Rules vs Values
In a presentation I attended in 2017, the speaker advocated for scripting behaviors and managing by ‘rules’ for employees in our companies. Based on the testimonials and stated results, it was a convincing presentation. The speaker cited many examples of successful companies that rigorously commit to rules-based scripting, direct instruction, and behavior reinforcement programs for their employees. I labeled an organization’s culture that operates in this manner as ‘inducive’ – as these behaviors are ‘induced’ by management from rules, instruction, or the coercion of reinforcement. Managers that facilitate behaviors through rules, instruction, or coercion would be ‘inducive’ managers.
I was conflicted by the presentation because my own experience was very different. I believed that inexorably linking a robust set of core values to an organization’s higher purpose – and then living these values to the fullest, largely supplanted the need for rules-based scripting, instruction, and behavior reinforcement programs. That by effectively instilling and communicating values, employees could feel more liberated – having more emotional and behavioral freedom within this set of values. Where rules exist, they should be mostly limited to necessary prohibitions rather than instruction or mandates. A reduction of ‘induced’ constraints on behaviors would improve motivation and creativity, resulting in better engagement and stable long-term employment. I labeled an organization’s culture that operates in this manner as ‘deducive’ – as these behaviors are ‘deduced’ by employees from internal or external stimuli rather than ‘induced’ by management from rules-based instruction. Managers that allow employees the freedom to choose their behaviors within a framework of values are ‘deducive’ managers.
Perhaps an effective way to understand the difference between these management types is that in an inducive culture, behaviors are externally motivated or ‘instructed.’ In a deducive culture, behaviors are internally motivated or ‘interpreted.’ Inducive management is ‘facilitated’ verbally. Deducive management is ‘understood’ conceptually. Employment cultures that are predominantly ‘inducive’ have more potential from inception to be orderly and well organized. Those that are mostly ‘deducive’ have more potential to be creative and to self-organize over time. The orderly, inducive culture will often be stagnant, unimaginative, and disengaged – but has little risk of descent into chaos. The creative, deducive culture will often be dynamic, imaginative, and deeply engaged – but is at a higher risk of being chaotic.
The two perspectives were a difficult reconciliation for me. The collective behavior of an organization broadly defines a company’s brand. For the collective behavior of an organization to be consistent with brand objectives is paramount. After attending these presentations, my contemplation was, ‘which is the better approach to achieve behaviors that are consistent with brand objectives?’ Is it to have management instructing behaviors from clearly stated rules? – or is it to have effectively communicated values from which employees conceptualize behaviors.
We know that when we instill values, we affect behaviors. We also know that when we impose rules, we affect behaviors. Rules and values are not separate and apart and are not ‘one or the other.’ More recent science has demonstrated that when we affect behaviors by imposing rules, we also affect values. And conversely, when we instill values, we affect rules. The issue is whether, in our role as leaders, it is better for our organizations to effectively instill values and allow behaviors to emerge as a byproduct of those values, or whether it is better to directly script and instruct behaviors around a set of stated rules.
I am confident that the general answer is that it is better to instill values and allow behaviors to emerge. But it is a complex and intricate relationship between instilling values and imposing rules, and painting with too broad of a brush could prove counterproductive.
By effectively instilling a set of core values and linking these values to a higher purpose, and allowing employees the freedom to choose behaviors consistent with those values, we can achieve higher morale and engagement and set the conditions for more energy and creativity. Further, it may be that providing these freedoms for employees is a moral imperative for providing higher quality, more rewarding employment. However, this can only work if we effectively discover and link our values to a stated ‘higher’ or ‘core’ purpose and communicate and embrace them throughout the organization.
When employees of an organization have the emotional and cognitive freedoms ‘to be themselves’ in the workplace, we believe they are more engaged. The organization is more productive and more durable. At the same time, these freedoms pose a risk to the organization. Our quest is to optimize the cultural use of these freedoms while at the same time minimizing the associated risk. Looking back on my company, I can see the benefit of this optimization and risk mitigation. This benefit was a natural evolution as the company matured, rather than a strategy from the onset. I grew to understand that there was great benefit in letting employees ‘be themselves’ in the workplace. The problem was how to allow for this while at the same time minimizing the associated risk and fostering behaviors that are consistent with brand objectives. For us, the solution was to have clearly stated values, and an effectively communicated higher or core purpose – and to profoundly understand the application of rule ‘installation’ relative to value ‘instillation.’ The company could have benefited from an earlier understanding of the paradigm.
In general terms, I think perhaps the balance between rules and values was most effectively expressed by Danah Zohar in her book ‘Quantum Leadership.’ Zohar claims that the best and most productive place for an organization is “on the edge of chaos.” (It is, however, the most dangerous place for an organization because there lies the precipice – and going over is catastrophic). An organization moves from order to chaos as an outgrowth of ‘individuality’ – the antithesis of rules-based instruction. Rob Goffee and Gareth Jones, in their book ‘Why Should Anyone Work Here?’, state the importance of authenticity for organizations. Authenticity is an outgrowth of emergent self-organization. Goffee and Jones state that allowing “employees to be themselves” in the workplace is essential to organizational authenticity. From both of these works, we can recognize the importance of individuality in the workplace and that an inducive, rules-based workplace that quashes individuality would have its disadvantages.
In the big picture and using the broadest brush, we state that a clear set of effectively communicated and cascaded values throughout the organization is an effective countermeasure to the risks that result from individuality and self-organization. These risks are endemic to a move from order to chaos – and we depend on these values to keep the chaos in check. And the closer we can allow the organization to move toward the edge of chaos, the more we benefit from individuality – but at the same time, the more dependent we are on our values as a counter-force to protect against a fall over the chaotic precipice. Perhaps the precipice is viewed as the inflection point at which emergent self-organization ceases, and a devolvement into disorganizing chaos begins. That inflection point moves further from ‘order’ as a function of an effective cascading of values within the organization. But this is likely an oversimplification.
An inducive organization that is entirely rules-based will remain firmly entrenched at the ‘order’ end of the continuum between order and chaos. This rules-based culture denies the organization the benefits of creativity that result from the individual freedoms that provide for a process of emergent self-organization. These benefits include morale, engagement, and, most importantly, collaborative problem solving that is an outgrowth of bonding and connection between employees. Here, the preclusion of collaboration works against the adage that “none of us is as smart as all of us.” Conversely, an organization without rules (as prohibitions) or without effectively communicated values will, over time, move into chaos and take the fatal fall off the precipice.
The communication of core values is the priority. Applying these values and their integration with rules allows moving toward chaos without falling over the precipice. As Danah Zohar points out, this edge of chaos is the place where organizations become supercharged. This is the place where they gain a competitive advantage.
Exceptions
Although it would be tempting to proclaim that a culture across an organization of behaviors deduced from company values is advantageous compared to a culture of behaviors induced by rules, this would be an oversimplification and too broad of a brush. There are areas of behavior in an organization that require clear rules and training. We call the rules that apply to these behaviors ‘core rules.’ They are defined as rules that are independent of values – they must exist and stand on their own. We cannot leave the areas to which core rules apply to discretion or any level of interpretation – and they do not require the validation of core values (in these areas, we supplant core values with generally understood universal or societal values). These rules would disproportionately be prohibitions. Examples would be human resource policy applied to the physical and emotional ‘safety and well-being’ of employees and regulatory, legal, and fiduciary compliance areas. Areas of gross misconduct should be clearly defined, and there should be a clear statement of rules that help define the violations and offenses that may result in employment termination.
Additionally, there is the question of whether the relative effectiveness of values-based deducive management is variable based on the job position within the organization – and if it is, how we can account for this variability in its application. In evaluating potential variability, the work of Elliott Jaques comes to mind.
Stratification and Hierarchies
I was introduced to Elliott Jaques’ work and Stratified Systems Theory in a peer-advisory seminar and workshop in 2016. In Dr. Jaques’ Stratified Systems Theory, positions in an organization fall into different ‘strata’ based on the time-span required for peak efficiency. Employees of a company have variable time-horizon levels – the time-span in which an employee is most productive. Time-horizon is, in essence, a measure of the ability to process and manage complexity. Employees at lower-level strata should have a shorter peak time-horizon for work than employees at higher-level strata. For example, an employee in a front-line staff or supervisory position may have a peak time horizon from 0-3 months. This time-horizon would align with a ‘strata 1’ position within an organization. By comparison, a CEO or General Manager may have a peak time-horizon of 5-10 years. This time-horizon would align with a ‘strata 5’ position within an organization.
Dr. Jaques believed that aligning the organizational position with the employee’s peak time-horizon is essential to optimal performance, engagement, workplace and career satisfaction – and this alignment additionally has general quality of life and emotional well-being implications. (It is worth noting that Dr. Jaques was a psychologist and a psychoanalyst). In this context, Dr. Jaques claimed a moral high ground for stratification.
For me, and based only on my values, the notion of a moral high-ground was not without conflict. While I believe that hierarchies are valuable (if not essential) and that there is a legitimate moral argument to be made for the benefits of their contribution to alignment, I have difficulty with ‘classifications’ and their potential to preclude individual potentiality. I am troubled by the premise of ‘fixed’ ability or ‘fixed’ potential as an expectation. In my many years of running a business, I had grown to believe that there is legitimate psychological interplay with perceived or measured aptitude that cultivates a gap between ‘measured’ or ‘perceived’ aptitude and actual potential. This interplay affects the perception and measurement of ‘aptitudes.’ If accurate, this interplay makes what we often view as ‘fixed aptitude’ more variable than it would seem.
The hierarchical risk of an individual being discouraged, or the risk of not creating the circumstances for an individual’s ‘blossoming’ because a system of classification encourages a ‘fixed’ perspective of aptitude, works against the moral high ground proclamation. At the same time, we should not discount the benefits of hierarchical alignment. Additionally, Dr. Jaques convincingly validated his work with measurement and data collection over the long term. His ‘Requisite Organization’ incorporates rigorous management mandates and techniques that safeguard against misalignment between time-horizon and strata-level. However, this is not the same as considering that there may be a moral imperative to not viewing time horizons as being fixed – even if they mostly are.
(The concerns I have about fostering perceptions that preclude potential, whether they reside in the self or the community, apply to IQ, as well. We have learned with more recent science that IQ is more variable than was previously believed. As examples, we have evidence that physical fitness through diet and exercise, mental fitness through meditation and contemplative practice, and cognitive activities that facilitate neuroplasticity can affect IQ. We also better understand the interplay of emotional or psychological factors with neurophysiology. That stratification can help explain workplace and career success independent of IQ helps work against the belief of IQ as a fixed potential, and allowed me to view the ‘fixed’ implications of stratification as not being incremental to the overall perception of a ‘fixed’ aptitude in the context of IQ.)
Another risk of hierarchy or stratification is the potential for ‘labeling.’ I am reminded of the importance, within a system of stratification of not ‘labeling’ people accordingly. It is okay to label thoughts, ideas, and concepts – but not people. We go through life handicapped by our narratives due to the labels others give us. For stratification to claim a moral high ground, this cannot occur within its system.
With consideration for my concerns about stratification, I continued to study Dr. Jaques’ Stratified Systems Theory. Contextualizing stratification within my organization, I started to think about inducive and deducive management and their integration into a stratified organization. I increasingly believed that an overlay of inducive versus deducive management practices onto stratification could result in limiting rules to ‘only as necessary’ while optimizing values to ‘everywhere possible.’ In this sense, we could optimize individuality in a hierarchical system. I increasingly believed that stratification could be relevant to the effectiveness of inducive and deducive managing and their implications for culture and performance within the organization. As we move the organizational position along the hierarchy from lower strata to higher strata, we should also move along the continuum from inducive to deducive managing. In the Jaques’ Stratified System’s Theory, as we transition from lower to higher strata, our processing moves from ‘symbolic verbal’ to ‘abstract conceptual.’ This transitioning is consistent with the previously stated belief that inducive management is most effective when facilitated verbally, and deducive management is most effective when understood conceptually. It suggests that verbal processing would be more consistent with an inducive management strategy, and conceptual processing would be more consistent with a deducive management strategy. If this is accurate, it follows that lower strata positions would be more productive in a rules-based, instructive culture. Higher strata positions would be more productive in a values-based, non-instructive culture. Considering Dr. Jaques’s reasoning that alignment between time-horizon and organizational position is a moral high ground, facilitating in this manner could be constructive to its fostering.
Again, caution is required. Dr. Jaques believed that ‘all’ tasks assigned to individuals must be attached to their importance to their organization’s purpose – regardless of strata-level or time-horizon. I think this to be profoundly true. As such, the difference between inducive managing at lower strata and deducive managing at higher strata would be more a question of ‘how’ than ‘what.’ In all cases, we must attach values and higher purpose to the tasks performed. However, at the inducive end of the continuum, management must contextualize tasks within the set of organizational values. At the deducive end of the continuum, employees attach self-imposed tasks to organizational purpose and values, without instruction. This distinction would be the model whereby we could optimize individualism while mitigating risk – while fostering engagement, and safely moving the organization closer to the edge of chaos.
The Brand
Ultimately, a company’s culture and its business model are determinants of its brand. The brand is all-important. In my company, we believed that our brand was nothing more than the business model and the organizational culture. Whether this is a more general truth about business brands, I am uncertain – but I held a firm conviction that this was the definition of ‘our’ brand.
Brands are sometimes confused with ‘branding’ or with marketing. We viewed marketing as the communication of the brand to the marketplace, and branding as the brand plus its communication. Alignment between the brand and the communication of the brand is essential. As such, any good advertising agency must intimately understand the brand they are communicating – in our case, the business model plus the culture – to achieve this alignment.
I developed a business plan with a detailed description of our model design before the business’s launch. The design reflected the company’s higher purpose and core values and remained unchanged throughout the duration. Unlike the model, which was unchanging, the culture evolved, over time, as the behaviors (within the organization) more closely approximated its higher purpose and core values. For purposes of this article, we are focusing on the culture and how a deducive values-based culture wherever possible and an inducive rules-based culture only where necessary, served the brand.
With a business model design in place and functioning well with the brand objectives, the challenge was to create alignment between the brand objectives and the company’s culture. (The business model and the company culture are not separate and apart. The business model influences the business culture to the extent that it reinforces the organizations’ higher purpose and core values). We can also be state this as creating alignment between the brand and the brand objectives. It was here that I formed my convictions regarding individuality, chaos, and self-organization. Through an unfettered and continuous communication of the company’s higher purpose and core values, cascaded throughout the organization, we were able to self-organize toward the brand objectives. As the organization, over many years, evolved from restrictive, rules induced behaviors toward behaviors individually deduced from higher purpose and core values, the organization increasingly self-organized around the brand objectives, creating more alignment between the brand and the objectives. This self-organization was at the core of organizational health.
At the same time, in the later years, I became increasingly convinced that the integration of inducive/deducive managing with stratification was the best opportunity to align the organization’s brand with its brand objectives while mitigating risk.
Closing
In summary, from my business experience, I believe that organizations and employees can significantly benefit from collective individuality left free to self-organize. Through this self-organization that can only occur when employees have the freedom to be themselves in the workplace, organizations can become authentic, and authenticity is essential to our companies’ success and durability. Simultaneously, there is significant risk in approaching the precipice of chaos when individuality is unfettered and not constrained by the limited and selective application of rules, as prohibitions and where necessary, and a robust application of organizational values (especially core values linked to a higher purpose), wherever possible. This critical constraint can only occur when values are wholly embraced and effectively communicated throughout the organization and are consistent with the organization’s higher purpose.
