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Individual tasks and decision making all too often get bogged down in overly rigid regulations, controls and protocols. This is why we advocated in a recent article that companies should rethink their traditional control model to unleash agility and the full potential of employees.
There are plenty of examples that illustrate the distortions of such bureaucratic control systems. At a large European corporation, the travel policy was so rigid that even buying a flight with extra checked-in baggage would be blocked by the system, requiring formal approval by an executive. At an industrial conglomerate, strict investment procedures and approval processes delayed by several weeks the implementation of COVID-19 measures to protect the welfare of employees. This forced work at the site to a halt and the company lost money.
Banking provides another good example. Apply for a loan in a branch and even if your credit score is healthy, the clerk will need to find an authorized signatory — usually two or three levels above the employee — before the loan is agreed. This might appear to be a prudent policy, but it disempowers the employee, slows down loan applications and creates bureaucracy.
Rethinking the traditional control model embedded in most policies and procedures is the best way to attack bureaucracy and make your company more agile. The question is: how?
Our previous article attracted a lot of feedback and debate. So, we have expanded our research, working extensively with agile firms. As a result, we have developed an exhaustive taxonomy of seven innovative control models (see the table) aimed at accelerating decision-making, reducing bureaucracy, and increasing employee empowerment. We have also developed fresh insights on when to apply which model; the decision will depend on the context and business goals.
In a nutshell
When it fits well
1. Guiding principles
Establish freedom within a framework: provide employees with clear purpose, values and priorities to help them make autonomous decisions in their day-to-day activities in line with the overarching principles.
When it is not possible to cover all possible circumstances with policies, but the employee needs to adapt, use judgement, and be creative in solutions (e.g. customer facing roles).
2. Boundary rules
Set objective rules with quantitative indications of ranges and conditions within which a decision can be made autonomously. Define the upper limit that would trigger formal authorization.
When there are clear and measurable indicators that can help you make a decision, often in a recurring situation (e.g. travel policy, investment approval).
3. Context setting
Explain the strategic context to guide employees in their decisions. When the context is well understood, it is easier to make good decisions without prescriptive procedures.
When there is ambiguity and it’s important to make decisions based on the bigger picture (e.g. market strategy, partnerships and deal-making).
4. Sounding board
Define meetings and routines from which to draw inspiration and technical advice from company leaders.
When the decision is important and needs input from the most experienced leaders in the company.
5. Peer review
Encourage frequent requests for feedback, reviews, and quality control from peers. Although the decision remains the individual’s, they consider other people’s perspectives.
When the decision is important and irreversible and when diverse perspectives add value or improve quality control (e.g. new coding).
6. Social pressure
Stimulate adherence to values and norms by increasing transparency and candid feedback to foster openness, respect and mutual trust.
When compliance with ethical norms or rules is important (e.g. setting ethical standards, diversity and inclusion policies).
7. Post detection
Establish mechanisms of (random) control and audit conducted after the decision or action is taken.
When the task or decision is standard, recurring, and can be easily tracked (such as tasks involving digital systems).
Traditional policies and procedures tend to be very detailed and prescriptive. While it is practically impossible to cover every specific situation with a rule, in most cases, having no rules is not an option either. To strike a balance, it’s wiser to provide employees with principles to guide their judgment and decisions, ensuring autonomy and adaptability within a general, meaningful framework.
For example, the Ritz-Carlton luxury hotel chain has 10 guiding statements, such as “I build strong relationships and create Ritz-Carlton guests for life” and “I am empowered to create unique, memorable, and personal experiences for our guests”. These allow frontline employees to use their judgment and to improvise.
Similarly, Disney’s resorts are well-known for “The Four Keys” (safety, courtesy, show, and efficiency), a set of principles that employees must follow when making decisions. The Four Keys are emphasized throughout the entire week-long on-boarding process of new employees at the company’s resorts. The principles are reviewed at morning meetings, and there is follow-up training from time to time to practice the application of The Four Keys in different scenarios.
Simple rules can set the range and the threshold for autonomy. Typical boundary rules are expressed as: “below/above X”, “up to X”, “within the range of…”, “if”, and so on.
One of our clients, a large utility company, is testing a new travel policy to allow more flexibility and autonomy, thereby introducing boundary rules. While in the past employees were bound to the best-buy option with virtually no flexibility, now they have a certain percentage buffer in terms of total cost, without the need to ask for authorization (approval is still required if the price is above the upper limit of the threshold).
Employees need contextualization to exercise good judgement and make autonomous decisions. The manager’s role is to provide them with the right context and to clarify the bigger picture to help guide their decisions.
Companies such as Netflix and Virgin hit the news when they decided to abolish their vacation policies, letting employees take as much holiday as they like. But it will require strong context-setting by managers to avoid chaos. This might mean, for example, an account director sitting down with the team and explaining which months are preferrable to take vacations. This can help people to understand that they should refrain from taking days off during the period of peak workload. Because if they are absent, the burden shifts on to their colleagues’ shoulders.
In agile organizations, executives need to accept that they are surrendering some status and power, or “unbossing” their companies. Leaders need to refrain from jumping in during team meetings and using top-down power to divert decision-making from their teams. They are present at meetings not for vetting or making choices, but to ask the right questions and provide a sounding board.
At one of our clients, a biopharma company, leaders contribute to ideas and solutions, while not slowing down the process, by regularly joining the review sessions of agile teams. The teams benefit from avoiding all the time-wasting formality of presentations and updates to steering committees, which have been abolished.
The peer review model leverages the wisdom of the crowd — by encouraging employees to get advice or reviews from colleagues to improve the quality of their output, without fearing the formal vetting of their supervisors.
Netflix’s employees are encouraged (and to some extent required) to “farm for dissent”, or confront colleagues with their ideas and plans. The aim is to get as much feedback and different views as possible before making the final decision. The company uses tools like “share a memo” (an employee can create a shared memo explaining the idea and inviting dozens of colleagues to leave comments electronically in the margin of the document which everyone can view); “get a rate” (or distribute a spreadsheet asking people to rate the idea on a scale of –10 to +10, with their explanations and comments, to collect insights in a structured way); and “internal roadshow” (where multiple meetings are set up to stress-test a proposal and collect opinions and data points).
Another example is Airbnb, which applies a “peer control model” to its coding process. In the past, Airbnb used to produce its code without a peer reviewed process. Instead, it did so simply with quality testing and supervisor approval. As a result, site stability deteriorated, and the time came to introduce routines for peer review.
But instead of imposing the new approach from the top down, a group of highly respected software engineers was asked to start requesting reviews. This set the example for the community of coders. The benefits of peer review were popularized and highlighted in visible meetings. Thanks to social pressure and positive reinforcement, in less than three months peer code reviews had become common practice — without a formal policy in place. Peer reviews have been particularly effective at increasing the quality of coding at Airbnb. Software engineers fear the judgment of their peers and community in assessing the quality of their work much more than a performance review from their boss.
Visibility and transparency are the key pillars of social pressure models, as the Airbnb example illustrates. For mutual trust and accountability, your colleagues should see what you do, and vice versa.
At India’s HCL Technologies, a multinational IT services and consulting company, sales account plans are posted on the company’s intranet (visible to everyone in the company), along with explanations that are recorded by the account manager in the spoken word. The plans are commented on by relevant executives, and all HCL employees can share their input too. With fully transparent plans, there is no need for formal review and control meetings. HCL leverages the power of the social control model to incentivize account managers and sales employees to perform strongly. It’s much more effective at motivating employees than even monetary rewards.
One way to make sure that trust, empowerment, and a lack of preventive authorization do not bring negative consequences is to have post-detection tracking and checking systems in place.
The power generation unit of an industrial conglomerate that we worked with is experimenting with such a model for the approval of routine investments below a certain threshold (typically investments for asset maintenance or enhancement). Employees are no longer required to submit plans to the investment committee for approval. However, they must clearly describe the rationale behind the choice. This explanation is visible to managers who, if they have any doubts, can ask for further details. Rather than authorizing every decision, the post-detection control comes later as a sort of verification, but only in case of anomalies flagged in the system.
The seven control models are not mutually exclusive and can coexist, depending on the situation. For example, in the case of the power generation unit’s investment approval, setting boundary rules (like thresholds and ranges) is complemented by social pressure (full transparency of expenses) and post-detection (supervisors can intervene randomly, or if there is an anomalous value).
But which of the seven models should you use? The main determinant is the frequency of the task or process. In general, a recurring decision fits well with quantitative boundary rules and post-detection checks. Decisions related to new ideas may benefit more from qualitative context setting, sounding board or peer review models.
Another factor to consider is the intrinsic risk of a decision (reversable decisions fit well with post-detection, while irreversible decisions may require good context setting and peer control). Consider, too, the level of automatization of the control model (simple flags that can be embedded in digital systems fit well with post-detection and boundary rules, whereas guiding principles and context setting require training and education).
But to unleash the full potential of agile organizations, companies must rethink traditional decision making and control models that create rigidity and bureaucracy, hampering the engagement of their employees. Pioneers in different industries are already paving the way for a new era of management control. It’s time for all companies that are serious about agility to seize this opportunity — and start experimenting and scaling new control models.
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