In the early days of starting Flurry, my co-founders and I made all of our decisions by consensus. It wasn’t hard, since we had similar opinions and were spending all of our time in development which we knew very well. The camaraderie of working together late nights and building something new fueled the excitement we had about our new path of entrepreneurship.
After about six months, we had a working product and were thinking of raising our first angel funding. One of our friends, a venture capitalist, offered to listen to our pitch as practice before we presented to potential investors. We spent a long time putting together the perfect pitch for our business and practiced it until it was second nature. When we pitched our friend the VC, he listened to the pitch, asked questions along the way and seemed generally impressed. Until, at the end, he derailed our entire company with a single question.
“So, who is the CEO?”
That question hit at our biggest weakness which we shared with most first time entrepreneurial teams. But before we talk about why, let’s talk about making decisions.
Democracy vs. Dictatorship
Democracy and Dictatorship are both ways of making decisions for groups of people. Democracy requires a majority to agree before a decision can be made which means a democracy makes fewer decisions, but will avoid making very bad decisions. In contrast, a dictatorship consolidates all decision making power in a single person allowing it to make many decisions very quickly, but with a higher chance of very bad decisions.
For a government, avoiding very bad decisions is the primary concern and the cost of not making any decision at all is often low so democracy thrives. However, in the military where there is a premium on making decisions quickly and it is dangerous to make no decision at all, dictatorship is used. The decision making framework needs to match the needs of the organization making decisions.
Companies are much like armies, where the premium is on making decisions quickly. You have limited time to execute your plan before you run out of funds, your competition picks up or the market moves. Making a decision quickly and doing something, instead of endlessly debating, is critical to your success.
Companies need CEOs
When we were getting started in those early days, we put off the decision about who was in charge because we were friends first and co-workers second. While I carried the CEO title, I did not act like the CEO nor did everyone treat me like a CEO. This was a dangerous thing to do, as I have seen teams fall apart after 6-9 months fighting about who should be the CEO and I am glad we survived.
Had we been clear about the CEO authority day one we could have set up the right decision making frameworks from the beginning, and avoided any chance of decision paralysis if the team disagreed on what to do. As it was, we had to change the way we made decisions which slowed us down during a critical period of the company.
Note that just because the CEO has ultimate decision making power does not mean they make all the decisions. A good CEO delegates decision making to his team as much as possible, and the best CEOs make sure their teams feel ownership of all decisions even if they don’t make themselves. Still, it is not always possible to make everyone happy with every decision which is the hardest part about being a startup CEO.
Who is the CEO?
I am glad that our friend asked “Who is the CEO?” because it forced us to confront the question of authority very early in the life of our company. It was also a wake up call to me, as the CEO, to step up as the leader I should have been all along. The team also needed me to become that leader, as it allowed us to move more quickly and overcome some of the challenges we had faced.
And it prepared us for the even harder journey ahead.
This post originally appeared on the FounderDating blog as a guest post.
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