Monday, July 1, 2013

Priorities in Startups

The hardest part of making decisions in a startup is when two choices serve opposing important priorities well.  

For example, let’s pretend you work in an enterprise sales-driven business.  You have 5 key customers that comprise all your revenue.  One of these customers in a moment of frustration behaves poorly with one of your customer support representatives, being borderline verbally abusive.

Poor treatment of your employees is of course unacceptable.  At the same time, if you “fire” the customer, a big portion of your revenue will disappear, potentially jeopardizing the entire business if you’re unable to raise capital through other sources (debt or equity). How do you make a decision like this?

When I worked at Homestead (back 8 years ago… yikes), the Company set aside time to list the prioritization of 5 different entities in a clearly-sorted, hierarchical order, and I recall the CEO Justin Kitch referring to this list from time to time. The priorities were:

  1. Our Employees
  2. Our Products
  3. Our Customers
  4. Our Community
  5. Our Shareholders

I like this list. I think it’s a great framework for prioritization in decision-making in a startup. It’s written out in full on the about page of Justin’s new company, Curious.com, if you want to read the rationale for each entity.

The piece about “Our Community” was not just lip service. I participated in 5-6 community service projects while at Homestead, all of which were held during business hours, so the Company was paying its employees to volunteer in the local community around Silicon Valley.  It was great.

For anything to make the list it all, it had to be important.  So, the fact that “Shareholders” is listed last doesn’t not mean that building shareholder value is unimportant.  I think that the CEO just recognized that the best way to build *long term* shareholder value is to make decisions that prioritize the other four entities first.

Notes

  1. thepursuitinc reblogged this from msg and added:
    Great post
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