Decision making - hard calls in tough times
Updated: Jun 3, 2020
More than ever, in tough times, your role as a founder / CEO is to make good, timely decisions. The rate of critical decision-making increases in times of change. You will find you need to adjust your strategy faster and to make frequent decisions on resource allocation and people issues.
Dragging the chain on decisions
Some of these decisions will be tough calls that may mean shutting down business units, delaying initiatives, axing products, or laying off staff. Some staff are likely to have become close friends during the start-up journey, so this can be the toughest, most emotional of all decisions. Yet decisive action is the best course. Leaving staff, partners and vendors in the unknown and dealing with uncertainty can be significantly worse than the emotional toll of making a tough call.
As a young founder at Aconex, and with limited life experience, I wasn’t always that good at saying ‘no’. I would sometimes agonise over difficult decisions, being too slow to move on an underperformer, getting overly attached to an initiative, or continuing to invest in a poor product idea rather than pull the plug. All this wastes scarce resources that can be deployed to higher value areas.
It’s easy to fall into this trap as a young and inexperienced leader. Many young founders in the Australia of 2020 will not have experienced a difficult economic environment before and may be reluctant to make the hard calls. But postponing decisions, not telling the full story, trying to break bad news softly or bit by bit is hard on everyone involved. Your company and your employees need you to make these tough decisions. Your management team and staff won’t like – or even agree with – everything they hear, but they will respect you for being decisive.
The four decision levers for a CEO
As a founder or CEO, there are four areas where only you can drive decision-making. Focusing on these and on making the right decisions in each area will move your business forward. (It will also make you a more effective leader). The four areas are:
1. Your own time - determining how and on what you spend your time is essential to your effectiveness
2. Your company’s purpose and strategy – setting the strategic direction, motivating and aligning your team to this and tracking progress against it
3. Hiring and scaling your leadership team – getting the right people ‘on the bus’, in the right roles and helping them to develop
4. Resource allocation – the big-ticket decisions on which initiatives are core and where you invest your company’s resources – dollars, assets and people.
Sure, there are many other activities that will call on your time – sales, investor relations, legal issues, HR, having a beer with the team – but nearly all of these can be handled by others for you (except the beer!). The four areas above are the jobs that only a CEO can do. You don’t have to do them alone or without support, but they are your responsibility.
I’ll go through each in detail in future posts, but today I’ll focus on resource allocation.
The best time to say ‘no’ is now
Resource allocation should always be important but right now you are likely to be working with fewer resources than you expected when goals were set. If ever there was a time to be decisive and to prioritise, it is now. Many of you will have less available cash over the coming year or two, so you must be ruthless in prioritisation. Clearly spreading resources across ten initiatives is going to have far less impact than focusing on, say, three. Saying ‘no’ to lower level opportunities allows you to commit more fully to your top priorities.
At Aconex we had a business initiative called Document Control Essentials. This was a good product that supported, trained and accredited the main users of the Aconex platform – document controllers. It was well managed, growing nicely and profitable. However, it was a distraction for management. It was never going to outgrow our core business and it diverted time, resources and ‘head space’ from other more important initiatives.
As a leadership team, we considered closing the business unit a couple of times. When we ranked it against other priorities it was always towards the bottom of the list but never quite low enough to be cut. I continued to postpone the decision to shut it down, meaning it remained a distraction for our leadership team for a year or two longer than it should have. Eventually, in consultation with my managers, I decided to shut the initiative down. Although I never regretted closing it, I did regret that I hadn’t done it sooner. Now, managers that had been spending a day or two a week involved with a non-core line of business were able to focus on more important activities.
I needed to learn that prioritisation meant saying ‘no’, which is harder than saying ‘yes’ but just as important. It doesn’t mean just moving an initiative to the bottom of a list with a ‘low priority’ or ‘less urgent’ tag. That is a sure-fire way to create a distraction for everyone. Saying ‘no’ also doesn’t mean pushing off a decision on an initiative to review it down the track. Unless there is a material reason for waiting, that just creates confusion. Faced with finite resources, you have to be clear, simplify your business and reduce your focus areas.
A model for prioritisation
With your leadership team, debate and agree a process to reduce your core focus areas to no more than say five. Here is a model that has served me well:
1. Determine the criteria against which you will assess and rank your focus areas, businesses streams or initiatives. These will differ by company but could include:
a. Alignment to purpose and strategy
b. Customer need, market attractiveness and competition
c. Forecast revenue and profitability
d. Return on investment and funding required to breakeven
e. Resources and capabilities required
f. Fit with existing businesses or other initiatives
g. Management oversight needed
h. Degree of execution risk
2. Then, force rank your initiatives:
a. Ask people to speak for or against each one and its relative priority. Often leaders won’t want to de-prioritise their own initiatives and may be reluctant to call out other managers. Force the debate in an open and constructive way
b. Consider the distraction and management time expended, not just the direct costs
c. Don’t consolidate initiatives under one banner - you just end up with a bunch of grouped priorities
d. Order your initiatives over time. Running two in parallel rather than in series means they both get delivered at the end of the period rather than one then the other
e. It’s almost inevitable that you will end up with more priorities than you set out to identify. Stay strong - draw a line, cut below it and don’t extend the list
f. Be clear, as a group, about what you are now going to stop, who will be responsible for managing that, and by when (say ‘no’!).
3. Push for alignment within your leadership team but ultimately, as CEO, you determine focus areas
4. Execute on decisions quickly. Shut down the initiatives and reallocate resources
5. Cascade decisions through the company. Ask all staff to ensure their own initiatives align to core focus areas. Ideally each manager will have three to five initiatives, all in alignment
6. Put your purpose, strategy and focus areas on one page. It has to be simple to communicate. At Aconex, after each of our strategic planning executive offsites (once and sometimes twice a year) I’d update our ‘strategy on a page’
7. Continually communicate you company strategy and focus areas (see previous blog post)
Finally, consider how to set the example on decision making as you lead your business. How you make decisions, your biases and methods, and how you involve your team in the process – all of these constantly set the tone for how decisions will be made across your company.
Next week I’ll dive into more detail on self-aware decision making.