Effectiveness of Rules and Regulations in Achieving an Organization’s Mission

What’s the importance of rules and regulations in an organization? Except for rules and regulations mandating ethical and legal behavior (a code of ethics), why do so many rules and regulations exist in business and other entities? How effective are they to achieving the entities vision and mission?
Several companies have many rules because they don’t trust their employees. Trust leads to empowerment which in turn leads to value creation for all stakeholders.

Trust begins with hiring the right people. A Chief People Officer could be the perfect catalyst to help an organization remove silly rules and regulations and free employees to be creative and provide increasing value to the business. I like Yves Morieux and Peter Tollman’s Six Simple Rules: How to Manage Complexity without Getting Complicated,1  which I believe could benefit every organization:

Minimize Rules and Regulations: Six Simple Rules

  1. Understand what people do and why they do it: Observe and understand the context to learn whether what people do is needed, and how you (the manager) might help them improve.
  2. Reinforce integrators: Folks involved directly cooperating and encouraging others are integrators. Organizations must reinforce these employees to produce a company with less hierarchy, fewer rules and greater empowerment for personal judgement–less hierarchal levels mean more dependency on one another. “It’s 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.”
  3. Increase the total quantity of power: Power reflects how a person can make a difference on issues that matter to someone else. More people on the frontlines need the authority to decide. Thus, eliminate rules and hierarchy to create more power, more cooperation, and reinforce integrators. Organizations should develop clear, common goals, but they must allow people closest to the delivery of services to determine how best to deliver them.
  4. Increase reciprocity: Create conditions where one person’s success depends on another person’s success.
  5. Extend the shadow of the future: Link people’s performance to the endpoint, that future state, not only the next quarter. Get folks to understand the impact of their actions on others by “walking a mile in the other’s shoes.”
  6. Reward those who cooperate: Focus on how to deliver results and those who help to produce them. Reward helpfulness thus increasing organizational resilience. Managers should ask three things of their employees in one-on-one talks: (1) What will you do to improve performance? (2) What are the personal risks to you in setting this target? (3) How can I help you get the cooperation you need from others to mitigate the risk?

Rule number one is evident, crucial, but ignored many times. However, together these six simple rules focus on doing the right thing in the best interest of the business. They entail encouraging cooperation, fostering long-term behavior, and empowering people to work together to create value for the firm. Several case studies in Yves Morieux and Peter Tollman’s book show why and how these simple rules benefit employees and businesses.

Dumb Rules And Regulations Stifle Creativity

Brazilian CEO Ricardo Semlar believes in people so much he abolished all rules in his family owned business, empowered employees, and achieved a happier and more productive workforce.2 His experiment continues successfully today.3

Former chief talent officer at Netflix, Patty McCord tells us about the major transformation at Netflix:4

Over the years we learned that if we asked people to rely on logic and common sense instead of formal policies, most of the time we would get better results, and at a lower cost. …If you are careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. … Most companies spend endless time and money writing and enforcing HR policies to deal with problems the other 3% might cause. Instead, we tried really hard not to hire those people, and we let them go if it turned out we’d made a hiring mistake.

Zappos5 started similar approaches to self-management and are experiencing teething problems. Self-management and zero rules will work only with the right people and appropriate culture in place. Each situation is different; treat employees well and model value creation to them.

Let’s keep things simple. Hire people of character. Trust, train, and empowered them and let them use their talent to create value for all stakeholders. As the late Steve jobs famously said: “That’s been one of my mantras — focus and simplicity. Simple can be harder than complex; you have to work hard to get your thinking clean to make it simple.”

(c) 2017 Michel A Bell

1 Morieux, Yves, and Tollman, Peter, Six Simple Rules: How to Manage Complexity without Getting Complicated, Boston, MA: Harvard Business Review Press, 2014

2 Semler, Ricardo, Maverick: The Success Story behind the World’s Most Unusual Workplace, New York, NY: Warner Books, 1993

Semler, Ricardo, Speaker | TED.com, accessed June 12, 2017. https://www.ted.com/speakers/ricardo_semler

McCord, Patty, and Ram Charan, How Netflix Reinvented HR, Harvard Business Review, January-February 2014, accessed June 12, 2017, https://hbr.org/2014/01/how-netflix-reinvented-hr

Reingold, Jennifer, Fortune.com, How a Radical Shift Left Zappos Reeling, accessed June 12, 2017. http://fortune.com/zappos-tony-hsieh-holacracy/

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Michel A. Bell

Michel A. Bell is a former senior business executive, author of six books (Business Simplified released in 2018), speaker, and adjunct professor of business administration at Briercrest College and Seminary (Briercrest). Michel graduated from Massachuetts Institute of Technology with a masters of science in management. As well, Briercrest awarded him an honorary doctor of business administration. He is founder and president of Managing God's Money, a private mission devoted to teaching biblical stewardship of time, talent, money and other resources. Visit Managing God's Money.

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