What HR Can Learn From Business Partnerships Breaking Down

What HR Can Learn from Stefanovic’s Time in Court

When a business relationship breaks down, the consequences rarely remain confined to the people at the centre of the dispute.

The recent proceedings involving Karl Stefanovic and his business partner Keshnee Ibrahim provide a useful example. The pair each hold a 45 per cent interest in 123 Podcast, the company behind The Karl Stefanovic Show, with the NSW Supreme Court becoming involved following a breakdown in their relationship. The Court has supported a pathway towards a buyout, with the business to be independently valued. The matter remains ongoing.

While the proceedings are fundamentally a commercial dispute, they raise an issue that is highly relevant to HR: what happens to an organisation and its people when the relationship between senior decision-makers breaks down?

Patrick Will, Principal Solicitor at Liquid Employment Lawyers, recently discussed this issue with HR Leader, highlighting the importance of clear governance and agreed mechanisms for dealing with disagreements between business partners.

⁠Read the full article in HR Leader

When leadership relationships become workplace issues

For employees, a dispute between business owners or senior leaders can create uncertainty very quickly.

People may not know whose direction to follow, whether responsibilities have changed, or how decisions affecting the business will be made. In smaller businesses, where owners and senior managers are often closely involved in day-to-day operations, the effects can be particularly visible.

HR may not have a role in resolving the underlying ownership or governance dispute. It does, however, have an important role in maintaining appropriate workplace processes while the dispute is being managed.

That can mean keeping reporting lines clear, ensuring employees receive consistent information and making sure workplace decisions continue to be made appropriately.

Don’t put employees in the middle

One of the risks when senior relationships deteriorate is that employees can become involved in the dispute, whether intentionally or otherwise.

Employees should not be expected to take sides, pass messages between competing leaders or make decisions about which version of events they should support.

Where possible, communication should remain focused on what employees actually need to know to perform their roles.

This is also an area where confidentiality matters. Not every detail of a dispute between business owners or directors needs to be communicated to the wider workforce.

The challenge for HR is to strike the right balance between keeping employees informed and protecting matters that are properly confidential.

Clear governance matters to HR too

Governance is not simply a concern for directors, shareholders and lawyers.

The arrangements governing who can make decisions can have a direct impact on how an organisation operates.

If business partners have clearly agreed their respective responsibilities, decision-making rights and processes for resolving disagreements, there is less scope for uncertainty when circumstances change.

Patrick Will’s observation to HR Leader is particularly relevant here:

“Ventures born from friendships require more contractual rigour, not less.”

The same principle applies to the workplace consequences of those relationships.

The stronger the personal relationship between business partners, the easier it can be to rely on trust and informal understandings. But if that relationship later breaks down, those informal arrangements may no longer provide a workable basis for running the business.

HR should think about continuity, not just conflict

When senior relationships become strained, the immediate focus can easily become the dispute itself.

For HR, the more practical question may be: how does the organisation continue to operate effectively while that dispute is being resolved?

That can involve reviewing:

reporting structures and delegated authority;
who is responsible for communicating organisational decisions;
how employees should raise concerns or seek direction;
confidentiality and information-sharing arrangements;
changes to leadership responsibilities; and
how significant organisational changes will be communicated.

These considerations are particularly important where the dispute involves people who occupy both ownership and management roles.

Addressing problems before they reach the courtroom

The proceedings also demonstrate why difficult conversations and appropriate dispute-resolution mechanisms should not necessarily be left until relationships have deteriorated.

For business owners, this may mean establishing clear arrangements around decision-making, dispute resolution and potential exits at the beginning of the relationship.

For HR, it means recognising when a dispute at senior level is beginning to create consequences for the wider workforce and addressing those consequences early.

HR cannot resolve every disagreement between owners or directors. But it can help ensure that employees are not left carrying the uncertainty created by that disagreement.

A practical takeaway for HR leaders

Business disputes are ultimately about the parties involved and the legal and commercial arrangements between them. But once those disputes begin affecting the workplace, HR has an important role to play.

The priority should be to maintain clarity, consistency and stability for employees while the underlying issue is dealt with through the appropriate channels.

That means keeping employees out of the dispute where possible, maintaining clear reporting lines and ensuring that workplace decisions continue to be handled appropriately.

The broader lesson is straightforward: good governance at the top of an organisation can have a significant impact on stability throughout the workplace.