Focus on the decision making process, not the decision

At any given week across our portfolio a few companies are bound to be making a bunch of tough decisions: new strategy, products, revenue models, international expansion, key hires – the list goes on. In a healthy entrepreneur – VC relationship a constant dialogue exists around major decisions, where the VC can act as a sounding board and advisor but always supports the entrepreneur in making the final decision. Something is wrong if it’s not like that and it needs fixing then.

The worst way to make important decisions goes something like this and I’ve seen it happen more than a few times:

  • Entrepreneur presents “options” (vs a suggested “plan”) to the board

  • No one’s briefed or thought about the decision properly

  • A debate ensues that is more or less an exchange of opinions and views based on at best anecdotal evidence

  • Those with the best argumentation skills or position win and the decision is made accordingly 

Fred Wilson wrote a great post on how board meetings can be run effectively so I won’t repeat anything here.

Instead I want to share how in general I like to act as a sounding board to entrepreneurs outside of board meetings and especially when I may have a different opinion than the entrepreneur on a given point that’s up for decision. It doesn’t happen too often but when it does it really shows what kind of relationship you have and it’s something I try to focus on a lot. Again – I really try to avoid an exchange of views and opinions; and never, ever try to suggest we want something to happen because we’re investors, the company may need money and its coming from us, etc. That can really put the spanner in the works and I don’t want to go there.

So I have a simple trick that works for me: I focus heavily on the “how” and “why” a decision is being made, and really not so much at all on “what” decision is being made because honestly that shouldn’t be my turf.

For each decision it’s not a lot of work to come up with a checklist to ensure the decision-making process is solid. Here’s one example for say a new product:

  • What data from our users / customers are we using?

  • What external data (market, similar models, external A/B tests, etc) are we using?

  • Are we interpreting the data right, where are our analytical weak spots?

  • What are our opportunity costs?

  • Do we have the resources to execute on this?

  • How does this fit in to our long-term plans? How will we be positioned vs where we want to be?

  • What impact on / reaction from our users / customers are we expecting?

  • How will we be able to measure the impact as quickly as possible afterwards, when will we see effects?

  • How does this affect other stakeholders in the company?

  • Have we talked to people who know their stuff on the matter if we’re getting out of our depth?

  • What would happen if this goes wrong? What would we regret? How does this look vs the upside?

  • etc…

It doesn’t really matter so much as long as you come up with a few points that help put structure around a decision – and most important of all – avoid things being based just on opinions and anecdotal evidence. After going through a structured processes I usually find in the end we are all in violent agreement. And if it was the wrong decision so be it and there will be no “I told you so” because the decision was well thought through and everyone went through the process.

OK but so here’s the thing. Not all decisions can be made like that. Sometimes it just comes down to the entrepreneurs gut feeling. It’s my job to sense when its one of those decisions and then to just get out of the way.

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