A Social Contract – Why you won’t survive without one

When was the last time you found yourself all alone.. in a dangerous dark alley.. and on the wrong side of town?

You’ve been strolling down a beautiful path of endless optimism, hope and opportunity. Suddenly you realize something has just drastically changed! You’ve made a sudden wrong turn and now find yourself, with the exception of the “thugs”  that intend to provoke physical and emotional harm, all alone in an obviously dangerous place!

What do you do? Who’s got your back? Who’s going to help you get out of the predicament you’ve just found yourself in? Who’s going to stand with you and deal with what’s to come?

Does this sound like a scary scenario? Unfortunately it’s all too frequent!

Let me take you back a few weeks when I had the privilege to be amongst illustrious fellow mentors at the Barcelona mini-seed camp. The night before, as I looked over the agenda, my excitement peaked when I realized that I would be in close quarters with the “legendary” Fred Destin of Atlas Venture. “Legendary” you ask?!?! Well, anytime highly successful entrepreneurs refer to a VC as someone they hold in high regard and respect, first my eyes open wide, then my ears perk up and finally I sit at attention ready to listen!

The very next day this reputation was cemented based on Fred’s shared view of “Social Contracts”. In turn I redefined how I viewed this critical catalyst for success. What I would later read in Fred’s blog couldn’t have prepared me for the wild and wacky, sometimes borderline ethical, tales of business dealings that go on between entrepreneurs and VC’s.

A few days later, Fred agreed to a Skype call, generously shared his perspective on Social Contracts, and here’s what I came away with:

  • A Social Contract is an “understanding” or gentleman’s agreement between two parties
    • To be effective, it supersedes the required legal contracts that govern a relationship
  • A Social Contract is bound by honor, integrity and will become most relevant during critical “moments of truth” yet to come
    • It will get all parties safely through the tough times and hard decisions that are guaranteed in any venture
  • You establish a Social Contract based on a firm hand-shake, a confident stare into the white of the eyes and a mutual respect that you’re both in this journey for the “long-haul”
    • It’s two “human beings” coming together to form an “enterprise”
    • It’s a relationship where either party recognizes the requirement to stand-up against pressure that is sure to come from business and likely life partners, as the journey get’s complicated and the waters become muddied
  • A Social Contract isn’t something entered into lightly and often needs to be the preceded by a multi-hour brainstorming session to guarantee the like-minded intentions of both parties
    • It’s the basis of how you’re about to govern your relationship whilst executing on an agreed 12 to 18 month business plan
    • It has little to do with the financial plan and more to do with the necessary “pivoting of strategy” that is sure to come
  • It’s an investment into the long-term strategy and is based more on the soft assets that are critical in a “moment of truth” vs. the hard assets that traditionally formulate a Business Plan

Our conversation reinforced the practical nature of “working agreements” that I’ve always felt are necessary for any engagement. I take relationships very seriously and just as I would expect my “friends” (vs. acquaintances) to never leave me stranded in an unfortunate circumstance, regardless of who’s at fault for getting us into the mess, I also expect my Social Contract counterpart to stand-up and fight with me regardless of the danger we’re about to face.

Practical Experience

1- The Entrepreneur and their Partner; In similar situations, within the past 12 months I can recount two separate entrepreneurs that “were left hanging” when their supposed partners “parked-it” and quit on them in the midst of the most significant challenges the venture was experiencing. In both cases the entrepreneur was at fault for getting themselves into trouble, more based on inexperience than reckless abandon, yet the partner “checked-out” and left them “hanging in the lurch”. They tried to make it about who’s right or wrong, over-looking that they were both, along with other investors, about to loose their shirts! Fortunately, the entrepreneurs’ resilience, along with a strong network of friends and allies helped pick themselves up by the boot-straps and out of immediate danger.

Both entrepreneurs paid a significant and costly price by either missing time-to-market or suffering a significant devaluation in equity, but most importantly, they learned a crucial lesson in Social Contracts.

2- The Employer and their Employee; Recently I’ve seen the same thing happen in three separate organizations with Senior Executives. This is yet another reason I identified so strongly with the core concept of Fred’s Social Contract. Too often the employee/employer relationship hasn’t been tested under difficult circumstances and when the moment of truth finally comes, especially in a critical situation such as a start-up or hyper-growth environment, the “paid/contracted resource” isn’t up to the task of facing the required adversity! Rather than having the courage to support their leader, or quit outright, they “park-it”, leaving their leader and their company “out-to-dry”. Later, they move onto another company, never taking full responsibility  to the true consequences of their actions, or lack there of.

I always share with employers that often it’s more important to know what NOT to count on than assume what you believe you can count on. Unless the relationship has been tried and tested under adverse conditions, you’re better planning off for, and expecting the worst, whilst hoping for the best.

3- The Friend and the Bar Room Brawl; Several years back, I’d like to think it were only a few ;-), when I was still living in Philadelphia and a few years “younger and innocent”, I was hanging out on South Street in South Philadelphia with 4 “close” friends. We had entered an outside bar that was protected from the street walking traffic by 2 meter high iron gates. In essence, no easy way out! We had all had a few drinks however one particular friend had too much to drink when he decided to cause trouble.  I bet you can imagine what happened next. First I tried to refrain him from being an absolute idiot, but he insisted. Then I tried to mediate the situation before it was 6 against 2! 6 guys staring me and my mate down. Where were my other two friends? They had “checked-out” and left the bar as soon as they saw we were out-numbered and headed for trouble. Later they justified that they hadn’t started the trouble so therefore they shouldn’t have to “face the music”.

The end result were some broken chairs, broken tables and my friend and I were barred from South Street for the next 6 months by the Philadelphia Police Department. We walked away with a little more humility and a few bumps and bruises to show for our stupidity. I slapped my mate over the head and promised to kick him in the pants if he ever did that again! The relevant fact was, I didn’t leave his side, neither would he have left mine. See, we had a bond stronger than words or any legal agreement! We had a Social Contract that we had entered into a few years before, which was to stand-by each other, be the times good or bad, regardless of who stuffed-up. Much like how most marriages are supposed to work! 😉

My closing questions to you are;

  • How secure is your Social Contract with the partners you have in your business or life?
    • Have you faced any moments of truth lately?
      • How did your partners stand-up in the face of adversity, regardless of who was to blame for the mess you found yourselves in?
    • What lessons can you take from that situation?
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