To be upfront, avoiding governance disputes is fundamental. It is a prerequisite for maintaining a healthy work environment that is geared toward growth as opposed to one that is reacting to issues that need your attention. Though there are several effective ways to operate a company, the following example comes from the book about the entrepreneurial operating system called What the Heck Is EOS by Gino Wickman & Tom Bouwer. Though we are advocating or recommending you incorporate the system into your business, we want to highlight one of the metaphors they used that will segue nicely into our first point.
Think of a circle; inside that circle, there are arrows pointing in different directions. “…each manager or department has different priorities and does things differently. As a result, employees get pulled left, then right, and then told to go backward…When people have different objectives, the arrows all point in different directions…” A lack of alignment and direction is what causes disputes, and it blocks efficient growth.
Establishing Clear Roles
Align the arrows. Each employee or leadership team member needs a clear understanding of their roles and responsibilities. It sets parameters in which they can operate. When everyone in your organization knows their task, mission, and purpose, there is no confusion on reporting lines (for an efficient flow of critical information) and decision-making authority. One of the easiest ways to create tension or a dispute is when two or more people believe they have overlapping responsibilities.
Make It Visible
To build off the previous section, businesses should devote time and resources to developing a governance framework. How do decisions get made? Who makes them? Both of these questions can be answered when established communication channels pair with established conflict resolution mechanisms. The chain of command used in military organizations exists because it facilitates solving problems on the lowest possible level.
Think of the new hire who goes to a vice president’s office because they are concerned about how to respond to a client’s email. The concern is not that the new employee is bothering someone above them. This new hire doesn’t understand how decisions are made, and conflicts are resolved. If this happens in an organization, they either don’t have an established governance structure or fail to communicate with their employees. When the framework is documented and readily accessible, every organization member understands where their information is coming from, who to speak with when there is an issue (which could be anything), and their ability to resolve it.
Bring People In
Governance structures identify who makes decisions, but that doesn’t mean they must be made in a vacuum. Leaders may make the mistake of assuming that they look weak when they ask for other people’s opinions. But promoting a collaborative decision-making process is effective leadership on any level. Bring in your key stakeholders whenever possible. Not only is bringing in different perspectives and gathering input foster ownership and accountability, but it reduces the chances of disputes. Again, there needs to be a clearly-defined person responsible for making the decision, but there is no limit on who can provide you with the information you need to make the best one.
Find Your Structure
The business law attorneys at Trembly Law Firm have extensive experience and knowledge in helping businesses understand the rights and obligations of shareholders, corporate procedures, and assisting with conflict resolution through negotiation, mediation, and arbitration. To learn more about how we can assist you with creating a shareholder agreement that helps your business run efficiently, contact our office today to schedule your consultation.