One of the reasons companies close down is mismanagement.  This includes improper (or lack of) management structure, lines of authority, and rules of decision making. Especially in family businesses and partnerships, they do not separate shareholding and executive roles.  At every meeting, the largest share holder can seem to dominate decision making just because he/she has got more money in the game.  Usually, the smaller shareholders feel uninvolved or perhaps forced into complying into the decision.  What is the percentage of buy-in, do you think, in these situations?  Close to nil. So what happens afterwards?  Could be mutiny, false harmony, or the end of a possibly good partnership.

So what can be done to prevent this?

  1. Realize that shareholding and executive positions are two different things.  You may have the biggest shareholding, but if you have been assigned the role of a Sales Director, you must respect the decision of the CEO (even though he/she is holding the smallest amount of shares)
  2. If the partners still has to remain active, appoint the right person for the right job.  If your strength isn’t being a CEO, don’t put yourself at the CEO level just for the sake of being in charge.  You will make the company fail!
  3. Gradually transition out into professionals.  Build your business so that it can work without you. At the end of the day, we’re only humans!  It’s hard to wear different hats and 100% never have a conflict of interest between our shareholder role and our executive role.  That’s why the best companies have chosen to build their foundation and systems, and hand the executive positions over to the professionals.  In this way, the shareholders then focus on creating and expanding the vision and keeping the executives accountable. Clarifying roles is probably the most important things to do in order to start reaching your company vision.  There’s nothing like bad management to bring down a great company.


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