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Chapter 2 | Principles Guidebook

How Principles Work

Principles translate mission, culture and strategy into daily decisions and actions.

Decision Principles replace processes to control behavior with principles to empower decision-making.

They tell people how to make decisions that advance your Shared Purpose, put values into practice and move toward goals.

Principles provide guidance that is more subjective and situational than rules, policies and procedures can address.

Managing by principles

Managing by principles and purpose more than people and process is a big shift in your role as a business leader.

Under the hierarchical model, your job as a leader is to manage people and process.

You decide on the process, assign roles and delegate authority. You determine what the people who report to you can handle themselves and what they have to ask permission to do. And when someone exceeds their authority, you decide how to handle it—and what penalties to impose.

In the new, more networked style of management, people follow principles instead of coming to you to break through gridlock—or circumventing you because they disagree with your decisions.

Instead of delegating, you empower the people beneath you to make their own choices based on purpose and principles.

When an issue gets escalated to you, your job is not to make a Solomonic decision about who wins or loses, but to clarify the “fork in the road" so people can apply Principles accordingly.

In other words, instead of telling people what to do, you now lead by giving them the clarity to decide on their own what to do.

Principles for aligned decisions

Principles translate purpose, mission, culture and strategy into daily decisions and actions.

Most organizations have a mission, values, goals and strategies to tell people where to go. They also have rules, process, policies and procedures that tell people what to do. Some even have a Shared Purpose that expresses what they’re co-creating in the world.

Principles are the missing middle layer in most organizations though—how to make decisions.

Principles tell people how to make decisions that advance the purpose, put values into practice and move toward goals.

They provide guidance that is more subjective and situational than rules, process, policies and procedures can address.

Translate values and goals into action

What creates a dilemma—a “fork in the road”—is when values and goals aren’t enough to tell you what to do.

It's important to be clear on the relationship between principles, values and goals:

  • Values are what’s important to you.
  • Goals are what you want to see in the world.
  • Principles help you make decisions in alignment with your values and goals.

For example, “frugality” is a value, “save money” is a goal, and “spend others’ money like your own” is a principle.

You don’t need Principles in a situation where there’s an obvious choice, like an equipment purchase where one product delivers a higher ROI than the alternatives.

When you face two or more choices that are equally consistent with your values and goals, a well-crafted principle empowers you to make a wise choice in the moment.

One way to help make values more concrete and actionable is to translate them into outcomes. If your organization says that it values transparency, what does that look like in terms of desired outcomes?

Example

Principles at Google

Google’s Nine Principles of Innovation help clarify the distinction between principles and values.

One of the Nine Principles is “Default to open processes.” If this were a value, it might be phrased as “Be open,” but that’s so broad that it’s meaningless.

This Principle makes it clear that Google prefers open processes, while giving employees the flexibility to decide when a closed process is necessary or appropriate. It guides them to leave a process open unless they have a good reason (like privacy or security) to close it. Google also expands on the value of “innovate” with the Principle “ship and iterate.” The decision point here is whether to continue working on a project or release it to the marketplace.

This Principle acknowledges that given what Google does, there’s no such thing as perfect. Instead, the entire company aligns around the idea of getting products out the door as soon as they’re good enough, then continuing to work on them while gathering feedback.

At the same time, “Ship and iterate” also gives employees the autonomy to decide for themselves when a product is ready to ship, how quickly to iterate and how incremental to make each iteration.

Exercise

Turn values into outcomes

Use this exercise to transform values into outcomes. For a value that you hold, ask what that means about what’s important to achieve. Reflect on and discuss these questions with your team. Use this worksheet to record your thoughts.

Prioritize what’s important

Where values and goals compete, priorities help force a choice.

Often two or more of an organization’s values or goals are in tension with each other.

Some examples of goals in tension are profit vs. purpose, or total revenue vs. profitability. If you had to choose, which would you prioritize?

As uncomfortable as it may feel to choose between two core values or goals, such a ranking is often vital to making the hard decisions.

Principles can help force a choice between competing goals—or provide guidance on how to achieve both.

Example

Agile

In the late 9os, software developers were struggling with competing goals in their projects, such as a desire to ship working software quickly vs. having a perfect product to ship. The agile software movement arose, and in 2001, the Manifesto for Agile Software Development was published. It is highly succinct while leaving plenty of room for interpretation and innovation.  

Instead of saying “Do X, not Y,” it says, “Y is valuable, so don’t ignore it, but X is more important, and here's why.”

By codifying this level of flexibility while still setting out fundamentals, a highly distributed Agile community was able to collaborate on key development methodologies like scrum.

Exercise

Prioritize values & goals

Use this exercise to prioritize values and goals. Begin by identifying a context where values or goals are often in tension with each other. Reflect on and discuss these questions with your team. Use this worksheet to record your thoughts.

Nested Principles

Nested Principles are context-dependent subsets that apply to progressively smaller groups of people.

Values may apply equally everywhere across an organization, but some decisions apply to everyone, while some are only relevant in certain contexts, departments or roles.

Nested Principles handle decisions that need to be made differently in different contexts.

For example:

  • Amazon’s fundamental Principle of “customer obsession” means different things for Product Development, Marketing and Customer Service.
  • Wikipedia has specific Principles for authors that nest inside the more general Five Pillars.
  • The Agile movement has general Principles that apply universally, and specific Principles for practices like kanban and scrum.

Example

Nested principles

One global Fortune 500 company shifting from a hierarchical to a more networked structure developed an outer envelope of principles for the entire organization, such as “Stay lean to go fast,” “Learn and adapt to win” and “Customers determine our success.”

Within each of those principles were more granular ones, including “Seek and trust the truth,” “Resolve conflict with empathy and transparency” and “Maintain focus and agility in the face of uncertainty.”

And nested within those were specific principles for every function, region and business unit in the company. Here are a few examples:

Corporate Communications used the principle “The ‘why’ with the ‘what’” to ensure that employees understood why the company is making a particular decision and how that supports business goals.

Marketing adopted “We are the advocate for the customer” as a reminder that executing a marketing campaign is just a means to the end of responding to and meeting customer needs.

Manufacturing and Sales aligned around “Allocate votes proportional to risk” to settle the ongoing power struggle between Sales (which wanted to maximize customization to increase sales) and Manufacturing (which wanted to minimize customization to make production easier).

To apply this principle, each department assesses its own risk for customizing vs. not customizing and votes to arrive at a decision. The manager only gets called in if they need more information to assess the risk, not to weigh in on the final decision.

Recap

  • Managing by principles and purpose more than people and process is a big shift in your role as a business leader.
  • Principles translate mission, culture and strategy into daily decisions and actions.
  • What creates a dilemma—a “fork in the road”—is when values and goals aren’t enough to tell you what to do.
  • Where values and goals compete, priorities help force a choice.
  • Nested principles are context-dependent subsets that apply to progressively smaller groups of people.

Read more:

"Decision-Making, 'Top Gun' Style"

"Use Doctrine to Pierce the Fog of Business"