The Power of High-Performance Decisions

For the past couple weeks, I’ve been digging into employee handbooks because a startup I’m involved with has grown to the point of needing one. Few perhaps realize how that document, usually given to you on your first day and then mostly forgotten, shapes culture and thereby fundamental organizational performance.

As one reference point, a company I’ve recently worked for has a 40+ page tome that starts every section with “COMPLIANCE IS ESSENTIAL” highlighted in bold, with “required to conform” sprinkled liberally throughout the document, and ending with a meaty discussion of the punitive measures that would happen upon deviation. And that’s a company very innovative in many ways.

At the other extreme is Zaarly, a San Francisco startup. Its employee handbook, posted online, talks directly to culture. In the “Rules for Work” section, it begins with, “We don’t have these.” And in a style prevalent throughout the document, it adds that, “If you want to coast, we recommend you apply for a job at Craigslist.” There are some good thoughts on teams, work, and communication—but no rules.

Then there’s the famous Netflix “business culture” PowerPoint that serves as that company’s employee handbook. Similar to Zaarly, it talks a lot about culture and lack of rules. There is no vacation policy, and the travel and expense policy is literally five words: “Act in Netflix’s best interests.” That’s it. But unlike Zaarly, Netflix does say some rules are necessary, such as “Absolutely no harassment of any kind.” I completely agree, especially on that item.

Netflix believes high-performance people should be free to make decisions, and those decisions need to be grounded in context. Mission, vision, and value statements do not create context—and Netflix provides the example of how Enron’s value statement included “integrity.” Real company values are shown by who gets rewarded and embody behaviors and skills. The document goes on to describe the primary Netflix values and the associated behaviors.

In the world of Netflix, as basically summarized on slide 74, flexibility in the long term is more important than efficiency. To inhibit the chaos that too much flexibility in a large organization can create, hire (and keep) only high-performance people. High-performance people make great decisions, which are better than rote rules. Later on there is good discussion on managing with context—context, not control of people—and when something fails, figuring out what went wrong in the context rather than in the people.

Perhaps a part of the Netflix document that gave me pause was an insinuation that defined processes as being negative. As those of us in the lean world know, standard work is the foundation for kaizen. To improve, you need to know what you’re doing—consistently. But it doesn’t necessarily mean a lack of flexibility, and the level of detail in the standard work depends on the application.

Yesterday our friend Brad Power posted a piece in Harvard Business Review titled “Drive Performance by Focusing on Routine Decisions” that hits at a similar concept. Instead of creating rule-bound defined processes, improve the quality of the decision points. He illustrates the idea with an example those of us in the manufacturing world have all experienced: the potential maelstrom of materials control. He writes, “These two stories highlight the advantages of focusing process improvement on “diamonds and arrows”—i.e., making better decisions. Project leaders who focus exclusively on the “boxes and arrows” of workflow action improvement will often find themselves caught up fixing yesterday’s operations and systems issues.”

Are your rules improving the boxes but constraining the diamonds? How is that rigidity affecting your long-term performance? Do you have a team of high-performance people that you can trust to deal with the diamonds in a flexible, agile way? Why not? And how do your underlying documents, even down to the employee handbook, support or impede that?

First published Jan. 12, 2014, on Evolving Excellence.

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