3 Questions That Define Your Startup

Founders, here’s a challenge: walk up to anyone at your startup and ask them 3 simple questions. My guess is how your employees answer these questions will be directly correlated with their happiness and indicative of your startup’s shot at long term success. Management science is complex and much has been written about it. While it would be naive to pretend one framework can resolve the infinite permutations of cultural nuances and management challenges that exist in startups, I have observed that many issues around culture and interpersonal dynamics can be systematically solved if everyone in a startup has bullet proof clarity on 3 key questions:

1) What specifically is your job?

2) Who do you report to?

3) What are the milestones for achievement and advancement?

It sounds simple, but I bet at most startups in the Valley, the ability to answer these questions averages out at around ~1/3. In my experience, it is crucial to make sure your startup is a 3/3 by the time you have 10 employees.

One of my favorite professors from law school, Jonathan Zittrain, advocates looking at the world from both an “inside-out” and “outside-in” perspective. He defines “inside-out” as being cognizant as to how a specific outcome affects the parties that are part of a given situation; meanwhile, “outside-in” is understanding the effect each outcome in aggregate has on the world.

In the startup context, I see inside-out as the set of actions we take to strengthen intra-employee relationships; this encompasses peer-peer relationships as well as manager-subordinate relationships. I see outside-in as what each of these individual relationships in aggregate mean for company wide cohesion. Ultimately, both perspectives together determine how well a startup is equipped to tackle its mission.

Let’s start with the benefits of addressing these 3 questions from an inside-out perspective:

Good employees want to learn, work hard, improve and succeed. When the “how” or “who” around any of these concepts lingers for multiple people (i.e. how should I prioritize my time? how can I best contribute? who has the authority to sign off for this decision? who do I involve in this particular project?) frustration ensues, politics come alive, and cultural toxicity festers.

By strengthening each individual peer-peer and manager-subordinate relationship, the organization benefits immensely. In Zero to One, Peter Thiel takes a macro view of this point in reflecting on how pivotal defining individual roles was at PayPal. This insight captures the outside-in benefit perfectly:

The best thing I did as a manager at PayPal was to make every person in the company responsible for doing just one thing. Every employee’s one thing was unique, and everyone knew I would evaluate him only on that one thing. I had started doing this just to simplify the task of managing people. But then I noticed a deeper result: defining roles reduced conflict. Most fights inside a company happen when colleagues compete for the same responsibilities. Startups face an especially high risk of this since job roles are fluid at the early stages. Eliminating competition makes it easier for everyone to build the kinds of long-term relationships that transcend mere professionalism. Internal conflict is like an autoimmune disease: the technical cause of death may be pneumonia, but the real cause remains hidden from plain view.

Taking Thiel’s insight to the next level, I think founders should apply a full bottoms-up analysis to organizational design to make the best of their human capital. A bottoms-up build should not only clarify responsibilities of individuals, but also teams and departments. I see a few more macro benefits as a result of this practice:

(1) An infrastructure to make your vision come true — clear definition of responsibilities across individual, team and department and how these entities work together determines whether the company is situated to execute on its vision. Understanding these dynamics can also go a long ways in tangibly spelling out values of the organization.

(2) A communication standard where truth trumps power — truth rising fast and in the right direction improves agility and sophistication of decision making.

(3) Ruthless empowerment of your team — improving autonomy of employees across the board frees up time to focus on higher value-add items. Empowerment is like a cheat code. Savvy founders are masters at extending what their organization can accomplish in a 24 hour day.

Every early employee at a startup knows how much of a firestorm the experience is. Once you’re on the inside, the cover of the book (aka great press) loses its allure; startups are constant chaos, in good and bad times. In this chaotic environment there is a tendency to forget about the big picture, especially with inexperienced founders. Focusing on these key questions may feel like a time suck, but over the long term it radically improves the horsepower of each individual member of the team. The best founders I have seen are incredibly intentional about organizational design; though it requires more initial effort, the productivity gain on the back end more than makes up for it.

Don’t risk building your house on top of a cracked foundation. Get the organizational design process rolling with these 3 simple questions.