Last week I worked with three entrepreneurs related to a new company. This was not a mediation or negotiation, but a facilitation. There are three individuals associated with this transaction. These individuals will be referred to as “A”, “B” and “C”.
“A” owns the existing company but was negotiating with “B” and “C” relative to the new company and stock ownership. “B” brought in 50% of the revenue and has an offer to leave. “C” heads up operations and is considering her options if “B” leaves.
As a Best Alternative to a Negotiated Agreement (BATNA) the existing company would need to contract to one third to one half its current size if it does not reorganize into a new company.
As a Worst case Alternative to a Negotiated Agreement (WATNA) the existing company may have to file for bankruptcy.
These are serious times for the existing company.
What might the new company look like?
“A” proposed keeping 60% of the stock with “B” and “C” each at a 20% ownership.
“B” proposed 33 and 1/3% for each.
“C” proposed something similar to “B” with “A” and “C” having a little more and “B” with a little less.
Compensation was also discussed as well as other issues, but simplifying the complexities, I will simply address the stock issue.
In the end considering the 20 prerogatives of control (Mercer page 48) they reached a tentative agreement for voting stock and an enhanced value for “A” with a disproportionate share of non-voting stock to bring his overall financial situation to 60% on distributions and for a potential eventual sale of the new company perhaps ten or more years from now.
Individual Voting Stock Non-Voting Stock Total Shares % Ownership All Shares
A 50 25 75 60%
B 20 0 20 16%
C 30 0 30 24%
Total 100 25 125 100%
In order to have control in this state venue one needs more than 50% of voting stock. In this scenario no one has control with over 50% of the voting stock. However, “A” cannot make a decision without either “B” or “C” (50% and 20% for A and B = 70%, or 50% and 30% for A and C = 80%). “B” and “C” together cannot make a collective decision either since together they own only 50% voting stock ((20% and 30% = 50% ).
But with what happened along the way, you can learn a little bit about brainstorming, negotiations and neuroscience.
Working with some neuroscientists (I am not a neuroscientist, but I find what they are doing to be of extreme interest related to negotiations and mediations) I continually am learning and find their work directly applicable to both my mediations and negotiations. In this case I was involved with a facilitation.
I want to share an article with you entitled “The Emotions That Make Us More Creative” from the Harvard Business Review written by Scott Barry Kauffman dated September 12, 2015. Some of the excerpts from this article are very enlightening and if you find this of interest I encourage you to read the entire article.
“The long-standing view in psychology is that positive emotions are conducive to creativity because they broaden the mind, whereas negative emotions are detrimental to creativity because they narrow one’s focus. But this view is too simplistic for a number of reasons.”
This has been my experience as well.
“Over the past seven years, research conducted by psychologist Eddie Harmon-Jones and his colleagues suggests that the critical variable influencing one’s scope of attention is not emotional valence (positive vs. negative emotions) but motivational intensity, or how strongly you feel compelled to either approach or avoid something.”
“So next time you want to keep an open mind and see the big picture, it’s probably best if you’re just in a pleasant (or even sad) mood. If you are too passionate about the activity, you may miss the forest for the trees. If, however, you really need to buckle down and focus on making a new idea practical, high motivational intensity can be just the ticket.”
In the end research has found:
“There’s something about living life with passion and intensity, including the full depth of human experience that is conducive to creativity. In my own research, I found that “affective engagement”— the extent to which people are open to the full breadth and depth of their emotions— was a better predictor of artistic creativity than IQ or intellectual engagement.”
For those that know me, they know that I am a very passionate person. They likely have heard me say that my wife states that “Mike really doesn’t work he just has fun”. My clients have called me a solution provider, a negotiator and mediator, and a leadership developer. I have found having a passion for what I do seems to make me more creative and to offer insights from several perspectives often not seen or considered by others as a negotiator. However, as a mediator, I have found I need to come to peace with myself and be there to encourage creativity, listening and understanding between the parties. In these instances I force myself to be reserved and to ensure the process is balanced with the parties making the decisions in client based mediation
As a facilitator in this instance the three parties trusted me to work with them to explore their individual and collective interests. After some initial background from each I asked each of them to share:
What they are most proud of with the existing company?
What would they like to keep?
What would they like to stop?
What would they like to start?
After that I asked each what they thought the new company compensation package should look like for each as well what the stock ownership plan. Four hours later they reached the conclusions on stock ownership presented above.
There are times when we may need to be passionate and times when we need to be reserved. Knowing which is applicable and when is key to resolving many differences. Bringing on someone to help with facilitation, mediation or a negotiation can help the parties work towards issue resolution. A real key is trust in that person and the willingness of the individuals to work with the process.
About the author
Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at firstname.lastname@example.org and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]