The Art of Making Decisions

The Art of Making Decisions

When it comes to the choices we make, most of us like to think we’ve made the “best” decision. And while the everyday decisions (what to eat for breakfast, whether to read this article) don’t sap much mental energy, the choices that we encounter at scaling startups are often far more weighty: Deliberation on whether or not to raise a new round, or which new product feature to add to the roadmap, is intensified by a high-pressure environment with no safety net. Where good decisions can accelerate your company’s growth and foster trust among teams, bad decisions can endanger the bottom line and injure morale, sometimes irreversibly.

The dilemma, of course, is that high-stakes decisions are seldom so clear cut. On a team, it’s difficult to get consensus on what the “best” option even means; with an excess of choices, leaders can fall into the paralysis of indecision, wasting precious time and opportunities. How do you make a choice that optimizes for both speed and sagacity? Should you place more weight on data, or go with your gut? How do you reconcile viewpoints among smart, strong-willed operators, without fanning the flames of conflict?

In search of insight, we pored through advice from seasoned leaders who’ve tackled the most challenging decisions in scaling startups and large companies alike. A common theme arose: The art of decision-making isn’t always about capturing some elusive “best” decision — it’s about making the most of information available, garnering trust across stakeholders and executing with conviction.

In this roundup, we’ve gathered six time-tested tools, frameworks, and principles for making high-quality decisions at fast-moving startups. They include strategies for distilling the information needed to make a decision, testing potential solutions and reconciling clashing perspectives. We hope they’ll help take the dread out of decision-making and lend you clarity on choices that can drive your startup forward.

1. Codify a set of decision-guiding principles

When a startup team is small and more or less in sync, most choices can be decided by the founding team. But as your team scales, and as you hit unprecedented new milestones, you’ll feel like you the guidelines on what makes a “good decision” start to blur.

As COO of Stripe, Claire Hughes Johnson has developed a decision-making framework that has become a sort of shared decision-making compass for all members of the team, new and old. According to Johnson, you need to document concrete core tenets describing the way you work.

Once they’re written down, you need to repeat them constantly until everyone has internalized them. Stripe calls them “Operating Principles.” (Many companies have “values,” but Stripe wanted to distinguish philosophical beliefs from the concrete principles that should be applied to the day-to-day work of running the business.) Two of Stripe’s operating principles, as Johnson describes them, are:

Think rigorously: “We care about getting things right and it often takes reasoning from first principles to get there. We work hard to detect the errors in received wisdom. Rigor doesn’t mean not-invented-here syndrome; we’re interested in the world around us and think that other companies, industries, and academic fields have a lot to teach us. But in many cases, progress comes from taking paths less traveled.”

Trust and amplify: “We want to work in a company of deeply good people who treat their colleagues exceptionally well. People should be committed to amplifying one another, going out of their way to help each other in both the short- and long-term.”

They should also be defined in a way that acknowledges potential tensions. When two principles seem to conflict, the context should tell you which principle should take precedence. For example, “think rigorously” is paramount for high impact and irreversible decisions, but “move with urgency” is critical for decisions that are lower impact and potentially tunable. In this way, your core tenets serve more as a guide to action than a toothless list of nice-to-haves.

This also makes them a useful rubric for hiring new people and assessing performance. Do candidates have aptitudes or experiences that align with your operating principles? Do existing employees execute their responsibilities in a way that upholds them? You should bake your operating principles into both your hiring and performance review processes to make them useful and keep them top of mind.

Your principles should be clear and explicit enough that the people who consult them will make the same decisions a founder of your company would.

The operating principles play an even bigger role in training for new managers joining the company. “If you’re not careful, managers bring whatever rules and behaviors they had in their prior roles — and they have a tremendous influence on their teams,” she says. “That’s why we built a different onboarding program for new leaders, to make sure they really understand the different way in which Stripe operates based on our principles.”

This is an all too common failure mode: A startup’s founding team uses a set of unwritten beliefs they all implicitly know and agree with to make hiring decisions and product decisions — but they never get said out loud or documented somewhere central.

“So much happens organically when you’re on a small team always working in the same room,” says Johnson. “You have a lot of informal ability to get things done because you all have an immediate understanding of what kind of decision is being made and how you want to handle it. But when you scale, you can’t easily teach that to someone new in a way that they’ll immediately understand. They have to be conditioned to understand it.”

If you’re a leader at a company, do you know what these unspoken, unwritten things are? Have you categorized the common types of decisions you need to make? Have you documented the beliefs that guide how you make those decisions? If not, pause, and do that now.

2. Lean on the matrix that’s been called the “Xanax for decision-making.”

When startups scale, teams grow, perspectives become more diverse and problems become increasingly complex. As Flatiron Health ballooned from four employees to 135, CTO Gil Shklarsi noticed a glaring people problem: his engineering leaders had a hard time making streamlined decisions, whether it was negotiating with product leaders or creating alignment around an internal debate.

To shake up the decision-making gridlock, Shklarski developed a framework based on a model introduced to him by his executive coach Marcy Swenson. The matrix, nicknamed the “Xanax for decision-making” among his team members at Flatiron, has enabled his increasingly autonomous and fragmented team to keep moving fast and smart through tough choices.

First, it’s important to establish the distinction between good decision-making and good decisions:

You can make a good decision that will still create chaos throughout your team if people aren’t happy with how it was made.

This framework is about improving team alignment while reducing stress in the decision-making process. There are two types of decisions:

Type 1: Irreversible decisions

Type 2: Reversible decisions

This system can be used for either. But Shklarski’s goal was to optimize for Type 2 decisions. Those come up the most often and are exactly the sort of thing that shouldn’t be escalated to top leadership. “People will expect and accept scrutiny and overhead for Type 1 decisions,” he says. “Streamlining Type 2 decisions makes teams and the people on them happy, allowing things to be accomplished without the usual stress.”

It starts with a basic chart, with the two (or more) options you’re deciding between at the top. Down the left-hand column, you have benefits, costs, and — uniquely — mitigations.

This can be a quick, structured thought process for someone making a decision alone. But if a team is working together through a suggestion, Shklarski suggests writing it on a whiteboard or in a Google Doc that everyone can see and collaborate.

This chart might look like a generic pro/con list, but the real magic happens when you put it to work. In particular, it lives in the row labeled ‘Mitigations.’

“The leader of the exercise should really be more of a facilitator, rather than placing their own opinions and judgments at the forefront,” Shklarski says. “She should encourage everyone to ideate and include the social considerations or ramifications of each option — not just the cut-and-dried causes and effects on the work. For example: Will a boss be made happy by a certain decision? Will a team be energized? Will someone who deserves visibility in the organization be given an opportunity?”

The facilitator also needs to ensure no one is dominating the conversations and everyone gets to document their perceived benefits and concerns. This contributes to psychological safety by fostering conversational turn-taking.

Filling in the Cost and Benefit slots for each choice should be pretty straightforward. Notably, the Cost row should also emphasize the risks associated with each choice.

The only other thing to watch out for is making sure you’re generating enough in each column, and thinking holistically around exactly how selecting a particular path will play out in reality. Who will be helped? Who will be upset? What are the long-term impacts? The short-term impacts? As the company grows, how will these impacts change? Really dig in and project each choice into the future.

Then you get to Mitigations. “This is where the facilitator should walk the group through how to soften, allay, or distribute the risks associated with each of the options,” Shklarski says. “If you didn’t do it already, this exercise forces you and everyone to think through what it would really be like if that option were selected.”

Having mitigation conversations elicits opinions and feedback from a wider range of people, and prompts the group to see the situation from other points of view — including those of other departments within the company that might touch or be affected by the decision at hand. It also gets everyone collaborating on possible solutions to the negative impacts on others.

Here are some best practices for mitigating risks and generating this row of the matrix:

Ask yourself questions that add an objective shifted perspective. For example:

What would be best for our customers?

What would be best for the patients? (Or people who are ultimately impacted.)

What would the board want us to do? (The board represents objective good for the company.)

Ask yourself questions about addressing the risk from a different angle. For example:

What is the root cause of that cost/risk, can we mitigate it?

Can we address this tech-debt/management-debt in other ways?

Can we resolve the underlying anxiety through other means?

Is there a long-term/short-term tradeoff we can make?

Sometimes through the conversation, you end up adding a Column C or D because new options or ideas emerge with different or fewer risks.

The exercise allows everyone on the team to put their fears, hopes and social anxieties into the decision-making process, and see them taken seriously as important factors.

3. Use A/B testing as a management framework to reconcile different points of view.

Elliot Shmukler has had a front-row seat to the dynamic interplay of people and products across his career, which has spanned stints as VP of Product at Wealthfront and Instacart.

His experience mediating disagreements between headstrong PMs with seemingly opposite opinions led him to turn to a familiar decision-making framework: A/B testing, with a distinct twist. “I wanted to use a framework that would simultaneously surface the best choice for the product while still encouraging the inherently different approaches to ideation among my product managers,” he says.

Shmukler was inspired to use A/B testing to settle scores when he noticed a pattern in the disputes on his team. He observed that PMs were likely to lock horns when they involved a clash between two distinct ideation styles: the way of the visionary and the data-driven PM. “The visionary product manager reads the tea leaves and decides more on gut feel, while the data-driven PM uses experimentation and analysis to make calls,” he says.

For visionary PMs, a lot of power is generated when they know something works and they want to bring it to the rest of the world. Shmukler admits that many of the visionary PMs that he’s known to have been or become founders or CEOs, because of their deep belief in taking something personally relevant to scale. “Reid Hoffman built LinkedIn to reflect how he approached professional networking and his vision for how it should work online. Obviously, the product has evolved over the years but the site is still largely true to his original vision, which was right on the money.”

Data-driven PMs develop their insights methodically and are less headstrong before making decisions. “I’d characterize these product managers with the phrase: ‘strong opinions, held weakly.’ Data-driven PMs come to their stance not so much from how they’re living their life, but by looking at and collecting new data. As more information comes in, they’re much more likely to refine those insights,” says Shmukler. “It’s more of a challenge to give recognizable names for these types of PMs because the data is at the forefront. But you’ll find them working on growth teams and gravitating toward roles where data already has a very strong role.”

Given these vastly different styles, it can be a challenge as a leader to reconcile these different approaches to product management. For heads of product, this scenario may sound familiar: A visionary PM says, “We need to do X.” Then, a data-driven PM responds. “No, X is wrong. It won’t work. We need to do Y.” Shmukler faced this countless times — and on a daily basis as his team grew. “It’s draining and very hard to resolve without seeming to favor aside,” he says.

“Instead of giving a verdict, test both theories and let data be the judge. At first pass, this method may seem to favor the data-driven people, but it empowers each PM to push ideas forward. They learn independently rather than feeling that a decision was made for them.”

Your team’s undoubtedly better with diversity of thought, but trigger the relief valve when tension mounts.

To illustrate its simple effectiveness, here’s how Shmukler has applied A/B testing as a management practice: “A group of visionary PMs wanted to change how we talked about the company, specifically in the language on our homepage. The more metrics-driven PMs said they had run those experiments before and that it hadn’t had an impact on sign-ups,” he says.

“To resolve that situation, someone has to make the decision to deploy time and headcount to do the test or not. Either way, someone will think you’re making a bad decision. Visionary PMs will say you’re too data-driven and not being grounded in the bigger goal and data-driven PMs will say it’s a waste of time,” he says. “Universal A/B testing solves this, as no such decision has to be made. Instead, there’s an understanding that any idea from a trusted team will be tested in a lightweight way. The results — rather than a single arbiter — decide if ideas should be pursued further.”

In this case, Shmukler asked the team to work together to put the theory to the test to gauge impact. “The visionary PMs wrote the new content for the homepage and the data-driven PMs took point on structuring the experiment. It took a day or two to implement and we collected data over a month,” he says. “All the tests’ results are public on a dashboard that the entire company can access. Both camps are happy: the data-driven PMs got to use data to experiment and determine results, and the visionary PMs got their idea out there. In this specific case, the new homepage language did not have a significant impact. There were no hard feelings. The visionary PMs recalibrated and redirected their energy to new, different ideas.”

4. Spell out your RACI and RAMs to create transparency and accountability around decisions.

Transparency is a key ingredient to good decision-making at startups. When good decisions are executed but lack top-down transparency, it can spark conflict and erode trust.

It’s a lesson that James Everingham learned not long after he joined Instagram as Head of Engineering. (Today, he’s Head of Engineering at Facebook’s Calibra.) A decision to move a team to a new office caught the team’s manager by surprise. The manager was rightfully shaken up, but it was his response that stuck with Everingham: “I’m really disappointed,” the manager told Everingham. “This is the first I’m learning about this. You didn’t involve me in this at all. You were not being transparent.”

James Everingham at First Round’s Founder Summit

This is what unlocked the transparency conundrum for Everingham. “I realized it all came back to clearing up decision-making. When you think of transparency, you usually default to the communication aspect: telling everyone what’s happening or admitting when you’ve made a mistake,” he says. “But when folks say that things aren’t transparent, what they’re probably getting at is that decision-making isn’t transparent. It’s the feeling that decisions sometimes roll on down from the lofty perch of the leadership team, seemingly out of nowhere. Instead, pull back the curtain on how decisions are made, putting some process and principles behind it so it’s not this mysterious black box that’s ripe for speculation.”

The fix for clarity on decision-making at Instagram came down to two things: Using frameworks and principles for the decision-making process and establishing clear roles with single accountable owners.“We had to make our decision-making understandable, consistent and repeatable. We also had to ensure people understood who was the single person making a particular decision. It was about standardizing our algorithms and guidelines,” says Everingham.

One of the first fixes that Everingham and his team made was instituting a RACI model for assigning roles and making decisions. Commonplace in consulting, it’s a tool that lends itself well to the world of startups. It works by identifying and assigning who is Responsible, Accountable, Consulted and Informed before every project or decision.

“My favorite illustration of this that I’ve seen is applying RACI to Star Wars,” says Everingham. “If you’re a geek like me, then it’s perfect. Essentially, in the effort to destroy the Jedi, the bounty hunters were responsible or doing the actual work, while Darth Vader was accountable, the stormtroopers were consulted and Darth Sidious was informed of what happened at the end.”

Of course, the issues Instagram applied the RACI model to were slightly different. “We used it for our most important initiatives and we actually would always start out by defining the ‘A’ first. For example, when trying to figure out which database architecture we were going to use moving forward, we singled out our CTO as the accountable decision-maker,” says Everingham.

“The ‘R’ group was responsible for doing the work and putting together a recommendation on what we should do, which included gathering input from a group of engineers that were consulted. There was a final presentation to walk the CTO through their thinking, where the ‘C’ group was also invited to hear the decision being made. Finally, we actively identified who needed to be informed of the decision and communicated it out to every affected group.”

In a bigger company, it’s clear how the RACI model can help cut down on chaos. But is it necessary for a startup just getting off the ground, where reporting lines are simpler and teams leaner?

“Instagram was a relatively mature company when we started this process. And it’s just plain harder to do this stuff when you get older and bigger,” says Everingham. “This may seem like pointy-headed management stuff now if you’re a new founder and just starting, and that’s valid. Usually, you’re able to sort most of this out instinctively at the beginning. But I firmly believe that it’ll be a lot easier if it’s already a part of your culture by the time you need it.”

Instituting an accountability system from the very beginning can help startups avoid bigger traps down the line. “There are just so many ways for decision-making to go wrong, whether it’s too many owners, too much of a focus on consensus or an inability to capture or articulate the decision before you. Going through a whole process may seem cumbersome, but you almost always uncover something that needs to be cleared up. And even if you’re not running into any of those problems just yet, I promise it’s coming. It’s a good team muscle to build,” he says.

You can have more decisions than decision-makers, but if you have more decision-makers than decisions, that’s when you run into problems.

“We wanted a single decider model. We wanted people to understand exactly who was making decisions, so you can only have one ‘A’, or decision-maker,” says Everingham.

To that end, Everingham and his team turned to another acronym: RAM or a responsibility assignment matrix.

“We needed to highlight the ‘who’ behind every decision or project and make sure that there was only one common understanding, so we went through this exercise of building a RAM out in a spreadsheet, putting the functions or teams across the top, the tasks vertically and filling the names of the owners in the boxes,” he says. “It’s about who makes the call. Some of them had more than one name assigned, which illustrated a lack of alignment. Some of them didn’t even have any names, which highlighted a clear gap.”

“I found it to be a great exercise to go through as an organization,” says Everingham. “It reminded me of the classic Eisenhower quote, ‘Plans are useless, but planning is indispensable.’ On its own, a RAM is fairly useless, but the process of building it and clarifying owners is essential to aligning your company. It’s a framework that outlines responsibility and makes visible how a decision will be made, for everyone to see.”

5. Don’t just think about what decision you’re making — consider how fast you’re making it.

Whether a decision is “good” doesn’t solely depend on the choice you made: You need to take into account shared principles, transparency and — Dave Girouard would argue — sheer speed.

Here, the founder and CEO of Upstart discusses why leaders shouldn’t waste time hemming and hawing, but lean toward acceleration:

Do you remember the last time you were in a meeting and someone said, “We’re going to make this decision before we leave the room”? How great did that feel? Didn’t you just want to hug that person?

The process of making and remaking decisions wastes an insane amount of time at companies. The key takeaway: WHEN a decision is made is much more important than WHAT decision is made.

Deciding on when a decision will be made from the start is a profound, powerful change that will speed everything up.

If, by way of habit, you consistently begin every decision-making process by considering how much time and effort that decision is worth, who needs to have input, and when you’ll have an answer, you’ll have developed the first important muscle for speed.

This isn’t to say all decisions should be made quickly. Some decisions are more complicated or critical than others. It might behoove you to wait for more information. Some decisions can’t be easily reversed or would be too damaging if you choose poorly. Most importantly, some decisions don’t need to be made immediately to maintain downstream velocity.

It’s important to internalize how irreversible, fatal or non-fatal a decision may be. Very few can’t be undone.

In my many years at Google, I saw Eric Schmidt use this approach to decision-making on a regular basis — probably without even thinking about it. Because founders Larry and Sergey were (and are) very strong-minded leaders involved in every major decision, Eric knew he couldn’t make huge unilateral choices. This could have stalled a lot of things, but Eric made sure that decisions were made on a specific timeframe — a realistic one — but a firm one. He made this a habit for himself and it made a world of difference for Google.

Today at Upstart, we’re a much smaller company, and we’re making decisions that matter several times a day. We’re deeply driven by the belief that fast decisions are far better than slow ones and radically better than no decisions. From day to day, hour to hour, we think about how important each decision is and how much time it’s worth taking.

There are decisions that deserve days of debate and analysis, but the vast majority aren’t worth more than 10 minutes.

Note that speed doesn’t require one leader to make all the calls top-down. The art of good decision making requires that you gather input and perspective from your team, and then push toward a final decision in a way that makes it clear that all voices were heard. As I’ve grown in my career, I’ve moved away from telling people I had the right answer upfront to shaping and steering the discussion toward a conclusion. I wouldn’t call it consensus building — you don’t want consensus to hold you hostage — but input from others will help you get to the right decision faster, and with buy-in from the team.

This isn’t a vote for rash decisions. I can be a little too “pedal to the metal” at times, and sometimes my co-founder Anna will say, “This is a big decision. Even though we think we know what to do, let’s give it 24 hours.” She’s saved us multiple times with that wisdom.

There’s an art to knowing when to end debate and make a decision. Many leaders are reluctant to make the final call when there are good arguments and a lot of emotions on both sides. We intuitively want the team to come to the right decision on their own. But I’ve found that people are enormously relieved when they hear that you’re grabbing the baton and accepting responsibility for a decision. Using the “CEO prerogative” — to make the final call — isn’t something you ought to need every day. As long as you do it sparingly, you can actually make your employees more comfortable, and engender more trust by pulling the trigger, logically explaining your choice and sticking with it.

In fact, gauging comfort on your team is a really helpful measure of whether you’re going fast enough or not.

You know you’re going fast enough if there’s a low-level discomfort, people feeling stretched. But if you’re going too fast, you’ll see it on their faces, and that’s important to spot too.

While I was at Google, Larry Page was extremely good at forcing decisions so fast that people were worried the team was about to drive the car off a cliff. He’d push it as far as he could go without people crossing that line of discomfort. It was just his fundamental nature to ask, “Why not? Why can’t we do it faster than this?” and then wait to see if people started screaming. He really rallied everyone around this theory that fast decisions, unless they’re fatal, are always better.

6. Make the tough call, but be ready to explain yourself.

The final ingredient to a “good” decision is how well you justify and communicate it to a greater team.

Gokul Rajaram, who heads up Caviar at Square, developed the SPADE decision-making framework with Square colleague Jeff Kolovson. The framework, which stands for Setting, People, Alternatives, Decide and Explain, has been used to make important calls, without depending on the slow crawl of consensus decision-making.

Gokul Rajaram, Caviar Lead at Square

“Once you do a quick assessment of the importance of your choice and start using the decision-making framework over and over, something happens. You realize that making decisions doesn’t take days. It can be done in an hour or two. In that time, you can quickly make a high-quality choice with this framework,” says Rajaram.

He goes into detail on the first four steps in his article, based on a talk he gave at First Round’s CEO Summit. Here, however, we’re focusing on the final and crucial step for making sure a strong decision sticks the landing:

Explain

Once the decision has been made, the final step of the framework requires the appointed decision-maker to explain the decision. She must articulate why she chose the option that she did, and explain the anticipated impact of the decision. This process is much easier if the decision-maker records her thoughts as soon as she makes the decision. This stage involves three steps:

Run the decision and process by someone with a fresh perspective. Seek the input of someone who hasn’t been heavily involved with the decision-making process. “If you’re responsible for the decision, meet with that individual, explain the decision, and get buy-in. If you created a high-quality decision framework, he’s unlikely to veto it,” he says.

Convene a reasoning meeting. It takes coordination, but it’s important to pull together all the consultants that have been involved in the decision. Reserve a conference room or line that will include all participants to date. Then, walk them through the decision. “Now is when you explain the decision and really take ownership of the decision. There might be grumbling or disagreements, but this is the moment when you explicitly become the owner of the decision,” says Rajaram.

Call a commitment meeting. After the decision is made, it’s paramount that each person — regardless of being for or against the result — individually pledges to support out loud in the meeting. “Go around the room and ask each one of them to support the decision one at a time,” he says. “Commitment meetings are really important because when you pledge to support a decision in the presence of your peers, you’re much more likely to support it. As the decision-maker, you’re responsible for executing on that decision, and so you need their support to help to move forward.”

After a decision is made, each participant must commit support out loud. Pledging support aloud binds you to the greater good.

Circulate the annals of the decision for precedent and posterity. Now that the decision is made, the real work begins.#

Thank you for reading.😊🙏