How to build a business – Growth and Conflicts

This morning we had our weekly Qhuba board meeting. We are trying to look at what we should keep doing, stop doing and start doing.

It is never that black and white of course, though. A small group of people running and company together with a larger group of partners have the tendency to focus on what needs improvement and on the sub optimal. I start every meeting with the Good News:

We are growing and have welcomed three new Associates in our company in the past week. Great news.

We have started using Yammer for collaboration, communication and knowledge sharing (or microblogging as it is called). At least half our people have become active users within two weeks. Great news, too.

We have a some new clients in the Mobile Telecom market (Vimpelcom, Ziggo), Technology market (Xtilton), Private Equity and Banking (ING). Excellent news.

We have also lost a partner. Or at least we lost him as a partner, and will for time being continue to work with him as an Associate.  This sparked a discussion about people leaving, and about the level of conflict involved. Since we started some ten people left, or were asked to leave

Dennis mentioned: “Without going into the specific of this case: is this an incident or is it an issue? Can we regular people “situations” and can we afford it that Associates, Partners or Staff leave the club? If they tell a story that is not consistent with the message we want to propagate in our internal or external network that might do more damage than any marketing agency can repair.” A commendable comment. Dennis started as an intern almost two years ago, ran the backoffice for the whole company within a year, and became part of our management team this year. Besides being an indispensable asset, Dennis is doing research for his thesis. The subject: successfactors in the governance of network companies. We expect more guidance from him when he is done.

Tjibbe – always the diplomat – responded: “We are in the people business. Two things: One: engagement with anyone in any structure is something of an experiment. Two: we have to look at each case separately. I am not worried about an Associate of employee leaving because of lack of performance. We are not in a static environment, where people do not know exactly how they can be successful. Sometimes they over-sell themselves, sometimes we look more at the cultural fit than at the motives – which are much harder to discover. With partners it is probably much more complex and has to do with the expectations. They expect, we expect, and we are all only going to find out what is realistic when we have started working. You will probably see a difference in outlook and commitment in the period where they join without an assignment, and in the period when they are deeply embedded in a client organization.”

Dennis: “I understand that we are in the people business and that people change with the circumstances, but I cannot understand how someone made conscious decision six months ago commit himself fully to a company like, wants to claim part of the proposition, has ambitions as a professional, as an entrepreneur and as a future shareholder, and now cannot wait to leave.”

My answer: “You’re right that there is too often a mismatch between mutual expectations at sign-on time and the expectations a few months later.

It seems that people are too enthusiastic in the beginning, or that we are too enthusiastic and that after a while the focus changes to the short-term and to cash, away from the long-term, the value, and entrepreneurship. Maybe we have a tendency to overrate the network. Knowledge and capacities, and they overrate over commercial capabilities. This makes perfect sense, because in the end almost everyone wants to spend most of his time on challenging client assignments, and earn an income, and only a few can afford to invest in the long-term entrepreneurial side of things.”

We have decided earlier that we should treat the relation with other Qhubans the same way as we treat emotional relations in our private lives: first we start dating, then we get engaged, than we get married. So we should always start working with people as Associates, and focus on the assignment, and only in a second stage (for example, after a year at the earliest), after he or she has met all the conditions, and he is convinced that it is in his long-term interest to join the company, should we consider a partnership. At the same time we have to make sure we address some of the things people find important. Remember the mindmap with changes and conditions:

I agree with Tjibbe that entrepreneurship is a bit of trial and error. It involves risk. You can’t foresee everything, and if it doesn’t work it is better to make a decision and not waste each other’s time.

However much we want to be a network of entrepreneurial professionals, the majority of people are attracted by assignments and our external network (Associates), a smaller group is attracted by our internal peer network, support, exchange of knowledge, and the possibilities to create business value (Partners).

Perhaps Dennis’ research will provide new insights in motivation and decision-making.

When coming back from holiday he Yammered: “After a summer period back in university library: what was it really about startup network enterprises? Is it trust, a common purpose, exchange relations? What about interdependencies or knowledge sharing? And reciprocity? Let’s find out…”

I can’t wait until he does (find out);

“What are critical success and failure factors of network governance regarding a startup network enterprise, whereas the social dilemma is taken into account?

 

Network governance is (interfirm) coordination that is characterized by organic or informal social systems, in contrast to bureaucratic structures within firms and formal contractual relationships between them (Gerlach, 1992:64; Nohria, 1992). Network governance is increasingly used to coordinate complex products or services in uncertain and competitive environments (Jones et al., 1997).

In case a network enterprise is a startup, a company with a limited operation history, governance of such an organization is even more defiant. These companies, generally newly created, are in a phase of development and research for markets and therefore faced by possible difficulties and challenges in their first phase(s). For network enterprises it could be more challenging because there are more dependencies compared to more traditionally organized or centralized organizations; e.g. a network is a pattern of social relations over a set of persons, positions, groups or organizations (Sailer, 1978). An extra important factor here could be the Social Dilemma. Social dilemmas are situations in which collective interests are at odds with private interests. Such situations arise when faced with prioritizing either short-term selfish interests or the long-term interests of a group, organization, or society.”

I am sure he will translate the academic English in business English for us. One thing is for sure: running a business involves tough decisions, but does it involve conflict? 
Martin Zwilling of Forbes.com believes it does:

Many entrepreneurs are not prepared for conflict, or actively avoid it. Their vision, passion, and focus are so strong that they can’t imagine someone disagreeing, much less fighting them to the death. But the reality is that startups are composed of smart people, with emotions as well as intellects, working in close proximity under much pressure, so conflicts will occur.

In fact, most business conflict is constructive and should be embraced in steering through the maze of innovation and change that is part of every successful business.

Good to hear. We are prepared and do not avoid it. Now learning how to deal with conflicts. Some tips from Peter T. Coleman in his book “The Five Percent: Finding Solutions to Seemingly Impossible Conflicts:

  • Know what type of conflict you are in. The first step is to assess whether the conflict is win-lose, win-win, or mixed (some competing and some shared goals).
  • Not all conflicts are bad. Most often, conflicts present us with opportunities to solve problems and bring about necessary changes, to learn more about ourselves and the business.
  • Whenever possible, cooperate. Research has consistently shown that more collaborative approaches to resolving work best.
  • Be flexible. Try to distinguish your position in a conflict from your underlying needs and interests in the relationship
  • Do not personalize. Try to keep the problem separate from the person when in conflict (do not make them the problem).
  • Meet face-to-face and listen carefully. Meet in a neutral location, and work hard to listen to the other side in a conflict. Accurate information is critical, and careful listening communicates respect. Don’t mistake sending text messages and emails as listening.
  • Be fair, firm, and friendly. Research shows that the process of how conflicts are handled in usually more important than the outcomes of conflicts.
  • Conflict occurs when individuals or groups are not obtaining what they need or want and are seeking their own self-interest. Sometimes the individual is not aware of the need and unconsciously starts to act out. Other times, the individual is very aware of what he or she wants and actively works at achieving the goal.

If goals cannot be aligned it is best to separate. But then out of mutual interest, and without conflict. Mental note to self.


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