By: Carl Koerner
Client issues often arrive like schools of fish – rapidly and in huge numbers. Sometimes this is the result of external events such as tariffs, shifts in the credit market, constraints on supply or falling demand. But sometimes there are no external events and I am left to conclude that it is just something in the air (cue Phil Collins), karma perhaps. Lately, I have been working with several clients who have been grappling with the challenges that come when business enterprises of different cultures combine.
I am speaking about two very specific culture types. One, which I call the “handshake” culture, finds its origins with entrepreneurial companies that are built upon a foundation of trust and friendship. Often these companies are formed by, and do business with, friends who bonded as children, during college or military service. The business relationship is mostly characterized by trust and many rely upon unwritten agreement. If written, the documents drafted are sparse and completed without attorney assistance. Business disputes are hashed out face-to-face based upon principles of fairness. As the business grows and more definitive documents are required – usually to satisfy outside parties such as the IRS, banks, auditors or investors – the agreements are completed as an afterthought to the business arrangement that has been formed.
The other culture is a “handbook” culture. It is common in larger, institutional organizations. In this environment, relationships are less meaningful. The faces change constantly. One quickly learns that the parties who negotiate a business arrangement will rarely be around when a problem occurs. Words are more important than relationships. Agreements tend to be formal, detailed and lawyerly. Everything is documented and when a dispute arises the first reaction is to look to the documents.
Inevitably, handshake and handbook cultures combine. The handshake entrepreneurs are attracted to the deep pockets, access to resources and stability that come with handbook companies. Handbook companies are attracted to new ideas, new markets and new methods that bubble up from handshake entrepreneurs. Since my clients are mostly entrepreneurs, I am usually on the handshake side of these deals. It is always fun during the due diligence phase when the handbook company acquirer seeks out data about its target handshake company and its agreements. Sometimes the “agreements” we have to provide are nothing more than an exchange of emails supplemented with notes on the back of a beer coaster.
Eventually the parties make a deal. As with any marriage of opposites, in time, the bloom comes off the rose. The handshake parties bristle at the forms and processes and “militaristic discipline” imposed by their new partners. The handbook owners rail against the seat of the pants management style of their new company. The grumbling usually diminishes as each side learns to coax the other onto some common ground.
But, sometimes the unexpected occurs, and despite detailed agreements and lengthy preparation, a path to resolution is not clear. The handshake parties seek a resolution that relies upon the relationship that they believed they were establishing with their new partners. The handbook side attempts to fashion an agreement by pointing out various terms in the written contract and interpolating a result from the principles laid out. At this point, both sides are talking past each other rather than with each other.
I have encountered this scene many times and have come to view this part of my practice as a form of marriage counseling. I remind my handshake entrepreneurial clients what it was about their institutional counterparts that they were attracted to originally and how those attributes come hand in hand with a rule-book mentality. I ask the institutional counterparts to do the same; recognize that the value they sought in combining forces with the handshake partner was created out of this notion of entrepreneurial comradery. We then explore opportunities to fashion common ground. It is a challenge and calls upon new skills for all involved. The reward is a heightened sense of trust and clearer understanding of the shared business relationship.