We recently met with Eric Ashman, Founder of Bothered Mind Advisors and a member of the advisory board of EforAll Roxbury. Previously, Ashman served as the President of Group Nine Media, one of the world’s largest digital-first media companies, the President and CFO of Thrillist Media Group, and the CFO of The Huffington Post up through the sale of the company to AOL in 2011. Ashman was also an advisor to Lerer Hippeau Ventures and has taught as an adjunct professor at NYU.
Understanding the many challenges facing company founders, especially during a crisis, the recent pandemic has tested the resolve and resiliency of many startups, and Eric Ashman shared several unique insights into the art of executive decision making during difficult times.
How does a founder help their team make big, difficult decisions quickly?
I’m going to go through three things that get in the way of making hard choices.
The first is the sunk cost fallacy. I like to use the breakfast buffet as the example of the sunk cost fallacy, where you pay $35 for your all-you-can-eat buffet. You go up, you grab your plate, you load your plate up as much as you can. You go back to your seat, you sit down, and halfway through that first plate, you’re full. And you’re devastated obviously because you spent $35 and you want to get all the value you can out of this all-you-can-eat buffet.
And so, you finish that plate, you go back, you get two more, you crawl home, and then you spend three days on the couch. And in the back of the mind somewhere, you think that you got your $35 worth, but you actually crushed all of your future productivity. The sunk cost fallacy, it keeps people from making hard decisions because they think about all the time and money invested over the last six months, 12 months, three years, and use that as a way of rationalizing whether they should stop something or not.
So you have to really break the mindset. And this again is the job of the founder, you have to break the mindset that keeps you from thinking about all of that past investment.
The second is the 20, 60, 20 rule. 20% of the things in your company are amazing. They’re clearly profitable, customers love them, easy to go to market, they just fly off the shelves, people click download, they buy, they subscribe, great customer attention. 20% of the things in your company are clear losers. It doesn’t work, it’s a time suck, it’s a huge investment of resource and people and time and money. And if you sit everybody around the table, everybody will agree. Consensus, get rid of it.
It’s the 60% in the middle of that can hurt your company and be the big block to the kind of change you need to make. You can rationalize any initiative in the 60%. “It just needs a couple more turns,” “We just got to try another different marketing strategy,” “it was just the creative,” “the user experience isn’t quite right.” You can go on and on and on. That’s all the stuff where all the money goes, all the time goes. It’s what all the meetings are about. Again, in the best of times, this is really what drags companies down. In a crisis these initiatives will drag you and your team down.
Finally, there is the risk of Analysis paralysis. Many people reading this are either a sole proprietor, founder on their own, just getting their company going, or they’re a company under 50 people. I think it’s safe to say that we don’t have best access to data systems, information, tools. I mentioned KPIs at the beginning. And some of you are probably just shaking your head saying, “What are we talking about? I don’t have a BI tool. I can’t report on stuff like that.”
You have to be able to be comfortable making really hard decisions with the best possible data you have right now.
Analysis paralysis is a terrific stalling technique that employees can use to protect their projects. When you get into talking about killing projects that people have a passion for, the easiest way to slow that process down is to ask for more information. It’s particularly true with the stuff in the middle, that 60%. So watch for that.
In a crisis, you need to move really quickly. Whatever information you have is probably what you’re going to have to use to make some really difficult choices. That’s okay, it happens to all of us. It’s part of the job. You pull down a distribution channel, you change a product assortment, whatever it’s going to be. And then you got to go all the way back to the beginning and reset your assessment framework because now you’re going to measure what your business looks like after those changes, and you have to be ready to respond again.
What about employees and communicating these changes across the organization?
Communication is a big, complicated topic. A few things to think about.
First, when we talk about making big changes to extend your cash runway, and finding the stop-doing items, generally you’re going to have to lay off employees. Handling this in the right way is not just about the impact on the employees that are leaving. It’s about the message you send to the employees who stay. It’s a reflection on how you define your company’s culture, how you handle moments like this. And as stressed out as you are, your employees, your partners, your investors, and the people around you will get a sense as to what type of company you’re building and what your culture really is in moments like these.
So handle layoffs in a transparent, honest, fair way. Take care of the employees that are losing their job. Pay proper severance. Extend health care for a month or two to help former employees land on their feet.
Then be sure to communicate the path forward to the employees that remain. They have to believe there is a vision for the future, and that it’s worth staying with you to as you try to effect this change.
Second, you may have to think about communicating big changes in strategy and tactics to your board and investors, which can also be incredible stressful and difficult.
I want to just frame it like this for now. If you partner with the mercenaries, they’re going to act like mercenaries when things go bad. If you’re building a startup because your goal is to try to grow fast, sell the company and get rich, you’re going to build a board, a group of investors and an initial group of employees with similar motivations. Your objective will be clear in how you talk about your aspirations for your startup. You’ll be attracted to those that speak that same language. They are not bought into a mission or a big problem to solve. They are along for the ride in the hopes of a big financial win. You’ll end up surrounding yourself with mercenaries, not evangelists for your mission and your team. If you partner with mercenaries when things go south, your board’s not going to be there, your investors are not going to be there. And I can assure you, your employees that came there with promises of bags of gold, will bail on you when things get hard.
So build your company right. Build a team of employees, investors and board members that believe in your vision, the problem you are trying to solve, and the market you are trying to unlock, and they are more likely to stand by you in difficult times. That’s the foundational piece of advice on effective communication in a crisis.
Thanks again to Eric Ashman for sharing his insights with our readers.