Complex Times, Simples Rules

Quentin Prideaux

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Applying simple rules to organizations

Organizations may aspire to the ant colony's efficiency, but will obviously operate somewhat differently. At a higher cognitive level, where the human ability to reason kicks in, rules like "follow the strongest scent trail" are not able to compete with "That pizza smells good but it isn’t time for dinner and I already blew my diet at lunch." The fact that we don't mindlessly follow rules to the letter is not only part of what makes us human, but part of what makes us successful. Ants die when their rules don’t work, and their rules do fail them before long. In fact, "…most ants survive only a few weeks before succumbing to some situation not covered by (their) rules." (‘Surfing the Edge of Chaos’). Furthermore, while an ant colony is very good at finding food, it has no ability to perform complex tasks that other animals can master, such as the flocking of birds or schooling of fish, let alone master such strategic actions as moving the ant colony to escape a new parking lot.

Simple rules in an organization therefore work at a much higher level than an instruction to ‘follow the scent trail’. These rules relate directly to an organization’s core competence and strategic positioning. They articulate the way that the organization chooses between reasonable alternatives. Examples of reasonable alternatives include: the decision to do all product development in-house, versus buying in designs; the decision to manage on a need-to-know basis versus a right-to-know basis; the decision to allow business units to compete for customers and resources, versus coordinating an enterprise-wide plan. These are the conscious and intrinsic choices that differentiate one organization from others. So the ideal rule set, based on the organization’s implicit principles and rules, is written above the level of process metrics, but below the level of a "mission statement."

The advantage of having rules written at this intermediate level is clear. Decisions are resolved at the level where the need is experienced. This means there’s less information to pass up and down the chain of command, reaction time is faster, and fewer errors are introduced. Like an ant following a scent trail, no other input, output, discussion, or approval is required. Unlike "ant rules," the right organization rules are flexible enough to allow creativity and innovation in their implementation, and prioritization of conflicting demands. Furthermore, issues that fall outside the scope of the simple rules now stand out clearly from background noise and these can be given the attention that they deserve.

Developing the Right Simple Rules

Writing simple rules not only requires an in-depth understanding of how the organization does business, but puts pressure on the organization to validate its strategy. Attempting to construct a set of rules often makes explicit any inconsistencies in the way an organization currently operates. Resolving such inconsistencies takes work, analysis, negotiation, and education. Through this rule-writing process, many efforts that had previously been at cross-purposes can be aligned, clearing out numerous unresolved impasses in the process.

Simple rules must pass the following tests:

• Rules are arguable in the alternative. If you consider writing the principle that the business will NOT respect employees, or will NOT deliver shareholder value it is immediately apparent that these do not represent reasonable alternatives. Platitudes have no value as rules.
  
• Rules are timeless. While there is some "stretch" in the rules, they should express today’s strategic differentiation, not some future target with a date on it. Significant strategic changes provide cause for revisiting rules. Otherwise they are updated on a 2-3 year cycle and in this way they will always reflect ‘the way we do things around here’.
  
• Rules are written as a self-reinforcing set, providing a "fail-safe" mechanism to guard against implementing any single principle to its own extreme. Using the rules as a set mitigates against any tendency toward decisions that are detrimental to the business as a whole. A simple grid, called a ‘Manser Matrix,’ can be used to test important decisions. This grid weighs each alternative by measuring the support it gets from the complete set of rules.
  
• Rules cover all important dimensions of the business, including areas such as organizational structure, profit/non-profit status, customers, employees, product development, geography, partnerships, flexibility, positioning, learning, and others. Obviously, only some areas will apply for any given business unit.
  
• The implications of the rules are established and understood at the outset. There is no point agreeing that "All divisions will help each other to solve customer problems" if divisions are measured only on their own results. Such a rule is merely a wish unless and until the many implications of implementing it are understood and agreed.
  
• Rules must be agreed in every word and every detail. If agreement cannot be reached on any individual point then this must be resolved either by deciding that the point does not represent a strategically defining issue, or by declaring that a breakdown has occurred and that separate action is required to resolve it. Once resolved the rule can be written.
  
• A useable set of rules will normally number between eight and twelve, with sub-rules for each providing greater definition of the central points. Providing these guidelines are followed, we have found that this number is sufficient even for very large organizations. While a large number of statements will be generated at the outset, many will be found to be goals, undifferentiated statements of fact, un-representative of the organization, or metrics based on other existing rules.