In his landmark 2008 Harvard Business Review article, and subsequent book, “The Founder’s Dilemmas,” Noam Wasserman posed a thought-provoking question for business founders: “Do you want to be rich or do you want to be king?”
Wasserman was mostly addressing startup CEOs about the tradeoffs inherent in taking outside money, or trading equity for needed skills. But it is a question that can be posed to founders of professional practices who are faced with challenges in reaching the next phase for their firm. The need to stay competitive, or just to reach their full vision, often means bringing in others with needed skills or merging to gain economies of scale. Getting this talent or scale often comes at the cost of giving up sole control.
In our experience this tradeoff is not quite so binary. There is more nuance to what drives people who build successful businesses than money or power. These include: the need for recognition, making best use of skills and talents, the opportunity for personal growth or making meaningful contributions to a community. Understanding and integrating these other drivers is important in communication among merging partners and will help them be more resilient to setbacks. The absence of this understanding can be the undoing of mergers and acquisitions that look so good on paper. Those who see things only as giving up control in the quest for monetary benefits can become very stressed if those benefits take time to materialize, as they often do. Incorporating a deeper understanding of the drivers of success can temper this stress and increase the potential for the new partnership to survive, and thrive.
If coming to deeper understanding about the tradeoffs among partners were easy, the statistics on partnership failure would not be so grim: as many as 70% fail within ten years. What is most alarming about this statistic is that the single biggest cause of failure in start-up partnerships, according to a study by Funders and Founders, is attributable to conflict among partners (62%).
There are tools, exercises and expertise that prospective partners can take advantage of to give more substance and clarity to the “softer” issues. It’s clearly a mission-critical part of merger success and until more attention is given to it, the dismal statistics are unlikely to change.