How to create your own simple business rules

Author: Paul Dughi

“All of us have too much complexity in our lives,” said Kathleen Eisenhardt, professor at Stanford University’s School of Engineering. In studying how product development teams with complex rules, no rules, and a few simple rules tackled projects, some simple truths emerged.

 

Kathleen Eisenhardt, Stanford University School of Engineering

Kathleen Eisenhardt, Stanford University School of Engineering

In companies that had very complicated rules, people would take a long time to navigate through the rules. “What would (often) happen is they would do the wrong product, very efficiently,” Eisenhardt said. Conversely, she said, companies with no rules were not functioning well. “They were having a great time, getting nothing done.”

The best companies put in place 4 or 5 simple rules. The rules constrained what people did, forcing a framework on the situation, but gave them flexibility to innovate within that framework.

I’ve used this technique throughout my career to help frame the conversation and get people to focus on coming with a solution. We don’t have a handbook for every situation that comes up, but we also don’t throw all the rules out the window. In trying to brainstorm ways to increase sales recently, we focused the discussion on new revenue initiatives and quickly narrowed down the discussion to a particular category of business. Then, we focused on that particular category and what it would take to grow revenue within it. That’s a much different discussion than saying “How do we put more money on the books?” It went quickly from a generic “how do we do this” to a specific “what tools do we need and how do we go after this specific category of business.”

Create your own simple rules

  1. What’s the objective? What are we trying to achieve?
  2. What’s the bottleneck that keeps us from achieving this objective?
  3. What are the rules?

The objective is usually the easy part, whether it is product development, revenue growth, or profitability — for example — the objectives are often clear. The hard part is figuring out exactly where the bottleneck is.

Bottlenecks at Google

“There were some problems at Google early on,” Eisenhardt said. “They weren’t getting enough product improvements in their search engine and other products.” In looking at the situation, they initially thought they needed to reorganize or create different team structures. In continuing to analyze the issue, they realized they didn’t have enough quality computer scientists to meet their product development schedule. Even within that, though, they realized the problems wasn’t the caliber of employee; they realized the real bottleneck was the hiring process.

So they adopted some simple rules, and they are not things you might expect. “Look for people who are eccentric because they’re more creative, the kind that might ride a unicycle, climb the Himalayas, do something strange,” said Eisenhardt.

Another rule was to value referrals from other Google employees. “Googlers know what other Googlers look like,” she said. A third rule was to “stop the hiring process if you see anything phony or fake on their resume, because we want high integrity people.”

The bottleneck wasn’t what they thought it was originally and that’s a common issue. Getting to the heart of the matter and then defining a few simple rules that can shape decision-making is where the real effort needs to be put.

Faster decision-making

Simple rules can make people more effective and lead to faster decisions. Often, leaders over think the past in trying to predict the future, she said. And people are more likely to remember simple rules, and follow them.

“You are more likely to remember and do it, even if you’re stressed out, busy, you’ve got a zillion things to do, you can say, ‘wait a minute,’ I’m supposed to be thinking about hiring people and remember these three rules and that’s all I have to remember.” — Kathleen Eisenhardt, professor at Stanford University’s School of Engineering

Stopping Rules

Maybe the most important rules — and hardest ones to follow — are when it’s time to stop. For years, I’ve counseled our sales people on the importance of closing business. Not just closing a sale and putting the money on the books, but closing out a sale. You’re not going to win every time out, but how long will you keep pouring time and effort into an account that never buys you? It’s why sometimes you just have to say “I’m done” and stop. Or fire a client that is taking too much of your time for the return you are getting.

One of the biggest mistakes people make in business is not killing bad ideas, or taking on something new without stopping something else.

“People are really good at starting and they’re really bad at stopping.” — Kathleen Eisenhardt, professor at Stanford University’s School of Engineering

 


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