Decision making in a startup: give up some to gain more

Most startups a have limited runway, constantly running against time, market, and competition. It is imperative to ensure that the right person calls the shots to avoid costly delays or deadlocks.  A proper, and efficient, decision making mechanism makes great difference between a successful startup and one that is doomed to fail.

 

Founders are rarely good at making every decision

However, we find that founders often grip onto each and every decision to be made, a highly inefficient and sometimes perilous setup. Too often, they are very opinionated on all these areas. Countless times we see many founders prize themselves for being ‘hands on’, heading down to Ikea themselves to decide colour of the nails on the chairs they buy.

They probably took inspiration from Steve Jobs, who dictated Apple on everything, allegedly.  However, Steve Jobs got away with it (and being an asshole) because he was Steve Jobs. Most founders aren’t. 

Also, having evaluated more than 200 companies for investment and consulted more than to dozen, we came to realize that founders are rarely experienced in all fields required for success – product, marketing, finance, and operations etc.

 

Perils of over-concentrated decision making

When the founders attempt to dictate every decision, they usually fail to do a good job. For a number of reasons:

1. Founders are not necessarily more informed than some of their employees on specific areas, for instance, how to optimise your Facebook ads.
2. They tie themselves down with many minute details, which in turn leaves them no time to think properly about company’s strategy, direction, and other more important decisions.
3. Good people will feel stifled in such an environment where they are almost micromanaged. They leave, and it will become increasingly harder for founders to attract other good talent.  

Empowering the good people

As much as the media prefer to glorify CEOs and founders of startups, we still argue the success (or failure) of a startup is a team effort. Money provides the fuel, but at the end of the day it is the motivation and persistence of the team, as a whole, that ignites the fuel and charges the wagon forward.

Startups often prize good culture – you would see foosball table, parties, drinks, pizzas and nights out. These are all superficial. We’ve spoken with a lot of good people – and it turned out, while most of them loved these perks, having the ability to make decisions (and to grow) matters much more. Many top startups see their top lieutenants depart when management fail to listen to them, let alone respecting their decisions.

We see this happen with Zalora, EzBuy and many other companies that were once promising. Good people joined, wanting to be part of the growth story; they left swiftly after realising that they were not empowered to grow with that story. It is extremely dangerous when people stop caring: a startup often runs an uphill battle against all odds (those with silver spoons, such as Grab, are notable exceptions). Founders need entrepreneurs to fight this battle with them – but once the ranks are filled with risk-averse types who only move when pushed, the downward spiral starts.

A once very hopeful venture by Rocket Internet, I shall not name it, are exhibiting similar symptoms recently. The key people who were instrumental in kicking off the venture from scratch are now leaving in droves. Why? Well, in boardroom meetings, their voices are no longer heard, replaced with the rants of the high-ups, who told them that from now on their only mission is to execute whatever they are told to execute. Now, it is finding it hard to raise more capital – why? The people in charge of raising the capital are no longer motivated.  

Don’t hire them if you don’t trust them

Many founders argue – it is a dangerous environment that I need to be sure my staff are doing the right thing, all the time. Well, the truth is, if you do not trust them, DO NOT HIRE THEM. If they are part of the team, they need to share the burden: the burden of all the challenges, the burden of mistakes, and the burden of decision making.

And needless to say, they need to share the rewards as well: be it salary, be it equity upside, be it the ability (and learning) to run a large team at a young age. There’s gotta be something that aligns with what they want to achieve in life.

And being a founder, it is your natural responsibility to steer team dynamics: knowing who is performing and who is not, and weeding out those who do not. Startups need to fail fast, and learn fast – one person (or a few) keeping a tight grip on everything would not speed up the process.