Agreeing how decisions get made, before you disagree

Aug 29
3 min read

Updated: 2 days ago

Introduction

Two owners decide everything by discussion. It works perfectly for four years, because they have agreed about everything that mattered. Then one wants to borrow to expand and the other does not, and there is no way to resolve it.

Decision-making in small businesses is informal by default and that informality is invisible while people agree. It becomes the central problem the moment they do not, and by then establishing a process looks like one party trying to gain an advantage. The time to agree how decisions get made is while none of them are contested. At that point it costs nothing and nobody has a position to defend. Whichever owner proposes it is assumed to be proposing the version that suits them.

1. Agreeing how decisions get made matters most when you agree about everything

The counterintuitive timing.

A process agreed while everybody is aligned is a neutral piece of governance. The same process proposed during a disagreement is read as a manoeuvre, which is why it becomes impossible exactly when it is needed.

2. Separate decisions by size and consequence

Not everything needs the same treatment.

Day-to-day operational matters either owner takes alone, and significant commitments require agreement. Defining where that line falls — an amount, a category, a duration — is most of the work. Once the line exists, almost everything else follows from it.

3. List what genuinely requires agreement

Keep it short and specific.

Borrowing, capital purchases above a figure, hiring, taking on premises, changing what the business does, taking on new owners, and setting owner pay. A long list makes the business slow; no list makes it fragile. The right length is short enough to remember without looking it up.

4. Give people clear authority in their own areas

The practical enabler.

Each owner or manager able to decide within a defined scope, without consultation. Businesses where everything is discussed move slowly and the people involved are simultaneously overloaded and disempowered. Nobody can act and everybody is waiting, which is the worst combination available.

5. Decide what happens when you cannot agree

The provision that matters.

A casting vote on defined matters, a third party who decides, expert determination, or a default to the status quo. Something has to break the tie, and picking which is easier in the abstract.

6. Record significant decisions

Brief and dated.

What was decided, when, by whom and on what basis. Not minutes of a meeting, but a note that prevents the argument in eighteen months about what was actually agreed. Two people remember the same conversation differently within about a fortnight.

7. Distinguish consultation from consent

A common source of friction.

Being told about something is different from having to approve it. Where one owner expects to be consulted and the other believes they were informing, the disagreement is about the process rather than the decision.

8. Review the thresholds as the business grows

They date quickly.

A limit that made sense when turnover was a fraction of its current level makes the business cumbersome later. Revisiting the figures annually keeps the framework useful rather than obstructive.

9. Put it in the agreement

Where it has force.

Reserved matters and any deadlock mechanism belong in the shareholders or partnership agreement rather than in an understanding. That is what makes it binding when it is tested.

Apply the same thinking to managers as the business grows. Employees who must ask about everything cannot develop judgement, and owners who complain that nobody takes responsibility have frequently never defined what anybody is permitted to decide.

Conclusion

Agree the process while everything is uncontested, because it cannot be agreed once something is.

Separate routine decisions from significant ones, list the specific matters requiring joint agreement and keep the list short, give people real authority within a defined scope, decide in advance what breaks a deadlock, record significant decisions briefly and with dates, distinguish clearly between consultation and consent, review the thresholds as the business grows, put the framework in your formal agreement, and extend the same clarity to managers.