Deciding which partner takes on which roles can be an ordeal in any startup. Although a title might not mean much amongst close friends, it can cause chaos soon into the start of the operation. Friends that are starting a company usually take a more “egalitarian” as opposed to a “hierarchical” decision making approach. It is important to define roles for functional areas that one is going to handle. Once the title is decided, it is more important to decide on the responsibilities that go along with the title. Knowing that when situations arise they can be properly handled by the appropriate person is key to a well oiled machine. In the event the partner or employee leaves the operation, there is an established position with clear responsibilities in place. This will allow for a more seamless transition to the new employee.
In the example of a startup that has multiple partners that are close friends, it may be difficult to decide on who will have a “Chief” title. Noam Wasserman answers that question in “The Founders Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.” First the level of commitment needs to be determined. If one of the partners holds on to a “day” job, they may not be the best person for the title of Chief Executive Officer. Noam Wasserman also suggests that it should make a difference who the “idea person” is to determine position. It only makes sense that the person the came up with the idea will be the most passionate about the business. Wasserman also mentions in his book that consideration of human, social, and financial capital should also be considered. The more a cofounder brings to the table, the more his collateral will be worth to the startup.
In order for the startup to be successful, it is important that the person that came up with the idea give up some control of key functional areas. In other words, he should not have total control with the CEO title. As discussed in previous posts, allowing oneself to maintain total control can actually lead to less growth in the company. This is because a CEO usually does not have all of the skills and assets to bring the new startup to immediate significant growth.
I have indicated throughout this post that it is key to a startup to have clearly defined roles. However, it is also important to be flexible enough to allow for evolution of an organization. Situations change constantly. The growth of the business might be faster than you expected. In this example, the founders may have to add people to the organization. What would happen if the founders suddenly met someone who had tremendous social capital in their industry? An adjustment would need to be made in the organizational structure.
I am not advocating for either an egalitarian or hierarchical approach to creating roles within a brand new startup, but it is necessary to properly define roles and responsibilities. It also important to remain flexible for changes the startup will inevitably make.
References
A Founder’s Dilemma’s: Anticipating and Avoiding the Pitfalls that Can Sink a Startup, Noam Wasserman, 2012
Master of Entrepreneurship Website for Mike Weimar 