Why Simple Rules Produce Better Decisions

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Defining simple rules

“Chains of habits are too light to be felt until they are too heavy to be broken.”

[Warren Buffet]

As our world has become more complex, so have our attempts to manage it by trying to predict ahead of time every possible scenario. Little by little, we have gotten into the habit of upping the ante on complexity with more complexity.

The habit is felt more strongly inside organizations where regulations and procedures can keep building on top of each other unchecked to unmanageable proportions. The tax code is a good example of this.

Instead of trying to cover all bases, say Donald Sull and Kathleen Eisenhardt in Simple Rules: How to Thrive in a Complex World, we should use a small set of simple rules — “shortcut strategies that save time and effort by focusing our attention and simplifying the way we process information.”

The authors’ definition of strategy thus is:

Strategy, in our view, lives in the simple rules that guide an organization’s most important activities.

Simple rules are those rules that are fundamental to achieving successful outcomes.

Why do simple rules work?

Because they do three things well. They:

  • confer flexibility to pursue new opportunities while maintaining some consistency
  • can produce better decisions — when information is limited and time is short, simple rules make it fast and easy for people, organizations, and governments to make sound choices
  • allow the members of a community to synchronize their activities with one another on the fly — as a result, communities can do things that would be impossible for their individual members to achieve on their own

What are the common traits of simple rules?

 1. they are limited to a handful — to maintain the focus on what matters most and be memorable

2. they are tailored to the person or organization using them — for example, a nutrition program designed to lose weight is different from one used for athletic performance

3. they apply to a well-defined activity or decision — trying to cover all bases injects vagueness and dilutes their impact

4. they provide clear guidance while conferring the latitude to exercise discretion — so that we can exercise judgement

To sum it up, simple rules:

refers to a handful of guidelines tailored to the user and task at hand, which balance concrete guidance with the freedom to exercise judgement.

If simple rules help solve complex problems, why aren’t they more common? First among the reasons is that simplicity requires time and effort to achieve. As Blaise Pascal wrote, “I have made this letter longer than usual, only because I have not had the time to make it shorter.”

The first obstacle is the effort required to develop simple rules. Like most worthwhile endeavors, it takes time and energy to get them right. The process of developing simple rules requires ruthless prioritization — honing in on the essential and decluttering the peripheral.

[…]

When explaining how he led Apple’s resurgence from near bankruptcy, Steve Jobs emphasized the power of simplicity. “You have to work hard to get your thinking clear to make it simple,” Jobs said. “But it is worth it in the end because once you get there you can move mountains.”

[…]

The third obstacle to simplicity is what we call the “myth of requisite complexity,” the mistaken belief that complex problems demand complicated solutions.

We rarely challenge that assumption because we forego expanding our options. One of those options is trust in human nature. Many organizations, for example, create and maintain detailed human resources policies that create “this is the way we do things here” type environments. Often, they go unchallenged for years.

After studying their human resources policies, executives at Netflix determined that 97 percent of their employees where trustworthy. Nearly all of the company’s time writing, monitoring, and enforcing detailed personnel policies was directed at the remaining 3 percent.

Rather than continue to produce binders of detailed regulations, Netflix executives concentrated on not hiring people who would cause problems, and removing them quickly when hiring mistakes were made. This change allowed the company to replace thick manuals with simple rules.

The company’s policy for expenses, travel, gifts, and conducting personal business at work, for example, was reduced to four rules: (1) expense what you would not otherwise spend, (2) travel as if it were your own money, (3) disclose nontrivial gifts from vendors, and (4) do personal stuff at work when it is inefficient not to.

Rather than counter complexity with complexity of our own making, we should seek to sharpen the quality of our thinking and our decision-making ability.

The process to craft simple rules starts with understanding what moves the needles and identifying the bottleneck. Testing and refining through use help improve the rules by adapting them to new conditions.

 


Conversation Agent – Valeria Maltoni

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