Founder's Guide: The Importance of Explicitly Delegating Power
Here's a not-quite-correct summary of a lot of political philosophy:
every organization derives its power from some source that is agreed upon by all members of the organization;
that power flows down from the source to administrators, officials, bureaucrats, and more, who are deputized in some way (perhaps through many layers) to act in the name of the power source.
There's a ton of discussion about what is or isn't a legitimate source of power. But pretty much everyone agrees: power is dispersed in roughly the same way.
The Pope derives power from God, priests and missionaries are empowered by and act on the behalf of the Pope. The US Government derives power from 'the People', the military, police, IRS, etc. are empowered by and act on the behalf of the US Government. My college debate club president derived power from 'everyone got in a room and decided that guy would be president', you get the idea.
Here's a not-quite-correct view of a startup:
the company is effectively a monarchy (either elected or de-facto, it doesn't really matter) led by the CEO;
the monarch makes all decisions, or deputizes someone else to make decisions on the monarch's behalf.
Obviously there are wrinkles -- the CEO can be ousted by a board, shareholders have some role to play, cofounders are often equally important etc. etc. -- but from the inside of a startup this is, in my opinion, more or less how it works and how it should work. There's somebody on top. Everyone else is acting in his or her name.
I want to quickly pause and explain why this is a really useful way to structure companies. Most companies fail. It's easy to assume that they fail because they didn't understand the market or got outcompeted, and in some senses that is trivially true. But generally, the reason the company gets outcompeted is because of internal dysfunction. Any team that is consistently able to march in lockstep is going to win eventually; most teams just can't do that. Paraphrasing Paul Graham:
When startups die, the official cause of death is always either running out of money or a critical founder bailing. Often the two occur simultaneously. But I think the underlying cause is usually that they've become demoralized. You rarely hear of a startup that's working around the clock doing deals and pumping out new features, and dies because they can't pay their bills and their ISP unplugs their server.
...
If you can just avoid dying, you get rich. That sounds like a joke, but it's actually a pretty good description of what happens in a typical startup. It certainly describes what happened in Viaweb. We avoided dying till we got rich.There are essentially only three sources of dysfunction inside a company: miscommunication, diffusion of responsibility, and enemy action.
Miscommunication is inevitable. Any message between an executive and his or her team is going to be lossy, because people have different mental models that they use to interact with the world. The executive is operating on a set of assumptions that are so blatantly obvious there's no point in communicating them, except for the fact that those same assumptions will be totally lost on the team. And this problem increases exponentially the more team members there are. As a result, it is critically important to have clear lines of communication. Even though every message is expected to be misunderstood, every person in the company should know where to go to find the 'source of truth'. You know what makes 'source of truth' really clear? Explicit delegation of power from a single source.
Diffusion of responsibility is less inevitable, but is more dangerous. In short: if one or more people act without an explicit delegation of power, they create multiple incompatible sources of truth; or alternatively nothing gets done because everyone assumes someone else is responsible. This almost tautologically leads to misalignment within a team, as different people may end up following conflicting goals without an obvious way to resolve the conflict. At best, this requires a lot of precious time to tease out right and wrong. At worst, it never actually gets resolved and your team ends up going nowhere.
Enemy action is least likely but is the most dangerous. If someone disagrees with the vision of the team and begins acting on their own, they can create a lot of chaos. Probably self explanatory how this leads to bad outcomes. While a clear power structure won't stop someone from disagreeing with an underlying team vision, it will help to quickly identify when someone is acting in a way that causes problems.
So. Explicit delegation of power from a single source of truth == good. Improves communication, decreases dysfunction.
Theory is great, but what does this actually look like mechanically? How does a CEO actually wield authority effectively?
One way is to just unilaterally make all of the decisions. The easiest way to delegate power is to just not. If all decisions come from a single source, it's actually pretty easy to make sure that a willing team is well aligned. There are two problems with this approach.
First, obviously, you as the founder may just not be the right person to make a decision. You can't be an expert in everything. You also just may not have the raw hours in a day. So at some point you might just be forced to delegate by logistics alone.
Second, more importantly, the word 'willing' in the phrase 'willing team' is carrying a LOT of weight. If you hire a team of contractors who don't give a fuck about the long term success of the company, sure, whatever, make all the decisions. But if you hire a team of highly independent, motivated, and autonomous people, you shouldn't be *surprised pikachu face* when they act as independent, motivated, autonomous people! Often the most talented hires are also the most autonomous, which puts the tyrant-CEO in a bind -- you need to, at the very least, get their feedback and have it inform the decisions that actually get made so they don't leave or start doing their own shit.
Look, I think we all know of CEOs who find ways to make this approach work. Elon comes to mind. But in my opinion, this is just not an effective way to lead. The best part of working with other people is that you get multipliers on each other’s knowledge and abilities. Unilateral decision making caps all of that at the knees.
The alternative, then, is to allow other people to make decisions. And, to be specific, the CEO should explicitly and publicly declare to the entire team who is responsible for making what decisions. Earlier, I described a company as a 'monarchy'. That wasn't an accident. Monarchs were very aware of the importance of public pageantry when it came to delegating power. In a world where knights and nobles were given ownership of people and lands based on king's decree, it was critical that everyone was aware of who was responsible for what -- if only to accurately collect taxes and avoid starting wars. In my experience at Google, team reorganizations or leadership changes were always over communicated, even if the actual motivations behind the change were not. And of course, virtually every large company has a clearly defined hierarchical org chart, so that it is very easy to answer 'who owns what'.
A low confidence hypothesis, grounded in something I’ve begun to notice myself: if you start delegating effectively, you may over time discover that the projects that you hand off to other people will be done with more precision and success than projects that you lead yourself. Why might this be true? Generally, a transfer of responsibility comes with well defined operational boundaries and success metrics. That is to say: delegation requires rigor and clarity. Projects that you lead yourself likely won't be held to the same standard, because it is very easy to justify away the costs of your decisions. As the saying goes, we judge ourselves by our intents and others by our actions. Turns out, in a company, it's the actions that matter!
In my opinion, the role of a CEO -- and to a large extent, the role of a founder -- is really counterintuitive. You may start a company because you think it means you get to make all the decisions. But in practice, your only real job is to put the right butts in the right seats. All the actual decisions beyond that are delegated away.
And this brings us back to hiring.
I mentioned earlier that the best talent is often highly opinionated and autonomous. They are also expensive and will demand that their opinions be heard. It is tempting to think that every team should be composed of the best people. But like every other investment, you need to critically think about where external expertise is required and how critical that expertise is to your company. If you are building some crazy deep-tech product, it is really valuable to bring in technical experts who are better than you and give them the authority to operate. But if you are building some CRUD SaaS thing, just hire a contractor team and instead focus on getting experts in sales and marketing.