Updated: Nov 9
As a founder or CEO, how you approach decision-making will set the tone for how the company as a whole makes decisions. The process you use, the way you engage your team, your use of data and even your own biases will all create the template for how other leaders in the business evaluate and choose between options.
In building a business, we will all make mistakes and poor decisions along the way. That is expected, the cost of being creative and taking considered risks. But a poor approach to decision-making can very quickly undermine trust and alignment within the company. Regularly getting to the right answer in the wrong way can be more detrimental to long-term success than getting the wrong answer from time to time.
While I can’t claim to have got it right in every instance, I learned early on to apply a consistent, measured approach to decision-making. I would try to define the problem and solution space clearly, rely on facts as much as possible, play the ball and not the person, recognise that I didn’t have all the answers and adjust as best I could for my own cognitive biases.
Facts beat opinions
Everyone can have an opinion but good, objective decision making calls for facts. It’s true that surrounding yourself with an experienced team will surface opinions that are grounded in that experience, which is not to be discounted. But if you rely only on opinions you will naturally end up with subjective decision-making, which is likely to generate conflict in your team. Objective decision-making needs to be supported by hard data, ideally from multiple sources.
Of course, you won’t always have every fact that you would like to have, so assumptions will have to be made. These should be clearly identified as such and stress tested. Aim to show how data and the assumptions, together, have led to the decision in a logical flow.
At Aconex, whenever we reviewed our strategy or operations at any level - board, leadership group or functional teams - we would define the problem and pull together any available data and information that was relevant to it. This included customer usage stats, marketing and sales pipeline and results, market information, economic data, survey results and views from within the company. We listed data sources and highlighted any gaps or inconsistencies. When assumptions were made they were clearly identified.
Over the years, the challenge changed from having insufficient data to what seemed like having too much. Today companies, particularly in technology, have access to more data than ever before and even the former black arts like marketing are rich in metrics.
But not all data in the deluge is equal. How you sift, sort and interpret it matters far more than it would have 15 years ago. In particular, be careful of confirmation bias, finding only data that supports your hypothesis. Looking for information that seems to disprove what you believe or provides a different perspective may seem unnatural, but is vitally important to sound decision-making. And narrowing the volume of data to what is most relevant is more important than just pulling together large volumes of information.
Play the ball, not the person.
Once you have a solid set of facts for decision-making, you want to ensure that the right people are involved in the process. Define the group that will have input to and then make the ultimate decision – the executive leadership or a subset, a group within a function, or a cross-functional team. Make sure the group is not too large (some say seven is the effective limit, although I don’t think there is one number for all cases). And be clear from the start on who is providing input and who is involved in making the final decision. That may be you, it may be the full group, or a delegated subgroup.
Ensure that you genuinely seek contributions from the group. Don’t be too quick to voice your own opinion, analysis or logic. Give your team the space to develop and state their views on both the problem and the solution. Show respect, take time to listen, and affirm that you have heard.
Most of all, debate the facts and assumptions, not the person. Show that you are open to debate and encourage people to counter your views. Don’t let emotion, especially your own, derail the decision process.
You don’t have to solve every problem yourself
While I and the executive team at Aconex set the strategy and decided high-level resource allocation, such as on market segments, major initiatives, financing, product roadmap and budgets, we learned to delegate and distribute as much decision-making as possible.
That was because, as the business grew, I realised that I was often becoming a bottleneck. Many of the decisions that I was making were hangovers from when we were a smaller company. The reality was, I didn’t need to be making them and I just slowed down the process.
For example, we saw immediate improvement in resource allocation decisions for overseas regions when we allowed the regions themselves to make them. To do this, we moved P&L responsibility to regional managers, so they could make budget allocation decisions, say between sales and customer success. Having established a company-wide approach, we saw a clear improvement in outcomes by moving decisions to the teams that were closest to our customers. A significant win from delegating like this was that our global managers and I could focus on other things.
In this way, as Aconex grew, we learned to manage decision-making well within our geographic regions and head office teams. But a few years ago I realised, with some prodding, that I was still involved in nearly all cross-functional decisions. I loved being close to the business, solving problems and jumping in to ‘help’ managers, but I had placed myself in the centre of a hub and spoke decision-making model that wasn’t scalable. As an executive team we decided to move to more direct cross-functional model where decisions were delegated to respective functional leaders. Most of the time they were able to come to an agreed solution, quickly and without my involvement. Occasionally, if an issue could not be resolved, I would step in but this was rare.
As Aconex expanded, we developed other tools to aid decision-making:
We created a comprehensive delegation of authorities, approved by the board, listing key decision-making areas and limits
Whenever an issue was raised at the executive team, we’d clearly define the decision process – who was accountable, the timeframe for making the decision and whether it needed to come back to the executive team or board for review and approval
We found the RACI model useful for ensuring clarity in a delegated environment. I tend to flip it to ARCI as that seems to be a more logical order:
A = Accountable: the one person who approves the decision
R = Responsible: the person doing the work
C = Consulted: those who provide data, information and opinions, with two-way communication
I = Informed: those who are informed of progress and of the final decision, with whom there is just one-way communication.
There are many resources online about how to apply the RACI model.
As a founder you must be prepared to let go if you want your company to scale. That means accepting that sometimes a decision will not be the one you would have made if it was your choice alone. But don’t lose sight of the bigger picture. Delegated decision-making helps your managers grow and take responsibility for their areas of the business, and it will generate a strong sense of alignment as your team moves forward with you.
Seek out new facts and differing views, but don’t endorse by default
As a general aid to my decision making at Aconex, I found it useful to regularly seek input from people across the company. As I travelled and visited our offices, I made a point of having conversations with managers and team members about the opportunities and challenges they were facing. I’d ask what they thought of our strategy, or how we were going: “What’s working well in the team, or here in the region?”, “What do we need to improve on as a company?”, and similar questions.
This can be a fantastic way to get broad input from the front line to support better decisions. But, until I realised what was happening, it sometimes created the problem of unknowingly endorsing decisions and courses of action.
People in the team would often raise great ideas and outline potential new initiatives. Because I wanted to foster distributed problem solving, I would often show support for the idea or concept. However, later I’d find out that this was sometimes taken as an endorsement to go ahead, which was not what I had intended. I would hear that “Leigh wanted me to go ahead on this” and then, from a manager, “Leigh, why did you ask Joan to pursue that idea?”.
After this started circling back to me, I made a point of handling these interactions differently. I’d still encourage ideas and new initiatives but I always then added a qualifier: “Great idea, you should run that past your manager”, or “Why don’t you speak to your manager about putting that up for review in the next planning cycle?”. I still received valuable feedback into my own decision-making, but without inadvertently sending teams off in different directions.
Don’t be the smartest person in the room
Face it. Even if you are super intelligent, incredibly witty and an accomplished debater, being the smartest person in the room does not encourage great, collaborative decision-making. This is a big risk for founders as a business scales up. You know more than anyone else about the company – you probably worked across all of the functions; you made the decisions that got everybody here; you know all the detail of every previous initiative.
But when you, as the founder or CEO, play the smartest person in the room, you undermine everything I have written about above. By virtue of your position and experience, your opinion carries weight, so you risk overriding others and undermining the fact-based approach that you are trying to foster. You may discourage people in the team from bringing ideas, views and even facts to the table. Over time, you may push smart people away. And you risk reinforcing your own cognitive biases (of which I’ll write more next week).
When you do all the heavy lifting on decisions, your team will never build decision-making muscle. It’s not scalable and you won’t arrive at the best solutions - a decision arrived at without the contribution of others is a waste of the talent of your people. And, ultimately, you deny your team the opportunity to grow and you make your business a less desirable place to work.
Create space for others to bring their best thinking. Step back from having to control every decision. Move from providing the answer to asking the questions. This doesn’t mean that you never make the final decision – many times it will rest with you - but it ensures that you bring in all of the facts and experience that are available to you, and that you align your team around a mutual understanding of the problem and the preferred solution.
Depending on the stage of your business, you have most likely hand-selected your key team. Make room for others to shine and your team will thrive. Empower them to make good decisions and you will fully harness the talent in your team. Stay well!