How to make (right) decisions

As a CEO, your biggest leverage is in decision making. In fact once you cross the early stage of a company, the two most important (and frequent) things you end up doing are — decision making and communicating. So, if the decisions you take can make or break your startup, how do you take the right decisions?

Basis my learning over the last 5 years, I have realized there are 3 key attributes of decision-making

Impact — how many lives it touches, till how long will it affect, does it significantly impact the key metrics etc.

Complexity — both in terms of gathering the data you need to make that decision and once decided the effort that goes into execution

Reversibility — if you end up taking the wrong decision how easily can it be undone, if at all.

While you are evaluating each decision against these 3 parameters, your ultimate goal is to optimize for the following 2 things

Speed — right decision taken quickly > wrong decision taken quickly > right decision taken slowly > wrong decision taken slowly. Yes speed is that important, a wrong decision taken quickly is actually better than a right decision taken slowly. That’s because, theoretically no decision is completely irreversible (other than altering life form). So even if you take the wrong decision, you can reverse it quickly. And since you don’t really loose something by making mistakes (you learn and become smarter for next time), a wrong decision quickly reversed is a better than a right decision taken slowly.

Conviction — if we keep the obvious situations aside where the right choice is obvious (like whether to jump in front of a speeding car), in most of the fuzzy real life situations any decision can turn out to be right if executed with conviction. That’s because the correctness of the decision cannot be determined at the time it’s taken but at the time it’s fully executed. So if you have complete conviction, your execution is bound to drive success.

The overlay of the 3 parameters — impact, complexity and reversibility can be demonstrated by the Venn diagram below. The circle of impact means a high impact decision, that of complexity means high complexity and that of reversibility means low reversibility.

Decision Making

Though there are various sections in the diagram, one can broadly divide them into two — low impact and high impact decisions. Let’s start with low impact decisions.

Low-impact Decisions

If you are in a role where you have to make a lot of decisions, as much as possible, delegate the low impact decisions. If you can’t delegate these decisions then replace decision making with process. Define a process such that you don’t have to expend mental effort every time a repeated low impact decision is to be taken.

In the low-impact segment, let’s first look at decisions that fall in C category — these are low impact decisions which are complex and have low reversibility. A good example of this is — which house-keeping service to use for your office. The decision is complex because you will have to meet a bunch of agencies, get their quotes and then finalize one — this can take up to weeks. It’s has low reversibility because once on boarded you will take at least 6 months before you figure out it’s not working out and then the selection process starts over again. But this is a low-impact decision because house-keeping service is a fairly common thing. There are enough good service providers and though it’s important to have a good service (it’s hygiene), having a great one is not a game changer as the upside of a great housekeeping service is fairly limited.

Hygiene decisions are not really high impact decision because I believe the impact of a decision is determined by the upside that it creates. So as much as possible possible, delegate these low-impact, high-complexity , low-reversibility decisions. And if you are not able to do that then optimize the decision for velocity over anything else.

There are 2 other types of decisions in the low-impact section — high-reversibility, high-complexity and low-reversibility, low-complexity. For the former, reversibility is high so take a quick decision and reverse if you are wrong. For the latter, complexity is low so quickly gather the facts and basis that choose the best available option. My strong advice is — ‘Don’t reinvent the wheel’. If you can find out the best practices or if someone has already done this before, just follow in their footsteps. Remember these are low impact decisions, so the upside of taking an A+ decision will not justify the time wasted for it.

High-impact Decisions

Though one should still optimize for velocity in high-impact decisions, I would not recommend rushing through them. Also, in many cases optimizing for conviction can be more important than speed. Let’s look at various decisions that fall in this section.

The first category is decisions that fall in section A — high impact, low reversibility but low complexity. There are not a lot of decisions that fall in this category because generally low reversibility decisions are also high complexity. However, an example is, what electives to choose in college. I call it high impact because the electives you choose can come in fairly handy later in life. They can open up alternative career paths or help develop a different perspective to your core job. These are low complexity decisions because one can combine common wisdom with innate interests to identify a useful list of electives. However, where we generally go wrong in these decisions is to not think through them properly. For instance, students often miss out on the good electives because they are too lazy to enroll for them early. The risk here is not that you will take a blatantly wrong decision, that’s unlikely as it’s low complexity decision but by not thinking through one is highly susceptible to making a sub-optimal choice and missing out on a potentially large upside. So the idea here is to optimize for the upside.

The second category is of decisions that fall in section B — high-impact, high-complexity but high-reversibility. An example of this is — you came across a customer who has an interesting use case but the product does not support it. If it works, there can be a lot of upside but you are not sure if it’s worth the time and effort (the complexity is not in taking the decision but executing it afterward). I have seen most of the companies taking these decisions extremely fast when they are small but as they grow they slide into analysis-paralysis. Since the decision has high reversibility, you can always shut it down if it doesn’t work. In fact in 9 out of 10 cases you will end up reversing the decision — shutting down the experimental product/feature. But it’s not about the 9 wrong decisions but about that 1 right decision that creates the high upside. As you optimize for velocity in these decisions, it’s ideal to reduce the complexity as much as possible — reduce the scope of the experiment or figure out a simple execution strategy. You also want to optimize a bit for conviction because you don’t want to end up in a situation where you are firing up experiments and shutting them down whimsically. The most ideal way to take these decisions is

• take the decision quickly but spend time in defining the success of the experiment — what should happen that you can say this was a great experiment. Define a few objective criteria that can be easily measured for success.
• commit a certain time to it. You know it’s not going to be successful overnight so commit a minimum amount of time and measure the success criteria during it. There are only 3 outcomes — success, failure & can’t say. What to do in the first two is obvious. In cases where you can’t say, if you still have high conviction, extend the time by some reasonable amount and evaluate again at the end. If you still don’t have an answer, I wouldn’t recommend extending any further.
• document the decision making — why you took that decision, what factors you considered etc. This will help you for future decision making.

Another example of decisions that fall in section B is when there is complexity in taking the decision itself and not so much in execution. Let’s say you haven’t used PR as a marketing strategy and you want to try it out. It’s a reversible decision because you will typically start with an external PR agency and move it in-house only if it works — so if the agency doesn’t work, you can reverse your decision. Also if the agency fails in demonstrating success, it’s likely that that outcome will be no different if you try this in-house.

This decision is high-complexity because you not only have to identify and on board the right PR agency, you also have to ensure that you have the right internal systems to leverage the agency work. Here the decision to try out PR should be fairly quick (you will be surprised by how much people think about such high impact, highly reversible decisions). But you do need to spend good amount of time in execution.

There is simple way to get these things right — don’t reinvent the wheel. Seek someone who has already done this and follow their advice.

Toughest Decisions

Of all the decisions that you will have to take, the toughest ones fall in section D — high-impact, high-complexity and low-reversibility. It’s not going only going to take you time to take these decisions but once taken it’s also difficult to reverse them. These are the kind of decisions where I would optimize for conviction over velocity. Because in the course of decision making, even though you will collect a lot of data, do significant amount of research and take multiple opinions at the end you will have to do what you believe in. Decisions like buying a house, getting married or significantly changing the strategy of your company fall in this category.

We went through a situation where we had to significantly change the strategy of the company, it wasn’t a complete pivot but a quite consequential change. For 4 years we had been a community first business and then one day we decided to be an enterprise SaaS company. This was going to have a far-reaching impact on the company. It meant all the teams had to be redistributed, a few product product lines had to be killed, couple of low-key business models had to be shut down, some roles would become redundant and most of the folks had to be re-trained. And to top it all, everyone in the organization had to be re-aligned to a new company mission. The impact was colossal!

You just can’t move fast on decisions like these and you rarely take these decisions in a point of time. The thoughts for such decisions are seeded in your head much before you consciously start thinking about them. Once you make up your mind, comes the stage of research. You have to engage in extensive research — mining through your data, doing competitive research, going through third party reports and public data and most of all speaking to tons of people. The most important thing in such decisions is to have a fixed-desired-end-state-condition. What that means is that you have complete clarity on where you want to be and why, even though you may not know how or when.

With this north-star metric, this non-negotiable outcome you start mapping a) where you are today and b) what are the possible ways for you to be where you want to be (a mind-map is a great way to chart out something like this). As you create this mind-map, collect detailed data for every point on the map and objectively evaluate how each point aligns with your fixed-desired-end-state-condition.

Though it’s important to have a time limit on any decision one should deliberately go slow on these. That’s because, not only you will have to do extensive research but more importantly you have to build a rock-solid conviction about the decision you are going to take. As you go through the mind-map, day after day, discussions after discussions, slowly it becomes clear what decision you have to take. And gradually the decision will sink into you. This is a high impact decision that you most probably may not be able to reverse, so whatever you decide, you not only have to live with but also enjoy and evangelize (at least in case of a strategic change because you need to go out their and convince internal and external stakeholders). So unless you are completely bought on, this decision is bound to fail.

If you use the above Venn diagram to classify your decisions and optimize them for velocity and conviction, you will realize that in large majority of situations it’s not so much the inherent complexity in decisions but the complexity that we create by not being objective and by over-thinking things.

Most of us tend to put high-impact decisions in the D section when they really belong to other sections. For example, people ask me how I was able to leave my plush, high-paying job at Google and plunge into the uncertainty of a startup with absolutely no prior experience. 99.9% will put this decision in high-impact, low-reversibility and high-complexity section_._ Though it is high-impact and maybe even high-complexity, it’s definitely not low-reversibility. If it doesn’t work out one can always go back to a corporate job, maybe at even better financial terms. We even reduced the complexity by deciding that we will not startup unless we have capital sufficient to sustain us for an year. Then it was all about finding an accelerator/angel investor who would help us startup. We essentially moved the decision from low-reversibility and high-complexity to high-reversibility and low-complexity. I have written about this in more detail here.

The whole point of the above matrix is to help you move decisions out from section D.

In addition to the above, there are a few other learning that I have had:

You make a few great decisions by making a lot of wrong decisions

Great decision making cannot be learned theoretically, it can only be practiced. We often underestimate the role of sub-conscious mind in our decision-making. The human instinct, the gut-feeling, that we have all found to be extremely useful in critical situations is not a mental skill that exists from birth, instead it gets built over a period of time. It is the manifestation of continued learning of human mind and it resides in those part of our brain that our conscious self cannot call at will. The only way to hone our instinct is to be put ourselves in a lot of decision-making situations, to consciously take the best possible decisions with information at hand without fretting too much about being wrong. And though most of the times you are going to be wrong, as you are consciously thinking while taking a myriad of decisions, our sub-conscious mind is identifying patterns hidden in seemingly unrelated data-sets and hard-wiring them in our mind. So when next time you come across a similar situation that you may have experienced in some form in the past, even though you are not able to recall the exact situation, your instinct is able to match the patter and point you towards the right decision.

Don’t reinvent the wheel

I have probably said this statement a couple of times in this post because I can’t stress enough on this. 99% of the times, the decisions that we take have already been taken by someone else. Most of the human lives are not very different, for what you are going through there are probably millions of folks who have gone through the same situations. So it’s really common sense to go out there and seek folks who have done similar things in past and learn from their success and failures. Thought it’s seems obvious people rarely do this. Maybe it’s because taking decision gives us a sense of power, so saying that let’s do what 5 other great people before us have already done doesn’t sound that impressive. Or maybe it’s because we are so drunk by our own decisions, that we don’t want to know that we can be wrong and hence we don’t seek other people’s counsel. Or whatever else may be the reason, one things is fairly obvious, we individually know far far less than what all of us know together.

What I have done to effectively seek counsel from other people is

• to have 2–3 folks as my mentors (who I feel are smarter than me) and every time I come across a tricky situation, I will quickly pick their brains. It doesn’t matter whether I take their opinion or not, at least it gives me another perspective.
• to maintain a running list of sticky situations that I have come seen in the past. Whenever I come across someone who is an smart in a particular domain I ask them a bunch of questions from that rolling list.

Reduce the number of decisions you make

This is not contrary to my first point. In the beginning it’s all about putting yourself in as many situations as possible and taking more decisions. But over a period of time as you mature, your value is not in taking a lot of decisions, but taking as few decisions as possible. As you create a system where you try and reduce the number of decisions you take, the following happens:

• you start empowering others to take decisions, hence eliminating a single point of failure (you) and adding more reliability in decision making process
• you create processes that ensure that majority of decision making doesn’t take a hit if you are not available
• you allow yourself to do less by ruthlessly asking yourself if you really should be taking this decision
• you cut through the noise to identify those decisions that are most critical and you focus your complete energy on them — your output will be significantly better

Decision making is more of science and less of art. You rigorously collect data, you take a lot of decisions, you document your decisions and learn from the mistakes and you seek advice from people smarter than you.