more.

References

Chen, Z., Lawson, R. B., Gordon, L. R., & McIntosh, B. (1996). Groupthink: Deciding with the leader and the devil. The Psychological Record, 46(4), 581-581. Retrieved from http://search.proquest.com/docview/212668876?accountid=35812

Gibb, B., & Schwartz, P. (1999). When good companies do bad things. New York: John Wiley & Sons.

Maharaj, R. (2008). Corporate governance, groupthink and bullies in the boardroom. International Journal of Disclosure and Governance, 5(1), 68-92. Retrieved from http://search.proquest.com/docview/196323941?accountid=35812 http://linksource.ebsco.com/linking.aspx?genre=article&issn=17413591&volume=5&issue=1&date=2008-02-01&spage=68&title=International+Journal+of+Disclosure+and+Governance&atitle=Corporate+governance%2C+groupthink+and+bullies+in+the+boardroom&au=Maharaj%2C+Rookmin&isbn=&jtitle=International+Journal+of+Disclosure+and+Governance&btitle=

Neck, C. P., & Manz, C. C. (1994). From groupthink to teamthink: Toward the creation of constructive thought patterns in self-managing work teams. Human Relations, 47(8), 929-929. Retrieved from http://search.proquest.com/docview/231490747?accountid=35812

Solomon, M. (2006). Groupthink versus the wisdom of crowds: The social epistemology of deliberation and dissent. The Southern Journal of Philosophy, 44, 28-42. Retrieved from http://search.proquest.com/docview/218152905?accountid=35812

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Small Business Risk Taking: History Repeats Itself


“History repeats itself” is a saying I hear on occasion and often wonder about. Today, for example, some businessmen say they cannot work because of uncertain conditions, yet Adam Smith designed capitalism as the “epitome of risk taking” (Bernstein, 1996, p. 19). According to Bernstein, up to the time of the reformation, the stable Protestant tradition stressed abstinence to avoid risk. Protestants considered the danger inherent in risk-taking as akin to gambling. Adam Smith (1904) introduced capitalism believing the danger attached to risk also came with opportunity. Instead of looking at risk as a zero-sum game where someone wins and someone loses, Smith believed trade resulted in a mutually worthwhile pursuit. Smith believed both parties to trade and risk taking could become wealthier contrary to practice before the reformation that relied on exploitation to gain wealth (Bernstein, 1996).

Recent conversations have talked about how unacceptable the transfer of wealth is from the elite to its underlings. Some business people espouse the pre-reformation idea that wealth transfer should only come from exploitation of underlings, while others see wealth transfer more like Adam Smith did. Smith believed business is risky, but full of opportunity and new wealth came to those adventuresome people willing to innovate (Bernstein, 1996). Today with the coming of supply-side economics, some want to return to the days of exploitation and stymie adventuresome entrepreneurs willing to innovate and create new trade. Does history repeat itself? Has the pendulum swung too far in the wrong direction?

I believe an efficient economic system has to balance opportunities with risk taking. If business people do not take risk, I do not see where innovation comes from under such conditions. Stable well-established businesses do not like to remove themselves from their comfort zone and their products and services eventually become stale and do not satisfy consumer needs. Meanwhile, society needs to provide more incentives to entrepreneurs to innovate and create new trade.

What do you think? Is our economic system returning to the stable pre-reformation days bereft of any risk taking relying solely on exploitation? Are you willing to take a risk in today’s economic setting? What incentives do you believe would help entrepreneurs to resume their efforts to innovate new trade? Please leave your thoughts here. Do you want to know more about incentives to small business entrepreneurship to its rightful role? Click here.

References

Bernstein, P. L. (1996). Against the gods: The remarkable story of risk. Hoboken, NJ: John Wiley & Sons, Inc.

Smith, A. (1904). The wealth of nations (5th ed.). London: UK: Methuen & Co., Ltd.

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Human Capital: Are Employees a Small Business’s Most Valuable Asset?


I have heard the words “employees are our most valuable asset” many times, but have rarely seen accountants embrace the idea of capitalizing human capital as an asset on the balance sheet. The theory goes that companies expense wages as employees earn them. If employees are an asset I believe the part of workers’ employment cost that adds value to the organization should appear on the balance sheet.

Although accounting rules forbid capitalizing human capital, they only recognize human capital on the income statement. Despite this oversight, many call accounting the language of business. At least one article admitted the problem and recommended alternatives for capitalizing human capital. Chen and Ku (2004) concluded, “The succession of the human intellect over machines and equipment in the contribution to industrial value makes a financial statement that relegates human capital expenditure to expenses inadequate if not obsolete” (p. 129). If accounting is the language of business why is the value of its most valuable asset excluded from the balance sheet?

This disparity leads one to believe companies’ accounting standards look at employees not as an asset, but as a liabilities. For example, in finance the main goal of the firm is to maximize shareholder wealth and accounting rules treat human capital as a period cost (expense) instead of an asset. In recent years many companies have reconsidered the view shareholders are the only stakeholders in a firm, and have expanded stakeholders to include customers, suppliers, and employees. Even with the coming of triple bottom-line reporting I have not seen accounting rule-making bodies espouse the capitalizing human capital (Elkington, 1994; Slaper & Hall, 2011).

Similarly, Reimers-Hild, Fritz, and King (2007) described human capital as a continuous investment leading to increased earning power. Reimers-Hild et al. further described human capital as responsible for innovation, creativity, and keeping pace with change.  Chen and Ku (2004) developed a theoretical classification framework that would capitalize certain formation and acquisition costs in early stages of development, learning costs in middle stages of development, and replacement costs in final stages. Chen and Ku argued for disclosing these costs as investments if the costs are unique and add value.

Do you believe employees are your greatest asset? I would like to hear your thoughts. Should your greatest asset show on the balance sheet? Please let leave your comments? Click here if you want to understand more about accounting for human capital.

References

Chen, H. M., & Ku, J. M. (2004). The role of human capital cost in accounting. Journal of Intellectual Capital, 5(1), 116-130. doi: 10.1108/14691930410512950

Elkington, J. (1994). Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(2), 90-100. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9410213932&site=ehost-live

Reimers-Hild, C. I., Fritz, S. M., & King, J. W. (2007). Entrepreneurial Career Development: Using Human Capital, Social Capital, and Distance Education to Achieve Success. Advancing Women in Leadership, 24, 1-N_A.

Slaper, T. F., & Hall, T. J. (2011). The triple bottom line: What is it and how does it work? Indiana Business Review, 86(1), 4-8. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=66506015&site=ehost-live

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The Role Leadership Plays in Delivering Excellence Throughout the Organization


 Leaders must start the course of delivering excellence by communicating a vision. Friedman  (2006) noted that leaders must align their core values with their vision and convert them into action by owning three skills – authenticity, integrity, and creativity. The total leadership approach is a method that promotes reading background materials and discussing principles that matter. This method is important in assessing and coaching people including giving and receiving feedback, refining ideas and gaining support for them, and reviewing progress and explaining any lessons learned. Newstrom and Davis (2002) described leadership as the “catalyst that transforms potential into reality” (p. 163). People provide the missing ingredient here to transform the vision into reality. 

Galpin (1998) suggested the key ingredient for a leader is to put together a strategy that  motivates and educates people to act on the strategy. Leaders must motivate employees through their influence. Galpin listed twelve critical influences important to motivating people. The twelve influences include goals and measures, rewards and recognition, communication, training and development, and senior leadership. Critical influences also include rules and policies; physical setting; staffing, selection, and succession; information systems and knowledge sharing;  operating procedure changes; organizational structure; and ceremonies and events.

Malveaux (1999) put the issue another way by saying one needs to lead by example. For example, if one sees children as the future, the leader must rise and play a role in their lives. If leadership represents listening, the leader should stop talking and start listening. Malveaux promoted self-reflection in deciding how to lead.

The leader embodies all of these characteristics and then some. A leader must assume responsibility and take credit for his or her actions. A leader must have a core ethical boundary that will not cave under pressure or give in to the influence of greed.

Do you believe leadership drives excellence in an organization? I want to know your thoughts. Do you want to learn more?

References

Friedman, S. D. (2006). Learning to lead in all domains of life. The American Behavioral Scientist, 49(9), 1270-1297. doi: 10.1177/0002764206286389

Galpin, T. J. (1998). When leaders really walk the talk: Making strategy work through people. Human Resource Planning, 21(3), 38-45. Retrieved from https://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=1452186&site=eds-live

Malveaux, J. (1999). Too many chiefs; not enough leaders. Black Issues in Higher Education, 16(8), 30. Retrieved from https://search.ebscohost.com/login.aspx?direct=true&db=f5h&AN=1926388&site=eds-live

Newstrom, J. W., & Davis, K. (2002). Organizational behavior (11th ed.). New York, NY: McGraw-Hill.

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The Value and Ethics of Treating People Right


Former Southwest Airlines CEO, Herb Kelleher, gained a competitive advantage over competitors like United, Delta, and Northwest by treating the airline’s employees with dignity and respect. The airlines all had unionized workers, but Kelleher believed Southwest had to dignify its customers by treating its workers right. Kelleher issued 20% of Southwest’s stock to employees to increase their motivation to treat customers well. During Kelleher’s time at the company, United, Delta, and Northwest all experienced damaging strikes by their unions, while Southwest remained profitable. The strikes caused thousands of passengers to miss their flights driving these airlines into bankruptcy (Jones, 2007).

Managing complex relations with pilots, cabin crews, and mechanics affected customer satisfaction for Southwest Airlines (Jones, 2007). Happy workers resulted in happy customers. Southwest Airlines remains one of the most profitable airlines today. Many companies in the airline and other industries today fail to value the importance of building and managing relations with workers.

In my personal experience, I have found managing employee relations can improve performance. I turned around a financially troubled university with a heavily unionized workforce by paying attention to the value of the workers and forging improved relations with them. I fail to grasp why many organizations have such a hard time understanding that happy employees produce happy customers. Happy customers breed new customers and grows the organization.

I would like to hear your thoughts on why building improved relations with workers has become so difficult today. I argue customers and workers are equally if not more important than shareholders. Please let me know your comments or let me know if you want to learn more.

References

Jones, G. R. (2007). Organizational theory, design, and change (5th ed.). Upper Saddle River, NJ: Prentice Hall.

 

 

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The Role of Entrepreneurship in Restoring the Economy


Before the financial meltdown of 2008, small firms in the United States in 2007 comprised 99.7 percent of all employer firms. These firms employed slightly more than half of all private industry workers, and paid 44 percent of private business payroll. Small firms produced 64 percent of net new jobs for 15 years before this time. Small firms created over half the private nonfarm gross domestic product, and hired better than 40 percent of high-tech jobs for scientists, engineers, and computer programmers. Further, small businesses made up 97.3 percent of all exporters producing 30.2 percent of known export values in 2007. Small businesses accounted for 52 percent of home-based businesses and 2 percent of franchises (Kolbe, 2007; Yallapragada & Bhuiyan, 2011).

A growing part of entrepreneurship comes from social entrepreneurship. Shockley and Frank (2010) distinguished social entrepreneurship from commercial entrepreneurship as consisting of a community orientation that forgoes private incentive for public benefit. Shockley and Frank connect the economic entrepreneurship theories of Joseph Schumpeter and Israel Kirzner to Western literature, namely Virgil’s Aeneid. The three main parts of Virgil’s (2006) Aeneid deal with using the mind to discover, developing a duty to community interests, and believing in the fate of the actor to avoid uncertainty or “unknown probabilities” (Knight, 1921; Shockley & Frank, 2010, p. 777).

Social entrepreneurship fills societal needs not met by commercial entrepreneurship and stresses discovery, community, and the fate to overcome unknown conditions. Commercial entrepreneurship is not exclusive of social responsibility, but in modern society has focused on the interests of enlarging profits for the benefit of capitalist investors. This motive is not to say entrepreneurs have no interest in societal interests as surely some entrepreneurs champion such issues before profits, but many companies put profits first after a founder finds a successful model. Social entrepreneurs can discover solutions to societal needs in either or both the public or private domain.

Schumpeter (1934/2002) argued new combinations affect the flow of capital and causes temporary disequilibrium aiding in economic development. Schumpeter (1994) put “creative destruction” at the center of entrepreneurship. Schumpeter explained how “creative destruction” leads to the demise of the entrepreneur and a temporary socialistic state to deal with new unmet needs because the entrepreneur becomes a capitalist and ceases to work as an entrepreneur. Shockley and Frank (2010) referred to Schumpeter’s works as foundational and timeless finding these same ideas in Virgil’s Aeneid.

Similarly, Kirzner (1973) put “entrepreneurial discovery” (p. 39) at the center of entrepreneurial theory. Kirzner argued the entrepreneur’s role is to stay alert to unnoticed opportunities and relies on unpredictable behavior akin to the fate in Virgil’s Aeneid. Both Schumpeter and Kirzner distinguish the entrepreneur from the capitalist because the entrepreneur risks no investment in discovery(Shockley & Frank, 2010).

The point of this literature is that both the role of the entrepreneur and capitalist are necessary in a market economy. Today, the role of the entrepreneur has succumbed to the capitalist and caused discovery to slow for the sake of promoting the profit motives of the capitalist, but the capitalist cannot grow without discovery. Capitalists choose not to meet societal needs. The temporary state to overcome the problem rests in Schumpeter’s notion of “creative destruction” where socialism takes over until the entrepreneur can return to the flow of the equilibrium process (Schumpeter,1994).

I see little effort today to recognize the entrepreneur’s role to resolve this problem despite the significant contributions entrepreneurs made before the financial meltdown of 2008. Some people have played down the role of restoring equilibrium and have extended the problem by suspending a capitalistic economy indefinitely. I see social entrepreneurship as a step to restoring discovery needed to return the flow to the equilibrium process.

I would like to hear your thoughts about how to restore capitalism by re-emphasizing entrepreneurship’s role and ending the state of “creative destruction” in which the United States economy currently resides. Learn more.

References

Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago, IL: The University of Chicago Press.

Knight, F. H. (1921). Risk, uncertainty, and profit (2002 Reprint ed.). Washington, DC: Beard Books.

Kolbe, K. (2007). How important are small businesses to the United States’ economy. Office of Advocacy, Funded Research, United States Department of Commerce, Bureau of the Census and International Trade Administration.

Schumpeter, J. A. (1934/2002). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. New Brunswick, New Jersey: Transaction Publishers.

Schumpeter, J. A. (1994). Capitalism, socialism, and democracy (5th ed.). London and New York: Routledge.

Shockley, G. E., & Frank, P. M. (2010). Virgil’s Aeneas as the quintessential social entrepreneur: Juxtaposing selections from epic poetry and entrepreneurship theory to teach social entrepreneurship. Journal of Small Business and Entrepreneurship, 23, 769-784. doi: 2281649991; 58798731; 54851; JSBE; INNNJSBE0000605310

Virgil. (2006). Selections from Virgil’s Aeneid. In S. Lombardo (Ed.), The Essential Aeneid. Indianapolis, Ind. & Cambridge, UK: Hackett Publishing Co., Inc.

Yallapragada, R. R., & Bhuiyan, M. (2011). Small business entrepreneurships In The United States. Journal of Applied Business Research, 27(6), 117-122. doi: 2519801721; 65758121; 12637; JRH; INODJRH0007536491

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Snake in the Grass Syndrome: Small Business Channel Partners


Often small businesses build relations with various suppliers and channel partners only to later find the relation is not as strong as first thought. The small business entrepreneur needs to protect against interruption occurring in the supply chain and make sure that everyone involved is on the same page.

I have had the unfortunate experience of working with a channel partner only to find later the channel partner only had its own interests in mind. I found the channel partner did not share a common vision and did not want to genuinely build a lasting relation. After working hard to build a good relation, the channel partner let the company down by not performing up to expectations. I call this the “snake in the grass” syndrome.

Because of this experience, I encourage small business entrepreneurs not to put all their eggs in one basket. As much as an owner likes a particular channel partner, competition is good and promotes efficiency. An interruption in the supply chain can have devastating effects on the small business. Consider what would happen if a missing link exists in the supply chain. Finding a new channel partner at the last minute is not easy and could harm the quality of the product or the service provided to customers. I suggest finding at least three suppliers for every slot in the supply chain to avoid last-minute problems.

Another step a small business entrepreneur can take is to make at least an annual evaluation of all channel partners in the supply chain. A business is only as strong as the weakest link in its supply chain so it pays to remove weak channel partners and replace them with stronger ones. I suggest developing a formal written evaluation form and think about what is important to the business.

Do you have a procedure to evaluation channel partners in your supply chain? I want to hear your thoughts? If you want to know more about how to remove the “snake in the grass” I urge to get help now. Learn more.

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David and Goliath: The Dyson story


The Dyson vacuum cleaner story is an interesting case study about a man taking on the established vacuum cleaner industry by believing in a superior product. Dyson believed in making the world better through ingenuity and took on the giants. Dyson took on the role of the consummate protagonist (Carruthers, 2007).

Dyson grew up in a family in which he had little direction and he developed a distaste for conventional institutions. Dyson’s parents knew of his rebellious side and wanted him to take up teaching, become a doctor, or become a professional. Dyson gained an understanding of industrial product design through the art school he attended in London (Carruthers, 2007). Entrepreneurs typically have a disdain for the way conventional businesses do things and have it in their DNA to reject conventional wisdom. Rebellion is an integral part of the entrepreneur’s mold.

Entranced with the idea of improving the vacuum cleaner, Dyson began his adventure by stripping down the Hoover Junior to understand its poor performance. Dyson introduced the cyclone and clamber in developing his prototype. At first, Dyson had no fear, but balked when low-income, a big overdraft occurred, and he faced the uncertainty. Dyson experienced several brushes with bankruptcy (Carruthers, 2007). Entrepreneurs have to learn how to deal with their fear and overcome it by moving on. Keeping an eye on the opportunity trumps the original fear, but the entrepreneur faces failure each time he encounters a hurdle and has to deal with it in a positive way. Risk-taking is scary even to the most accomplished entrepreneur.

Jeremy Frey had mentored Dyson and provided the original funding for his venture. Dyson met Frey at college, and the millionaire and founder of Rotork served as an innovative person with whom he could identify. Dyson spent three years working on thousands of  prototypes and testing them. Dyson found industry unwilling to accept or license his ideas, but Japan did eventually license the Apex and G-Force products. Dyson relied on inventing and marketing himself instead of the conventions of big business and its marketing tricks (Carruthers, 2007). Entrepreneurs are bold people who reject established mediums and want to improve on them, but fighting with the enemy has its risks.

Dyson decided rather than to license his work to produce the product himself. Self-manufacturing the products, obligated Dyson to raise capital by borrowing against his property putting his family at risk. Dyson decided to take this path and export directly to the to the United States (Carruthers, 2007). This experience shows entrepreneurs have to look danger square in the eye and have the confidence to deal with it.

The last challenge for Dyson is to bring the product to the United States, the world’s largest market, where he must beat Hoover, Amway, and Black and Decker. Although Dyson set up manufacturing in Asia, he must confront the Big Three on their own turf in the United States. To bring the product to the United States, Dyson has to distastefully import the product from Asia and play by the rules. Dyson successfully captured enough of the United States market, but faced intense competitive pressure from his rivals. Hoover infringed on Dyson’s patent rights and Dyson filed suit to protect his business. Despite the challenge, Dyson wins the battle and confirms his success (Carruthers, 2007). Entrepreneurs often want to create the rules they play by, but sometimes have to conform to win the larger battle. The Dyson story shows how entrepreneurs can persist and improve existing products. David beat Goliath!

What have you learned from the Dyson story? Please let us know your thoughts. If you need help getting started I urge you to seek our help now. Learn more.

References

Carruthers, I. (2007). Chapter 5: The Entrepreneur’s Story Great brand stories Dyson: The domestic engineer: How Dyson changed the meaning of cleaning (pp. 85-99). London: Marshall Cavendish Limited.

 

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Defining Roles: Visionary versus Missionary Leadership


Many times people starting a new business find a partner they know little about. Defining the roles partners play in the business at the start is important to avoid problems later. Looking at a live example might help identify the problem and discover some lessons learned from forming a new partnership. This story applies to either a partnership or a small business corporation such as a limited liability company or an S corporation.

Joe and Jerry worked together as real estate agents at a local brokerage and decided they wanted to start their own. Joe had extensive experience in management and finance. Jerry came from the ministry after serving as an Episcopal priest. Joe and Jerry worked well together as real estate agents, but knew little about each other otherwise.

The two men worked together to develop a plan to start their own business. Joe and Jerry decided to divide the business equally and make an equal contribution. Joe and Jerry did not know is the role each would play in the business, but Joe believed Jerry had excellent marketing skills because of his dealings with people. Jerry believed Joe had excellent administrative and financial skills to run operations, but neither man shared their beliefs with the other or formalized the role each would play in running the business.

The men did work together to find a real estate office available at an excellent location and proceeded to lease the building. Jerry wanted to make the office comfortable and professional insisting on first-class furniture and equipment. Joe wanted to find sales Associates as quickly as possible to train and ramp up sales.

After leasing the office space, the two men worked to redecorate the office and lease furniture and equipment. Jerry took the lead on redecorating the space and Joe worked on incorporating a business. Each man did what he thought important to start the business and prepare for the grand opening.

Once the office opened, Joe worked feverishly to recruit sales agents to start finding business. Jerry showed up occasionally and worked from home. Joe quickly recruited 16 new agents and began to train them, while Jerry continued to work from home expecting a paycheck despite not having enough revenue to earn a salary.

Joe and Jerry started having discussions about how to develop enough revenue to meet continuing expenses. Joe continued working feverishly to train agents and teach them how to sell. Jerry continued to work at home contributing little to the operation. Jerry continued to insist he needed a paycheck despite a lack of revenue. Joe argued both he and Jerry should work the plan keeping the vision in mind for the future. Jerry continued to espouse his mission to earn a paycheck.

Although the sales agents started to develop, the revenue did not keep pace with Jerry’s mission for a paycheck. Joe felt good about the developing sales agents who started to ramp up sales. Jerry began withdrawing from the company because his sole mission relied on earning a paycheck. Joe started to feel overwhelmed because he had to do everything himself.

The lesson learned from Joe and Jerry’s experience is to know your partner and decide on their roles before starting a business. In this case, Joe took the role of the visionary leader to follow plan. Jerry’s only role came from his mission to receive a paycheck. A visionary leader needs to have teamwork. The missionary leader has more selfish motives and sits back waiting for business to develop.

Before taking on a partner consider not just how to divide profits, but what role each will play in running the business. Consider the expected time the business needs each partner to devote and what to hold each partner accountable for. Decide how often partners will meet and go over plans to stay on track. A few questions to ask include:

  1. How does the company track and share information?
  2. How does the company decide on use of available capital?
  3. How are organizing goals decided and carried out?
  4. Who is responsible for carrying out the strategic plan?
  5. What steps does the company need to seek more assets?
  6. Does compensation match with the role of the partner?

Are you thinking of taking on a partner? Have you defined the roles of each partner before starting your business? I urge you to do so before problems start to develop. Do you want help in setting up a plan and agreement for your partner? Learn more.

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