Strategic Management

An Issue of Trust: How Well Do You Know Your Business Partner?

Goldman Sachs 10,000 Women empowered young Masooma Habibi. She was only 21 in 2008 when she was accepted into the program at the American University of Afghanistan in Kabul, run in partnership with Thunderbird School of Management in Glendale, Ariz. Habibi, who had a job in a decoration company, heard about the training and dared to think that this might be her calling, despite traditional Afghan views that devalued women's role in society. "I really didn't imagine I would start a business for myself," she says. "But when I learned more, I thought I could be a business owner. It was a dream for me."

And like so many women around the world bolstered by new 10,000 Women-taught business skills, Habibi started her own company, an electrical engineering firm that offered such services as Internet installation and heating and cooling. After graduation in early 2009, she formalized the business with two men as partners and even hired her brothers, both engineers who had run their own shop in Kabul. They operated the company for more than a year, and when Habibi headed to the U.S. for a Goldman Sachs-supported visit some months later, she believed her endeavor was well-established and on a path toward growth.

But Habibi returned home after a few weeks to shocking developments. "When I went back, I received a call from the government saying that my partners wanted to cancel the company," notes Habibi. "They wanted to be partners with each other in a new electrical engineering company and kick me out. They brought one--and--a-half-years of profit with them -- everything, all the financial reports. There are no policies or laws in Afghanistan to help this. The government thought I was lying [about my ownership in the company]. I thought before that we were a group, and I trusted my partners. It was my weakness; I am a girl and I am young. After that, I faced psychological problems. My parents thought [before I started] that I couldn't be a business owner. I broke down and didn't have anything to say to my mother about why this had happened. I was working so hard, morning and night, and put so much time into the company and it didn't work. People [like my partners] are not the face that they are showing you. They have two faces -- one that you see and one that you don't."

A Partnership Is Like a Marriage

Habibi discovered the hard way that business can sometimes be neither kind, nor honest. A handshake, especially in a relatively lawless country like Afghanistan, can be meaningless when individuals are hiding a separate agenda. It is a lesson made even harsher by the fact that Habibi trusted these men. "I shared with them because they were very good men," she says. "I thought they could work well with me." 

Trust is essential in a business partnership, especially where money is involved, says Mahbouba Seraj, a past 10,000 Women instructor at the American University of Afghanistan, who taught Habibi. Even then, money can motivate an otherwise reliable partner to act dishonestly. "I always recommend that a business owner start out on her own if she can," says Seraj. "A partnership in business is very much like a marriage and can be extremely difficult. Either you live happily ever after or you don't get along and the partnership ends in divorce. There are good divorces and bad divorces. In Afghanistan, women usually don't get a divorce, so the mentality of a partnership not working is that much harder."

If a business owner wants to take on a partner, do your research -- well before the partner is on board, suggests Seraj. "Make a thorough investigation of that person before signing any kind of agreement," she notes. "Ask people about your potential partners and find out their reputations through their dealings with other people. You can get to know someone if you really look into it. Talk to people who have worked with them and find out all you can."

Safeguards need to continue as the relationship progresses, points out Seraj. "Get yourself prepared from the very beginning. What are the expectations and rules, and what should each person be doing, especially involving the money? For instance, you should always put in controls such as the need for both signatures in order to withdraw money from the bank account. Partners should be very clear on which parts of the business they are responsible for. Ask your partner, 'Have you done what you said you would do? Has this been taken care of? Are we okay on this?' Partners must know that each is very much aware of what is going on with the business at all times and will be holding the other accountable."

New Company, No Partners

And what if the partnership goes sour? Protect your investment in the business, says Seraj, and prepare to work through the issues or move on. "Secure the safety of your investment first and foremost so that the person can't get your investment out of the bank. Then you should right away bring a mediator with you, somebody whom both parties trust, to talk to your partner about the issues you have," says Seraj. "You should take notes about what is said during this mediation. You need to write down all the points: what is not working out, what are the exact circumstances, what are the partner's shortcomings. Partners have a way of saying, 'She never told me that.' Solve the issue at hand as quickly as possible. If you don't, it destroys the business and the trust and everything will fall apart."

While Habibi struggled with the pain that comes with broken trust -- "I had a very bad feeling because I thought that I had failed at my business" -- she did not languish in defeat for long. In 2010, with encouragement from Goldman Sachs, she started Check Up, an electrical engineering firm that had five technicians in advanced training and was still in its beginning phases at the end of last year. "I don't know why I came back and started again. I figured if I could do it with them in one and a half years, then I could also do it alone," says Habibi. "I'm thinking more realistically. I want to work with the reconstruction supported by the U.S. army. I don't want to be a subcontractor -- my goal is to be the top contractor. And I don't have any partners." But if she did? "I think it's better to have women partners, not men."