Strength at the Broken Places

“The world breaks everyone and afterward many are strong at the broken places.” So wrote Ernest Hemingway in A Farewell to Arms. I think businesses are like that, too. Scan down the membership list of your trade association or take a moment to look at the businesses passing by your car window. Every one of them is a survivor. Every one of them, at one time or another has collided with the world and come out broken. The question is whether, eventually, they became stronger at the broken places.

Several years ago, one of my clients experienced a shareholder break-up. One of the shareholders, after five years in the business, wanted out. They turned to the Stockholders’ Agreement which had been signed at the formation of the company. It did not serve the company well. Apparently, the founders had decided that they would be overly generous to a departing member of the group – each having envisioned himself as the one to leave. Now that the others wanted to carry on, they were burdened with an agreement that placed the company in a very precarious cash situation because they had to pay the withdrawing stockholder much more than the true value of his share.

They put the issue on the back burner for three years, but they finally came together to discuss the issues. Each shareholder evaluated each scenario of departure – death, disability, voluntary withdrawal, termination for cause, and retirement – from both sides of the equation. They considered what would enable the company to move forward and what arrangements would constitute a fair return for the departing shareholders. It took a bit of soul searching, but they finally executed a new agreement that made them stronger in their broken place.

Breaks come in every conceivable form.

  • Companies lose money on projects every day. The good ones figure out why. Did the problem lie in poor estimating, poor execution, an inefficient workforce, indifferent supervision, or an inequitably drafted contract?
  • What if an employee leaves for a competitor and takes a boatload of business with her? Is there a non-compete in place and, if so, is it strong enough to accomplish what you want it to do?
  • Years after signing a lease, the business owner listens to her peers discussing landlord/tenant issues and realizes she could have negotiated a better deal. There’s no going back. The question is “what is she going to do about it when her lease comes around for renewal?”

Consider the history of your own collisions. Examine the breaks. Ask why they occurred and describe the outcome you would have wanted.

Now ask the real question: “What have you done to make yourself stronger in the broken places?”

This entry was posted on Tuesday, March 18th, 2014 at 8:18 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.