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Chapter 1 | Principles Guidebook

Why Decision Principles?

Decision Principles enable leaders to empower effective decisions without having to control everything.

When success demands speed and flexibility, how can leaders let go of control and still get the results they want?

Decision Principles empower people across an organization to make decisions when they come to a “fork in the road”: a situation or dilemma where the best solution is impossible to predict in advance.

A recipe for whiplash

Many organizations oscillate between centralized and decentralized decision-making, leaving people disempowered.

Let’s say your company’s executive team wants to increase innovation to keep up with fast-growing new digital competitors disrupting your industry.

Word comes down that they’re going to flatten the organization and empower everyone to be more agile and take more risks. Everyone gets excited about the possibilities, and a bunch of projects get launched.

After a few months, though, the executive team looks around and sees chaos: What are all these new projects, and why aren’t they better aligned with business goals?  

So the executive team yanks back top-down control, taking over some projects and ending the rest.

Those whose projects get killed or micromanaged can’t help wondering why management let them take the initiative in the first place.

And everyone is a lot less enthusiastic a few months later when, inevitably, the executive team starts talking again about empowerment and agility.

Does any of this sound familiar?

This kind of whiplash is caused by oscillating between two competing mental models of how to operate a company: hierarchy and network.

Hierarchies and networks each have their advantages. But you can’t run an organization by careening back and forth between them.

From hierarchy to network

In the 21st century, where success demands speed and flexibility, a company with a bias towards hierarchy is at a disadvantage.

In the 20th century, a successful company was one that was large, stable and above all hierarchal. In fact, the very definition of the well-run company was one run from the top, with orders filtering down through the org chart one level at a time.

But when information about actual market conditions has to percolate back up from the company’s distant edges, it often reaches the top too late for meaningful action.

The larger a top-down company is, the slower and less agile it is—and the harder it gets for top management to let go of old models of what a company should look like.

Today’s market is data-driven and highly interlinked. You have multiple connections to your customers, and they have multiple connections of their own, both internally and with each other. So do your competitors.

As organizations as diverse as Amazon, Wikipedia, and U.S. military have discovered, it takes networked thinking to serve a network—or to compete with one.

Compare mental models: Hierarchy vs. network

Hierarchy excels in creating alignment: coordinated activity to achieve organizational goals.
Networks thrive on autonomy: the ability of individuals to act in response to local conditions.

In a hierarchy, decisions are centralized to stay aligned to corporate goals. Information flows up, authority and decisions flow down, and people remain in their organizational silos.

This model keeps decisions and actions aligned with business goals—but being told what to do can disempower people and impede their agility and responsiveness.

In a networked model, decisions are pushed to the edge of the organization to be more responsive to market demands. Information is shared laterally, relationships are more fluid, and peer-to-peer connections and actions don't require a superior's permission or direction.

This model gives people more autonomy to make faster, better informed decisions so they can handle complex issues quickly—but it also leaves them a lot of room to move in the wrong direction, creating chaos and steering the company away from its goals.

Example

Flocking behaviors

Enormous flocks of starlings are called murmurations.

As a murmuration of starlings swirls through the air, no individual bird seems to be in charge. But when the flock needs to change direction to find food or dodge a hungry predator, all the birds somehow move together at high speed like a single organism.

Computer modeling of starling murmurations reveals three simple principles:

  • Stick together (move to the center)
  • Follow neighbors
  • Don’t collide

The interaction of these three principles generates the rapid and complex behavior of a murmuration.

Within the starlings’ Shared Purpose—to stay alive—these principles offer a perfect balance of autonomy and alignment. No one has complete control, but everything is under control.

What could that look like for humans?

Alignment + autonomy = empowerment

How can leaders let go of control and still get the results they want? Decision Principles empower alignment with autonomy.

The shift to managing by principles is more than a tactic. It's a new mindset for management.

The question for leaders of networked organizations is how to design systems that produce distributed, empowered, aligned leadership as an emergent property, like the shape created by the flocking of birds.

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

Instead of making decisions for others or delegating decisions to them, it's about creating principles with them so they can make decisions for themselves.

Leading from Decision Principles and Shared Purpose enables leaders to empower people without having to control everything.

Example

Nupedia / Wikipedia

Did you know that Wikipedia is actually Jimmy Wales’s second free, crowdsourced online encyclopedia?

His first attempt was called Nupedia. Anyone could submit an entry, but a small team of editors reviewed each submission and decided which to publish.

You can probably guess what happened: more submissions poured in than the editors could keep up with. In one year, they only managed to approve and publish about 18 entries.

Clearly, Nupedia wasn’t designed to scale. So Wales removed the bottleneck of the editorial team. He redesigned his site as a wiki—a website built on software that lets users edit the content and structure collaboratively—and renamed it Wikipedia.

Then he declared that not only could anyone contribute entries, but they could edit other people’s. By the end of the first year, Wikipedia was 18,000 entries and growing fast.

A site that anyone can change at any time could easily collapse into chaos, but Wales took a crucial step to ensure its success as a networked organization: he shifted from managing by people and processes to managing through purpose and principles.

Example

Wikipedia’s Five Pillars

Wikipedia established a set of principles called the Five Pillars.

1. Wikipedia is an encyclopedia
2. Wikipedia is written from a neutral point of view
3. Wikipedia is free content that anyone can edit, use modify, and distribute
4. Editors should treat each other with respect and civility
5. Wikipedia does not have firm rules

As Decision Principles, the Five Pillars guide users toward the objective: creating a comprehensive, reliable, accurate source of information.

The first one lays out the strategy: it’s an encyclopedia, not a dictionary or a thesaurus.

The Five Pillars are authoritative: any content that violates them quickly gets fixed by other members of the community.

Together—especially the fifth one, which is a commitment to governance by Principles—they give the community a lot of leeway in deciding how and what to change, including the principles themselves as needed.

The power of Shared Purpose

Shared Purpose is what keeps everyone headed in the same direction.

A flock of birds can move fluidly together because they have the same Shared Purpose—to stay alive—and a set of simple principles to achieve it.  

In an organization, Shared Purpose is the common intention that connects your company with all its stakeholders, including employees and customers.

Unlike a flock of birds, your Shared Purpose is something bigger than just staying alive. It’s what your organization does WITH other players, not just what it sells TO or does FOR them.

Shared Purpose keeps everyone in your organization aligned on what you’re all creating together.

Imagine an organization where everyone does what you would have told them to do if you were there.

Better yet, imagine them doing what you didn’t know you wanted them to do until they did it.

And imagine their decisions are aligned with organizational goals and objectives, even though no one was there to direct them.

That’s what leading from principles and purpose can achieve.

Example

Military Doctrine

To fight effectively, soldiers need to act together. But what civilians often don’t realize is that soldiers also need to be able to act autonomously.

The tumult of the battlefield causes the “fog of war”: fast-changing circumstances that create confusion and prevent communication from flowing effectively down the chain of command from military leaders to troops on the ground.

The fog of war can turn straightforward orders into
a confusing mess.

To cut through the fog, individual soldiers need guidance in interpreting orders in a way that keeps them aligned with battle objectives, even when they can’t check in with someone higher up the ladder.

The military calls this doctrine. As defined by NATO, doctrine is “fundamental principles by which the military forces guide their actions in support of objectives. It is authoritative but requires judgment in application.”

Military doctrine pushes decision-making closer to the ground by helping soldiers adapt quickly to current circumstances.

“Authoritative but requiring judgment in application”—that sounds like the balancing point between alignment and autonomy.

Good Decision Principles provide the combination of empowerment, autonomy and direction it takes to make this work.

“In the absence of guidance or orders, determine what they should have been
and execute aggressively.”

—Traditional military precept, quoted by General David Petraeus

Principles defined

Principles guide actions in support of objectives. They are authoritative but require judgment in application.

Principles…

  • Guide actions in support of objectives: Assuming that you already know what your objectives are, the purpose of Principles is to determine how best to achieve them.
  • Authoritative: For principles to work, you must abide by them, regardless of circumstances. The ends do not justify the means; it’s not OK to stray outside their parameters, even—especially—when doing so makes achieving your objectives easier.
  • Require judgment: As long as you don’t violate your principles, you should use your own judgment in putting them into practice. In fact, you should apply all of your creativity and innovation to that task.

Help for the “forks in the road”

Principles provide guidance for moments when it’s impossible to say in advance which way to go.

Not all decisions call for Decision Principles. In situations where it’s possible to know in advance which way to go, rules and procedures can work just fine.

Decision Principles empower people to make decisions when they come to a “fork in the road”: a situation or dilemma where the best solution is impossible to predict in advance.

Use Decision Principles when there are two or more viable options, and people need guidance to determine which will best fulfill the mission and purpose of the organization—for example, serving customers vs. investors, short vs. long term, local vs. global.  

Principles help people handle gray areas and make judgment calls. They empower people to make decisions without having to escalate up the hierarchy to someone with decision rights.

In traditional companies, managers make decisions based on a governance model that assigns them a certain set of decision rights.

But conversations about decision rights can get stuck when leadership wants to delegate decision rights but doesn’t trust that they've articulated all the what-ifs.

Meanwhile, employees want clear decision rights but don’t understand or don’t feel invested in the principles they’re based on.

Principles provide a distributed governance model for networked organizations. They can transform empowerment from a buzzword into a living part of organizational culture.

Example

Principles at Amazon

In the very first paragraph of its Leadership Principles, Amazon makes it clear in the very first paragraph that its principles are authoritative.

“Our Leadership Principles aren't just a pretty inspirational wall hanging. These Principles work hard, just like we do. Amazonians use them, every day, whether they're discussing ideas for new projects, deciding on the best solution for a customer's problem, or interviewing candidates.”

In other words, Amazon expects every employee, from the warehouse to the C-suite, to abide by the principles it sets out.

For example, Amazon's first principle is “customer obsession." Plenty of companies say they’re customer-centric, but the decision guided by Amazon’s principles is the choice between “We’re going to focus on getting our customers to want what we provide” and “We’re going to focus on providing what customers want.”

Amazon explicitly says, “Leaders start with the customer and work backwards.”

As long as employees remain in alignment with the principle of prioritizing what customers want above all else, they have the autonomy to interpret it in any way they choose.

Exercise

Opportunities for empowerment

Think about contexts in your organization where more empowerment is desired, along with any obstacles to that empowerment. Reflect on and discuss these questions with your team. Use this worksheet to record your thoughts.

Where do people in your organization want to be more empowered to make decisions? What is getting in the way?
Where does leadership want people to take more initiative? What is getting in the way?

Recap

Decision Principles enable leaders to empower effective decisions without having to control everything.

  • Many organizations oscillate between centralized and decentralized decision-making, leaving people disempowered.
  • In the 21st century, where success demands speed and flexibility, a company with a bias towards hierarchy at a disadvantage.
  • How can leaders let go of control and still get the results they want? Decision Principles empower aligned autonomy.
  • Shared Purpose is what keeps everyone headed in the same direction.
  • In the NATO definition, principles guide actions in support of objectives. They are authoritative but require judgment in application
  • Principles provide guidance for moments when it’s impossible to say in advance which way to go.

Read more:

“Letting Go Without Losing Control”

“Can Bigger Be Faster?”