Fatal vs Non-Fatal Errors

A framework for when owners/board members should intervene with CEO decisions, based on distinguishing between fatal and non-fatal errors.

Core Philosophy

• Let CEOs make their own mistakes and learn from them
• Only intervene when errors could be fatal to the business
• Allow non-fatal errors to play out, even if you disagree

Fatal vs Non-Fatal Examples

• Fatal Errors (Intervene):

  • Decisions that could ruin company reputation
  • Actions that imperil the business's survival
  • Choices that could destroy core business value

• Non-Fatal Errors (Don't Intervene):

  • R&D investments you disagree with ($2-3M range mentioned)
  • Strategic decisions you wouldn't make
  • Operational changes you doubt will work

Benefits of This Approach

• Prevents CEO resentment
• Avoids the "you held us back" excuse
• Allows CEOs to:
  • Learn from their mistakes
  • Develop better judgment
  • Make more good decisions than bad over time

Implementation Tips

• Clear upfront agreement on intervention boundaries
• Focus on long-term development of CEO decision-making
• Accept that watching mistakes happen is part of the process
• Trust that good CEOs will make more right decisions than wrong ones over time