As start-up founders, you have the prime role of looking forward to long-term goals without endangering those short term ones. Hence, any wrong decisions you make may spell the success or failure of your business.
In a video by Harvard Business Review, Noam Wasserman outlines three common pitfalls founders commit in the founding years of their business. He labels them as the 3R’s: relationship decisions, role decisions, and reward decisions. Gathering from a decade-long study, he asserts that along with the 3R’s, 65% of failures are caused by people problem.
Relationship decisions pertain to how the founders build their team. He found that usually founders composed of families and friends have businesses that are less stable. This is because, commonly, these people possess almost the same skills. Also, since they feel that they know each other well, they tend to assume that there is no need for them to know each other professionally. The key to success here is building a barrier that will protect both their professional and personal relationships.
Second, role decision is the manner to which responsibilities are assigned. Most often, he says, start-up founders cluster towards the higher roles in the organization. This is a misguided practice as it can create problems in decision-making and may even build up tension. The more ideal approach is to assign titles that are reflective of the realistic responsibilities they will carry-out in the future.
The third and last pitfall is related to reward decision. This refers to the way equity ownership is decided. He has noticed that the most common way founders go about this is through the 50-50 share approach. Again, this is not ideal as it is myopic and does not anticipate business transformations. A solution, he strongly suggests, is engaging in a negotiation which can adjust as changes occur.
Run time: 3:35
This video is best for those who are in the starting phase of their venture. Click button to watch video
What other common mistakes do start up founders commit that Noam Wasserman failed to mention? Let your thoughts be heard by leaving a comment.
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