Imagine the competitive strength your business would have if there were a resource that everyone could refer to, at any time, to find the right answer to any question they had. No, it’s not the latest Artificial Intelligence, just simple guiding principles.
Simple guiding principles are the unique tailored ‘basic laws’ that every business requires to be great.
Active Knowledge Question:
How do you ensure that everyone in your business responds the right way to any issue that may arise at work?
It’s All In The Rules
Incorrect responses are a potential risk for every business – whether it is a customer-related matter or an operational issue to do with production, supply chain, human resources or one of the myriad of activities that occur across your business every day.
It’s an issue for businesses of every size. In smaller businesses, it’s the constant knock on the boss’s door for answers on what to do. But the boss isn’t always there, and even they get it wrong sometimes. Or as the business grows larger, there are more rules, policies, procedures and regulations created and enforced, in an attempt to try and ensure the ‘right answer’ is achieved.
We call this ‘bureaucracy’ as the command and control structure in the business tries to keep every action and decision under their control. Of course, we all know that ‘bureaucracy’ rarely leads to the right answer and typically drives the competitiveness of a business backwards at a rapid pace.
And often these rules and regulations are reflective of the fact that leaders do not trust their employees to make the right decisions and, therefore, they place boundaries around what they are permitted, and must, do. The fact that leaders are employing people in whom they do not have trust is even a bigger issue than the effectiveness of the controls they create.
Again, the importance of worthy leadership can never be overemphasised in the success of a business and the level of faith which that instils throughout the business.
Effectiveness Of Rules
Bill Taylor in his article, ‘Trust Your Employees, Not Your Rule Book’, published in the Harvard Business Review, believes it is time for ‘leaders to toss out their rule books and trust their people’.
Every day, employees at every level follow the rules set by their business and yet the results can be a total failure. Creating more rules to cover a failure is not necessarily the answer. Rule-obsessed cultures cannot hope to cover all the possible scenarios that can arise. They can only create a business in which its employees are reluctant to make decisions if the rule-book does not provide the exact answer.
The more rules you create, the less likely your employees are to use their common sense and judgement.
Taylor makes an interesting reference to Roman law principles, under which anything that is not expressly permitted is forbidden. And then he compares this to common law principles, under which anything that is not expressly forbidden is permitted.
Businesses following a rules-based approach to ‘guide’ their employees’ actions are effectively building a business governed by Roman law principles. And in today’s competitive marketplace that is a dangerous culture to build.
One need only consider the impact of social media on highlighting the mistakes businesses sometimes make to appreciate the fact that you need your employees to be able to make the right call at critical times – and not fall back on the ‘regulations do not allow me’ excuse.
Effect Of Emergence
The reality is leaders understand that it is not possible to foresee every event and, therefore, it is impossible to provide every answer in advance.
In 1985, Henry Mintzberg and James Waters published an article in the Strategic Management Journal titled, ‘Of Strategies, Deliberate and Emergent’.
Mintzberg defined the various components, as follows:
- Deliberate strategies are those in which the focus is on the direction and control of the planned strategy. Once intentions are set, all attention is then riveted on them and there is no place for adaptation or development.
- Emergent strategies describe a process where the concept of strategic learning is included. The process of strategy formulation is opened up to learning – taking one action at a time.
Expressing this process in a more practical sense, deliberate and emergent strategies form the end points of a continuum along which strategies are crafted.
Applying these principles to decision-making, it is not possible to predetermine a set of rules that will provide the answer in every situation as every situation is unique and events can emerge that will make the ‘rule’ that has been set inappropriate and a potential disaster waiting to happen.
What is required is an approach that will allow employees to craft the right answer as the event confronting them emerges. The effectiveness of such an approach will rest largely in having the right culture in place.
Of course, all this discussion begs the question, is there a right answer for every situation? And the answer is – maybe surprisingly – yes, there is.
What Is The Right Answer?
The right answer always lies in how you intend to compete as a business.
Business strategy should set direction, alignment and focus with the entire capability and energy of your business striving to win. It will be reflected in how you position the customer value you deliver at any point in time, but strategy is continuous and often emergent. You will develop a competitive posture, a way you compete to win, that draws your strengths to the surface each and every day, and allows you to always outcompete everyone in your chosen marketplace.
The competitive posture that you set will be supported by the culture of your business, which includes its values, and through the organisational design that you craft. In short, everything that happens in your business must be focused on delivering on your competitive posture.
And therefore, you want every decision that is made in your business to also support that competitive posture.
What is the right answer in any given circumstance? The one that upholds your chosen competitive posture.
Simple Guiding Principles
Simple guiding principles represent a real-time strategy. They allow the person to make the right decision on the spot. They provide a freedom of choice that is based on how that business has chosen to compete in its marketplace. They allow customer value to be maintained as relevant to the circumstances that are emerging. They address the expected and the unexpected.
A few points on simple guiding principles, they:
- Are not rules or instructions.
- Are simple but give rise to complex and sophisticated behaviour.
- Are the ‘basic laws’ against which every choice can be measured.
- Represent a link between the competitive posture of the business and the event that is emerging at that time.
- Should be few and clear, and taken as a set.
- Should seem just like common sense, but common sense in relation to your competitive posture.
- Underpin the performance of any great business.
Consider, for example, a flock of migrating birds in nature. Their simple guiding principles might be:
- Alignment – head, more or less, in the same direction as the birds around you.
- Cohesion – Fly at the average speed of the birds around you.
- Separation – Maintain the same average distance between yourself and the birds around you.
If all birds in the migrating flock follow these rules, they should all arrive at their final destination together.
Crafting Your Own Simple Guiding Principles
Simple guiding principles are developed through a process of scenario-playing whereby you consider how you did, or may have, responded to an event or scenario, and what lessons can be learnt from that experience.
However, before commencing this process there are three elements that must be in place:
- A clear competitive posture that describes what the customer value is that you are seeking to deliver.
- An organisational design that supports that competitive posture and details how you will operate to ensure that value is delivered.
- A focus on the competitive engine that sets the performance level of your business.
With these elements in hand, you can then begin to ask yourself, what are the most important things we need to focus on every day to ensure we deliver the value we promised to our customers? Note, the focus is on ‘the value we deliver to our customers’, which is the basis of out-competing everyone else in your chosen marketplace.
You bring substance to this question by applying it to real and make-believe events:
- Think back over the last five or so years and identify three real events for each of the following:
- Something you responded to well.
- Something you did not respond to well.
- Something totally unexpected.
- For each of the three events, ask yourself and note down the answers:
- What did we do right?
- What did we get wrong?
- What could we have done better?
- What lessons can we learn from these experiences?
- What principles can we craft from these lessons?
- Now, look to the future and craft five possible scenarios that fit under the following categories, basically, an event which is:
- Likely to happen.
- Could possibly happen.
- Not in any way going to happen.
- Would be our worst nightmare.
- Would be an unbelievable opportunity.
- Take the principles listed in point four above and apply them to each of the scenarios in point five. Detail, in writing, how you would have responded to that scenario and what the outcome would have been.
- Consider the outcomes that would have yielded from applying the principles to the scenarios and rewrite your principles to refine them, based on these learnings.
- Now you have the makings of your simple guiding principles. Refine them to meet the criteria noted above and this is your start. Now, begin using them.
In any business, thousands of actions and decisions can occur that were unplanned and unexpected. But for that business to be successful, it must get their responses right. Simple guiding principles are the linkage that support and allow a coordinated and consistent response. A response which supports how that business has chosen to compete in its marketplace.
Act Now To Grow Your Business:
Are you facing challenges in your business that you are struggling to overcome?
Are you looking for opportunities and new ideas on how to take your business to the next level?
If so, then join the Entrepreneurs+ community.
Sign up for my eNewsletter and join the conversation by sending your questions to Ask Richard.
All the best in the success of your business,