Why do founders behave so poorly?
Why do they struggle to distribute authority?
Why is it so hard for employees to have their voices heard, for their good data from the edge of the organization to be incorporated into decisions?
I believe all of this stems from asymmetrical risk.
Almost all of my “portfolio” is tied up in one asset: shares of August Public Incorporated. Relative to others, decisions made by the business that impact the value of that asset have a disproportionate impact on my future — either positive or negative.
In a normal company, it’d be completely acceptable for almost everything to run through the founder(s), with the assumptions that the founders know best and that their disproportionate risk gives them the right to make the decision.
“Hey, it’s your money, after all.”
We’re trying to do something different at August in service of structural safety:
- We’ve reserved 50% of shares of August for current employees.
- This gives everyone skin in the game, meaning that we’re all participating in the risks and rewards of owning and running a business.
- As a result, all owners can be confident that the outcomes of decisions are felt by all — not just the folks who founded the business.
- Taking this step allows us to create and ratify a constitution that limits the power of owners to make operational decisions.
Today, it’s implicit that the founders of August have distributed authority to working teams. But the traditions and norms of the working world —including the portrayal of “how a founder should be” in media — impact the way ‘Gustos perceive the power of owners over the day-to-day work.
The net impact on me is a great sense of confidence — a belief that I’m entrusting my future to a network of people that I not only like and trust, but that I know will make good, long-term decisions in favor of our purpose, and who can feel safe and secure that innovation and free-thinking are protected by law.
If it’s unclear that ownership can only be wielded in a particular way, its influence will be felt everywhere.