Establish a Corporate Structure First

Posted by Vaughn Pourchot on 4/2/19 9:00 AM
Vaughn Pourchot
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When you’re a small business with a staff of fewer than ten people, you are much more analogous to a conventional definition of a ‘Team’ than a company with a staff of over 100. With regard to the former, you know the person you can rely on when it comes to performing a specific task, much like a sports team. With the latter, you have teams within organizations to form one big group. This adds to the complexity and a dire need for an HR department. However, while a properly outlined corporate structure may appear more important for large organizations, it is just as important for startups.

Business Decision-Making

Business Decision MakingNow reflect on what the decision-making process may look like for a small business verses a large one. While on the surface they look entirely different they share a universal similarity: they’re both performed via a representative republic.

When you’re a small business as previously defined, you can make time to get everyone’s input on what to do when faced with a crossroads. This form of effective leadership promotes creative thinking by giving everyone a voice and in turn improves and strengthens team dynamics. However, just like a sports team one member retains 51% of the voting rights should you reach an impasse: the coach, aka CEO/President. Since there is a disproportionate weighting of the votes, the team structure goes from a democracy to a representative republic. While listening to your employees and taking their ideas and concerns into the decision-making process are both employee needs, sometimes tough decisions must be made that would never survive a democratic vote. Sadly enough, most startups with more than one founder have to learn this lesson the hard way.

Team Dynamics

who cares attitude about business decision making processMulti-founder organizations thrive on the euphoria of all the greatness that is in their future thanks to the widget they’ve developed. Establishing a formal corporate structure, with defined voting rights, becomes a taboo topic due to the confrontation it stands to cause. Thus, the co-founders maintain equal voting rights which are all fine and dandy until they face their first deadlock.

For odd-numbered teams, the good news is at least a decision will be made since it will be impossible to have a tie… unless one member abstains from voting (great help they are). The problem that arises from this is that the alliances forged through this process stand to disenfranchise the members who lost the vote, in turn creating animosity and hurting productivity. Also, keep in mind that it is only a matter of time before there is an impasse encountered by the newly allied team of the winning vote. As you can imagine, team dynamics get very toxic very fast.

For even-numbered teams, the demise is much quicker. The first stalemate that is encountered is the last because when a decision can’t be made a business can’t continue to operate. All it takes is one decision-making process to tear apart a team and deprive the world of what could have been.

Voting Rights

Voting in Business and Tie BreakersAll that said, no matter how small your business is you should always act as if you’re a large one. That starts with formalizing a corporate structure, as difficult as that may be in the case of going into business with your best friend whom you’ve never disagreed. People change when money is involved which is why management must step in and give one person the final say.

Topics: Business, small teams


About the Author: Vaughn Pourchot

Vaughn is the CEO of VTR second, and a loving husband/father first. He took control of VTR in 2016 when he saw a platform and associated content that was not being utilized to it’s full potential. He has always had a passion for learning and wanted to provide the masses a low cost means to study the building blocks of running a business. VTR was born from this passion. Seeing that only MBA programs offered the knowledge that everyone deserves to know, he took an online MBA program and put a team in place that could scale down the courses in to bite-size chunks that everyone could afford to pursue. Thanks to a dedicated team VTR continues to grow and hopes to one day be the go to for Continuing Education needs.

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