Startups are more likely to die from suicide than homicide.
-Paul Graham
The above quote is so powerful and so true — most companies die from self-inflicted wounds than from an external force (competition, economic downturn, etc.).
To expand upon this further, I believe there are two main types of startup suicide are: toxic founder relationships and indecision.
In my post about toxic founder relationships, I shared how we cultivate a healthy relationship among the founding team at Panacea. In this post, I’d like to dive into the perils of indecision and how it leads to startup suicide.
Indecision leads to decision-making by consensus (only making decisions when everyone agrees) and as a result, slow decision-making. This ethos is magnified at a startup because speed is a true competitive advantage that is vital for success. Indecision not only leads to slow decision-making, but also leads to fear of failure. Indecision leads it playing safe because the conservative route is the only one that everyone will agree to. Indecision among the leadership team permeates throughout the company and before you know it, you’ve created a culture that fears failure, struggles to make decisions with conviction, and plays it safe every time.
This leads to failure because a company that doesn’t move with conviction and speed will bleed talent and lose out to the competition.
As a result, it’s important for leaders to implement a decision-making framework that allows their companies to make decision with conviction and speed.
I believe there are three fears that paralyze decision-making:
- Fear of going against the crowd. This is the most common problem to effective decision-making. People fear going against the crowd by stating an unpopular opinion. What often happens is the entire group feels each other out and waits for a consensus to develop before anyone risks taking a position. If and when a group consensus emerges, one of the members will state it as a group opinion, not as a personal position (you’ve probably heard it phrased as “It sounds like we agree that…”). After the group opinion is shared, if the rest buy in, the position becomes reinforced and further validated by others.
- Fear of sounding dumb. This is a natural fear that everyone has faced at some point. Moreover, this fear often afflicts those who are highly knowledgeable and/or in positions of authority. For the senior person, this is likely to keep him from asking questions he should ask because there is the belief that he should already know the answers. This fear permeates throughout an organization because it will make others merely think their thoughts privately rather than articulate them for all to hear. Each time a question is suppressed and as a result, an insight or fact is withheld, the decision-making process is compromised because there are less data points to make an informed decision.
- Fear of being overruled. This is a fear that often affects junior-level people in an organization. If a manager (or the group) vetoes or opposes the position a junior person was advocating, the junior person might lose face in front of her peers. This even more than the fear of losing their job makes junior people hang back and let the more senior people make the decisions.
These fears are present in many organizations because they’re natural fears we as humans face and have to overcome. Leaders need to take proactive steps to eliminate these fears and cultivate a culture that makes decisions with conviction. Below are three core beliefs we preach and practice at Panacea:
Obligation to dissent. This is a phrase that we’ve adopted from Google. Obligation to dissent gets at the heart of true consensus-driven decision-making.
- Consensus is not about getting everyone to agree. Instead it’s about coming to the best idea for the company and rallying behind it.
- Reaching this best idea requires conflict. People need to disagree (it’s an obligation) and debate their points in an open, safe environment where opposing viewpoints are welcome.
- The right decision is the best decision, not the lowest common denominator decision upon which everyone agrees.
- The people closest to the decision are the best equipped to make that decision. Regardless of position or authority, there needs to be an emphasis placed on empowering those who are closest to the decision. There needs to be buy-in from the highest levels of an organization to trust those who are closest to the decision-making process. This doesn’t mean blind trust — there needs to be effective checks and balances (thus reinforcing the obligation to dissent and debate opposing viewpoints).
Decision-making hygiene. There are six assumptions that must be in place for effective decision-making. By answering the following questions, the chances of politics entering the decision-making process are minimized:
- What decisions need to be made?
- When does it need to be made?
- Who will decide? An “obligation to dissent” approach only works if it is managed by a single decision-maker who owns the deadline and will break a tie. There is a point at which more analysis and debate won’t lead to a better decision. This is the most important duty of the decision-maker: Set a deadline, run the process, and then enforce the deadline.
- Who will need to be consulted prior to making the decision?
- Who will ratify or veto the decision?
- Who will need to be informed of the decision?
Social capital. Social capital is the human currency we have with other people. Like money, social capital is finite and earned. Unlike money, social capital has a ceiling — there’s only so much social capital one can have with another person.
To create a culture that makes decisions with conviction and speed, decision-making needs to be decentralized. This is a pretty straightforward concept — if all decisions must be made by a single person or at the executive level, there is a bottleneck effect that slows down the decision-making process.
Decentralized decision-making relies on empowering those closest to the decision to make the decision. To cultivate this type of culture, leaders must pay attention to social capital and be mindful of when to step in and take action.
Every time a manager steps in and overrules a junior person who makes a recommendation (because the junior person is closer to the decision), the manager burns some social capital with that junior person. If she isn’t careful, the manager will burn all their social capital with that person and effectively lose the junior person’s trust.
Once trust is eroded, morale and commitment dies because the junior person sees no point of putting in the work because he knows his manager is going to overstep and make the decision regardless of his recommendation.
At Panacea, we use a 2x2 Impact/Conviction grid to determine when to step in and when to trust the person closest to the decision-making. The 2x2 Impact/Conviction grid is a powerful tool that needs its own dedicated post (maybe the next one?).
In summary, it is a framework to weigh the level of impact of the decision at hand and the level of conviction that a leader has to determine whether that leader should empower the junior person to make the decision or overstep and make the decision that goes against the junior person’s recommendation.
