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Posted On January 18th, 2018 by Crowded Ocean

Decision-Making: the essential cultural trait of startups

There is no single prescription for success for leaders of early-stage companies. Personality-wise, founders can range from transparent to ultra-secretive. Culturally, they can create perk-rich environments or go with Spartan surroundings. And when it comes to their leadership style, startup founders can choose from a number of successful models, from the consensus-driven to the dictatorial.

But there is one area in a startup’s early history that is a major determinant for long-term success: how decisions are made and communicated to the company. Because those initial decisions are critical, not just from a business or product perspective, but in terms of the cultural tone it sets.

Company-building experience trumps technical brilliance

It’s sometimes hard to say what brings employees to a specific startup: it can range from the track record of the founders to job titles to dress codes or the length of their commute. And of course, equity is always a factor. But regardless of the initial draw, none of those things will have staying power if each employee in the company doesn’t understand, contribute to, and feel a part in advancing the vision/mission of the company. Which brings us back to the decision process.

Decision-making is not for everyone

In an early-stage startup, every employee is heavily invested, emotionally and financially. Which translates into their believing that they should have a voice in company decisions. But herein lies the problem: most early-stage employees shouldn’t be involved in the decision-making process. Which poses a major problem for the first-time CEO.

For work-life balance and economic reasons, many of our startup companies are going ‘virtual’, with employee locations scattered around the globe. Managing these employees and making them feel a part of both the culture and the decisions shaping the company’s future is an ongoing challenge. Employing free tools like Skype and Google Hangouts, we encourage our startups from Day One to hold regular town hall meetings so that information is shared and so that the implications of decisions can filter across the entire team, regardless of location.

Good decisions come from diverse teams

This communication and collaboration is essential, since while good decisions can occasionally come from a single individual, in the long term the best decisions come from well-informed, diverse teams. Data shows that diverse teams make better decisions because different backgrounds and ways of thinking lead to better outcomes. In another study of the accuracy of decision making of groups, when participants were in diverse company, their answers were 58 percent more accurate.

Challenges to Participative Decision-Making

Despite the compelling data and logic behind adopting an open and participative decision-making culture, achieving it in today’s startup environment can be challenging for these reasons:

  • Early employees are often “narrowly brilliant” in their particular technical domain (aka “nerds”) with limited general business experience in building successful organizations that make and communicate decisions;
  • The structure of many startups today is “virtual”, with many key employees hired because of their domain expertise and track record. But vital team members working remotely can be a huge obstacle to communication and participation;
  • Instilling “ownership” across the team, from top to bottom, is a trait that startup leaders want to foster and reward, but only if it’s genuine. Ownership that’s recognized and rewarded typically makes people work harder. Even if a CEO is seriously top-down in his/her decision-making, we encourage them to find areas of genuine ownership, however narrow, for each employee.
  • Startups are always on. Critical business decisions regarding priorities like market segment focus or hiring decisions require real business experience, and often, there’s very little time for discussion. Getting participation from the right decision makers (with real-world company-building experience) is what counts.
  • It doesn’t matter if a CEO models him/herself on Hitler or Gandhi, as long as employees feel that their voices are heard and their ideas are fairly considered and evaluated. But CEOs need to distinguish encouraging participation across the team in a decision from assigning the ultimate responsibility and accountability for the decision.

The difference between participation and communication

Given the limited business sense and remote locations of many of their early employees, CEOs have an obligation to their investors—even to the employees themselves—to limit how actively they open up participation by employees in the company’s early decisions. Instead, we caution CEOs to open up participation in the “direction” of the company. But, cynical though it may sound, it is possible to “look” participative (through communication tactics like regular “town hall” meetings of all employees; published company business goals on Google docs and posted performance “actuals” against goals) while keeping the decision-making firmly in the hands of the management team. Because, ultimately, if employees feel like their ideas are appreciated and considered, and if decisions and their results are announced on a regular basis, employees will feel engaged in their company rather than cynically excluded from the decision making process.

Fake It ‘Til You Make It

It should be the goal of every startup to have a participative decision-making culture. But in the early stages we encourage our CEO’s to “fake it, ‘til you make it.” And as the company grows, and you’re able to hire professional managers who can build strong teams, your culture of “participative” decision-making will hopefully transition from altruistic goal to active reality.