Save Your Startup: How Mediation Can Resolve Co-Founder Disagreements
Mediation is a low-cost process that can save you a lot of time and money down the line.
Conflict at the co-founder level can threaten even the most successful startup. Typical co-founder disagreements include:
- Differences in long-term vision and goals for the company
- Confusion or conflict over each co-founder’s roles and responsibilities
- Power struggles due to overlapping duties
- Disputes over equity distribution and ownership percentages
- Conflicts over decision-making processes and authority
- Disagreements on major business decisions (such as marketing strategies, product development, investment opportunities, etc.)
- Imbalances in perceived workload and contributions to the company
- Disputes over financial management
- Poor communication, leading to misunderstandings and unresolved conflicts
These issues can simmer for months, straining even the most successful co-founder team.
In his book, The Founder’s Dilemma, Harvard Business School professor Noam Wasserman states that 65% of startups fail due to interpersonal conflict within the founding team.
Mediation can help resolve even the trickiest co-founder dispute. Through an impartial third party, known as a mediator, the founders get support for navigating conversations through a structured conversation that does the following:
1. Separating the Founders from the Problem
It can be hard to stay grounded when discussing sensitive issues or problems. It’s even harder to perceive these issues neutrally. Founders can have their own biases or assumptions about their co-founders, potentially affecting any resolution efforts. Add in the fact that disagreements can get personal, escalating the problem even further, which results in cognitive inertia (i.e., the inability to revise past assumptions based on new information).
This sets the stage for each founder to try to persuade the other to his or her side, without really listening to one another. This further polarizes the founder team and keeps many of the assumptions and biases in place.
Mediation corrects this by approaching business disagreements first as people problems. Founders are recognized as regular people who need to be acknowledged for their expertise and worldview without judgment or blame. Mediators do this by:
- Acknowledging perceptions or differing perspectives;
- Maintaining a communication space without blame;
- Facilitating the calm expression of emotions or negative sentiments;
- Cross-reflecting what someone said and calling out conciliatory statements;
- Finding common ground that everyone can agree on.
2. Looking at Interests, Not Positions
The mediator helps cultivate the dialogue space so the founders can talk about their problems from a rational place. They also help the founders improve how they talk about these issues. An example from Getting to Yes: Negotiating Agreement Without Giving In illustrates how mediators do this:
“Two men are quarreling in a library because one wants the window open while the other wants it closed. No solution satisfies either of them; neither a crack, halfway, nor three-quarters of the way closed will do. Enter the librarian. She simply asks one why he wants the window open, to which he replies, ‘To get some fresh air.’ The librarian then asks the other the same question, to which he replies, ‘To avoid the draft.’ After thinking about it, the librarian opens wide a window in the next room, which brings in fresh air without a draft, satisfying both.”
Mediation looks at interests instead of positions. The position is what someone wants, while the interest is what lies underneath. Disagreements lock us into mental schemas that make us prove why we are right, preventing us from looking at our interests fully.
A good mediator will guide the conversation and ask open-ended questions to uncover each founder’s interests (why they want what they want). Unearthing each founder’s interests then becomes the basis for the joint problem-solving process that the mediator uses to find solutions that meet everyone’s needs.
3. A Collaborative Problem-Solving Process
There comes a point in every mediation where the co-founders must make some decisions about next steps. If the mediator has done their job well, having explored their interests while setting them up to understand each other’s perspectives, the next step should be an exciting one.
Much like a brainstorming session, the mediator facilitates this collaborative problem-solving process to get clear on what the founders will do next. For example, if the founders disagreed about their equity split and the perceived uneven contributions each founder was making, part of the joint problem-solving process would be to get clear on the equity split and better define each person’s roles and responsibilities. That would then be memorialized either in a memorandum of understanding or an official mediated agreement.
To get to this place, the founders must collaborate, working together to define what is reasonable and fair for their situation. Most importantly, should the founder team get to an agreement, it’ll also hopefully keep everyone on the team motivated, energized, and incentivized to do their best work. The mediator structures this part of the conversation by reminding the founders of their perceptions and interests involved and by looking at the following:
- What shared interests exist between the founders;
- Acknowledging preferences on issues without judgment;
- Finding opportunities for mutual gain;
- Presenting industry standards and norms;
- Reality-checking options and agreements made.
This produces a range of options that the mediator and founders can work through to produce a result that leaves everyone equally satisfied.
Mediation Restores the Working Relationship
One of the tangible benefits of mediation, if successful, is the restoration of the founders’ working relationship. They’ve addressed their “conflict debt,” did the hard work of being uncomfortable together, and corrected past assumptions, resulting in a cathartic feeling of elation.
Best of all, mediation is usually reasonably priced, which means it could save your startup and get you back to doing what you love most: building your business.
The collaborative space that results also produces more openness, a willingness to communicate differently moving forward, and enhanced trust.
Bottom Line
Mediation can help resolve your co-founder disagreement and save your failing business partnership by separating the people involved from the issue, unearthing the founders’ interests while allowing everyone involved to tackle potential solutions collaboratively. Don’t let a co-founder dispute kill your startup — try mediation before it does.
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Who am I & why should you listen to me?
I am a certified mediator and executive coach that specializes in resolving co-founder disputes and helping founders become the best leaders they can be.
I have brokered high-stakes equity deals between founders, dissolution agreements, and have coached dozens of executives and business partners to lead a pace that aligns with or surpasses their startup’s growth. I’ve also consulted with the United Nations, USAID, MUFG/Union Bank, and more.
I have found that no negotiations are ever the same — and it usually comes down to the business partners’ willingness to move forward. You can learn more about my work at my website or connect with me via LinkedIn.
