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Ben Horowitz: The Framework for Making Decisions That Will Haunt You

By Ben Horowitz · Startup Growth · 1 min read

An executive works harder than anyone in the company. He is in over his head. Do you demote him or fire him? Horowitz walks through the decision.

Key Points

A demotion that looks easy for one person has consequences for the whole company
You are not making a decision about one person — you are setting the standard for everyone
The real question: does effort earn equity, or do results?

You may think you're dealing with one person. But what you're really doing is saying: what does it mean to fail on the job?

Great Effort, Wrong Job

Horowitz: "He had an executive who was putting in a great effort. Hired him, working harder than anybody else in the company, everybody liked him. But he was just in over his head knowledge-wise. He did not have the knowledge and skills to do what the company needed him to do."

Horowitz: "It's really hard. If somebody comes to work every day at 6 AM, works till 10 PM, harder than anybody in the company — it's really hard to say, sorry, nice effort, but you get an F because I fired you. Nobody wants to have that conversation."

If somebody works harder than anybody in the company, it's really hard to say, nice effort, but you get an F because I fired you.

The Demotion Looks Clean

Horowitz: "A demotion is kind of neat from the CEO's point of view. We keep him in the company, he works so hard, he's a great example. I can bring in somebody above him, solve my problem without creating another problem."

Horowitz: "From the executive's perspective — I don't want to be demoted, but I really don't want to be fired. Getting demoted is easier to explain to my next employer than getting fired."

The Equity Problem Nobody Sees Coming

Horowitz: "I asked, what's his equity package? He said, a point and a half. I said, okay, so you're an engineer with 0.1 or 0.2 percent. How are you going to feel about somebody who used to be head of sales, who got demoted, sitting there with 1.5% of the company?"

Horowitz: "Are you going to take the equity away? Are you up for that? How productive do you think he'll be if you take back his compensation?"

How are your engineers going to feel about somebody who got demoted sitting there with 1.5% of the company?

You Are Setting the Standard for Everyone

Horowitz: "Will people give him the same respect now that you've demoted him? They knew him as head of sales. Now he's the regional manager telling them what to do. They're thinking, you got demoted — who are you to talk to me?"

Horowitz: "You may think you're dealing with one person. But what you're really doing is saying: what does it mean to fail on the job? Is it good enough to put in an effort, or do you have to get a result?"

You may think you're dealing with one person. But what you're really saying is: what does it mean to fail on the job?