Startup and scaleup founders tend to focus on building a great product and having enough free cash flow to keep the innovators innovating. And that’s fair enough. In the early days you hustle hard to develop, commercialise and market your product or idea, and if you do that well, you pass the deadly first year mark where 1 in 3 businesses fail. Then the revenue starts to build and you do cartwheels as you finish year 2, where 2 in 4 businesses fail.
Before you know it, you have a real business with great products, recurring revenue and a growing team. But the innovation culture that was once explosive feels slow and painful. Business growth might stagnate, motivation may lag and even revenue might stall. All signals that something has to change. And quite often the problem lands with decision making.
Signs That Your Decision-making Structure Has Failed
Decision-making processes in growing businesses break down all the time. Or perhaps the structures were never set up right to begin with. Here are some signs that things aren’t working:
- Clear strategic priorities become items of fiction.
- Any real change gets stuck in a bottleneck.
- Meetings go round in circles without clear actions or progress.
- You fight over whether to pay bonuses or invest in marketing.
- Employees feel caught in a battle for control of the company.
- Culture is impacted due to a lack of leadership
- Key people decide to resign because they have no say in the direction of the business, or no ability to initiate change.
Land On Your Decision-making Structure
So, what does a good decision-making structure look like? First off, the decision-making structure is different to the legal structure of a business, although it may be influenced by it. Here are some best-practice tips to ensure a solid decision-making structure is in place that will allow different decision-making styles to flourish.
Lock In Working Agreements
Working agreements are a set of rules that you commit to when you join a team. This defines how the team functions within itself and in relation to other teams. As a team, create a list of expectations of each other so you can work together successfully and avoid misunderstandings that may come up.
Wondering if you should send an email, pick up the phone or send a DM? Check the working agreement! How long can I take to respond to an internal request from another team? Check the working agreement. You get the idea. All your team norms, processes and policies should be in here.
Determine Who Decides What
Make your working agreement a destroyer of bottlenecks by clearly articulating who makes what decision. An important place to start is identifying what decisions could sink the ship without proper oversight, such as when the law requires a certain person with a special licence to sign off on something.
Another example is setting spending approval limits where certain people can sign off on a purchase order or supplier invoice up to a certain amount only, and anything above the limit goes to the CEO for approval.
Know These 4 Key Decision-making Styles
Different types of decision making can be appropriate in different business scenarios. There’s no right or wrong way. Keep these in mind next time you’ve got a big call to make so that you can move forward with confidence and alignment across the team.
Command
Decisions made by strict hierarchy, usually due to a risk to the business. A registered tax agent may choose for their firm not to engage a potential client whose identity they cannot verify, as a potential fraud committed by the client could lead to the whole practice losing its licence.
Consult
Sounds intuitive, because it is! Before you make a decision that affects someone, get their opinion. You don’t need to follow their opinion, but you do need to afford affected parties the option to voice it. Ultimately, one person has the delegated authority to make the final call.
Contribute
If you love democracy, then get everyone to vote. The majority wins the right to make the decision. This is generally the case when choosing somewhere to go for lunch, but also around things like meeting cadence, communication channels or other less meaty decisions.
Consent
100% of the group must agree. This is the hardest decision-making style to implement; however, this is useful when a “would be nice” but not “business critical” decision needs to be made.
All 4 decision styles have their place. An organisation just needs to be clear on when each one is relevant. Chaos occurs when some members of your organisation want to contribute but the founders only operate on command.
Delegate Decision Making Within Your Business
Delegate decisions to the best-placed decision maker, not the highest paid person. Here are some benefits of having a clearly documented decision matrix in your working agreement:
- Employees know who to approach when they need something and how to approach that person or group
- Bottlenecks are removed, which also removes the frustration of slow uninformed decision making
- Inadvertently, working agreements define the culture in practice. This is the code your team lives by.
Get In Touch If You Need Help With Business Decision-making Structures
An effective workplace agreement is driven by the people doing the work. However, it’s important to have an impartial third party facilitate the building process and feedback loop.
Our business advisors, through a series of monthly meetings, can lay out the roadmap to create a high-performing team that together makes great decisions. Grow your business with purpose by deep diving into decision-making structures with your BlueRock advisor.
