Every Decision You Make as CEO Sets a Precedent

Ben Horowitz gave a fantastic talk at Stanford for Sam Altman’s class (linked here and embedded below, please watch after reading this, it’s worth it). It was essentially focused on decisions you make as CEO and their effect not on one person or yourself, but the entire company. Ben went through examples like raises, firing, demotions, and more. There was a key takeaway for me as a former founder and CEO that rings true: every single decision you make as CEO will set a precedent in an organization.

You may think a decision to give a raise, to change priorities, or to sign a specific sales deal will have no impact. In reality, each decision sets a precedent for employees and the culture of the company. Culture starts at the top and if you say x is okay, then everyone else will think it’s okay. Example – If you start to make business decisions that impact the quality of the product, it sets the cultural tone that product takes a backseat to revenue. It tells the business team that they can sign deals that impact product and it tells engineering that their work isn’t important. The opposite might be sacrificing the quarter’s revenue to implement a new engineering feature instead of something that will generate more sales. The engineering team starts to feel that they call all the shots and the sales team feels like their ability to earn revenue (and likely their bonuses) are inhibited. Each decision you make sets a precedence for priorities. If you change the priorities by setting new precedents, people start to get really frustrated.

You have to look at each situation not only in isolation, but also in conjunction with all of your past decisions. Will this decision tip the scales or will it keep the scales balanced? Every decision you make sets a precedent for what’s okay and what the boundaries are, so you want to keep those boundaries where they were.

The best way to set boundaries is to have a clear set of values. The values should help set the precedent from the onset and then the decisions you make help reinforce them, not replace them. If everyone in the organization knows that a great user experience is first and foremost, they’ll start to make decisions putting that value first. If a decision might go against a certain value, it better have a damn good reason to be brought up.

When a kid sees their parents do something, it reinforces that it’s okay. You need to think of every decision you make as CEO in a similar light. The same is true for any manager in the company. It’s important that managers can manage without having to go to you for approval, otherwise you never delegate and become a micromanager. Every decision other managers make also impacts culture and sets precedence, so they need to understand this concept as well. Values will guide them as to what decisions they should be making along with your reinforcement of what decisions you make.

I look back to areas where I could have done better myself and this area is one of them. Most CEOs don’t realize the seemingly simple things will have such an impact on culture and set precedence. Be thoughtful with your decisions and take time to make them. Think about what precedent your decision will set within the organization.