How do you fire an ineffective partner?
How do you fire an ineffective partner? Nice guy, but not pulling his weight, and maybe holding back progress. He may be the right technical guy, but he is ineffective as the business guy. And refuses to follow the lead of a seasoned business development guy.
The first 5 people in determine the success of the company locally.
The first 20 people in determine the success of the company globally. I am after the global market
Greetings Francis: I concur with Eileen, and would only add, make sure you do your due diligence in prepping any type of "separation agreement" clauses. Firing doesn't have to always be a bad thing, if the rules of engagement are clearly defined at the onset of the relationship/partnership. Then if the partner is not fulfilling the terms of this arrangement, both parties are well aware of next steps. Pure business, nothing personal. Hope this helps, and I wish the best in your business endeavors. Sean
I am taking three factors: social, technical, and family, as a junction of first two. Violation of one of these three factors gives the understanding to ineffective partner to leave on his/her own.
If I had a partner that wasn't effective. I'd try to change that first before making any move.
If I had a partner that wasn't effective and hold back progress... I'd call my lawyer.
If your business is suffering because of this, then you must remove this person, and now. His way of thinking, working, ethics may be being seen by others in the company. You cannot be soft. You must project your workers, yourself, and the future of your company. Being friends is great, being friends under a bridge because the company filed for bankruptcy... not so much.
Do the right thing for you and your employees.
The best way to handle this is by being 'assertive' ..and using the three step formula...
When you do(not pulling his weight) this ..The effects are (holding back progress)..I would suggest that (maximise your contribution by) ...
This works real-time ...
Hi Francis, a partner in business is like a partner in life.
You cant fire them you have to divorce them.
This may mean dissolving the partnership.
It all depends on how the business is structured along with the contribution each party brought to the table.
Just like in life it san be smooth, or it can be messy.
My suggestion is for you to be realistic, not just emotional.
You would have to provide for your self hard facts relating to the statement
" Not pulling his weight" / lost opportunities, net worth and net contribution.
It may also just be this guy is not the best person for the business development, but he may be more suited to something else within the company.
Maybe he hates doing business development, which is now reflecting in hie output.
I would be sitting down with him, have an open honest chat, make it informal, after all you both must of got on very well in the first place, otherwise you would not be partners.
Point out the problem as you see it, find out if he agrees,
Present your facts, via discussion not on paper, which is more threatening.
keeping in mind at this stage it's just an informal chat.
If things work out you still have a friend.
If it is no better, you will need to go back and gather the hard evidence, and check your status, and position with an adviser.
If you need to do that, seek council from someone who is completely independent.
The term "partner", not shareholder or employee, has specific legal significance. The term "partner" means a person or entity that has agreed with one or more persons or entities to form a partnership, which is an association of two or more persons to carry on as co-owners a business for profit and includes, for all purposes of the laws of the State of Georgia, a limited liability partnership and who owns an interest in the partnership (a general partnership, a limited partnership, or a limited liability partnership). This discussion will not address LLCs, although the applicable law on LLCs can be found in your state's business codes. Therefore, for purposes of this discussion, it is assumed you, the so-called "ineffective partner", and possibly others had previously formed a partnership.
Absent specific terms in a well drafted partnership agreement that would allow a partner to be involuntarily retired and his interest bought out, by the occurrence of certain defined events or by the vote of a specified percentage of the other partners, the other partners will have difficulty forcing the "ineffective partner" out. You and the other partners, if any, may have to petition a state court with jurisdiction for an order to dissolve the partnership.
In Georgia dissolution of a partnership is caused:
(1) By the termination of the definite term or particular undertaking specified in the agreement;
(2) By the express will or withdrawal of any partner;
(3) By the expulsion of any partner from the business in accordance with the terms of the agreement between the partners;
(4) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership;
(5) By the death of any partner, unless there is a written agreement between the partners expressly providing otherwise;
(6) By decree of court under Code Section 14-8-32;
(7) In other circumstances as provided in the agreement between the partners.
Especially where there is no written partnership agreement, one or more partners may seek court ordered dissolution and other equitable relief. In Georgia under OCGA § 14-8-32, a court can order the dissolution of a partnership whenever:
(1) A partner has been declared mentally incapacitated in any judicial proceeding or is shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;
(4) A partner willfully or persistently commits a breach of the partnership agreement or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;
(5) Other circumstances render a dissolution equitable.
In summary, absent a negotiated settlement with the partner or a well drafted partnership agreement or other enforceable contractual agreement that specifically addresses your concerns, you may need to litigate to dissolve, wind-up, and terminate the existing partnership and start a new business entity.
Unfortunately, due often to the short sighted efforts to save money at start-up, to not complicate things, and to expedite the commencement of business operations, too many partnerships operate without a well written partnership agreement.
I suggest you retain legal counsel and refer to the state statutes in which the partnership was formed..
W.B. McCarty, Esq.
Notice: The statements made above does not constitute legal advice and should not be relied upon as such. You should retain counsel authorized to practice in the state in which you reside or in which the partnership was formed.
Hi Francis, Firing should be the last option. If he is also an investor then please do realize that Investors don’t get fired. Your options then would be to buy him out or find an investor that will replace him, both incredibly hard things for a start-up to manage.
I would suggest you constantly communicate and build Trust with him. If he is a nice guy as you have mentioned, sit down with him and be transparent. Talk to him and tell him what’s wrong and why you can’t move forward. Share with him all the key metrics and your plan to get into the global market. I am sure he will be able to provide value and help, once he understands the pain points. For example, if he is week in ‘Business’, but good in ‘Technology’, then see if he can concentrate only on Technology, while you give assistance to the seasoned business development guy you already have. Also if both of you can define a set of mutually desired outcomes and operate from a place of mutual trust, then I am sure you will be able to find an amicable resolution to your business partnership problems.
However if ‘terminating’ is the only solution then be aware that it requires Patience, Planning and proper Documentation.
All the best and let me know if this helps. If you so desire, I can closely look at details, interact with you one on one and suggest a ‘finer’ solution.
I think there has been some great technical advise as far as checking your contract and agreements and potentially consulting a lawyer. However, the reality is firing an ineffective partner is like asking for a divorce. There is much more at play than just the legal side of how to do fold the partnership and continue on with your own goals.
There is a relationship that was started with a passion, vision, and a commitment and this is not easy to dissolve without dealing with the emotional human element as well. In reality there should have been a deeper assessment of strengths and limits before entering the partnership and I do this now for many executive teams and potential partners, much like a marriage counselor.
Often the core of the differences that are leading to the discontent existed before the partnership started, but the emotion and excitement for what could be overshadows the reality of what is. Our emotional brain will cause us to make poor decisions every time.
There is a need to separate the emotional relationship side from the task performance side. It is the emotional side that makes it difficult to deal with the real performance issue.
Step back and both go through a reality check of where you thought you would and why you are not. The key is to get the other partner to see his own flaws enough for him to want to step down to reduce the emotional defense and retaliation that can happen, like in a divorce.
At the same time you as the person pointing the finger, you need to take a look at the three pointing back at yourself as well and ask what have I done or not done to provide this person with a better framework for success. What anticipations in performance did I have out of the gate and why are they not being met now.
In many instance the three strikes and your out rule work well. You attempt to pin point what you feel is not working and then provide a framework for potentially how to make things better that is mutually agreeable. If this agreement is broken you attempt a second time to see where the party may be overwhelmed or bored by and set a new set of guidelines. If these do not work you than dissolve the partnership by whatever legal steps you need to take. Many will try a third time, but note when the other person doesn't reach the goal you mutually set, their lack of performance is then the object addressed and not their character.
Hello Francis - I would swing the question why he got hired as a Partner in the first place? If you were unable to sense the "nice guy but doesn't pull the weight" on him what says you will do it on the next person to get the job? I have fired myself in a situation where the partner went off rails because we did not have the same view on how to grow the company. One phone call and no strings attached. If you must keep ownership it's important to do it by the book and fast. Think divorce and lawyers charging by the hour so the math is actually simple: is it more effective to fire or to buy yourself the other part of the business?
Wishing you nothing but success and life will go on once it's all over. It always does.
As a partner, the dynamics will be different than terminating an employee. If he has done nothing "wrong", and it's a true partnership, you have to consider the contribution, the value of that and determine your path accordingly. Did you determine accountability factors early on? He may not realize he is not meeting expectations. This should be crystal clear.
If he is a nice guy, perhaps he will be objective and admit he has lost interest or re-engage. If he isn't willing to "pull his weight", you've got to find out why, and have a legal offer in writing that acknowledges his position, the direction of the company and options, or an exit strategy.
If you have been having conversations about this, prepare a document and both parties sign and acknowledge them. There should be no surprises...that's when risk turns into real problems.