Punishment for Bad Decisions
By Ben Dyer
At the time of this writing, it happens to be the opening weekend of spring training for MLB. We can look forward to many great games, but there will be plenty of questionable decisions made by coaches and by individual players every day. The athletes and managers who are delivering the show are subject to considerable scrutiny in the press and social media. All their games end with a score, and there’s no hiding from the consequences of posting too many L’s too soon.
A startup founder also gets to make his or her share of bad decisions from day one onward. Very few decisions in a fast-moving startup environment can be made with full knowledge of all the circumstances or enough time for thoughtful analysis. One must make real-time choices under duress and when facing deadlines. Not all of those will be good, even if you are very smart or very lucky. The results won’t be immediately tabulated and witnessed by tens of thousands of fans, but there may be some form of punishment in your future. Let’s list a few thoughts on this topic:
Whether you prefer lean startups or fat ones, as I do, it’s still important to de-risk every decision you make as best you can. Most accelerators and programs like the NSF’s I-Corps preach the gospel of talking with as many customers as possible before committing to any course of action. That means more listening than talking. I’ve advised startups in the digital health arena, and I’ve heard the comments by nationally prominent doctors that “no bunch of engineers are going to sit around a room and tell us physicians how to do business.” I’ve observed that to be the case. Even doctors themselves do not necessarily have good instincts as to how their peers will behave. And, fair warning, you can talk to hundreds and get smiles and nods about your idea and still see it flop if it doesn’t fit their workflow and, more particularly, their cash flow. The ultimate de-risking can only take place in any market when you have something to deliver and can ask for the order – hence the value of getting quickly to a Minimum Sellable Product (MSP). If you run aground at that point, you’re experiencing the punishment you may not deserve but nonetheless have allowed to happen through a series of product or business method decisions along the way. Then you must deal with the painful question of what to do next.
Some decisions have only transient effects. They’re smaller in nature, and if made wrong aren’t going to change the course of your startup. They can be fixed, or perhaps even undone. The penalties may be light. Things happen. So, the ball was dropped, it’s just part of the game. There’s time and a way to recover. Bugs can be fixed and features modified. Don’t sweat. Others can set in motion big strategic initiatives that have a high capital cost following by ongoing operational overhead. I’ve seen a major example of that in another digital health case where scalability was deemed critical for a complex business model, and there was no shortcut to create the necessary IT infrastructure for such a venture. When the MSP was ready, the physician support was not there as anticipated, even after a year of constant conversations in the marketplace, and the company had to adopt some very different models to use all this finely tuned machinery. Rather than just making an error at the plate, that was losing a season and having to completely reload for the next. What’s the punishment for that? It could mean personnel changes, a punitive follow-on financing, and enormous energy rethinking every aspect of the venture. But, that said, crafty management can come up with some creative new directions and may well play the game out to a happy ending. This works if the funds have been applied to building something with high quality and versatility that has value in and of itself. However, if all the investment funds have been burned up in salaries and fees with no asset creation, then hoist the Strike 3.
The most perilous of startup decisions are the ones dealing with personnel. If you saddle yourself with folks who can’t keep up the pace and make their own business decisions with a reasonably good success rate, you’ll put a lid on your venture’s potential. Every player on a baseball team has choices to make on every bounce of the ball. While the ones by the pitcher may be the most obvious, it’s hard to tell in real time if something he decides in split seconds is good or bad or whether one of his teammates has missed an assignment. In live action, hopefully the coaches have a much better sense of what happened than I do from my spectator perch, but even they only have limited data on which to make on-the-fly adjustments. As you grow your startup, you will become increasingly reliant on the quality of decision making at all levels of your company. If you try to micromanage, you’ll stall, and you’ll run off the best talent. You have to be a coach, which means leading, delegating, organizing, making assignments, and trusting your team to perform. You aren’t always on the field, as in dealing with customers, technical plans, new opportunities, and the attendant live action problems than come along with those. Startups are a team sport, as I say repeatedly. You may be the ultimate “decider” – but decision-making skills must be honed at all levels of your staff. And you need to create your own film room equivalent in the way you measure and reward those who are making the best decisions in your cadre. You will be justly punished by well underachieving your potential if you don’t succeed in drafting and properly motivating a team with whom you can truly share the load at all times.
Anyone who has read any military histories or who has served in combat knows well the truism that soldiers fight for their buddies in the foxholes with them. Their greatest fear is letting down one of their comrades in a genuine life or death situation. Sure, there may be some subconscious notion of God and Country, but when the bullets wing it’s all about the people immediately around you. Similarly, your decisions as a founder must always be considered in light of how they affect your colleagues. You might have the urge to dart off in some unplanned direction but think for a moment about how that affects the workers who depend on your leadership. Will they lose confidence or lose balance on their assigned tasks when they see incoherence at the leadership level? Of course, they will. This is a corollary to distributing decision making throughout the organization, which only works if you as a leader maintain your own composure and consistency under the intense pressure of trying to bring a great business to life. You can picture the consequences of miscalculation in this respect.
Probably the most severe punishment for bad decisions is time lost. You can always make back money that is lost, and you can fix all kinds of other problems, but if your choices are muddled and you throw your startup off pace, you’ll see time disappear. Before you know it, you’ll have missed your early objectives in the plan that convinced your investors, and you’ll be perpetually thereafter digging out of a hole. In some ways a bad or middling decision made quickly may ultimately be better than a good decision made too deliberately. You’ve probably dealt with executives who have a hard time getting contracts culminated because they keep ruminating over all the what-ifs and are constantly reopening questions that everyone else thought had already been put to rest. At some point trust and judgment must push aside this continual grinding on a deal under negotiation so that the business can proceed. I’ve seen this behavior sometimes resulting from a lack of self-confidence and sometimes from the opposite – excessive hubris about one’s relative bargaining position. There are many cases where just getting on with a decision and finalizing things is a far better use of precious time than holding out for the unachievable perfect deal. Your time lost is punishment enough, but if this behavior results in a rocky start to a business relationship, there’s even more time lost recovering the mutual respect that brought you to the table in the first place.
Every decision you make as a founder has consequences. Keep that in mind and minimize the punishments. And, if you’re a baseball fan, I hope your team makes enough great decisions in its next game and delivers you the W’s you want.
Ben Dyer is best known as the founding CEO of Peachtree Software and has been responsible for numerous startups in both Atlanta and Austin ranging from technology to financial services. He is currently an Entrepreneur-in-Residence at the ATDC at Georgia Tech and spent 7 years in starting in 2011 in similar roles at the University of Texas at Austin. He is a prolific writer and has written many hundreds of blog posts on entrepreneurial topics. Among numerous honors, he is a member of the Georgia Technology Hall of Fame.