Memoirs of a Mediator: Lessons in Conflict

I doubt there is anyone reading this who hasn’t experienced interpersonal conflict, first-hand. Don’t worry, it’s quite normal for conflict to arise within different types of relationships. We experience it with our friends and loved ones, in our place of work and within our communities.

Conflict is like fire. If wielded properly, it can power the continual growth and prosperity of your business. However, if treated with reckless abandon, it can burn everything to the ground.

As a mediator for several years, I noticed that most disputes eventually boiled-down into interpersonal issues, or ‘people problems.’

This was especially true when the two parties were previously engaged in a business relationship. As an objective intermediary, I marveled at how people could allow petty differences to escalate to a point that necessitated legal action.

In our current legal landscape, it is only natural that disputes escalate quickly to the ‘point of no return.’ Our court system, by and large, condones an ‘all-or-nothing’ framework where you either go ‘all-in’ to litigate or walk away completely. This heightened threshold for legal recourse prompts many ‘would-be’ litigants to intensify their claims in an effort to maximize their potential gains within a slow, expensive and painstaking legal process.

Enter mediation. Unlike traditional litigation, mediation shifts the onus of control over the outcome back to the parties themselves. It also redirects the focus of the parties away from hostile aggression and toward repairing damaged relationships.

When parties decide to mediate, they enter into a collaborative process that requires both negotiation and compromise to effectively resolve the dispute. This serves as a huge step in the direction of repairing the underlying relationship, an objective that is all but non-existent within most legal channels.

For those not familiar with mediation, it is a form of alternative dispute resolution (ADR) that is gaining popularity both inside and outside of the justice system. Today, practically every case that goes through family law or probate court now requires mediation. However, it still has yet to penetrate into other areas of law, where I believe it could make a similar or even greater positive impact.

Mediation requires both parties to consult with a trained mediator, or neutral 3rd party, who has but one clear objectiveTO SETTLE YOUR CASE.

While different styles of mediation exist, there are a few basic ground rules that every mediator must follow:

  • It is voluntary — parties must agree to mediate and can walk away from the process at anytime.
  • It is confidential — anything communicated during the mediation process is strictly confidential and cannot be used later during trial.
  • It is a neutral process — mediators must act as neutrals and cannot bestow favor to either party.

I first fell in love with mediation during law school. On a whim, I enrolled in USC Law’s Mediation Clinic (admittedly, I heard it was an easy A) and within a few short months, I had my first taste mediating actual cases in small claims court.

Since that inflection point of my life years ago, I've mediated over one hundred cases that spanned various practice areas, including:

  • breach of contract
  • divorce
  • defamation
  • personal injury
  • IP protection
  • class-action suits against local government
  • equal protection
  • insurance claims
  • probate issues (i.e. trusts, wills and estates)

What I loved most about mediation was being able to use practical problem-solving skills to help others in a meaningful way. Mediators need to be creatively adaptive, since settlements can consist of practically anything that can be agreed upon in writing. Case in point, I once settled a heated dispute on the verge of trial over a handshake and heartfelt written apology.

Remember when a close friend provided great relationship advice or feedback that you hadn’t before considered? Similarly, mediators have an ‘outsiders advantage,’ where they have the ability to evaluate complex situations with greater clarity and objectivity than the participants themselves.

As previously mentioned, I firmly believe that most types of conflict can be boiled down into ‘people problems.

Here are some of the most common drivers of conflict I’ve encountered:

  • defending perceived notions of fairness justice
  • needing to be heard, acknowledged and validated as a legitimate victim
  • seeking reprisal for perceived disrespectful or discriminatory actions
  • defending one’s ego or sense of self-worth

What surprised me the most was how often the transgressions at issue were actually the result of prior misunderstandings. I witnessed, first-hand, how easy it was to fall into the trap of jumping to conclusions whenever a breakdown in communication occurred. This fallacy often became self-fulfilling, especially once legal action commenced which, by its nature, is adversarial and antagonistic.

Think of a recent dispute you had where, after reaching out to the other side, you realized it was all just one big misunderstanding.

If most conflicts are the result of misunderstandings, and misunderstandings are caused by poor communication, then the path of least resistance to preempt future conflict must be to improve communication.

The Resolution Co, our main goal is to help founding teams of startups improve their communication and transparency with one another. However, we believe there are a few simple steps that anyone can take to prevent unhealthy conflict within their existing relationships.

  • Work on establishing healthy relationships as early as possible, where you are comfortable being transparent and open with each other.
  • Make an effort to truly understand the interests and motivations of others. Do not habitually make assumptions about how a person actually thinks or feels.
  • Make time to check-in regularly with each other to share important thoughts and feelings that touch upon the basis of your relationship.
  • Make it a habit to push back whenever prudent or necessary. Holding in grievances related to perceived transgressions will likely lead to more serious conflict down the road.

If you are an entrepreneur who is suffering from unhealthy conflict within your startup (or know someone who is), know that this is not uncommon and there are people out there willing and eager to help! It takes courage to admit to having a serious problem, but once you take that initial first step, you will be far better off for it!

Wishing you the best!

Christopher Chen, Esq.

Co-Founder @ The Resolution Co.

The Entrepreneurs' Checklist - Chapter One: Co-Founders

At The Resolution Co, our goal is to help ensure that every aspiring entrepreneur is both well-informed and prepared for their next business venture. To help you along your journey, we’ve created a brief checklist series that covers the nuts-&-bolts of what every entrepreneur should know before moving forward.

#1: Co-Founders — Where should I be searching for co-founders?

Noam Wasserman, a former HBS professor and author of The Founders’ Dilemmas (a book I HIGHLY recommend), discovered a key insight in his dataset when it comes to choosing co-founders:

In a nutshell,

Former Co-workers > Strangers/Acquaintances > Close Friends or Family

Here are a few of the main reasons why you would want to partner with former co-workers over friends/family or acquaintances.

  • You’ve already established a professional working relationship;
  • higher comfort-level when exchanging critical or constructive feedback;
  • minimal collateral damage if the relationship were to dissolve;
  • and direct experience of either managing or being managed.

Here are a few reasons why partnering with strangers or acquaintances may be more favorable for your business than with close friends or family.

With close friends or family, there is a pre-existing relationship that runs counter to a healthy working relationship.

[How do you tell a close friend or family member that they are under-performing, or even worse, that they are no longer needed for the business?]

By selecting from your pool of family and friends, you run a serious risk of irrevocably harming your pre-existing relationships. In my opinion, that is almost always too steep a price to pay for the marginal added benefits of familiarity and camaraderie.

On the other hand, there is no pre-existing relationship with acquaintances, so you can work together on building a healthy professional relationship from the ground-up. Also, there is practically no risk of collateral damage to your social life or close family ties in the event things go sour in the future.

#2: Co-Founders — Do I even need any? What about flying solo?

While running a business by yourself (as a “solopreneur”) and having full decision-making authority may be an attractive option for some, a few major drawbacks to consider are:

  • Difficulty raising funds: investors typically see “solopreneur” businesses as extremely risky investments.
  • You may rely too heavily on your own strengths & abilities while discounting the value or necessity of your functional areas of weakness.
  • There is nobody else to bounce ideas off of or to give you a reality check, especially when needed.
  • The weight of the world will be on your shoulders — Trust me, startup life can be really tough, especially if you’re doing it right!

#3: Co-founders: How to choose ones that are a ‘great fit’ for your business — (Values & Company Vision)

While functional expertise may be critical, an often overlooked consideration when choosing co-founders is how well they align with your own values & vision for the company.

Company Values

Sam Altman, of Y-Combinator, once said, “the team you build is the company you build.”

When your company starts to scale, its core values will likely spread from ‘top-down,’ starting with upper management. Therefore, if you want to create a clear and unified company-wide culture, you should start early by selectively choosing co-founders and early hires that align with your set of values and vision for your company culture.

Vision for the Company

This may come as a surprise to many, but the period of time when most high-growth startups fail is right after they close their first round of financing.

Think about it.

[Long story short: money changes people.]

How would you feel if you:

  • built your company from the ground-up;
  • [against all odds] managed to raise outside capital from VCs, Angels & the like;
  • and, right when it’s time to bring the champagne out, you discover that your co-founders fundamentally disagree on the direction that the company is headed in.

Can you imagine this scenario being the iceberg that sinks your company? Neither could they.

@ The Resolution Co, we believe it is mission critical for your team to be on the same page when it comes to your company’s mission, values & vision. By aligning your team early on in the process, you will significantly reduce the risk of future co-founder conflict that may lead to a messy founder divorce, or worse, the dissolution of your business.

#4: Co-Founders — How to Assign Roles, Responsibilities & Decision Making

According to Wasserman’s study, autonomy and power & influence were top motivators for entrepreneurial men in their 20’s, 30’s & 40’s. For entrepreneurial women in their 20’s and 30’s, autonomypower & influence and altruism were top motivators.

Of course, it would make sense that most entrepreneurs desire independenceand a sense of control from their role within a startup. However, a difficult dilemma still remains:

How do you carve up roles and responsibilities within your startup that:

1. not only satisfies your co-founders’ own desires for autonomy, power & influence;

2. but also fosters a balanced and high-performing dynamic within your team?

This question can be difficult to answer. This is especially true when your fellow co-founders have their own ideas on how their skills and expertise would be best put to use for the benefit of the company.

Another common bottleneck that can slow the growth of early-stage startups is decision-making management.

How do you decide the following?

A: Who has decision-making authority and ‘final say’ over ___________?

B: Which type of decisions must be reached by consensus or majority vote?

C: What about decisions that fall outside of the scope of A or B?

Our Advice: When delegating decision-making duties within your startup, you always want to be as specific as possible in assigning authority to avoid future conflict & confusion.

#5: Co-Founders: Splitting Equity

The decision of how to split equity can be one of the most difficult tasks for any founding team. So difficult, in fact, that one-third of founding teams choose to split equally and avoid negotiating further based on their skills, experience or relative contributions to the company.

Our advice: Don’t split up equity right away. We recommend that you wait at least until you have a better idea of how each core member will contribute to the business and what their overall commitment level will be. The last thing you want is to be careless in this process and award more equity to someone than they truly deserve in the long-run. If you don’t believe us, check out what Robin Chase, co-founder of Zipcar, had to say about her own experiences in making this early mistake!

I hope you thoroughly enjoyed this first installment of the Entrepreneurs’ Checklist and stay tuned for the next chapter in this series!

Best,

Christopher Chen, Esq.

Co-Founder @ The Resolution Co.

‘Mo Money Mo Problems’ — How Money Changes People

By now, we should all be aware that money has the power to change people. But why is this the case? While money primarily serves as a store of value and medium for exchange within our society, it also has the power to affect the minds and hearts of those fortunate enough to be given ample opportunity to seize it for themselves.

See: gambling addition, politicians, American Greed (MSNBC), Wall Street

If money is simply a resource or “thing” we all require, then why has it become such a difficult subject to talk about? And why are ‘money issues’ so often the root cause of the dissolution of otherwise great relationships?

See: Family Inheritance Disputes, Divorces, Band Breakups

My objective in this article is to highlight a few common risk factors to watch out for when entering into any business relationship, especially one with a close friend or family member.

(Think of a time you lent a close friend or family member a considerable sum of money; did you experience any change in the relationship? If so, was it a positive or negative one?)

I would like to begin with a story I recently heard from a mentor of mine, a former serial entrepreneur turned VC partner, about a colleague of his that started a business with a close friend, whom he both knew and trusted for a long time. Though he received fair warning of the risks associated with doing business with friends or family, he shrugged it off, citing his relationship as more authentic and time-tested than others he felt the admonition should apply to. As a consequence, he neglected to investigate the following:

-His friend’s principal motivations for entering into the business;

-his overall financial health (i.e. savings, disposable income);

-and his standard of living and spending habits.

He basically thought, what had happened to all those other naïve entrepreneurs couldn’t possibly happen to me.’

He was wrong. Once the business received funding and started to take off, his ‘close friend’ absconded with $500K of funding in-tow and fled the country, never to be heard from again.

Of course, not all friendships are created equal and I suspect you may believe that something like this will never happen to you. You’re probably right. However, in matters of business, it’s always better to be safe than sorry.

Whenever I wear my ‘lawyer’ hat, I advise my clients to ‘err on the side of caution’ and take reasonable preventative measures for any foreseeable outcome, no matter how dismal or improbable it may seem. Simply put, you never know what the future may hold.

Here are some common risk factors you should always be on the lookout for when entering into a new business partnership:

#1 — Persistent Self-Serving Behavior: does your partner tend to put his or her own interests over that of others within the company or over the company itself?

#2 — Perceived Unfair Treatment: does your partner feel that he or she is not being fairly treated or compensated within the company?

#3 — Large Capital Contributions: did your partner contribute a large sum of personal capital to the business that was neither repaid nor redressed in a manner that was deemed satisfactory to him or her?

#4 — Financial Hardship: does your partner suffer from financial hardships that affect his or her judgment or ability to make sound business decisions?

#5 — Other ‘Red Flags’ to Consider: gambling habits, unhealthy addictions, outstanding debts, poor credit, or excessive spending habits.

We @ The Resolution Co believe the best preventative measure against future ‘money problems’ is to have difficult conversations about money and personal finances as early as possible.

A few example topics you can start the conversation with:

‘What is the minimum level of income you require to maintain your current standard of living?’

‘What are your financial goals, both now and in the foreseeable future?’ (i.e. one-year & five-year plan)

‘Are you satisfied with the amount of money you are currently earning or projected to earn in this business?’

‘Is there anything else I should know about your present financial situation?’ (i.e. debt, dependents, future plans, etc)

Even with close friends or family, you may not truly understand how another person reacts to financial stress or ‘money issues’ until you enter into a business relationship with them. As a company continues to grow, latent ‘money issues’ can become greatly magnified. This is especially true when financial compensation becomes linked to one’s own sense of self-worth or identity and is used as a competitive basis for comparison.

At The Resolution Co, we understand that it is never easy nor comfortable for business partners to talk about issues revolving around money and finances. To address this clear pain-point, we offer affordable service packages that are designed to make these difficult, yet crucial, conversations as manageable and constructive as possible.

We offer both a highly-structured Founders’ Agreement Process and an immersive Founders’ 360 program. Both of these packages are guaranteedto improve the communication transparency and depth of mutualunderstanding within your team!

Let us help clear the air, so your team can move forward with confidence and resolve to progress with what truly matters, growing your business!

Best wishes,

Christopher Chen, Esq.

Co-Founder @ The Resolution Co.

We Used to Be Friends - Losing Friendships in the Startup Game

We used to be friends – losing friendships in the startup game

This story is dedicated to every startup team of close friends who had the courage and wisdom to seek outside help when faced with the challenge of balancing their friendship with the needs of their business.


This story begins with two close friends who dreamed of one day starting a business together. 

Their relationship began in early childhood, where they forged the strongest of bonds by overcoming the many hallmark growing pains of adolescence and early adulthood.  Collectively, they believed that the strength of their bonds of friendship gave them a competitive advantage in any endeavor they decided to pursue.

However, startup life can be a distant reality from the fantastic stories that make up the lore of Silicon Valley and its legendary unicorns. 

As the business started taking off, the two newly minted entrepreneurs transitioned into their ‘jack-of-all-trades’ roles, where no job was too trivial or mundane to take on.  All the while, they made it a top priority to sustain the level of trust they shared in the past.  However, it proved difficult at times, especially when things seldom went according to plan. 

These friends quickly learned that startup life was far more challenging and unpredictable than either had anticipated.  The day-to-day experience often felt like riding an emotional roller-coaster with euphoric highs and abysmal lows.  In order to forge ahead, they had to constantly remind themselves that there was light at the end of the tunnel and that, if anyone could pull this off, it would have to be them.     

Attempting to grow the business felt like drinking out of a fire hydrant.  There were countless jobs that needed to be done on any given day and seemingly never enough time.  Coveted opportunities were missed and careless mistakes were made.  As a consequence, tension began to manifest internally.

Somewhere along the startup journey, the friends experienced an ‘evolution’ in their relationship.  They no longer saw one another as close companions, but rather as distinct parts of a greater whole, their company.  It all started when potential investors applied pressure for them to choose a CEO and finally culminated at a point when the vast majority of time they spent together was during work.

After many trials and tribulations, the company finally reached its inflection point and began to scale.  New talent was brought on-board and a new organizational structure for the company was put into place.  Soon thereafter, the non-CEO founder discovered that his new role no longer made him privy to the internal discussions that were effectively shaping the future of the company.   

Despite the fact that his new position was a ‘solid fit,’ given his functional expertise and area of interest, he felt dejected by his relegated position within the company.  It especially hurt him, since he knew that, but for his early contributions, there would be no company in the first place.  It became clear that, over time, his identity and self-worth became inextricably tied up in the business venture.  Much like a war-hero during times of peace, he felt forgotten, discarded and confused.

Not before long, the same founder decided it was time has come for him to leave.  The CEO, his once dear friend, pleaded with him to stay.  He asked of his friend, ‘why would you choose to leave now, after we have accomplished so much together and are finally poised to reap the bounty of what we have struggled so long to sow?’   

The exiting founder replied, ‘as satisfying as this feeling of success may be, it will never be able to replace what I had lost along the way: my brother, dearest companion and closest friend.’  

The CEO took a long, hard look at his dejected partner and could only muster up the courage to utter the following, ‘I’m truly sorry you feel that way,’ before turning his back to him and walking away. 

From that day on, the two former friends rarely spoke to one another, but they shared a common curiosity as to what might have been, had they only done things differently to preserve the friendship. 


Noam Wasserman, author of The Founders’ Dilemmas & former HBS professor, surveyed over 6,000 startup teams and found that 65% of startup failures are due to co-founder conflict or ‘people problems.’  He found that teams made up of close friend performed poorer than teams made up of former co-workers or even complete strangers.

At The Resolution Co, we understand both the appeal and risks of entering into business with close friends or family members.  Let us help you navigate the dynamic of your working relationships by setting expectations early-on that will protect your cherished relationships from the occupational hazards of starting a business together! 

Best,

Chris & Nigel 

 

Great Article on Founder's Agreements!

Hey Fellow Co-Founders!

We ran across a great article that really highlights the value & impact that a Founder's Agreement can bring to a early-stage startup company.  We hope you enjoy reading it as much as we did!

Click here to view!

Best,

Chris

The Resolution Co.

SaaStr Conference - Lessons Learned

The Team with a colleague @ SaaStr!

The Team with a colleague @ SaaStr!

 

Last night, we wrapped up our involvement at the SaaStr Conference in San Francisco!  We wanted to post some juicy tidbits of information and advice from some of the biggest names in tech for our customers!  Here are a few tips we picked up:


For new founders, be creative about the problem you are solving, but don't be too creative about the business "stuff" (i.e. organizational structure, division of roles) that "stuff" exists for a reason and is proven to work.  

 - Tracy Young (Co-Founder & CEO - PlanGrid)

 

For new CEOs, one important skill to develop is to learn how to evaluate advice, especially from investors.    

-Sam Altman (President - Y Combinator)

 

[Company] Culture is something you discover; it is a function of the people you have within your organization.  

 -Joshua Reeves (Co-Founder & CEO - Gusto)

 

Try not to focus too much on valuation metrics, especially before your Series A round, to avoid undue stress.  Make sure you have a fundraising plan in place, execute on it, and always stay focused on achieving your next milestone.  

 -Elizabeth Yin (Partner - 500 Startups)

 

And, the piece of advice we think is most relevant to our business:

The team you build is the company you build.  

-Sam Altman (President - Y Combinator)

 

We hope you found these pieces of advice to be as helpful & insightful as we did!

Wishing you the best,

Chris

The Resolution Co.

Helping Great Teams Become Exceptional

Last week, we facilitated a difficult discussion between three Co-Founders that were, arguably, the most transparent and understanding group we have worked with, to date.  They talked openly to one another, trusted each another, and genuinely enjoyed working together.  My partner and I had to quickly iterate on our facilitation model, as it was originally designed for teams with pre-existing communication and transparency issues, and they had no significant issue with the former.  

One change we made during our one-on-one interviews was to ask more 'deep-dive' questions to learn more about their true intentions in joining the company and what unique value proposition they saw themselves contributing to the team and company, moving forward.  My initial impression was that their current style of communication was too harmonious and 'politically correct' to properly address internal conflict.  This is a common issue among teams that are comprised of former co-workers who, over the years, developed very close friendships.  

According to popular literature, teams of former co-workers are well suited for handling internal conflict.  This is due to their pre-existing professional relationship and direct experience managing and overcoming internal conflict.  On the other hand, teams of close friends often run into trouble when their professional relationships begin to conflict with their personal friendships and force them to make costly sacrifices in either relationship, or even worse, in both.  

Equipped with this knowledge, I followed my intuition and probed them individually on 'uncomfortable' topics amongst close friends, which included the following:

-self-perceived strengths/weaknesses;

-how they gauged their own roles & responsibilities relative to others within the organization;

-team commitment level;

-& areas of ambiguity/uncertainty within the current business model/timeline.  

Drawing from the information I obtained from our initial one-on-one interviews, I launched into the group discussion by highlighting the teams' core strengths, namely, their mutual trust and respect for one another, and explaining how these same strengths can create problems when mutual trust and respect translates into deference and reticence within individuals who ought to be voicing their opinions and concerns, especially at such an early and critical point of the startup's lifecycle.  By identifying and addressing inconsistencies in how each member evaluated themselves, one another, and the overall direction of the business, we were able to improve their communications as a team, especially in the areas of transparency and candor, which builds a strong foundation of openness to draw upon when inevitably faced with internal conflict in the future.  

Chris - The Resolution Company