Value-based versus Rules-based Decision Making
The word value has
many meanings; the first six of which (according to my dictionary)
relate to an expression in economic terms. In other words, "how
much does it cost" or "how much can I get for it?"
If you are running
a business, this is a very good and measurable definition of the
term. Business leaders should be making decisions that will lead
to the increased profitability of their companies.
The word value
also has about another dozen definitions that have nothing to
do with money: specifically, "the quality of a thing according
to which it is thought of being more desirable" and other variations
on that theme.
If we overlook the
secondary meaning of the word, we often deny ourselves opportunity
to realize the first.
The word rule
has as its primary definition "an established regulation for action."
Its secondary meanings deal with governing or controlling. The
two are tied together since people govern by establishing and
We live by rules all
the time; mostly they are transparent to us. We get up in the
morning, get dressed, hop in the car, and drive to work. And not
once do we question why we are driving on the right side of the
road. Traffic laws are nothing more than a set of rules, and arbitrary
rules at that. There is nothing inherently "best" about driving
on the right side of the road. In many places in the world, the
rule is to drive on the left side of the road, and their accident
rate and ability to get where you are going is no better or worse
than right-hand-rule countries.
The point is rules
make things convenient. People like convenience. When rules are
followed faithfully in the situation for which they were created,
they almost always guarantee success.
One of the problem
with rules is that they are so convenient that people attempt
to use them when the situation for which they were created no
longer exist. This is the "trying to make the problem fit the
box" syndrome. It blinds people to new solutions and new discoveries
since rules, like maps, only show where other people have already
gone. Like well-traveled dirt roads of the past, they have ruts
that guide you to a very specific destination, and these ruts
are difficult to get out of without damaging your cart.
Another problem with
rules, is that they are so universally accepted that they take
on an authority of their own, and are used as a substitute for
thinking. Many bureaucrats hide behind the rules. The most poignant
example of this was at the Nuremberg Trails where mass murderers
insisted that they were "only following orders." Many religious
sects are also rules-based institutions with little tolerance
for independent thinking.
This is not to say
that rules are bad. If everyone had to figure out how to drive
to work in the morning solely on independent thought, we would
have chaos instead of routine. Rules were made for the routine.
However, it is always important to understand the values behind
the rules. In the instance of traffic rules, the value is public
values will get you results rules can never achieve. Consider
the following example: in New York City, the rule is "no right
turn on red" period. If you are at a red light, and an emergency
vehicle comes up behind you, and you are in its way, what do you
do. To obey the rule is to delay emergency service to someone
who needs it. To break the law, and violate the rule by making
a safe right turn, satisfies the value behind the rule.
OK, so what does all
this have to do with business? So many business practices are
nothing more than a string of rules, some of which may no longer
satisfy the value for which they were made. As you analyze your
processes, ask at every step of the way, "What value does this
step provide?" If the answer is "none" then eliminate the step.
Otherwise, ask some follow-up questions, "Can we get the same
value for less work either here, or somewhere else in the process?
Can we get more value out of the work done at this step?"
One of the differences
between a good manager and a poor manager is knowing when to use
rules and when to know values.
If the problem fits
the box: use the rules. Rules are easy to teach. They can even
be automated. They can be codified to the point where everyone
knows exactly what to expect at least when the work enters, travels
through, and leaves their work areas. Little training is needed
for the workforce. Many people take comfort in knowing how to
do their job well. Rules give people a sense of control and where
If the problem doesn't
fit the box, either reject the problem, or build a box that fits.
Building a new box is going to take knowledge of the values your
company finds desirable.
Value based decision
making is not for the faint of heart. There is risk. Unlike rules
which virtually guarantee success, improperly implemented values
can backfire. However without values, there is no forward progress.