What do you do if you have a problematic co-founder who’s also the CEO and he/she isn’t running the company the way it should be run?
- Quit your startup?
- Figure out a way to make him/her quit.
- Drag the investors into the room and get the co-founder CEO fired?
Nah…
Let’s dig into why co-founder disputes happen and how to resolve them peacefully.
In less than 5 minutes today, you will learn:
1. Why do co-founder conflicts happen?
2. How to solve co-founder disputes peacefully
Let’s go 🚀
Why do co-founder conflicts happen?
#1 Unclear roles and responsibilities
It’s important to have a clear understanding of who is responsible for what.
I usually see this when the CEO isn’t clearly defined and the co-founders all just carry the co-founder title.
Decide who is CEO, this can help to avoid confusion and conflict down the road.
Once you decide who is CEO, decide what role the other co-founders play including what they are accountable for.
#2 Rash/poor decision-making
It’s important to have a process for making decisions, and everyone should feel that their voice is heard.
Too many solo decisions from the CEO without consulting their co-founders can lead to a disgruntled team.
BUT… consensus-based decision-making is slow and ineffective.
So the CEO must hear out all the relevant voices but then take the decision he/she thinks fit and share why they think so.
The other founders’ job is to back the CEO.
Yes, not everyone will be pleased. That’s what makes the CEO’s job so hard.
#3 Compensation
Make sure the founding team is agreed on compensation early on…
What you get paid is directly proportional to the depth and breadth of your responsibilities and the risk that you take.
Nothing else.
For example, a part-time co-founder cannot expect the same level of equity or salary as a full-time co-founder just because they have a kid and need to pay childcare expenses. In situations such as they play with the equity component if cash is more important.
It’s weird when one co-founder gets paid substantially higher than the other for any reason other than scope of work and risk.
I’ve seen situations where a co-founder with a secondary role is taking 50% more salary and the same equity as the primary co-founder simply because he was older, had children in college, and lived in a more expensive state.
#4 Commitment to the company
First, understand that startup founders do not have a normal work-life balance. Work is your life.
If you think you will have a normal work-life balance, forget it. Don’t start a company.
But let’s be honest, not every founder is committed in the same way. There will always be some differences…
… and these perceived differences in commitment can lead to fights. Often.
Just be aware of this.
One way to solve this is to be accountable to each other by reporting your wins and losses for each week in a Slack channel.
#5 Personalities and values
It’s important to be aware of each other’s personalities and values and to be willing to compromise when it makes sense.
Just don’t start a company with someone whose values aren’t aligned at all.
I would personally never start a company with someone who isn’t transparent or has a Type A personality.
Why? Because it just wouldn’t work for me!
I am transparent and hate dealing with secretive types, and I’m a type A. There can only be one type A in the room :p!
How to solve co-founder conflicts peacefully
#1 Have a conflict resolution plan
Hey, conflicts happen. It’s a part of business building. What’s important is to have a plan for how to resolve conflicts vs. avoiding them altogether until they blow up.
Here’s my 3-step conflict resolution plan:
- Talk openly and honestly to achieve a resolution, if this fails
- Involve a mutually respected third party like a board member, exec coach, or an adviser, if this fails,
- Figure out a way to part ways amicably without going to court (legal battles are shit expensive).
#2 Talk openly and honestly without hurting each other
It’s so hard to have difficult conversations. But believe me, it’s harder to have them when shit hits the ceiling.
The framework I recommend is this:
- Identify the core issue and detach it from the person (issue focus vs. personality focus).
- Focus on the symptoms, identify root causes, and lay out potential solutions.
- Create an action plan to implement the solutions.
- Review the results at a pre-determined date/frequency and adjust your plan.
What to avoid:
- Verbal attacks and direct criticism.
- Bypassing your co-founder and throwing them under the bus in front of a third party (investor, board member, etc.).
- Gossiping with other employees/co-founders.
Some blogs/books I recommend reading:
- Never Split the Difference by Chris Voss to sharpen your negotiation skills.
- The Four Horsemen of a Marriage from the Gottman Institute
#3 Be willing to compromise
It’s important to be willing to compromise and to put the success of the business first.
That means, putting personal egos aside.
If you and your co-founder(s) are 100% committed to the success of the business but still have a dispute with no resolution, sometimes you just have to swallow the bitter pill, agree to disagree, put your shit aside and just focus on execution.
There isn’t more to it.
