Running a startup means making hundreds of decisions a week – some of them simple – which brand of coffee to stock in the kitchen – and some of them impossibly complicated – should I replace my founding CTO? When parsing through them, I always consider a piece of advice a long-time colleague once gave me:
“There’s no value in an option destroyed.”
I can’t remember the first time he offered me that chestnut, but I’ve used it countless times over the past decade or so, and it’s always served me well. Take the CTO example, for instance. Let’s say he was a great early co-founder with a significant stake in the company, and he was central to the initial build of your product. He’s the only person at the company who truly understands your codebase. But as your company grew, he began disengaging – not responding to simple update requests, failing to come into the office for team meetings, ignoring the administrative and management duties inherent in running a growing team.
Then he does something that is clearly a fireable offense – perhaps he questions the company’s core mission in a public forum like Reddit.
You’ve already been thinking about parting ways with him, but now he’s practically asking you to do it. You’re pissed, your employees are confused, and your investors are asking what you’re going to do.
You have a few obvious options: First, you could immediately fire him. But that means you lose all the institutional memory your CTO has of how your product actually works. It also invites a painful confrontation and possibly even legal action.
Next, you could do nothing and try placate everyone. For conflict-averse founders, this is often the default, but it fails to address both the immediate and the long-term problem.
Maybe you could put him on a PIP and communicate to the team that you’re addressing the problem? But that requires he accept humiliation in front of the company, something he’s unlikely to do.
You only have bad choices. What to do?
It’s at this moment I run each choice through my colleague’s advice and ask myself: Which choice destroys optionality, and which leaves the most open? Running this math doesn’t predestine a decision, but it often clarifies a direction I’ll end up taking.
In this case, immediately firing the CTO means destroying the option of keeping his value to the company intact. He’s the only one who understands the code base – a vulnerability that you should have identified and addressed – but didn’t. You don’t want to close off the option of keeping him around – but by considering cutting ties with him through the lens of lost optionality, you’ve come to understand that while the CTO predicated this crisis, responsibility for its impact falls to you. That’s valuable insight that should inform your next move.
What options are destroyed by doing nothing? Initially this seems the safest choice – but that depends on how you define an option. Do you want to maintain your team’s confidence and trust? Do you want to be understood as a responsive and strong leader by investors or co-founders when it comes time to raise your next round or start your next company? You are likely damaging a future version of yourself by doing nothing – that’s an option destroyed. Another insight to inform your decision.
What about forcing your recalcitrant CTO to accept a PIP? Does that destroy any options? Possibly, because he might just quit, and you’re back to the problems of our first scenario, where you lose his institutional memory. Plus, PIPs rarely work for senior leadership – and the vibe in the company is most certainly going to be off for however long the PIP is dangling over your CTO’s head. And what happens if he doesn’t change his ways?
Our situation in a nutshell: You feel the need to take decisive action, because ignoring the CTO’s behavior damages your team and your own future options. But decisive action threatens to damage the company even more – if he leaves, you lose access to the core workings of your company’s technical infrastructure. Tough call.
Running the “options destroyed” exercise helps you understand the nuances of the problem, and perhaps an alternative approach comes to mind. No matter what, you’ll need to have an immediate, private sit down with your CTO. What will you say to him?
I’ve found the best approach is to lead with your personal disappointment, but also acknowledgement of your role in how you both got to the present moment. Take responsibility for allowing the situation to get to the point where the CTO felt comfortable slagging the company mission, but force him to own the transgression of doing so. These kind of conversations are hard, but necessary, and they almost always lead to a breakthrough in terms of the next possible steps.
Your CTO owns a significant stake in the company, so his and your long term interests are aligned. Knowing this, your job is to identify and offer a path forward that allows him a way out with dignity. You need to announce a resolution of the issue to your stakeholders so the company can move forward. He needs a way out of a mess that he helped create.
It’s at this point in the thought experiment that you need to put yourself in his shoes – run the optionality exercise from his point of view. What is a solution that best preserves his optionality?
Your job is to find a path that aligns his interests with your company’s – and to include him in that discovery. Perhaps you offer him an offramp – an advisory role and protection of a chunk of his equity vesting in exchange for an apology to the team and acknowledgment that he was ready to move on and should have realized it sooner. That both preserves your option to have access to his knowledge, and gives you time to find a suitable replacement.
Each situation is unique, but what presents as your initial choices are rarely the only ones. Asking yourself if you’re destroying future options for your company, your stakeholders, and yourself is a great way to explore possible alternatives.
A footnote: my colleague’s advice doesn’t just apply to decisions we make at work. It also applies to personal situations, as well as societal ones. In future posts, I’ll be exploring the idea of “options destroyed” as it applies to the choices we’re making – and not making – in our relationships to new technologies like AI, particularly when it comes to governance, policy, and economic flourishing.
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