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Management without rules

Friday, 29 June 2012

By chance, I caught the last half of one of Niall Ferguson’s Reeth Lectures whilst in the car earlier this week, and was sorely disappointed to have missed the first half - thank goodness for the modern miracle of podcasting! Today’s lecture was entitled “The Darwinian Economy”, and was summarised as an argument in favour of simple regulations supported by significant penalties for transgressions.

Whilst the subject of the talk was the banking sector, we take a similar view with regard to what constitutes the most effective organisational approaches and management styles.

The essential rationale behind the argument is that, if you attempt to control behaviour through regulation, you will struggle, if not fail. The scale of the regulations needed constantly expands, constantly becomes more and more complex; in the meantime, the potential for genuine mistakes (as well as deliberate contraventions) expands in line with the growth and complexity of the control mechanisms.

The approach of “management by rules” suffers similar consequences. As time passes, the quantity of rules or regulations will grow; new circumstances will demand new policies and procedures to be put in place; and governance simply becomes more and more complex. This makes it increasingly difficult for “management” to keep on top of things, but also makes it increasingly difficult for even the most willing employee to conform.

In addition, once this spiral has started, it can be tough to stop it. The behaviour of people in an organisation becomes conditioned to the circumstances, and simply removing all regulation and “starting again” is a risky process. It’s far, far better to start in the right way - as Stephen Covey put it, start with the end in mind. However, we are all where we are, so here are five simple steps to take so that you can audit the approach that your organisation takes, and make helpful, if initially scary, changes.

Step 1 - Check the rules you have

What rules are currently in place? How detailed are they? How well are they known, how well are they “obeyed” and how effective are they in delivering great results? In most organisations of size, you’ll probably find a terrifying number of rules, and if you dig deeply, there will be examples out there that you didn’t even know existed. If the rule book is too big and complex, it simply won’t work - it won’t do what it was intended to do, but it will undermine initiative and motivation in the organisation.

Step 2 - Track the inception of rules

All rules start somewhere. Someone experienced something, and decided that the best response was to regulate against it. If you can understand what causes rules to be imposed, you can reduce the likelihood of them appearing. If you can stop cutting your finger in the first place, you don’t need a big supply of sticking plasters.

Step 3 - Explore alternatives to new rules

Once you know the rules that exist, and why they were brought in, you’re in a great position to explore alternatives. If the “wrong thing” is being done, is it a lack of skill, gaps in knowledge, poor support structures, or simply the wrong people in the wrong jobs? Root cause analysis will help to defeat the disease rather than the symptoms.

Step 4 - Understand the risks

Ripping up the rulebook, if you’re that way inclined, can be a very cathartic experience - but it’s risky. Steps 1-3 will have created a rich understanding of the existing situation; now is the time to test and trial the more positive alternatives. Remember that people have been conditioned to (subconsciously) behave in a certain way, and that the behaviour change needed is not an overnight thing.

Step 5 - Develop rewards

You want people to do the right thing because it is the right thing, not because the management rule book says so. So encourage and reward the right behaviour, and make clear the consequences for the wrong behaviour.

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What rules and regulations exist in your organisation? Why are they there, and what does it say about the way you and your people work?

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