Great Leaders Have No Rules

by Kevin Kruse

  Assuming the best of intentions, rules are implemented to maintain quality, high performance and standards, and also to mitigate risk.

  You decide to start your own company. You are employee number one, and there are no others, so you need no rules. You, of course, know right from wrong and trust your own decisions.

  It’s a year later, your company is growing, and you now have ten employees who report to you. You still don’t need rules, because whatever your personal whims, you are still able to personally hire, train, coach, and manage all the company employees. I can remember when I had ten team members and no official “rules,” but everyone knew that I wanted the office phone answered by the third ring, casual dress was fine unless clients were in the office (then we wore suits), and we couldn’t start our marathon games of Doom II until after 3:00 p.m.

  Your company keeps growing and you now have 110 employees; ten still report to you, but each of your direct reports is now a manager of ten more people. And you also have more clients, more products, and more at risk. There are too many people and too many things demanding your attention. You can no longer personally hire, train, and coach every single employee yourself.

  Suddenly, you notice things you don’t like. Angela sent out a proposal with typos in it. Sloppy! Mei, while on a business trip, paid $700 to stay one night at the Ritz-Carlton. Wasteful! David wore cargo shorts and sandals and had his Hawaiian shirt unbuttoned to his waist when a client was in the office. Unprofessional!

  So, to make sure this never happens again—in order to maintain quality—you help everyone by sending an email:

  Team, in order to preserve quality, professionalism, and profits I am issuing a few rules.

  All proposals must be proofread by Doris before being sent to a client.

  While on business travel, you must stay in a Motel 6 or cheaper.

  Dress code: No open-toed shoes, no shorts, no unbuttoned shirts.

  Despite the best of intentions, despite how reasonable these rules seem, we know how this ends.

  Soon, your company loses a sale because Doris was out sick for a week and couldn’t check the proposal for typos. The Motel 6 in Duluth had no vacancy, so instead of spending an extra $10 to stay at the Super 8 motel next door, your employee spent $250 on a rental car to drive four hours to a Motel 6 that did have vacancies. Oh, and your managers are now walking around examining everyone’s shoes and debating how many undone buttons at the top of a shirt or blouse is “unbuttoned.”

  Policies and rules are a natural phenomenon as a company grows; the business becomes more complex, the quality of new hires tends to go down, and communication with top leadership becomes more difficult. Even in small companies rules quickly multiply in the spirit of consistency—as a way to institutionalize the beliefs or standards of the CEO. And in large companies, policies and rules multiply like rabbits in an attempt to prevent or de-risk lawsuits.

  Law firms that specialize in employment law spread the message that companies need more policies and contracts. From one law firm’s website, “It is in every employer’s best interest to protect itself from potential litigation by using every resource possible. An employee handbook is one tool that can aid employers in defending against such claims.” The irony is that most handbooks expand to a length that even the HR team can’t tell you what’s in them anymore.

  RULES REDUCE ACCOUNTABILITY

  Leadership guru, and my personal mentor, Bill Erickson frequently says, “every rule takes away the opportunity to make a choice.” As more and more of the job is dictated by processes, policies, and regulations, employees will feel less and less ownership over their work, and their emotional commitment wanes. The fewer choices people have—the fewer chances to make a decision—the more they’ll think it’s your company, and not their company.

  Coach Mike Krzyzewski has been the head coach of the Duke Men’s Basketball Team since 1980. “Coach K” has led the team to more NCAA tournament wins than any coach in history and has more championships than any other coach except the legendary UCLA coach John Wooden. And yet Coach K considers himself less of a basketball coach and more of a leader who happens to be involved with basketball. In his five books, radio show, and speeches to corporate audiences, he repeats the theme that leaders should strive to have the players care as much about the team as the coach does.

  When it comes to rules, Coach K believes, “Too many rules get in the way of leadership. They just put you in a box…People set rules to keep from making decisions” (Krzyzewski 2001). And, further, Krzyzewski maintains, as he told Greg Dale in an interview for the Championship Coaches Network, that there is a danger: “You become an administrator of rules rather than a leader. So, the first thing is to not have too many rules” (Dale n.d.).

  Jessica P. told me she once had a boss who wouldn’t even let her choose her own writing implement.

  I once worked for a woman in a health care setting and she thought that everything had to be written with a specific brand of pen in black ink. She didn’t think that this was her rule—she believed that this was a well-known rule that everyone believed. She made me rewrite anything that didn’t appear in the special pen ink—and refused to buy these pens for the office. The rule was pretty unmotivating and certainly had me questioning my job selection. In case the health care setting threw you off—and you thought I was doing something important like writing prescriptions or working on patient charts, nope, I was in marketing and the writing I was doing was for the internal team only.

  Similarly, rules and processes can even take away the opportunity to voluntarily do the right thing. Lauren is a teacher at an international school in Asia who shared this story:

  In the school calendar there is an International Spring Fair. This is an amazing highlight of the year. Families and students come together to run tables and put forward the best food their country has to offer. There are booths everywhere, crafts, goldfish, jumping castles, you name it. As a part of the school community I was really looking forward to volunteering and enjoying the day with my husband and children.

  So a shared document was created so all booths could be looked after. Here comes the dumb rule from administration, “You have to volunteer for at least two hours. I expect everyone to be there. I will be watching you, and checking. You don’t have to but I will notice if you don’t, it won’t look good.” In one swipe the possibility of really enjoying the day was ruined. Taking the power away to choose made the day tiresome and another day at work. We fulfilled our obligations and then went home. It is interesting that a dumb rule had as great an effect on morale as it did.

  When something is forced, it takes away the pride and joy of participation from choice. Management, once again, snatches defeat from the jaws of victory.

  RULES CAUSE SUFFERING TO MANY, TO PROTECT AGAINST THE FEW

  Another problem with rules is that in an attempt to protect against a small minority, you decrease trust and increase hassles for the majority. Nick is a business owner in Australia. He shared a story that perfectly illustrates this point, and it turns out Nick is the one who created the “dumb” rule. He told me:

  I employ ten staff in three teams, all having access to laptops to perform their daily duties. I defined and distributed a technology policy that strictly prohibited the use of personal email, social media, etc. on those work laptops. Then in my infinite wisdom, I installed various software controls on each laptop to ensure the policy was not circumvented.

  This resulted in countless lost hours for me and my staff due to these overzealous controls that not only blocked social media applications, but just about everything else. Standard software updates were blocked, required websites were blocked, and other work-related applications, too. Each one of these incidents required my “Administrator Password” to allow staff to proceed. It was a prod
uctivity disaster.

  In a similar story, Heidi wrote to me about the corporate rule that, while trying to protect against the minority offenders, prevents an entire department from doing their job. She explained:

  Our entire department’s focus is on emerging customer-facing digital technologies. Yet we are not given access to any social networks, or sites like Slideshare, when connecting from our office network. To get access to the sites we use to do research, we have to raise a ticket with Group IT Services, and get director approval on the request. This practice is archaic and counterproductive, considering we actually need access to do our jobs.

  RULES PUT FOCUS ON ACTIVITIES, NOT OUTCOMES

  The third major problem with rules is that they are applied to activities when what really matters is outcomes. This is a common management mistake. For example, in an attempt to make sure employees are giving a full day’s worth of work, there are often rules against working from home. But who’s to say workers sitting in their cubicles aren’t playing solitaire on their computer, checking Facebook on their phone, or hiding out in the bathroom?

  Shelley is a real estate professional who works from home, along with her husband, on a real estate team. Their boss, in an attempt to teach customer service, inadvertently communicates distrust, which fosters disengagement.

  Our boss insists that we answer all emails from her well within an hour, answer texts within two minutes, and answer calls immediately. Always. From 7:00 a.m. to 10:00 p.m., seven days a week. Her reasoning: she wants us to be in that habit so that we respond to clients that quickly. I think this is bad because she is grossly controlling of us. We are not people who take customer service lightly. We are superresponsive. We are possibly workaholics!!! But to micromanage…that just makes us feel like she is waiting to yell at us. (Which she does.) I take Sundays off, and she agreed to that, but she insists that my husband answer my emails for me on Sundays.

  Andrew Crookston shared his experience with rules as an IT professional, and some lessons from a mentor who fought against rules and policies. Crookston explained that many software companies will have a blanket rule for the percentage of code that needs to be quality checked with test scripts (instead of trusting the software engineers to determine the best way to test the code). For example, there could be a rule that 85 percent of the code you write needs to be checked with automated tests. In response, many software engineers—who had already tested the major risk areas—would waste time writing unnecessary test scripts just so they could conform to the 85 percent rule.

  TOO MANY RULES LEAD TO TOO MANY LIES

  The US Army requires company commanders to put their soldiers through 297 days of mandatory training each year, even though there are only 256 days available. A US Army War College study explains, “In the rush by higher headquarters to incorporate every good idea into training, the total number of training days required by all mandatory training directives literally exceeds the number of training days available.” Yet commanders all report being compliant; noncompliance is not an option.

  How can this be?

  Retired army officers Leonard Wong and Stephen Gerras published a fascinating study titled Lying to Ourselves: Dishonesty in the Army Profession (Wong and Gerras 2015). Although the army officers interviewed wouldn’t use the term “lie,” they admitted that they routinely met required standards by getting “creative,” by having one soldier take the online training repeatedly for everyone in the squad, by filling out forms and reports without actually doing the work. A term frequently used was, “we pencil whipped it.”

  Curiously, senior leadership seems okay with it. When one officer was asked if he believed the units under his command were submitting false data, he replied, “Sure, I used to do it when I was down there.”

  While fibbing on routine checklists may seem harmless or even amusing, it’s less funny to hear it happens on the battlefield. Officers described falsifying inventory shortages to get additional equipment, falsifying poll site inspections during the Iraqi elections, falsifying readiness assessments of partner forces, and even losing track of large amounts of money intended to support local populations.

  Wong and Gerras maintain that despite rampant dishonesty, military officers firmly cling to their self-identity as honest people who highly value integrity. Officers interviewed rationalized their dishonest actions by saying that nobody ever falsifies anything that’s important. The question they had about so many of the demands put on them was, “You need this for why?”

  Today army officers play this game from the top to the bottom. Rules are implemented in response to some crisis or demands from Congress or at the whim of a single general. Because it’s impossible to comply with them all, soldiers “pencil whip” the information and move on. Those who collect the info pass the information up the chain of command knowing it’s of questionable validity, and also believing it to be of no consequence.

  The danger among troops—and in any organization—is that ethics can become a slippery slope. Every signature certifying something that isn’t true, every checklist that is completed on paper only, every compliance claim that is false can cause them to become, in the words of the authors, “ethically numb.” Bending the rules on the small things can lead over time to lying about bigger things: mistakes, actions, or achievements.

  LIVING IN A “NO RULES” ORGANIZATION

  Rules are a way for senior managers to micromanage from afar. Inevitably they disempower workers in the spirit of protecting against very low chances of risk or loss. Innovation, creativity, and risk-taking plunge. Morale drops as there is no sense of ownership; nobody likes to be micromanaged. Your ultimate goal is that your people make good decisions. To accomplish that, they must feel ownership of and accountability for those decisions. As individuals in your company think through decisions and prepare to answer for them, they develop that ownership mentality.

  What you need is a framework that empowers your staff to make good decisions. So, ironically I’m offering up some rules that’ll make the rest of the rules superfluous. Here are my “rule replacements.”

  RULE REPLACEMENT #1: HIRE THE RIGHT PEOPLE

  Netflix is well known as one of the great success stories of the last two decades. Launched as a DVD-by-mail company in 1998, it now has thirty-five hundred employees and generates over $7 billion a year from eighty-one million subscribers to their online streaming service. Of course, the company doesn’t just stream content—it also produces your favorite series like Stranger Things, Orange Is the New Black, and The Crown.

  So what’s the key to Netflix’s sustained success? How does a company grow that fast, change business models so many times, and maintain a fanatical customer base?

  Remember, rules are supposed to protect quality and consistency and profits as a company grows. Yet at Netflix, it’s not the rules management put into place that account for their success, it’s the absence of rules.

  If you’re familiar with the technology start-up scene, you’ve probably heard of the “Netflix Culture Deck” and its legendary influence. Facebook COO Sheryl Sandberg called this simple PowerPoint presentation “one of the most important documents to come out of Silicon Valley,” and it’s been viewed millions of times across the globe (Hass 2013).

  In the famous presentation, Netflix leaders explain the traditional logic for rules and the short-term benefits of reducing mistakes. But the deck goes on to teach that over time, a process-focused culture drives out the high-performing employees that companies aim to keep. When the market shifts quickly due to new technology, competitors, or business models, rule-driven companies can’t keep up and lose customers to competitors who adapt. In such an environment, slow-moving, rule-oriented companies grind “painfully into irrelevance” (Hastings 2009).

  Netflix sums up its culture—and its competitive advantage—on slide one: Freedom and Responsibil
ity.

  Netflix asserts that a business should focus specifically on two things:

  Invest in hiring high-performance employees.

  Build and maintain a culture that rewards high performers and weeds out continuous, unimproved low performers.

  Netflix leaders believe that responsible people—the people every company wants to hire—are not only worthy of freedom, they thrive on it. Creating an environment where these individuals are not inhibited by myriad rules allows them to become the best version of themselves.

  Taking this belief to its literal meaning has spawned a series of human resource innovations that were previously unheard of. For example, consider the Netflix “unlimited vacation policy.” Instead of establishing a formally tracked vacation policy, Netflix decided to allow salaried employees to take as much vacation time as they liked. (Hourly workers were given a more structured policy.) Certain guidelines were provided; for example, those working in accounting and finance were asked to be in the office during the beginning or end of a quarter. Additionally, anyone who wanted more than thirty days off in a row should meet with HR.

  Netflix also resisted the urge to institute any type of formal travel and expense policy. According to former Netflix chief talent officer Patty McCord, “we decided to simply require adult-like behavior…The company’s expense policy is five words long: ‘Act in Netflix’s best interests’ ” (McCord 2014). Employees were expected to spend company money as if it were their own, looking for opportunities to save when possible.