Article
How Leader Bias Can Result in Business Failure
February 11, 2021
When trusting your gut is dangerous
Your Decisions Create Your Future
There is an old saying, “Leaders are paid to make decisions.” Whether in business or any other field, making decisions is one of the most critical things leaders do. Look at any company’s performance, and you can immediately see the results of its decision making. It is not an exaggeration that the success of your team or your organization depends on whether your decisions enhance your chances of success or set you up for failure. You are creating your future, one decision at a time. The results you get reflect the effectiveness of your decision-making.
Take a quick look at your own past decisions, both personal and professional, and you will have to concede that your track record is far from perfect. Sure you will see smart, timely, effective decisions that got you where you are today. But if you look objectively, you’ll see over the long term the impact of decisions you made that were impulsive, where you trusted your gut, or you made decisions in the heat of emotion, or you had strong beliefs that got in the way of the facts, and you shaped the analysis to fit the mental model that you already had in your head.
Improving your capabilities as a decision maker involves understanding and making use of what research has discovered about the decision making process, as well as understanding your own tendencies and the things in your behavior and your problem-solving process that can lead you astray. The fate of companies rises or falls based on the wisdom and efficacy of the decisions that are made. And so do the careers and destinies of the deciders.
The Pressure to Make Important Decisions---Fast
As all leaders know, the pressure of decision making is great, and gets greater the higher up you go. The torrent of problems requiring solutions and decisions is relentless. “This is the terror of being a founder / CEO,” said Andreessen Horowitz co-founder Ben Horowitz. “It is all your fault. Every decision, every person you hire, every dumb thing you buy or do — ultimately you’re at the end.” The list below shows just a fraction of the key decisions that entrepreneurs, for example, have to make:
• Should I raise more capital to fuel growth but reduce equity?
• Do I have the right people on the bus?
• Do I have the right people in the right seats on the bus?
• Should I change my role or my job?
• Is it time to lay people off?
• Is it time to give up and throw in the towel on this project?
• Is it time to sell the company or should I go for an IPO?
• How should I deal with this new competitive threat?
• Should I pursue this merger opportunity?
• Is it time to expand or should we stick with what we know?
• Is it time to raise funds?
• Should we make this huge capital investment?
• Should we go all out or conserve cash?
• Should I accept a term sheet now or hold out?
“If There Is Time To Reflect, Slowing Down Is Likely To Be A Good Idea" Daniel Kahneman
How do you make decisions of this importance? Do you take enough time to gather data and carefully weigh all the options, the pros and cons? Do you seek input and feedback from your team and/or your peers and mentors? Do you go with your gut?
According to futurist Stowe Boyd, “There is an enormous lie underlying business, the lie that decisions are made rationally, applying logic and expertise, sifting evidence, and carefully weighing alternatives.” The reality, he says, is quite different. “The science is clear: in general, we don’t really make decisions that way.” [Source: “How to Untell the Lie at the Heart of Business”, quoted in “Don't Fail At Decision Making Like 98% Of Managers Do,” Eric Larson, Forbes, May 18, 2017]
Most people are not totally rational when they make decisions. Far from it. According to Daniel Kahneman, the Israeli-American economist awarded the Nobel Memorial Prize in Economic Sciences in 2002 for his work on the psychology of decision making and behavioral economics, “irrationality often trumps rationality in the human decision-making process.” Kahneman’s findings on the prevalence and influence of cognitive biases challenged the assumption that human rationality was the key factor in decision making. His book, Thinking Fast and Slow (2011) was an international best-seller.
Most people are not totally rational when they make decisions
Because of cognitive biases, impulsiveness exacerbated by time pressure, failure to do due diligence and get all the relevant facts, and overconfidence regarding our brilliant decision-making ability, a disturbingly large number of our decisions turn out to be faulty. Most people are not totally rational when they make decisions. And because we are unaware of what we don’t know, key information may be lacking. Yet in order to make effective decisions, we need all the information relevant to the problem, viable alternative viewpoints, and we also need a process that minimizes the impact of our biases and blind spots.
Ninety-five percent of our decisions use irrational mental shortcuts or rules of thumb that cloud our judgment and impair our decision-making. “The brain,” Kahneman wrote, “is a machine for jumping to conclusions”.
Entrepreneurs are Wired to Move too Fast
Hagberg research (and others) shows that leaders are often optimistic and self-confident risk-takers, who have strong opinions and a bias for action. These are valuable qualities in leaders, but they are a two-edged sword: This confidence, along with a forceful personality, action orientation and clear points of view can lead to a failure to consider what might go wrong, and that they themselves might be wrong. They over-trust their intuition and jump to conclusions, and are therefore more vulnerable to making bad decisions.
The Impact of Biases on Judgment--200 Ways to Make Your Company Fail
Cognitive biases are systematic mental shortcuts in thinking or judgment, mental models or rules of thumb that influence how we evaluate our experiences and make decisions. They can be helpful, in that they make our thinking and decision making faster and more efficient. But they can also lead to faulty judgment, illogical interpretations and irrational choices.
Close to 200 cognitive biases have been identified and explained, many of them by the American-Israeli psychologist Daniel Kahneman. Over 40 years of research, Kahneman found that 95% of our decisions use irrational mental shortcuts that cloud our judgment and impair our decision making. As a leader, it is vital for you to be aware of these biases, which color not only the attitudes and behavior of team members, but also influence your own. But Kahneman’s later research suggested that this is very difficult and almost impossible for most leaders.
“For every complex problem there is an answer that is clear, simple, and wrong.”
– H.L. Mencken, American journalist and social critic
Kahneman’s research makes it crystal clear that if we want to make better decisions, we need to develop preemptive “workaround” strategies that enable us to make decisions that are more rational. One of the best strategies for this is group decision making, where all members of the team weigh in with their insights and perspectives.
As you learn about cognitive biases, you will be able to spot team members falling prey to them in meetings. And if you have built an environment of trust, in which your people can speak freely without fear of retribution, you can use the collective intelligence of your team to help you uncover your own faulty thinking and thereby enable better decisions.
Common Biases That Derail Entrepreneurial Leaders
Sunflower Bias
: People lean in the direction in which the leader is leaning, as sunflowers pivot to face the Sun. Groups tend to align themselves with the views of their leaders, whether overtly expressed or assumed. If a team knows your position on a decision, or believes they know it, the team is likely to be an echo chamber. As Kahneman said, the decision-making process becomes contaminated when people believe they know the leader’s preference.
Confirmation Bias
: Confirmation bias is the tendency to search for, interpret, favor, and remember information that affirms our prior beliefs or hypotheses. (Remember this bias the next time you do a Google search. Are you looking for info that supports your position or your hunch, or are you truly looking to learn?) In the same way, people often discredit information that does not support their views.
Overconfidence Bias
occurs when a person's subjective confidence in his or her judgments is greater than the objective accuracy of those judgements, i.e., you think you’re smarter or more savvy than you really are, or you’re certain that your plan will bring great results when you really don’t have the data to back up your belief. In tests comparing confidence to actual ability, research data regularly show that confidence often exceeds accuracy, that is, people are more sure that they are correct than is warranted.
Optimism Bias
is at play when we overestimate our likelihood of experiencing positive outcomes and events and underestimate our likelihood of experiencing negative events. People with this bias are sometimes quite unrealistic about what might go wrong when making a business decision. When a leader’s subjective confidence in their own judgments is regularly greater than the facts would suggest, disaster could be right around the corner.
Action-Bias
: This is the pressure or tendency to take action NOW, without doing adequate research and/or taking time for analysis and reflection. “Let’s just get the deal done.” Thus we don’t consider all the possible ramifications of our action. When you have this bias, you will tend to overestimate your odds of a successful outcome, and minimize or discount the chances of failure. Bernard Baruch, American financier and advisor to several 20th century presidents said, “Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in public and private life, have been the consequences of action without thought.”
Other Common Biases That Can Damage Your Judgment
Affinity Bias
: The tendency to be biased toward people like ourselves, with similar backgrounds, interests, skills, and affinities. This is a common temptation in hiring but may not result in building the strongest team.
Blind Spot Bias
: This happens when you are able to recognize biased thinking by others, while failing to see the impact of biases on your own judgment and decision-making. This is extremely common: In one study of 600 Americans, more than 85% believed they were less biased than the average person.
Status Quo Bias
: Directly opposite the action-oriented bias, status quo bias is an emotional or unconscious preference for maintaining the current state of affairs. “If it ain’t broke, don’t fix it.” This is not based on analysis that shows the current state to be objectively better, but is simply an attachment to the way things are and have been. Sticking to what worked or works now is fine if a rational decision-making process shows it to be the best alternative, but status quo bias can interfere with openness to new ideas, new technologies, and to progress in general.
Effective team leaders need to be willing to change as the company scales. They often hold on to practices that worked when the company was small and flexible and everybody was in one room, but all of a sudden they have 4,000 employees and holding on to what worked for a dozen or twenty just won’t work.
Anchoring bias
: This describes the tendency to base a decision on the first piece of information we receive; it makes a strong enough impression that we become “anchored” to it This happens consistently when making budgetary predictions and financial plans. When considering a decision or course of action, the decision maker gives undue weight to the initial input or information received. These initial impressions, estimates, or data anchor subsequent judgment or analysis.
Self-serving bias
: We believe our failures are due to external factors, that it is “their fault” when things go wrong, but we believe we are responsible for our successes.
Framing
: Frames, according to cognitive scientists, are the different perspectives through which we look at the world. They are mental models that simplify and guide how we make sense out of a complex reality. They limit the effectiveness of our decision-making. This happens when making decisions with a multi-functional or multi-cultural team who have a variety of perspectives based on their background. Marketing, finance, engineering, product, sales, human resources, operations and so on have very different perspectives on many other issues. They look at different factors, and see different risks, opportunities, and potential outcomes, and are driven by different values and interests, all of which frame their decision making. They may have competing perspectives and concerns. Team members from different countries and cultures see the world differently due to their differing values.
“Mental models are deeply held internal images of how the world works, images that limit us to familiar ways of thinking and acting. Very often, we are not consciously aware of our mental models or the effects they have on our behavior.”
- Peter Senge
Trusting Your Gut or Systematic, Reasoned Judgment
In his book, Thinking Fast and Slow, Daniel Kahneman distinguishes between two broad categories of decision making. Fast decision making is essentially intuition-based, and involves feelings, beliefs, hunches that come readily to mind, require little effort or gathering of information, and result in on-the-spot decisions. Slow decision making, on the other hand, is based on reasoned judgment, and involves decisions that take time and effort to make, require careful information gathering, generation of alternatives, and evaluation of the alternatives. “If there Is time to reflect,” says Kahneman, “slowing down is likely to be a good idea."
Rapid decision making can be based on too-little data and too-little time to analyze it, increasing the odds of making miscalculations and mistakes that can have company and career threatening consequences. The antidote would seem to be to slow down, yet business and technology today are moving at warp speed, and leaders of fast-scaling companies must make multiple decisions every day. Not only that, but even the best-reasoned decisions come face to face with randomness and unpredictability. The challenge is to balance speed with the best possible judgment.
Hiring Mistakes Caused by Trusting Your Gut
A prime example of how biases can interfere with wise decision making is in the hiring process. An interviewer who makes snap judgments and lets his or her first impression cloud the interview can make critical hiring mistakes. You think you don’t do this? Guess again: A study from the University of Toledo found that the outcome of an interview could be predicted by judgments made within the first 10 seconds of dialogue! Interviewers then subconsciously spend the rest of the time seeking new information to confirm their first impression, rather than objectively assessing the person in front of them.
What this means is that your initial or gut reaction isn’t always a product of hidden wisdom! It may be a result of unacknowledged biases that can lead you to overlook strong candidates or choose those who are less qualified.
Example: Giving more credence to the fact that the candidate graduated from the interviewer's alma mater than to the applicant's knowledge, skills, or abilities.
Studies and surveys over the last 50 years have shown that 80% or more of the hiring decisions from traditional interviews are based on rapport and likeability and often miss competency, accomplishments, ability, and potential. In short: We like to hire people who are like us, who share our interests, values and style. But they are not always best for the job.
Hiring mistakes can be very costly. A common rule of thumb is that a hiring mistake ends up costing about 15 times the employee’s core salary, including both hard costs and lost productivity as you bring the new hire up to speed. That means a hiring mistake with a $100,000/year employee can cost you $1.5 million, or more. Another thought provoking statistic is that the success rate for hiring at senior levels is estimated to be about 50% - half of all executive hires do not pan out. According to Marc Bennioff, CEO of Salesforce, “Acquiring the right talent is the most important key to growth. Hiring was – and still is – the most important thing we do.”
We Are All Blind to Our Biases and Mental Models
You have probably recognized many of the biases and mental mind-sets described above, and no doubt you can see how they can and do interfere with clear thinking and thus to making the best decisions. However, it is not enough merely to understand the nature of various biases. Kahneman and other decision-making researchers have concluded that it is extremely difficult to eliminate your cognitive biases by yourself. They are too subtle and wired in. It’s like asking a fish to describe water. In addition, awareness of the effects of biases has done little to improve the quality of business decisions at both the individual and the organizational level. To combat the negative effects of bias on team performance, active steps need to be taken.
Catalyzed by the research of Daniel Kahneman and many others, we now know vastly more about how the decision-making process operates, why it so often leads us astray, and what we can do to become a more effective decision maker. I will summarize some of that research in this and follow-up blog posts, with a special angle: much of the existing research concerns how individuals decide. In today’s corporate universe, an enormous number of decisions every day are made in a group setting by teams of various kinds, a far less studied field that I will look at in addition to discussing individual decision making.
Evaluating Your Decisions
Ask yourself
:
• Did you do enough analysis?
• Did you follow a disciplined process to get all the right facts and views on the table?
• Did you avoid letting your strong viewpoint influence your team and narrow the options that were considered?
• Were you overconfident?
• Did you make assumptions that were wrong?
• Did you miss options that might have improved the results?
• Did you miss the big picture?
• Did you focus too much on short-term rather than long-term implications?
• Did you let pressure and stress influence your choice and end up compromising your standards or violating your values?
• Did you act impulsively without validating your intuition?
share this
Related Articles
Related Articles
One of the biggest dilemmas that founders face knowing when and why to bring in a Chief Operating Officer (COO) . Too early, and you risk creating bureaucracy before the business finds its footing. Too late, and the founder becomes a bottleneck, throttling growth and burning out teams. Get the wrong type of COO, and you’ll spark culture clashes or stifle innovation. I have had 4 COOs over my career. Their styles and capabilities were very different and the role I needed them to play differed dramatically based on the stage of the company. Some of them worked out beautifully and were the perfect complement to my founder tendencies and limitations. Some were a disaster. Here is what I learned. The COO is the most variable role in the C-suite. Some founders never hire one. Others go through three or four before finding the right fit. In many cases, the question isn’t if you need a COO—it’s what type of COO your company and your leadership style demand at this stage of growth. Let’s break this down. Why COOs Matter Founders are visionaries. They are idea machines, market spotters, and force-of-nature storytellers who rally talent and investors around a dream. But those same strengths often come paired with weaknesses: disorganization, impatience, lack of systems, and difficulty letting go of control. A strong COO is the counterweight. They turn vision into execution. They stabilize culture. They keep promises made to customers and investors. And, at the right time, they free the founder to do what only the founder can do—set direction, evangelize the mission, and keep the spark alive. But “COO” isn’t one job. It’s a category. And picking the wrong type is like forcing a square peg into a round hole. The Seven Archetypes of COOs 1. The Executor The backbone of day-to-day operations. They build systems, enforce discipline, and make the trains run on time. Best fit: Visionary founders who thrive on ideas but leave chaos in their wake. Stage: Early scaling, when the business needs process without killing momentum. Examples: Sheryl Sandberg at Facebook (balancing Zuckerberg’s vision), Gwynne Shotwell at SpaceX (stabilizing Musk’s whirlwind). 2. The Change Agent The fixer. Brought in when transformation is urgent—scaling fast, restructuring, or pulling out of crisis. Best fit: Founders who know the business has outgrown their own operational grip. Stage: Scaling into hypergrowth, or turnaround scenarios. Examples: Daniel Alegre at Activision Blizzard, leading cultural and operational overhaul. 3. The Mentor/Partner The grown-up in the room. A seasoned leader who steadies a first-time or young founder, often more coach than operator. Best fit: Visionary but inexperienced founders, often in the earliest stages of institutional growth. Stage: Transition from startup scrappiness to formal organization. Examples: Eric Schmidt at Google—while not COO by title, he played this role for Page and Brin. 4. The Heir Apparent The COO as CEO-in-waiting. They take on broad P&L responsibility, often shadowing the founder before succession. Best fit: Companies preparing for leadership transition. Stage: Later scaling into maturit Examples: Tim Cook at Apple before succeeding Steve Jobs. 5. The MVP Functionalist The specialist. A COO with deep expertise in one critical area—finance, product, supply chain, or sales. Best fit: Founders strong in vision but weak in a single domain essential to scaling. Stage: Startup to early scale. Examples: Prabir Adarkar at DoorDash, covering finance and operations. 6. The Complement to the CEO’s Gaps A tailor-made role. If the founder is a disorganized visionary, the COO is structured and disciplined. If the founder is technical but introverted, the COO is outward-facing and people-savvy. Best fit: Any founder aware enough to know their own blind spots. Stage: Anywhere, but especially scaling. Examples: Sandberg balancing Zuckerberg’s lack of operational rigor; Shotwell countering Musk’s volatility. 7. The Integrator/Hybrid The most complex type. They unify strategy, execution, culture, and talent at once—bridging across multiple functions. Best fit: Complex, multi-line businesses with global teams. Stage: Scaling into maturity. Examples: Angela Ahrendts at Burberry, integrating brand, culture, and operations before moving to Apple. Why Founder–COO Relationships Fail So Often If the COO role is so valuable, why do so many founder–COO relationships crash and burn? Boards are often gun-shy about hiring COOs because they’ve seen these partnerships implode. The reasons fall into several predictable buckets. 1. Lack of Role Clarity The fastest way to sabotage the relationship is leaving the COO’s job undefined. Who owns what decisions? Where does accountability lie? If the COO’s role overlaps with the founder’s, or isn’t communicated to the rest of the team, the COO quickly becomes either a glorified project manager or a powerless deputy. Both end badly. 2. Founder’s Inability to Let Go Many founders simply can’t let go. They want to approve every detail, revisit every decision, and undermine the very autonomy they hired the COO to exercise. A COO who feels second-guessed or constantly overruled either disengages or quits. 3. Misaligned Vision and Values Operational excellence isn’t enough if the COO doesn’t fully buy into the founder’s vision and cultural values. When the COO wants to optimize for stability while the founder is pushing disruption—or vice versa—the two end up pulling the company in opposite directions. 4. Trust and Emotional Reactivity Trust is fragile. If the founder is volatile under stress, or the COO isn’t skilled at navigating the founder’s personality, the relationship becomes brittle. Outbursts, defensiveness, or miscommunications erode psychological safety between them and ripple across the organization. 5. Succession Ambiguity and Power Tensions Is the COO being groomed as the future CEO—or not? Few questions create more tension. If expectations aren’t clarified up front, the COO may feel misled and the founder may feel threatened. Meanwhile, employees begin to compare the two and pick sides. Boards have seen this movie before, and it rarely ends well. 6. Unrealistic Expectations Founders and boards often expect the COO to “fix everything yesterday.” In reality, operational improvements take time—learning systems, culture, and people. When results don’t appear overnight, frustration builds. On the flip side, some COOs expect to make sweeping changes immediately, without respecting the founder’s legacy or the team’s tolerance for disruption. 7. Culture and Communication Breakdowns The founder and COO need structured ways to align—weekly check-ins, clear communication norms, and mechanisms to resolve disagreements. Without them, minor irritations accumulate into major grievances. Worse, the team sees open conflict at the top and begins to question who’s really in charge. 8. Identity and Ego Issues Let’s name the elephant in the room: many founders see hiring a COO as an admission of weakness. They sabotage the hire by bypassing the COO or contradicting them in front of the team. On the other side, ambitious COOs often chafe at being “Number Two.” If the relationship isn’t anchored in humility and respect, egos will clash. How Founders Can Prevent the Breakdown Knowing the pitfalls is only half the battle. Preventing them takes deliberate work: Define the COO’s mandate explicitly —what they own, what’s shared, and what stays with the CEO. Set up trust rituals early —regular one-on-one check-ins to surface tension before it festers. Align on vision and values —not just what you’re building, but how you’ll build it and why it matters. Clarify succession expectations —is this person a partner, a long-term No. 2, or a potential future CEO? Say it. Set realistic timelines —agree on milestones, but don’t expect magic overnight. Communicate clearly to the org —so employees understand who does what and aren’t caught in the crossfire. Hire for complementarity —choose a COO who fills your blind spots, not one who duplicates your strengths. The founder–COO relationship is like a marriage with the pressure of Wall Street, venture capital, and 200 employees watching. When it works, it’s transformative. When it doesn’t, it’s messy, public, and expensive. The Founder × Stage × COO Fit So how do you know when and which type of COO to bring in? Here’s the decision logic: Startup + Visionary Founder Needs an Executor or Mentor/Partner. Someone to turn chaos into motion without killing energy. Startup + Operator Founder May not need a COO yet. If they do, it’s usually a domain specialist (MVP Functionalist) to cover blind spots. Scaling + Visionary Founder Needs an Integrator or a Complement to gaps. Execution and people issues become bottlenecks. Scaling + Operator Founder May need a Change Agent or Heir Apparent. The role becomes about transformation or succession. Mature Company + Visionary CEO The COO role is succession-oriented (Heir Apparent) or complex integration (Hybrid). Mature Company + Operator CEO Sometimes no COO is needed; the CEO already runs operations. In other cases, the COO is simply the next CEO waiting in line. Takeaway Hiring a COO isn’t about “offloading work.” It’s about admitting what kind of company you’re really building, and what kind of leader you are. If you’re the spark but not the engine, you need an Executor. If you’re a force of change but leave wreckage behind, you need a Relationship-Builder complement. If you’re building for the long haul, sooner or later you need an Heir Apparent. The best founders aren’t the ones who try to do it all. They’re the ones who know when to step aside—just enough—to let someone else make the company stronger. Closing Thought In Founders Keepers, I often say: what got you here won’t get you there. The founder’s job is to create possibility. The COO’s job is to turn possibility into performance. The only real mistake is waiting until your company is already fraying before you decide which kind of COO you need. By then, the cost of waiting may be higher than you can afford.
The Founder’s Dilemma Founders are fountains of ideas. You see possibilities everywhere, you connect dots others can’t, and you can sell a vision with enough energy to light up a room. But there’s a problem: ideas don’t implement themselves. They need systems, people, and execution discipline. In my coaching of more than a hundred startup founders—and backed by data from 122 founder assessments—the same challenge comes up again and again: founders are world-class at generating ideas, but their companies stumble when those ideas aren’t translated into action. I have struggled with this tendency for my entire career. My creative ideas just keep bubbling up and my execution discipline and focus can’t keep up. I have the classic “shiny object” distraction problem shared by many founders. The irony? The very traits that made me a classic visionary evangelist—creativity, independence, impatience, and risk tolerance—are the same traits that made execution difficult. If you want your ideas to live beyond a brainstorming session, you must learn to do what feels unnatural: offload execution, delegate real authority, and empower others to carry your vision forward. Why Great Ideas Die Without Execution Most failed ideas don’t die because they weren’t brilliant. They die because: 1. The founder keeps ownership too long, trying to do everything personally instead of empowering others. 2. Delegation is fake, with tasks assigned but no real authority granted, leaving the founder still in control. 3. Priorities aren’t clear, so teams are overwhelmed by too many initiatives and unsure of what matters most. 4. Accountability is weak, with no consistent follow-up or consequences when commitments slip. 5. Founders love possibilities but resist discipline, avoiding the planning, sequencing, and focus execution requires. 6. Ideas are left open-ended, because founders generate endlessly but fail to converge on closure and completion. 7. Optimism turns unrealistic, as founders overestimate what’s possible and ignore what could go wrong. 8. Expectations aren’t communicated, leaving teams uncertain about roles, outcomes, and next steps. 9. They rush ahead without buy-in, moving too fast to bring others along and win their commitment. 10. They undervalue operators, failing to leverage managers of execution who can turn vision into systems. This is what I call the founder time bomb. Early success convinces you that your personal hustle is the engine of growth. But as the company scales, hustle becomes a bottleneck. Unless you shift, your best ideas will choke on lack of oxygen. Step 1: Translate Vision Into Tangible Priorities Your job as a founder isn’t to hand down a 37-slide vision deck and hope for the best. Your team needs clarity. That means breaking down your big idea into concrete, winnable battles. Set the “critical few” : Define 3–5 top priorities for the quarter. Outcome > activity : Don’t assign tasks, define the result (e.g., “Increase retention by 5%”). Overcommunicate : If you feel like you’re repeating yourself, you’re doing it right. One founder I coached changed his company trajectory by beginning every weekly meeting with just three priorities. The noise vanished. His team finally knew what mattered. Step 2: Practice Real Delegation, Not Fake Delegation Too many founders think delegation means assigning a task and then hovering over the person doing it. That’s not delegation—that’s micromanagement with extra steps. Real delegation means: Handing over ownership, not just chores. Giving the decision rights along with the responsibility. Accepting that “80% their way” may be better than “100% your way.” Here’s a phrase worth practicing: “You own this. You don’t need my approval.” Few sentences are harder for founders to say. Few sentences build more trust. Step 3: Build a Culture of Accountability Without Becoming a Tyrant Accountability is where many founders stumble. They either avoid conflict (hoping problems fix themselves) or they overreact when deadlines slip. Both extremes poison execution. Healthy accountability requires: Clear expectations : No hidden rules or shifting targets. Visible commitments : Public goals build peer pressure to deliver. Rhythms of review : Regular check-ins that aren’t nagging but structured. Consequences : Underperformance addressed quickly, not ignored. Accountability isn’t punishment—it’s support. It says, “I expect the best from you because I believe in you.” Step 4: Share Information Like Oxygen Execution thrives on information. Yet many founders hoard knowledge—sometimes out of habit, sometimes out of insecurity. Teams can’t execute if they don’t understand the why behind the what. Empowered teams need: Transparent dashboards : Everyone sees progress metrics. Context, not just orders : Explain reasoning, not just results. Accessible strategy docs : Kill the “founder black box.” When people understand the big picture, they stop running back to you for every decision. They start acting like owners. Step 5: Invest in Second-Line Leaders Scaling execution isn’t about having 50 great individual contributors—it’s about having 5 managers who can each lead 10 people effectively. Yet many founders neglect their managers, focusing instead on product or fundraising. Strong second-line leaders can: Translate your vision into plans. Coach their teams instead of doing the work themselves. Spot and develop talent below them. Your leverage point is not how many people you personally manage, but how many leaders you multiply. Step 6: Watch Out for Founder Autopilot Your instincts—boldness, independence, impatience—got you this far. But they can sabotage you at scale. I call this founder autopilot. It looks like: Jumping back into execution “just to speed things up.” Overloading the team with new initiatives before finishing the old ones. Cutting around your managers and making unilateral calls. The cure is self-awareness. Tools like 360 feedback and coaching help you notice when you’ve slipped back into heroic founder mode instead of scalable leader mode. Step 7: Celebrate Execution, Not Just Ideas Most founders glorify the spark of ideation but forget to recognize the grind of implementation. If you only celebrate creativity, you’ll get lots of brainstorming but little delivery. Shift the culture: Spotlight the team that launched, shipped, or solved—not just the one that dreamed. Tell stories of execution at all-hands meetings. Publicly recognize “builders,” not just “visionaries.” What you celebrate becomes what your team repeats. The Founder’s Evolution: From Genius to Builder of Builders The founder who can’t offload execution ends up as the bottleneck, exhausted and surrounded by frustrated employees. The founder who masters delegation and empowerment evolves into something much more powerful: a builder of builders. In my research, the difference between founders who scaled 10x and those who flatlined wasn’t idea quality. It was execution quality. The 10x founders learned to empower others, create accountability systems, and step back from doing everything themselves. The founder who shifts from “I’ll do it” to “I’ll ensure it gets done” makes the leap from fragile startup to durable company. Closing Thoughts Ideas ignite companies, but execution sustains them. If you want your vision to shape reality, you must resist the temptation to hold the reins too tightly. Translate vision into priorities. Delegate real authority. Build accountability and transparency. Develop leaders beneath you. And above all, celebrate execution as much as you celebrate ideation. That’s how founders ensure their ideas don’t die in the brainstorm stage but live on as products, services, and companies that change the world.
Every founder eventually faces a moment of reckoning. It doesn’t arrive with a clear announcement. It creeps in gradually, often disguised as small frustrations: projects slipping, team members complaining, or investors quietly losing confidence. And at the center of it all is a painful truth: The people who carried you through the chaos of the early days, the ones who slept on office couches, pulled all-nighters, and took pay cuts to bet on your dream—can no longer keep up. The company has grown. The stakes are higher. And the job has outgrown them. This is one of the hardest truths in entrepreneurship, and one most founders struggle to face. Instead of acting, they convince themselves: “She’ll grow into the role.” “He’s been with me since day one—I can’t let him go.” “Loyalty matters more than resumes.” But here’s the hard truth that separates founders who scale from those who stall: loyalty doesn’t scale. Competence does. The Startup Version of the Peter Principle The Peter Principle tells us that in large corporations, people rise to their level of incompetence. In startups, this principle plays out in hyper-speed. What made someone a hero in a five-person company, improvisation, raw hustle, and the willingness to do anything becomes a liability in a 50- or 500-person company. Think about the hacker who was indispensable in the garage. Brilliant at rapid problem-solving, he could patch servers at 3am and crank out features in a weekend. But leading a team of 50 engineers requires a totally different skill set: planning, delegation, recruiting, building processes. His improvisation becomes chaos. His genius turns into bottlenecks. Or the co-founder who thrived on energy and vision. In the early days, charisma and instinct were enough. But scaling requires a discipline around metrics, process, and accountability. What once looked like bold leadership now looks like reckless improvisation. Even the beloved “culture carrier”—the person who organized team offsites, boosted morale, and made the company feel like family—can become a roadblock. When decisions stack up and complexity explodes, loyalty and good vibes aren’t enough. What the company needs is a strategic operator, not just a glue person. This is what I call team obsolescence : the brutal, recurring reality that many early employees get outgrown by the job. The Head vs. Heart Conflict Why do founders struggle so much with this? It’s not because they’re blind. It’s because they’re human. The tension isn’t just intellectual—it’s emotional. Guilt and Indebtedness : Early employees bet on you before anyone else did. They turned down safer jobs, endured lower salaries, and staked their careers on your vision. Cutting them loose feels like betrayal. Psychologists call this the principle of reciprocity: the human drive to repay sacrifices. Founders feel they owe these people more than just a paycheck. Fear of Losing the Magic : Founders often worry that bringing in “outsiders” will ruin the scrappy, intimate culture that made the company special. This is a classic case of in-group bias. We trust the familiar, even when it’s no longer fit for purpose. Many founders cling to the idea that culture is fragile and must be protected from “corporate types.” Conflict Avoidance : Few people relish difficult conversations. Founders, especially those wired to inspire rather than confront, often procrastinate on hard personnel decisions. This is loss aversion at work: the immediate pain of conflict feels worse than the long-term risk of stagnation. Blind Loyalty Bias : Founders frequently overestimate an early employee’s ability to “grow into” a scaled role. This is the halo effect: past loyalty and past performance cast a glow that blinds you to current shortcomings. This is the founder’s head-versus-heart struggle. Rationally, you know the company has outgrown someone. Emotionally, you can’t let go. A Founder’s Story: When Friendship Meets Reality One founder I coached built his company with a close college friend. This friend was the first engineer, working nights and weekends to bring the product alive. He coded nonstop, patched outages at all hours, and was the reason the company survived its early chaos. By Series B, the company had 80 employees. Suddenly the role wasn’t about heroic coding; it was about systems, processes, and leading dozens of engineers. The founder knew his friend was drowning. Deadlines slipped. Senior engineers were frustrated. Investors raised eyebrows. But he kept saying, “He’s been with me since the beginning. I owe him.” Eventually, he faced reality. With coaching, he had the hard conversation: “You’re invaluable to this company, but the role has outgrown your strengths. Let’s find a place where you can thrive without being set up to fail.” The friend transitioned into a specialist role where his brilliance could shine without the weight of leadership. The company brought in a seasoned VP of Engineering. Painful as it was, the decision saved both the company and the friendship. This is the essence of true leadership: honoring loyalty without letting it sink the ship. The High Price of Avoidance The costs of avoidance aren’t abstract—they’re devastating. Execution Bottlenecks : An underqualified leader slows everything down. Projects drag, opportunities slip, and customers churn. It’s like trying to scale a skyscraper on a foundation built for a cottage. A-Players Walk : The best people won’t stay if forced to work under weak leaders. They leave, taking ambition and excellence with them. The company becomes a place where mediocrity thrives. Culture Corrodes : Protecting underperformers sends a loud signal: politics matter more than performance. Over time, resentment builds. High performers check out. Trust erodes. Investor Mistrust : Boards and investors notice quickly when execution falters. They start asking tough questions—not just about your team, but about your judgment as a founder. Founder Burnout : Perhaps the greatest cost: you, the founder, pick up the slack. Instead of scaling your vision, you spend nights fixing problems others should solve. Exhaustion sets in. Your energy, the one resource no one else can replace, gets depleted. What feels like an act of loyalty today can quietly strangle the company’s future. Another Case: The Culture Carrier I once worked with a founder whose operations manager was beloved by the team. She organized payroll, ordered office supplies, and planned offsites. She was the glue. But when the company hit 150 employees, the demands shifted. The job required scalable systems, compliance expertise, and strategic HR planning. She was still running things on spreadsheets and memory. People loved her, but they were increasingly frustrated with the chaos. The founder feared that replacing her would “destroy the culture.” Eventually, he hired a Head of People. But instead of cutting her out, he redeployed her into an employee experience role. She continued to be the cultural heartbeat of the company while freeing leadership to professionalize operations. The lesson: redeployment, when done thoughtfully, preserves loyalty without sacrificing competence. What Great Founders Do Differently The best founders I’ve studied don’t avoid this problem. They approach it with discipline and compassion. 1. They Diagnose Early They don’t wait until the crisis is obvious. They ask themselves, “If I were hiring for this role today, at this stage, would I choose this person?” If the answer is no, they don’t kick the can—they act. 2. They Separate Potential from Plateau Some people can grow. With coaching, training, and mentorship, they can rise to the next level. Others plateau quickly. Great founders don’t confuse the two. They invest in growth where it’s possible and cut losses where it’s not. 3. They Redeploy with Respect This isn’t about discarding people. The best founders move loyal employees into roles where their strengths shine—special projects, advisory positions, cultural leadership. Redeployment preserves respect and institutional knowledge while freeing the company to grow. 4. They Upgrade Before Crisis They don’t wait until the engine fails. They hire seasoned executives early, before execution falters. And they communicate clearly: every stage requires different skills. Honoring the past doesn’t mean guaranteeing the future. Leadership with Compassion The real test of a founder isn’t whether you can attract capital or inspire a team. It’s whether you can make the painful calls that protect the company’s future while respecting the people who got you started. True leadership is not about cold detachment. It’s about balancing head and heart: Gratitude means honoring contributions, celebrating sacrifices, and rewarding loyalty. Governance means making clear-eyed decisions about whether someone can perform at the next level. When founders confuse the two, they put sentiment ahead of survival. But when they balance both, they create companies that endure. One founder I know addresses this directly with his team: “Every stage requires new skills. Some of us will grow into them. Others will contribute in different ways. What matters is building a company that lasts.” That’s leadership with compassion—telling the truth while honoring the past. Why This Matters More Than Ever The startup environment today is more unforgiving than ever. Capital is tighter. Investors are quicker to act. The margin for error is smaller. In this climate, founders who delay tough calls are at greater risk than ever. Execution failures and cultural corrosion are spotted instantly by boards and competitors. The founders who scale are those who balance loyalty with realism—who act before the cracks widen into chasms. The Founder’s Real Test It’s easy to celebrate early wins and bask in loyalty. The real test is whether you can honor that loyalty without being trapped by it. Because here’s the paradox: The only way to truly honor early sacrifices is to build a company that endures. And that means making the call when loyalty becomes liability. Call to Action If you’re a founder facing this dilemma, don’t wait for the board to force your hand. Don’t wait for top talent to walk or investors to lose confidence. Confront it now. Diagnose honestly. Redeploy with respect. Upgrade before crisis. Be compassionate. Be decisive. Be clear-eyed. Your team—and your company—will thank you later.
