Six Simple Rules

by Yves Morieux

  Rules in the workplace can take many different forms:

  A process definition specifies that the way to achieve X is by doing Y followed by Z.

  A performance target becomes a priority in every situation, even when the target doesn’t really make sense.

  A template specifies the only way to convey a certain type of information.

  Monitoring scorecards specify how activity is recorded.

  A computerized job request is a rule on interaction.

  An internal contract, such as a service-level agreement (SLA) between support services and internal customers, details what mechanisms constitute minimum (and very often, therefore, maximum) service.

  The overreliance on rules reflects a misunderstanding of how rules really function. It is not what the rule decrees that matters. It is the effect the rule has on the actions and interactions of the people involved—how the rule affects the context of goals, resources, and constraints to which people adjust their behaviors.

  We have already discussed how rules are especially problematic for dealing with contradictory performance requirements. Rules cannot accommodate contradictions, but complexity is full of them. The imposition of formal guidelines meant to specify and control behaviors inevitably leads to one of two dead ends. First, the management team will create guidelines for each performance requirement, but, because the requirements are contradictory, the instructions will end up in conflict with one another, leading to confusion and often considerable stress (dealing with a complex problem is one thing; working with contradictory orders for how to go about the task is quite another).

  Alternatively, the management team will create a rule that specifies the trade-offs between contradictory performance requirements. But a trade-off specified in advance will always be at some distance from the situation-specific optimum that can be found in the here and now. That distance was not necessarily an issue when customers had few options to choose from. But in the current business environment where choices abound, the sum of such distances—mounting up day after day, situation after situation—is what separates winners from losers. No set of instructions can ever be complete, current, or flexible enough to bend around the numerous, changing, and contradictory needs that arise in the workplace. Only when people use their judgment and the information at their disposal can they deal with the contradictions contained in complex situations.

  But there is another problem with an overreliance on procedural rules if managers are to function as integrators. Beyond a certain threshold (which can only be determined by the specific work context), adding new rules also decreases management’s control over the people to whom the rules apply. Indeed, it’s no coincidence that one of the most effective practices of labor unions is the so-called “work to rule” action in which, instead of going on strike, workers instead adhere strictly to every rule, to the degree that no real work can get done.

  No matter how carefully a rule is devised, it will always require some judgment and interpretation in execution. But by definition, there can be no rule about how to correctly interpret a rule. People need to determine the spirit of the rule beyond its letter. They must use their intelligence within each situation, instead of just checking the box.1 Therefore, the more rules there are, the more managers depend on the good will of the team members in interpreting the rules. The real issue with too many rules is not that they constrain freedom, but that they create freedom in a system designed to avoid it—in a system thus unable to orient people’s freedom so that it serves the ultimate goals of the organization.

  As the rules pile up and apply to more practices, managers can make less of a difference for their teams. They do not have the power to make or change the rules, because rule-making power is typically held at the top of the organization or by authoritative bodies, such as regulators or unions. The result is, again, an inverted hierarchy. Managers increasingly depend on their teams, and teams depend less and less on their managers.

  This counterintuitive effect of rules explains why requests for more rules often come from the team members, rather than from their manager. Rules protect teams from the hierarchy by diminishing managers’ room to maneuver. Midlevel and field managers, in particular, get squeezed between the top-down demand for control and the bottom-up desire for protection. Gradually, people at both the top and the bottom of the organization become distrustful of the managers in the middle who seem unable to ensure effective performance, despite the abundance of rules that supposedly gives them power to control but, in fact, takes it away from them.

  So, to reinforce your managers as effective integrators, make sure they are bound by fewer rules. That way, they will be free to use their judgment in setting targets and articulating ambitions, in defining success criteria, and in evaluating and rewarding performance. The same is true of a company as it grows. The bigger a company gets, the greater its need for integrators and, therefore, the more it needs to remove rather than add rules. But companies more frequently do the opposite. (See the sidebar “The Benefits of Reinforcing Integrators.”)

  KEEP IN MIND

  The Benefits of Reinforcing Integrators

  More direct cooperation to optimize contradictory performance requirements.

  Less complicatedness thanks to the removal of matrix dimensions and hierarchical layers.

  Less waste and fewer mistakes that result from escalating decisions.

  Decisions made as close as possible to where the action takes place and where information is richest.

  Rely on Judgment over Metrics

  Another counterproductive effect of the hard approach is that it leads managers to rely mainly on measurement to know whom they must reward. Careful measurement supposedly serves accuracy, objectivity, and thus performance. But too much reliance on metrics to assess and reward individual performance can actually become a detriment to performance because it impedes managers’ ability to act as integrators.

  When all the people involved in a task cooperate, their individual efforts combine instead of being simply additive. This compounding of effort makes a great difference to team performance. When people cooperate in this way, however, some portion of their individual effort manifests itself only in the achievements of others. It becomes impossible to measure who contributed what to the overall performance of the group.2 In a 4 × 100 meter relay race, for example, the victorious team is not always the one that has the fastest sprinters. The runners also have to skillfully pass the baton. To do so, they must divert energy to their arms to properly make the pass and to their voices to effectively communicate—rather than putting all their energy into their legs for maximum speed. Consider the 2003 World Athletics Championships. Of the eight teams competing in the women’s 4 × 100 meter relay final, the United States was heavily favored yet the French team won. Based on the individual records of its runners, the US team should have been the fastest by far. The sum of the 100-meter personal best performances of the four US runners, compared to that of the French runners, gave the US team an edge of as much as 3.2 meters. And, considering 2003 performances only, the US margin over their French rivals was 6.4 meters. According to Christine Arron, who ran the final leg for the French, the win was achieved through exceptional cooperation.3 In this kind of activity, there is no way to precisely measure individual performance. Did one sprinter run a particularly fast individual leg? Or, was her exceptional performance a consequence of the previous sprinter transferring the baton especially smoothly? No metric will provide the answer. The energy in one runner’s arm in passing the baton makes a difference in the speed of the next runner’s legs—but how much? (See the sidebar “Cooperation Cannot Be Measured.”)

  To cooperate always involves a decision about how to allocate your efforts, time, and energy. That decision always carries some degree of personal risk. You agree to sacrifice the ultimate protection granted by your measurable performance in order to enhance in a disproportionate way the performance of others and the overall result
s.

  KEEP IN MIND

  Cooperation Cannot Be Measured

  What you can measure:

  Overall group output (revenues, profit, return on investment, speed to market, and so on).

  Some individual inputs (efficiency of units in tasks independent of others).

  What you can’t accurately measure:

  The contribution of one individual or unit to the effectiveness of others (the contribution of procurement to the effectiveness of manufacturing, the contribution of front offices to the effectiveness of back offices, and so on).

  Therefore:

  Don’t measure behavior; measure results.

  Use judgment rather than measurements to evaluate the degree of cooperation.

  When companies only use individual KPIs to reward performance, people put all their energy into the individual output that can be measured, at the expense of cooperation and group results. But collective goals don’t do the trick either. They are necessary, but insufficient. Unless cooperation also makes a difference to the individual, he or she will stop taking the risk to cooperate with others. (We will come back to this issue in chapter 4 when we discuss rich objectives.)

  Yes, companies need measurement, and they should measure whatever is useful and measurable to monitor performance. But in order to foster cooperation, they must move beyond KPIs and other formal systems for appraisal. Since cooperation cannot be measured, rewarding people for their cooperation can only come through the personal recognition of the manager. Such recognition is the product, not of metrics, but of observation and judgment. As the word suggests, recognition is about cognition, knowing what people do and understanding what is really going on.

  This imperative sheds some fresh light on the necessary linkages between our first two simple rules. Many discussions about leadership emphasize the importance of managerial presence in the workplace. By now, you should realize that this presence is not some empty slogan or abstract philosophical stance. It is an extremely practical issue: managers need to be present to observe and gather, through conversation and interactions, the nonmeasurable data that reveals the content and result of cooperation. This is what social sciences demonstrate and what great managers do. Sir Alex Ferguson, the outstanding former manager of Manchester United, the English football (soccer) club, put it this way: “I don’t think many people fully understand the value of observing. I came to see observation as a critical part of my management skills.”4 In the financial industry, catastrophes could have been avoided if some managers had applied the observation principle. This kind of in-depth knowledge of the work context has nothing to do with what some call “micromanagement.” The goal is not to be constantly telling people what to do but, rather, to use this in-depth knowledge to continually shape and reshape the work context to foster cooperation. Only when they do so can managers function effectively as integrators.

  SUMMARY OF SIMPLE RULE TWO

  Reinforce integrators by looking at those directly involved in the work, giving them power and interest to foster cooperation in dealing with complexity instead of resorting to the paraphernalia of overarching hierarchies, overlays, dedicated interfaces, balanced scorecards, or coordination procedures.

  Among operational units, find those that can play the role of integrators among peer units, because of some particular interest or power.

  Use feelings to identify candidates: feelings provide important clues for the analysis, because they are symptoms rather than causes.

  Among managerial layers, remove those who cannot add value and reinforce others as integrators by eliminating some rules and relying on observation and judgment rather than metrics whenever cooperation is involved.

  3

  Simple Rule Three

  Increase the Total Quantity of Power

  The more an organization needs cooperation to address complexity, the more power you need to have in the organization. In the previous chapter, we discussed the importance of power in reinforcing the role of the integrator, for instance, the empowerment of InterLodge’s receptionists and the vesting of interest in the MobiliTele transceiver unit. Now, we must draw a distinction between simply redistributing power (as was the case at InterLodge) and actually increasing the total quantity of power in the organization. In this chapter, we will discuss how to increase the total quantity of power available and why it is so important in today’s business environment.

  You will learn:

  How to understand power. Power is not a direct function of position, individual skills, or authority. Rather, it derives from the possibility for one person to make a difference on issues that matter to someone else.

  How to create new sources of power. By increasing the amount of power available in the organization, more people will take the risk to cooperate.

  How to use power skillfully for better strategy, leadership, and organizational design, thus achieving performance levels beyond the reach of traditional solutions.

  We will illustrate these lessons through the story of a company we call GrandeMart, which solved a performance problem by giving local store managers a new source of power.

  What Power Is—and What It Isn’t

  Most managers understand that power is an important part of organizational life. But their understanding is often corrupted by the assumptions embedded in the hard and soft approaches. The hard approach assumes that power is an automatic consequence of position or formal authority. This belief is reflected in comments such as “the higher you are on the org chart, the more power you have,” or “if you have the authority, you automatically have the power,” or “if you have the knowledge, you have the power.”

  The soft approach, by contrast, tends to focus on leadership style or personal traits such as charisma. This view is reflected in statements such as “she is a tremendously powerful person” or “he has a presence that projects power.”

  Power is none of these things. Overly complicated organizations have managers in all kinds of positions that, according to the org chart, have authority, but who in reality have little or no power to make things happen. (See the sidebar “Three Myths about Power.”)

  These misunderstandings about power did not do much harm when relatively few interactions were required to get things done, say, on the traditional assembly line. But the more that performance requires multiple interactions among many different organizational units, the more these common misunderstandings about power become costly for the company and its people.

  KEEP IN MIND

  Three Myths about Power

  Power is an attribute of position. This statement is not true; reporting lines—whether full, dotted, or bold—are just formal conventions without any automatic effect.

  Authority is equivalent to power. This statement is also not true; authority provides the legitimacy to exercise power, not power itself.

  Power is an attribute of individuals and their leadership style. Again, this statement is not true; personal attributes or style may be ways to exercise power but don’t determine whether an individual has power in the first place.

  What is power? Power is the possibility for one person to make a difference on issues—or stakes—that matter to someone else. Because A can make a difference on issues that matter to B, then B will do things that he or she would not have done without A’s intervention. Power always exists, one way or another, either helping or hindering good outcomes. It helps mobilize people, either directly or indirectly, toward a specific target or a goal. Look to the places in an organization where people are doing things that if, left to their own devices, they probably would not be doing. It is a sure bet that someone is exercising power over them.

  Another way of putting it is that power comes from having control over uncertainties that are relevant to others and to the organization. The control of uncertainties determines the terms of exchange between the individual and the organization. The greater the uncertainties controlled by one actor for other organization members,
the better that actor can negotiate his or her participation and the more he or she will get in return from the organization. This insight is a major contribution from the strategic analysis method developed by Michel Crozier and Erhard Friedberg.1 Think back to the transceiver engineers at MobiliTele. Because they were able to set de facto specifications for the transceiver and the other components of the system—determining how much rework engineers in the other units would have to do—they controlled a key uncertainty for those units. As a result, the transceiver engineers could organize around their own priorities, and other units had to adjust and bear the consequences.

  As this example suggests, power exists only in the relations between people; it is an imbalanced exchange of behaviors. Despite popular belief, power is not particularly related to an imbalance of information available to the parties. Instead, the asymmetry relates to the terms of exchange in a relationship: the reciprocal possibilities of action. The imbalance—thus, the power—comes from the fact that A can make a greater difference regarding stakes that matter to B than the reverse. On another issue or as the stakes change, though, B may have power over A. Power is an attribute neither of position nor of people’s personality traits. Rather, it stems from a relationship tied to a situation.

  Power has significant implications for how behaviors adjust to each other. The people with the most power bear the least adjustment cost; those with the least power bear the most. The powerless will adjust their behavior to the powerful. Depending on how these behaviors adjust and combine with each other, the results will be more or less beneficial for performance. If what is ideal for the powerful deviates from the company’s overall goals, the power balance will not be beneficial to the company. That was the case with the powerful transceiver unit at MobiliTele; what was ideal for the unit had a negative impact on the company’s ability to bring superior products to market quickly.