Typically, during their initial phases, businesses tend to be exceptionally creative with minimal rules or low rule density. Their guiding principles might encompass aspects like prioritizing customer satisfaction, and encapsulating the essence of their operations.
This makes sense in these early days because the goal is to do everything possible to survive.
As companies scale, rules and bureaucracy come into play to keep things organized. The catch is that entrepreneurs tend to hate rules–which is why most organizations find themselves at a crossroads if they continue to scale.
But the secret to long-term success for organizations is to find ways to instill some rule density while embracing creativity.
Finding a balance
There has been a lot of research on the concept of complex adaptive systems. These systems that can adapt and evolve embrace both rules and creativity.
Think about it: there are areas in every organization where rules make sense. You need stability and predictability, like making monthly payrolls and ensuring books are accurate. That’s why departments like HR, accounting, and even operations rely heavily on rules. In the complex system of a human being, the comparison might be things that need to happen all the time and automatically, like breathing.
But we also know what happens when rules dominate everything: it squeezes out the creativity that is vital for the organization to move ahead innovatively. The hard can push out the soft.
For example, if you want your marketing team to develop creative and innovative campaigns for your products and services, you can’t load them up with rules. The same goes for product development. You want them to think far less about following the rules and more about breaking them in search of new ideas.
The goal, therefore, is to find that balance where your organization can adapt and grow.
The role of the leader
As a leader, you should strike that balance between rules and creativity. And it’s that zone where opposing forces meet and conflict often occurs.
You can imagine a scenario where your sales team is chasing a big $20 million deal, and they neglected to file their expense report on time–which infuriates the accounting team. What do you do? Which is more critical in this scenario: the sales team chasing the big deal or following the rules when it comes to expense reports?
Another example: When I was running an early-stage company that was scaling fast, one of my administrative leaders devised a plan to write a 50-page employee handbook with rules defining everything everyone had to do in the company.
But I saw this kind of project as a slippery slope to becoming a rules-based business at a time when we were trying to adapt and survive. So I nixed the employee handbook project in favor of a much simpler concept: our one rule was that every employee was expected to “Behave like an adult professional.” That’s it. Simple, and it provided a tremendous guiding principle for us as we continued to grow and scale the business over the next few years. I knew that eventually, we would need to add rules as the organization scaled, but that would happen after we had refined and grown the business.
The trick, again, is balance. Low rule density when you are seeking innovation, and higher rule density when you are looking for predictability.
Adapting to the future
Every organization will face this conflict between following rules and breaking the rules in search of creativity and innovation. And the truth is, you need both. But the laws of nature tend to lead to the hard rules pushing out the soft creative ones over time. Don’t let it happen in your organization. When too many rules creep into your organization, you risk losing your ability to adapt to the future.
