One of the simplest arguments against consensus-based decision-making: it leads to suboptimal results over time. Here, Katrina Booker looks into Greylock partners make their bets.
Katrina Booker, How Greylock Partners Finds the Next Facebook
Heighten the Conflict
“There is a lot of mythology about how firms decide,” says Sze one recent afternoon at his Sand Hill Road offices. The space is, for the most part, nondescript—tidy rooms and cubicles above a New Republic bank branch. There is something unusual installed on one wall: the shape of a slender tree painted black, branches blossoming outward. At the end of each branch is a small wall mount holding every cellphone and mobile device Sze has owned—from a brick-sized US West to the Apple Newton to the iPhone. It is a physical reminder of how quickly technology has transformed just about every part of our world over these past 20 years. For much of that time, Sze has been deep inside this revolution, finding the companies that are driving it.
“A lot of these voting systems are consensus oriented, where you need to have 100 percent unification of the group,” observes Sze. Greylock’s system is different. A few years ago, the partners analyzed their pitch meetings, looking at ones that had led to their best deals and their worst. The deals fell into three categories: ones everyone hated, ones everyone loved and ones they fought over. It was this last group that yielded Greylock’s biggest wins. Facebook, Pandora, Airbnb were all hotly contested pitches. On Airbnb, Sze clashed with Hoffman, certain the idea would never work. Luckily for Greylock, Hoffman doesn’t back down easily. “We are looking for outliers and extremes,” explains Sze. “So we try to heighten this conflict.”
All companies today have to operate like VCs: they are making bets on dozens of innovations in their own business – ideas for product enhancements, customer support changes, new ways to get things done, technologies to buy and roll out – and just as in the world of venture capital, things are moving too fast for all to come to agreement. And no one is smart enough to be the sole decision maker, either.
As Reid Hoffman of Greylock says
When the idea is big enough and edgy enough—it’s either madness or genius. What you are trying to figure out is which one it is.
And companies need to have a system to move forward – to experiment on big, hairy, dangerous ideas – even in the face of dissent about whether the idea is crazy or genius.