Conflict Management
The first work-related conflict I can think of is Mark Zuckerberg booting his co-founder Eduardo Saverin out of Facebook back in 2005. I learned about this from the movie The Social Network, which is a more dramatic adaptation of the actual event. The short clip below from the movie depicts the unpleasant disagreement between the cofounders, from Saverin's (one in the suit) perspective.
When Facebook first started, Zuckerberg asked Saverin, a friend from Harvard University, to put $15,000 in a bank account that could be accessible to both of them that went toward the websites servers. Saverin was also in charge of the "business" side of the company because of his affluent background and many business connections. The website took off so well in 2004, that the cofounders and another Harvard Business school student Muskovitz formed Facebook as a limited-liability company. That was the high point of Zuckerberg and Saverin's work-friendship, and things quickly went down hill from there.
When Zuckerberg and some other software engineers of Facebook moved to Palo Alto to work on Facebook.com, Saverin went to New York to work for Lehman Brothers for an internship. In the mean time, Zuckerburg asked him to set up the company, get funding, and set up a business model. However, instead of doing those three things, Saverin ran unauthorized ads for his personal startup, Joboozle, on the Facebook website. This infuriated Zuckerburg not only because Joboozle was a potential competitor to Facebook, but putting its ads on Facebook for free was particularly disrespectful of Saverin. What really put the cofounders' relationship on thin ice was Saverin's delay on signing crucial documents that were required for Facebook's funding, even though Zuckerburg had offered Saverin frequent flyer miles, so that he could be present for the signing in Palo Alto.
That was when Zuckerburg decided to cutting Saverin out of the company by reducing Saverin's stake by creating a new company, and then distribute new shares in the new company to everyone but Saverin, in attempt to regain control over Facebook instead of having to run everything by Saverin first. After diluting the shares, Saverin's stake got reduced to less than 10%.
The conflict between the cofounders started off with one party not doing what he promised the other party. After a series of actions of betrayal (running free ads, not getting funding, not signing important financing documents), the other party needed to save the company by regaining most of his control. I would say this was quite inevitable because when the partner acts only based on his own benefits, there would be no room left for negotiation, especially when every step of the decision making process mattered because of how new the company was. Saverin acting out so early on gave Zuckerburg no choice but to reduce his shares to save the company.
When Facebook first started, Zuckerberg asked Saverin, a friend from Harvard University, to put $15,000 in a bank account that could be accessible to both of them that went toward the websites servers. Saverin was also in charge of the "business" side of the company because of his affluent background and many business connections. The website took off so well in 2004, that the cofounders and another Harvard Business school student Muskovitz formed Facebook as a limited-liability company. That was the high point of Zuckerberg and Saverin's work-friendship, and things quickly went down hill from there.
When Zuckerberg and some other software engineers of Facebook moved to Palo Alto to work on Facebook.com, Saverin went to New York to work for Lehman Brothers for an internship. In the mean time, Zuckerburg asked him to set up the company, get funding, and set up a business model. However, instead of doing those three things, Saverin ran unauthorized ads for his personal startup, Joboozle, on the Facebook website. This infuriated Zuckerburg not only because Joboozle was a potential competitor to Facebook, but putting its ads on Facebook for free was particularly disrespectful of Saverin. What really put the cofounders' relationship on thin ice was Saverin's delay on signing crucial documents that were required for Facebook's funding, even though Zuckerburg had offered Saverin frequent flyer miles, so that he could be present for the signing in Palo Alto.
That was when Zuckerburg decided to cutting Saverin out of the company by reducing Saverin's stake by creating a new company, and then distribute new shares in the new company to everyone but Saverin, in attempt to regain control over Facebook instead of having to run everything by Saverin first. After diluting the shares, Saverin's stake got reduced to less than 10%.
The conflict between the cofounders started off with one party not doing what he promised the other party. After a series of actions of betrayal (running free ads, not getting funding, not signing important financing documents), the other party needed to save the company by regaining most of his control. I would say this was quite inevitable because when the partner acts only based on his own benefits, there would be no room left for negotiation, especially when every step of the decision making process mattered because of how new the company was. Saverin acting out so early on gave Zuckerburg no choice but to reduce his shares to save the company.
One wonders whether this happens a lot at startups founded by younger people. They live in the present and may not have a good idea of what should come next. Also, who is a part of organization in the early days may be determined by convenience as much as by being the right person for the long term.
ReplyDeleteDo you think you could have tied this breakup to the content that was in Bolman and Deal's chapter 8? The point of this exercise was to illustrate the general principles in that chapter. I didn't see you try to do that in this post. Might you try in response to my comment?