How do you make decisions?

DecisionCalcs

I’ve said elsewhere that startups are decision machines, nowhere else will you have to make the number of decisions you’ll need to make as a founder. So just how do you go about making those decisions?

At Mainspring Communications the chair of my advisory board had been senior VP for software development at Apple, then moved to a senior VP position at Microsoft, reporting to Bill Gates. He didn’t talk a lot about his years at Microsoft, but one day when we were having trouble making a decision he described how Gates’ senior management team arrived at decisions, using pros and cons and decision trees.

Here’s my thoughts on how to establish a decision process in your startup without creating a bureaucracy, using the core tools my advisor once used at Microsoft.

  1. Prioritize your list of decisions. Priorities need to be based on weighing short term outcomes vs. long term outcomes. The definition of long term in a startup varies, but certainly no longer than three years and as short as a year. However you set your short term and long term planning time frames, be consistent! Don’t use three years as long term for one decision and a year for another.
  2. List your options. By definition a decision is between two or more choices. Make sure your team puts together a short list of options. Don’t let this exercise turn into a brainstorming session about everything you could possibly do.
  3. List the pros and cons of each decision on your white board.
  4. Develop a decision tree for the option that has the best pro/con ratio. The tree takes into account the consequences of a decision, including event outcomes, resource costs, and benefits.
  5. Make your decision. Obviously it’s best if you can get consensus, as consensus equals buy-in, which in turn drives motivation. But at the end of the day as CEO you own the decision, so if you can’t reach a consensus decision, the buck stops on your desk.

You may well want to test out this process on less than mission-critical decision to see if this process works for you, for example on a rent vs. buy decision on a piece of equipment. There’s a wealth of material on how people reach decisions, but the bottomline is that they don’t always do it rationally. A classic that is highly recommended is Thinking, Fast and Slow by Daniel Kahneman.

As the company grows your decision making process will need to get pushed down to lower and lower levels in the organization.  Establishing a short and simple methodology early on is important, as it will become part of your corporate culture, as many others besides the founders will become responsible for decision making.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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