Start The New Year By Learning To Avoid Bad Business Relationships

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Business runs on relationships. Which means that as with personal relationships, we can and will make mistakes. Every marriage starts out with the best intentions, but 30% (at least) end in divorce. Every CEO is hired with optimism (and great investment.)  But a significant percentage will end in forced turnovers, most of these due to ethical problems.

Failed relationships in business have high costs, both financial and emotional –expensive golden parachutes, failed hires who waste costly training, partnerships and investments that lead to misery and conflict, investments that make you wish you had put your money anywhere else, buyouts that lead to the destruction of a business you’ve nurtured over decades.

The owner of a branding firm, listening to a talk on how to get the ideal client, asked, in the Q &A, “Ok, but what about nightmare clients?” A venture capitalist told me her firm’s biggest problem is finding out—too late—that the founders of the firms they’ve invested in are impossible to work with.

Can bad business relationships be prevented? Not entirely. But two strategies will help improve the odds of avoiding a painful business divorce.

• Know what positive and negative indicators to look for before entering into a business relationship.
• And think twice when positive values are missing or negative ones raise red flags.

Positive Indicators

Elsewhere, I’ve laid out a model of leadership that identifies 5 essential character traits and cognitive capacities you should look for in a leader before you entrust him or her with responsibility for fortunes and lives. The model is based on a marriage of two unexpected bedfellows—100 years of research and thinking in psychology and psychoanalysis, and a remarkable document on leadership, the Army Field Manual on Leader Development. Possession of these five vital capacities does not guarantee success. But significant deficiencies, combined with a failure of self-awareness and absence of the ability to learn and develop does guarantee failure or disaster. The five capacities are:

• Trust—the ability to inspire trust and trust others
• Self-control/Discipline
• Judgement/Critical Thinking
• Self-Awareness
• Empathy

Assess these five positive traits before committing to an important business relationship.  We all have weaknesses and deficits.  Probe to see if your perspective partner/CEO/President/senior manager is aware of the areas where he needs to improve and has specific, meaningful ideas about how to accomplish that. He should be open and non-defensive with a concrete plan for dealing with areas of deficit. You don’t need to worry about a leader who can say, “I know my vision and drive gets in the way of my being empathic, so I make sure I have a trusted advisor who says, ‘Slow down’ and tells me I’m neglecting to take into account the effect my decision is going to have on others.”

Negative Indicators

If you feel something is off or wrong, it probably is. Don’t ignore your gut reaction out of wishful thinking or search fatigue.

If someone has behaved badly in the past they are likely to do it again, unless they’ve gone through an extensive process of self-examination and personal change and can openly describe this process. By all means give someone a second chance, but only if he or she has tackled the personal vulnerabilities that led to past problems and has an ongoing plan to deal with them. Non-defensive openness in discussing this plan is essential.

Pay attention to red flags.  A history of litigious behavior is a non-starter. So is any hint of dishonesty.

As you are getting to know a potential partner in business, listen to what she reveals when talking about her past business relationships. And pay attention to how she treats you as you jointly negotiate the early phase of a working relationship. A person’s character comes through whether she’s planning a get-acquainted lunch or negotiating a high-stakes merger. If someone is exhausting when you are trying to set up a phone call, you can be sure it won’t be any better when you are closing a major deal.

I watch for personality traits and habitual behaviors that predict business relationship difficulties. Here are some character types that lead to problematic and tiring business relationships:

• Blamers – Don’t sign on with people whose narratives of their past business relationships are dominated by grievances and blaming. Oddly, some people with this character trait can be very engaging. They tell stories of alleged unfairness that are compelling and may activate an urge in you to prove you’re better than all the villains they’ve encountered in the past. Don’t fall for these “convincing blamers.” Always look for self-awareness – does the person think about hiscontribution to a past problem?
• Dependent types—While this is unlikely to be a problem in CEO selection, be on the lookout for this trait when you’re considering taking on a new client. Do you feel like you have to do all the thinking, planning and organizing? Some people quickly turn every relationship, business or personal, into a parent-child one. They don’t want your expertise, they want to be taken care of.
• Over-idealizers –Beware of individuals who think you are just fantastic and tell you that repeatedly. Some who practice this flattery are sincere, but the idealization can flip into blame when you disappoint (see "blamers," above). For others, it continues unabated, covering up an immaturity and mental laziness that will leave you doing all the work.
• Entitled and exhausting—This trait will show itself in the earliest contacts. The danger is you won’t take it seriously. I was once approached by another consultant who wanted to talk about collaborating on an approach to a new market. As we planned a get-acquainted coffee, she suggested a café near her apartment, in a neighborhood I never have reason to go to.  I decided to be agreeable and met her at the place she requested, telling myself the inconvenience was no big deal.  And it wasn’t. But the character trait of entitlement was. I should have known that our first foray into joint consulting would be awful. I had to quickly terminate the nascent partnership.
• Strangely passive/indifferent—Unfortunately, this personality problem is difficult to detect early on—it emerges over time. As you try to work together you find yourself getting increasingly frustrated by the other person’s lack of initiative, emotional flatness and willingness to let nothing happen. Get out when you can.

People in business are constantly entering into relationships—choosing a critical leader, engaging an advisor, considering a partner or buyer, investing in a new CEO’s business, contracting with a new client, agreeing to be a mentor. Giving some thought to the personality issues and interpersonal psychology underlying relationships can help prevent sunk cost, regret and frustration down the road