Critical Success Factor: Decision-Making

Startup leaders, especially CEOs, must be effective decision-makers because a huge portion of the job of leading a startup is making an avalanche of decisions in many domains and often with limited context. Decision-making is a skill that can be developed. Yet it also demands the confidence to decide even when context and information are limited. If you are not biased towards making the call, look for someone else to take on that leading role in your cofounding team.

Leveraging my decades of experience building startups, it is clear to me that one of those critical master skills of leading businesses as a CEO, Board Member, and project leader is being an effective and confident decision-maker.

Over the years, I have realized that this is one of those skills that does not come naturally to everyone. Over and over again, I have been struck by how the many I have worked with who are uncomfortable when put on the spot of making important decisions under conditions of uncertainty. They have a propensity towards wanting to keep gathering more information, asking others’ opinions, and putting off the crucial step of making the call. Yet this is at the core of what a startup CEO must be able to do because gathering the relevant intel, identifying and weighing the options, and then pulling the trigger with good-to-excellent results most of the time is a foundational competency for building a successful startup. Here are some examples of the many types of decisions a startup CEO may be confronted with:

• Deciding what product to build, incorporating customer discovery, competitive landscape investigation, and technical opportunities to create value and sustainable advantages.
  
  
• Determining if and how to structure a startup to pursue your identified opportunity, with an eye to what is needed to successfully sell, deliver, and scale, as well as how to assemble and deploy the resources necessary for success. 
  
  
• Making the call on which strategy to pursue because focus is demanded, and you don’t have the resources to pursue them all.
  
  
• Figuring out who to recruit, how to build the requisite team, and when someone needs to part ways to maximize your chances of success.
  
  
• Deciding when to offer, negotiate, and ultimately accept the terms of a relationship, whether a hiring offer, an investor’s term sheet, the terms of a potential strategic partnership, or a letter of intent to purchase the startup.
  
  
• Making critical go/no go decisions on committing the team’s resources to a particular path, with an intuitive and hopefully informed viewpoint on the probability of success, opportunity costs, and risks of each potential pathway.
  
  
• Determining what opportunities to chase and what to forego, with clarity on what your capabilities are or could be and how to maintain focus while also being agile enough to adjust and add on sometimes.

This list could go on and on because building a business is one long stream of decisions – and while the CEO should be seeking opportunities to systematize, delegate, and otherwise not become an over-controlling decision-making bottleneck – it is also the nature of the startup-building beast. Here are some concepts to consider as you develop your decision-making capability as a startup leader:

• Get comfortable with uncertainty. Few decisions in a startup are obvious. Most of the time, you will be making decisions with incomplete information, missing insights, and generally fog. Honestly, if it is that clear, maybe you should be able to delegate that decision. Once a startup has grown, for CEO-level decisions, it is imperative to be able to determine when you have enough information to make decisions and then get moving.
  
  
• The pace of decision-making varies. Sometimes, decisions can and should be mulled over. Sometimes, there is great urgency, and you must make the right call in real time. Sometimes, getting others onboard with a path is essential to making the decision stick. Be aware and intentional about what sort of decision you are facing.
  
  
• Pursue multiple shots on goal. Sometimes, you can improve your chances of finding a successful path by pursuing multiple paths simultaneously. Keep an eye out for cost and time-effective opportunities to pursue parallel paths.
  
  
• You will make mistakes. If every decision you make proves to be right, then perhaps you are waiting too long to make the call or hanging onto lower-risk decisions. Cultivate your ability to assess the risk and consequences of potential mistakes and weight the value of moving quickly against the value of incremental information. Do what you can to mitigate possible negative consequences when you can.
  
  
• Beware of sunk costs. Sunk costs (costly commitments you made in the past) are a classic anchor that makes deciding to move on to a different strategy difficult. Yet, a startup leader must be ruthless in stopping the bleeding by continuing to invest in a failed decision. There is an art to determining how much information you need to confirm failure and switch. Yet, some of the most consequential strategic calls can mean making a critical team member, development partner, or commercialization approach switch when it is just becoming clear.
  
  
• Make it safe for negative information to reach you. Usually, people rush to tell you good news and hesitate to share bad news. The impact of this is to bias your information base for decision-making. Be disciplined and careful not to shoot the messenger who brings you bad news. That news may be just what you need to begin resolving the problem quickly.
  
  
• Seek advice and input to fill in gaps in your understanding. Some decisions are well within our personal expertise, while others are not. Make sure to seek advice from experts (technical, legal, financial, market, etc.) who can help you make a better-informed decision, but remember that often, the ultimate decision will be yours, so do not get stuck in analysis paralysis.

Good decision-making develops with experience, so be intentional about cultivating your systems for gathering, analyzing, and deciding. Practice. Seek feedback. Notice the consequences. Keep learning and growing so you get better and better at this crucial skillset because it can become one of the most consequential capabilities that you can provide to your startup – and if you cannot rise to the level needed, then collaborate to bring on someone who can.