Conflicts between partners : The end of a start-up company

Although conflicts between group members could be the most common thing for a company, it does require democracy policies, the wisdom of solving problems and understanding built during the long term working experience. If not handled properly, the situation could get worse which would affect the productivity and the future development of the group and the company. During my first internship, I witnessed a start-up company collapsed because of the conflict between partners.

The company I worked before is called Genius Education, just as indicated in its name, it is a educational company which is devoted to a worldwide student activity known as MUN( Model United Nations). The most famous program  of Genius Education is called “Traveling and Learning in USA” which packages the MUN meeting held by the big name university such as Harvard and Yale with the traveling around USA  together. Since the worldwide popularity of MUN and the big name university convinced most parents that taking part in this program will help their children applying for american university, it was a great success at beginning. However, the surprising amount of cash in hand made the partners think different way of the development of the company in the future. Two of them think they should split the money even and sell the company to those who are interested such as New Orient( a famous Chinese education company, the stock quote is EDU). However, Mr. Li, who I was working for insists on keeps the company and use the money earned to reinvest. Because Mr. Li is always like the big brother of the three, the other two obeyed him at first. But the ugliest thing happened two months later, when Mr.Li taking his students to Harvard to attend Harvard MUN meeting, the other two took all the money in the company’s account, fired all the employees, emptied the office and left to HongKong. Obviously, it is too late when Mr.Li realized what happened and went back to Beijing.

Technically, there is no conflict at all but only the disagreement between three “brothers” who started the company together. Mr.Li was not even given the opportunity to argue for his opinion before the end of the story. But he did analyze why he failed to us who were still working for him in his new company. According to him, the reason why the company ended like that is due to how he managed the relationship between them. Before, he is always the man who speaks of the three, almost in every meeting he is the one in front of the PPT screen, summarizing the work and describing the future of the company. In his plan,he should be the one to control the direction of the company,and under his lead, as long as the other two can finished the work assigned, the company will be as successful as New Orient. Besides, he is a type A person while the other two are not, so after all the hard work and sacrifice they made, they just want to liquidate the company rather than moving forward. So what made the other two ended the company so ugly is the lack of communication space and strategy since based on the past experience, they believed there is no chance that Mr.Li  would change his mind. In addition, Mr.Li relied too much on the relationship built on before between them before and gave so much power to the other two that they can made the final decision without the agreement of Mr.Li.

He said what lead to the tragedy is he did not understand what the idea of company really is and how the company should work. For me, the biggest mistake he made is that company should work on agreed rules rather than personal relationships , although it is quite difficult to change the what they think of the company personally, it seems that one possible way to solve the problem is to come out with a exit strategy for those who does not want to work for the company any more  at the beginning.

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2 comments

  1. profarvan · November 3, 2014

    This is an odd story and I can’t tell whether it is a good example of conflict or not. Were there warning signs of the break up beforehand that Mr. Li Ignored. You said he was a type A personality and the others weren’t. Did the others have it out with Mr Li about getting their capital from the company.

    The other issue, whether this is an example of conflict or not, is whether the outcome was efficient. If i’m understanding things, the other alternative that might have been efficient was to have company keep going with Mr. Li buying out the other two partners. Would that haven been possible? I’m guess here as I don’t know the details, but if Mr. LI had access to borrow and the ability to hire others to work in the company, but ignored doing this, then it seems that the other two partners didn’t think they could get to this outcome via a reasoned face to face discussion. And if that’s true, by Mr. Li aiming for the moon, he ended up with nothing.

    There is an expression that goes – half a loaf is better than none. It seems applicable here.

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    • shiyuchen1992 · November 4, 2014

      Yes, the reason that the other two ended the company in that is because they don’t think that they can get their shares fairly by a face to face conversation with Mr Li. As I indicated at the end of the story, if they agreed before setting up the company on what to do if someone wants to quit the outcome could be efficient.

      Like

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