The Partnership Charter is both a creative process and a product – a document
What is the Partnership Charter?
The Partnership Charter is a comprehensive, structured process for establishing and maintaining a business or family partnership. The centerpiece of this approach is the Charter, a document that clearly outlines the goals, expectations, responsibilities, and relationships of the principals. The Charter identifies potential sources of conflict and how they will be resolved, while addressing such sensitive issues as personal styles, values, money, and power. The Partnership Charter process dispels common myths and presents a practical framework for launching, building, and sustaining a thriving business partnership.
The Partnership Charter covers every topic in a Partnership Agreement and much, much more
Vision and Direction
In the excitement of launching their companies, partners are often so eager to begin (and pressed for time) they short circuit this fundamental discussion. Exploring their ideas of where they each want the company to go and how it’s going to get there is critical to ensure they’re not excited about two slightly different businesses.
Conflict-Handling Styles
What entrepreneurs refer to as “inevitable conflict” is the number one reason many people avoid partnerships. By taking an assessment, exploring each partner’s conflict-handling style, and developing behavioral commitments to one another about how they’ll communicate, they boost their confidence they can talk productively about their differences.
Contributions and Rewards
Before diving into the details of financial rewards or ownership percentages, partners should contemplate the entire range of skills, assets, expertise, etc. that all the partners plan to contribute to the partnership as well as the money, perks, benefits, and other rewards that each partner hopes to receive.
Personal Values
Personal values drive and motivate partners. They are the underpinnings of their decisions. They’re the guideposts they rely on to chart their course through the myriad dilemmas they face every day. Partners need to understand their own and each other’s values to work effectively and harmoniously.
Personal Styles
Research has demonstrated that people imagine they know other people better than they really do and some people hold onto those misunderstandings. Digging into feedback from style assessments helps partners understand one another and helps them make behavioral commitments to one another so their day-to-day interactions are much more collaborative and satisfying.
Roles & Authority
Dividing roles and authority is advantageous for both partners and the business itself. Using a detailed roles table and clear levels of authority, partners discuss responsibilities and carefully specify the levels of authority each partner will have for each of their responsibilities. The result is far fewer turf battles and misunderstandings.
Expectations
Many people say they avoid partnerships because partners so frequently complain about “unmet expectations,” which can feel like breaking a trust. The problem is partners routinely fail to share their expectations with one another. When partners explore their expectations from a number of different perspectives, they reduce the risk of this problem and build greater trust.
Ownership
Equity percentages are often a major focus of partners. Despite being a critical topic and very complex, there’s very little written on the topic. Even some seasoned entrepreneurs misunderstand the real significance of equity percentages and the relationships between percentages and other issues like compensation and control. This unit “unpacks” those interrelated topics.
Money
For many co-owners determining pay, distributions, dividends, benefits, and perks is one of the toughest assignments they have, and one that can result in divisive negotiations. Provocative questions covering the entire span of money issues and partners thoughtful answers, assist Guides to skillfully facilitate discussions and negotiations, and document everyone’s understandings.
Governance
Most closely held companies have a Board but rarely do partners understand the span of decision-making authority of the Board, owners, and managers. Really “getting” how these three entities can operate without stepping on the others’ toes puts partners at a distinct advantage and ready for growth without all the normal growing pains.
Scenario Planning
A wildly successful businessman once said, “All events should be crossed in imagination before reality.” This unit sets up partners to “think the unthinkable” and become more confident they’ll be able to handle whatever anybody – including their partners – might throw their way. These exercises also teach partners more about one another so they don’t have to wait for a crisis to learn how a partner might respond.
Managing Disagreements
Even though the Charter process is designed to significantly reduce the likelihood of destructive conflicts, it’s still important to have agreed-upon strategies just in case. This unit helps partners identify more strategies for handling difficult conversations as well as a sophisticated multistep process for handling even major conflict without ever resorting to litigation.
Fairness
The concept of fairness is at the heart of all successful partnerships, but it’s often taken for granted: we don’t think about it until it doesn’t feel equitable. Often, that’s too late. Fairness discussions are hardwired into the PC process so partners have productive ways to think and talk about them.
The Charter process is comprised of 3 simple steps
The Design Your PartnershipTM tool is for advisors and their partner clients
The tool supports advisors facilitating partner negotiations, and supports partners creatively exploring options
DYP assists advisors to address partners’ needs
- The PC Workbook acts like a short course in starting and operating a partnership
- It completely removes the guesswork about the questions advisors need to ask partners
- It acts like an insurance policy by greatly reducing the likelihood of partner conflict
- It ensures your clients are in sync about where they’re headed and how they’ll get there
- Perhaps most importantly, DYP builds your clients’ trust in one another
Developing a Charter, like starting a business, is a creative process. No two sets of partners will have the same arrangement, and therefore each Partnership Charter is unique.
A Partnership Charter vs Partnership Agreement?
Ideally, partners have both documents. The Partnership Charter spells out the entirety of the partners’ “arrangement” with one another – their intentions, understandings, commitments and agreements – and does it in clear, down-to-earth language. While it’s meant to be non-binding, most partners rely heavily on what is captured in it.
A Partnership Agreement is a much more narrowly focused document that serves a legal purpose pertaining to the rights of the parties.
Lawyers who can read the partners’ Charter will learn more than they need, but what they learn will save time and allow them to produce highly customized documents that will serve the partners much better than the more typical boilerplate documents.
What comes first: A Partnership Charter or an Operating Agreement?
On the “Crafting Solutions to Conflict” podcast, the host, attorney and mediator Jane Beddall, described the difference between Partnership Charters and Operating Agreements succinctly during her interview with David Gage. She wondered if the basis for PCs is “a common understanding that’s a little deeper and wider than the legal documents.” She observed that being partners “is very personal. It’s what works for these two people. It’s not a boilerplate situation… It’s this person and that person figuring out for their Charter how they’re going to do this act of being partners.”
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