In previous posts I’ve examined the relationship between founders & funders. I believe a deep understanding of the Founder / Funder dynamic is the key to developing a solid, constructive relationship infused with a strong sense of empathy. I consider the empathy between founders & funders a key ingredient for the success of any startup.
In this post I would like to focus on decision making and how both founders & funders must be able to master the art of influencing as an effective management tool to support the company building process.
However, the key point to acknowledge is that some decisions should be influenced while others must be taken directly and there are not black and white rules that can help founders & funders in navigating these choices.
Both founders & funders must recognise that the art of influencing a decision starts with acknowledging that the final decision might be very different from what they wish. That said, influencers must be comfortable with and supportive of all decisions not just the ones that they have been able to successfully influence.
In order to better develop their influencing capabilities both founders and funders might want to keep in mind the following tips:
1 — Understand the Context
In order to effectively influence the decision making process it is important to have the right context.
For founders this means developing a company culture based on openness and transparency with significant level of attention towards people and their personal and professional development. Founders can influence decision making only if the company culture they have developed is receptive to this modus operandi.
For funders the right context implies consistency and credibility. Some funders are affected by the on/off syndrome (e.g. some months they are super engaged while some other months they disappear into vc-land). Funders can successfully influence decision making if over time they have built relationships with the team, have consistently been there when needed and have contributed regularly over time instead of sporadically when convenient.
2 — Influencing a decision vs deciding
There is a big difference between “influencing” a decision and “deciding.” It’s critical that founders & funders know which type of situation they are facing and manage them accordingly.
a — Founders influencing decisions
Often times founders are conflicted between empowering their team and following their own beliefs and instincts: an internal emotional tension between empowering their subject matter experts and following their personal instincts. This is not an easy situation to manage.
Founders who overrule the decision making process of their direct reports develop a powerless company culture and an environment that is often frustrating for the most talented. However, founders who stop listening to their gut might miss major opportunities. It’s critical for founders to find the right balance between motivating and respect while listening to their entrepreneurial instincts.
b — Founders deciding
In some instances it’s critical that founders make decisions quickly. One example would be when it becomes apparent that a direct report needs to be fired. Putting off a decision that could impact the health of the team and company can have devastating consequences. Founders can obviously get feedback from other team members but at the end of the day the final decision resides with them and it’s critical that they don’t fall into the trap of procrastination decision making.
c — Funders influencing decisions
Funders should never push founders towards a decision based on personal preference or what they think is the best for the company. They should provide insight, knowledge from previous experiences and of course a fresh perspective from outside of the company in hopes that it helps the founder to make the best possible decision.
Funders unhappy with the founders’ decision can always clearly voice their opinions and very precisely make their arguments, but it is never acceptable to overrule the founders. That sort of behaviour is demoralising, makes the founders feel powerless and ultimately undermines the future success of the business and the founder/funder dynamic. Generally speaking in Europe, more than anywhere else, I have seen a plethora of funders convinced they “know better” than the founders they have invested on and as such they tend to enforce their views. I hate this level of intellectual arrogance and I would never co-invest when I can see a similar sick dynamic.
d — Funders deciding
The most important decision a funder can make is whether or not to invest. Funders can and should talk to anyone who can help them to qualify the investment opportunity but at the end of the day, it’s their sole responsibility to decide obviously (within the context of their venture partnership rule). To decide in a timely manner without wasting the time of the entrepreneur is a golden rule often neglected.
3 — Influencing techniques
There are several techniques that can be used for influencing decision making. In my opinion the three that work the best are:
a — Socrate’s art of maieutic
One great way for both founder and funder to influence decision making is to use the Socrate’s maieutic approach: ask direct and insightful questions. Help the final decision maker to examine and approach the problem from a different perspective. Instead of just steadfastly looking for a solution, take a step back and gain new perspective. Asking questions can be the the most effective way to influence a decision maker.
b — Share knowledge based on personal experiences
Both founders and funders should always take advantage of their past learnings and apply them as much as possible to the current situation to attempt to influence decision making. To be able to recognise patterns based on past experiences and share knowledge is often an appreciated method of exercising influence.
Be aware, however, that sometimes pattern recognition can be tricky and we might be influencing a decision in the wrong way simply because we are identifying the wrong pattern.
c — Share knowledge in the network
Developing a strong network of trusted parties is a key characteristic of the most successful founders and funders. Sharing knowledge from your personal network is also a great way to influence the decision making process. Making some key introductions to the right people at the right time is a great way to share the knowledge inside your network.
The most difficult aspect for both founders & funders is to figure out a framework of reference for their decision making process that allow them to clearly determine when to decide directly v/s when to influence a decision. Such framework of reference is influenced by several factors such as: time, maturity of the business, development of the people involved in the decision, emotional buy in.
However, it must be recognised, that the key to the deciding v/s influencing dilemma is the capability of founders & funders to match their personal framework of reference to the exact situation in which they need to operate. There are not rules, this is an art: the art of influencing!