Michael: Well, and to me it’s very powerful just the idea of particularly once you’re beyond a two-person partnership and there’s three-plus people in the room, like, just clarifying, “Here are the kinds of decisions where we don’t move forward unless we have unanimous voting, like, everybody’s got to get on board, ” versus, “Here are the decisions that, you know, we’re going to talk about it, and then we may agree to disagree, and then we’re going to move with whatever the consensus is and we’re going to ask everybody to be on board with that.” And I feel like it’s something that sometimes happens implicitly in partnerships or just, you know, group meetings in general, but sometimes it doesn’t happen in a way that everybody is happy with, particularly if you’re the one that’s getting outvoted on an issue.
So, you know, just sort of having agreement upfront like, “Okay, can we all agree at the end of the day, like, this is a minor thing, and we may not all agree but we should be okay on it, but this is a major thing, so these are the kinds of things we have to get everybody on board or we will agree to not move forward on them.” And just having an agreement about literally how you’re going to make those decisions to get an agreement. I can certainly see the power in that so dissenters at least know, like, when they’re going to be left out or not and can, you know, frankly choose your battles accordingly because sometimes you have to do that in partnerships.
Tanya: That’s right. When we started out, one of the first things that we did was a little bit of our own partnership research. And we did a survey and followed up with phone interviews. And we found that two-person partnerships were the most satisfied. And we thought that maybe it was because, in a two-person partnership, most of the time decisions are unanimous because two people, one no vote would kill it, you know, or you would do some trading back and forth. And it was the three, four and five-person partnerships where it’s a little harder to get…you know, everybody is going to have their own take on an issue and it’s a little harder to put it all together.
And then for the six people, six persons or more, satisfaction seemed to go back up again. And maybe it was because at that point you’re adopting more of a corporate structure, bringing in someone to be a managing partner to kind of help decide, you know, what spheres people are going to be decision-makers in, or at least deciding, you know, making those decisions like you just said, which decisions are going to need, you know, unanimous consent or which decisions are going to…
Michael: Yeah, it makes a lot of sense to me, right? Like, once you get six-plus, like, you typically have to start putting in more corporate structure and essentially a governance structure, which to me at the end of the day, like, that is an agreement about how you’re going to make decisions, right? Like, you know, we come together as six-plus partners and say, “Okay, we’re going to have a management team and then here’s what gets decided at the management team. And then maybe, like, we’ll have a smaller executive team and here’s what gets decided at the executive team. And then all the partners, all the shareholders are going to be, like, a board of directors that oversees the executive team. So, you know, there’s only certain things you make at the board, certain decisions you make at the board level because the rest get made at the executive team level or come down to a management team.”
But, like, just the process of deciding how to make that corporate structure that you kind of have to do for your size at some point means you’ve now made an agreement about how you’re going to make decisions. So, two people, we know how this works. We agree or we don’t. Six-plus people, we make a corporate structure and then we all agree how this works. And then in the middle is three, four, five partners that may not have been through the kind of process you’re talking about and end out with all these conflicts because they don’t actually have an agreement about how they make decisions.
Tanya: Right. And actually, we know of someone who left a three-person partnership just because he felt like he was always going to be the third man out even though he had been an original partner in the firm.
Michael: Well, I guess that’s part of what happens. You know, I mean, it’s kind of the nature of, I guess, politics and how people organize, right? Like, if you’re in a three-person partnership, everybody usually becomes acutely aware that, you know, if you’re the odd one out on a decision, like, if you ever put this to a vote, you are losing. You know, five-person you get the same thing. Threes gang up on twos. Fours you get weird coalitions because if you want to get to work you’ve got to get three on board and then you can overrule the one, but otherwise, if you get two on two you get stalemated, which can be worse because then no one is happy with the outcome. And just, you know, all the ways that we kind of organize as human beings to make decisions, which are harder if you don’t have agreements about how you make decisions in the first place. I guess that’s kind of the point, the takeaway to it, right?
Tanya: That is the point, the takeaway. So if you had done maybe some of this kind of work about the styles that everyone has and maybe being aware of these decision-making pitfalls and kind of, like, wrap that into your partnership constitution, you can avoid some of them.
Up Next: What is a Partnership Constitution and How Can It Reduce the Conflict in Your Business?