I started my career as a management consultant. We would drop into Fortune 100 companies to try and help them make a decision they didn’t feel up for. Should we make this acquisition? Where should we cut costs? What new products should we prioritize? At first, I was surprised that these brand name companies needed help making core business decisions. Their willingness to pay was even more surprising.
Now I realize that decisions are the atomic units of a business. Each employee makes decisions every day, small and big. And as one progresses in their career, the decisions get more ambiguous and involve more people1. In some rare cases, it makes sense to pay a premium for a third party to come in and help you.
“Ultimately, a company’s value is just the sum of the decisions it makes and executes2.”
CZ, the CEO of Binance, talks about his policies for decision making within his company on a recent Epicenter podcast interview. As one of the fastest growing (if not the fastest of all time) companies inside or outside of crypto, Binance is clearly doing something right.
Decision-making at Binance
“We really don’t don’t waste a lot of time on decision-making. We spend most of our time on execution […] we have a very simple decision-making process and we don’t really dwell on it. Once we decide we just execute”
CZ orients his team around execution by minimizing time spent on decisions. This practice has multiple parts. First, he establishes a simple decision-making process. Second, he creates a culture where the team does not second guess decisions. And finally, underlying it all, he nurtures a shared sense of values that guide decisions.
[1] Simple decision-making process
“I tell all my team if you’re relatively comfortable about a decision then just make it and execute. If you’re not too confident about that decision, then ask two or three people beside you. It might be a colleague or your boss or your subordinate–it doesn’t matter–and if you’re really not sure then ask me”
Most decisions are straightforward. CZ protects his team’s time by empowering individuals to make decisions. By encouraging individuals to make the call, he reduces time spent on low-stakes decisions and clears the path for execution. For trickier decisions, he provides a clear escalation path that can go all the way up to him. This provides a strong foundation for his team: they are empowered when they are confident, and when they’re unsure, they know they can escalate all the way up to CZ if necessary.
“If your decision process involves more than four people, that’s usually not a good way to make decisions. We never have like 10 or 20 people in your room trying to make decisions. That’s usually bad–it wastes a lot of time and you make decisions that are usually compromises”
Here, CZ decouples the complexity of the decision and the complexity of the decision-making process. Complex decisions often lead to expensive processes that end in unintentional democracies: where the decision maker solicits input from too many stakeholders and tries to account for all of them, leading to compromises. Limiting the number of stakeholders involved in a decision forces prioritization and reduces overhead–leading to lower costs and fewer compromises.
[2] No second-guessing
“I have a decision-making philosophy that if I make eighty percent good decisions, it’s usually okay as long as the 20% decisions are not fatal major decisions”
A simple decision-making process prioritizes execution over deliberation. Empowering a team to execute comes with the risk of making more mistakes. CZ acknowledges that the team may make some wrong decisions, but explicitly chooses that trade-off: preferring fast execution with 20% wrong decisions to slow execution on 100% of decisions. Because he states his preference for this trade-off, his team can feel more comfortable taking risks, knowing that occasional mistakes are expected.
[3] Company values as a foundation
“Our value is to spread freedom. I think crypto offers a different level of freedom in terms of investments, exchange exchange of value, and holding different assets, so it’s this freedom we think is beneficial to society. Spreading this freedom is our core mission.”
CZ cultivates a shared stewardship of Binance’s values: spreading freedom and protecting their users. The team made decisions early on that role-modeled this behavior3 and now individuals on the team have a foundation for their decision-making. Even if an individual makes a decision on her own, it’s guided by the foundation of shared values.
Decision-making at Coinbase
Brian Armstrong, the CEO of Coinbase, outlined a pragmatic framework for making decisions in “How we make decisions at Coinbase.” Armstrong agrees with CZ that the “vast majority of decisions in a company are low-risk and should be made unilaterally by the owner of that area.” His framework is for the remaining decisions.
“A decision making framework is only needed when there is lack of clarity about a decision that is higher risk. Higher risk can mean that the decision has long term implications or that it can be costly to unwind if the wrong decision is made.”
CZ provides guidance on how avoid unnecessary costs in low-stakes decisions and prioritize execution on all decisions, Armstrong offers structure to the ambiguous and high-risk decisions. Structure removes ambiguity around process and should lead to better decisions with lower overhead.
The process has three stages: (1) setting the parameters, (2) deliberation, and (3) decision.
- Setting the parameters is about describing what decision we’re making, who needs to make the decision, who is impacted, and when the decision needs to be made.
- Deliberation is voting on the options.
- Decision documents the decision made, the rationale for the decision, and the plan to communicate the decision back to those impacted.
Communication is critical to the process. A decision is not complete until all impacted by that decision are notified. The decision-maker is accountable for determining the best format to deliver this communication. For example, if everybody is highly impacted, an email to all employees may be the best way to communicate the decision. If nobody is directly impacted today, an FYI in a slack channel and a note in a design doc may be sufficient.
Putting it all together
CZ and Armstrong offer complementary perspectives to decision-making. Both believe that the majority of decisions should be made quickly and by a single person. CZ emphasizes simplicity and a focus on execution, minimizing unnecessary costs around decision-making. Armstrong emphasizes rigor and effectiveness for the minority of decisions that are both ambiguous and high-stakes.
Altogether, we can take both CZ and Armstrong’s approaches and construct a simple process to triage decisions.
If the decision is both ambiguous and high-stakes, we use Armstrong’s framework. If the decision is only ambiguous, the decision-maker can collaborate with a few people and make the call. And if the decision is neither ambiguous or high-stakes, the decision-maker should simply move forward. In all cases, communication to the team completes the decision.
We’re trying this out at Decentraland. Curious to hear from other teams–especially distributed or open-source teams. What has worked well and what hasn’t?
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I wrote in my post “What makes a good product manager”: “The GPM involves all of the stakeholders required to make an effective decision and enable follow-through. The BPM sometimes involves too many stakeholders, wasting time and increasing the likelihood that meetings go off track. Other times, the BPM involves too few stakeholders, leading to poor decisions or inability to operationalize.” ↩
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A study by Bain and HBS showed a clear correlation (at a minimum 95% confidence level) between decision effectiveness and business performance. (Harvard Business Review) ↩
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Last year, China asked exchanges to refund ICO investors. Investors in the ICOs facilitated by Binance would have lost money on average. Binance decided to refund them the full amount even though they were not required to, paying the difference out of their pocket. ↩
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