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 enforcing rules.

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 safety.

Understanding the 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 they belong.

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.