How to tell my co-founder that he is lazy and needs to step up his game?

Good friends probably shouldn't become business partners.

You are saying (essentially) that your friend's participation is parasitic.

Do each of you have well defined roles and duties? Do you just expect him to figure out what needs doing? Maybe he is too much of a follower and/or employee mindset type to act independently.

What are his duties supposed to be? Marketing and outreach? The social networking could be viewed by him as a necessity for his job. Given your description, you should determine jointly with him what your roles in the business are.

Assuming that he claims that he is filling the role appropriately, you should quantify the effort that each of you is making toward the business, along with a justification for that effort. Usually (not always) the unit measurement of net effort is hours.

Telling someone that they are wasting so much time every day is always subject to argument - there's no quantification so the other person can always say "no, I don't." Nailing down a list of tasks and/or duty areas and quantifying each person's effort level are a step toward creating a much less arguable contention.

If you can show that you spend 10 hours to every 2 of his on the business then the imbalance becomes very apparent even to him.

As far as separating, good luck on that. It's a lot easier to be selective about your partners up front then to get disentangled from them. In most partnership formats, company assets are owned equally, like marriage. I have anecdotally heard of several startups that were formed in haste with immature members and a small minority winds up saddled with all the work while the rest expect to ride his/her coat tails. The one worker bee is essentially stuck with parasites who will share the wealth and none of the work.

The bottom line is - you may have to buy this person out for cash if you want him to not profit from your work.

*get out now.*you don't trust your business partner to manage his time, that is an awful basis for a partnership. It can only get worse.

You need to manage him by setting milestones and dates for progress and projects.

Don't try to dictate what he does during the day, that will come across as "micro managing" and won't get positive responses.

Instead say "We need to build widget Foo for customer Y. They are ready to buy, but we have to deliver in (target minus 7 days), can you pull this together?" He may want to negotiate for a longer time (that why you pre-pad the delivery date with a shortened schedule), but either way, let him have a part in defining the date within reason.

Then, don't worry about WHEN he chooses to work throughout the day, just focus on the final deliverable, along with checkpoints along the way.

Now, if you do this, and he still doesn't meet the date, your conversation will seem less critical. You both agreed on a macro-goal and gave him the freedom to work how/when/where he felt it was most efficient for himself. As a business, you need to be able to project timelines, take on new features, and so on. If he cannot be managed high-level, and he is opposed to direct feedback and management, how does he suggest you continue to make this a viable business? (rhetorical question).

Well, I can relate to you since I've had the exact same experience. In my case, however, it wasn't that he was lazy. I was more of the "go getter" and he was too risk aversive.

At the end of the day, you need to find someone with complementary skills and someone who certainly doesn't slack off. That quality doesn't work in any kind of business setting. So if you've already tried to offer feedback and have failed... try again!

But if it's still not working out, offer to buy his share out or move on.

Disclosure: I'm affiliated with a commercial performance management software service.

If someone is lazy, that means they are not meeting expectations of the other players. To that end, what I would suggest is two things.

1) Start doing regular check-ins about expectations and review outcomes. A weekly meeting generally suffices.

2) Tie executing on expectations to compensation/incentives. And make it equal - that is, you treat them the same way they treat you. This way there is no double-standard.

Then who cares if he spends 6 hours on social networking so long as he gets his work done. If there are only two of you, consider getting an advisor involved in the discussion - someone your partner would respect.

I've spent the last year working on this problem and built a performance management system to calculate impact based on performance evaluations (fairsetup.com). This could work, or there are other ways that you could do it. I would just focus on the goals (growing the business, ensuring traction, meeting milestones, etc.)

Ive seen similar issues myself and the best thing I think one can do in this scenario is build a stronger team without him..

Suggest to him that you both dissolve 10% each to get someone in on 20% equity. Ok you lose 10% but you now have a team member who is actually helping you. If you can do that a couple of times, you have diluted the impact his laziness has - but then new two new members can sell to each other and they get controlling share of business! So gotta tune equity/contracts to deal with that

Depending on your contracts with each other you can consider:

http://en.wikipedia.org/wiki/Stock_dilution

But some might consider this underhand?!

Start paying large performance linked salaries, see if it motivates him?

He is lazy / wastes 5-6 hours every day on social networking and the like

Okay - whether it is wasteful or not depends on what actually gets delivered at the end of the week. Many people search for inspiration / input from others while formulating a plan of attack. Others just post what they just ate.

Rather than labeling what (s)he does as "waste", why not focus on gaining consensus on what the current task at hand is, and working on sharing progress status / discussions / insights on a continuous basis? Sometimes what looks trivial to one is actually not so trivial to actually implement.

This way, you (both) have a better understanding what progress is being made and whether you both (as an organization) are working towards a common goal.