How Six Simple Rules Can Help You Cut Through Business Complexity

Our swiftly evolving economy and technological landscape have created a world of unprecedented complexity. These six simple rules help managers cut through the complexity.

As a young man, and a volunteer member of the Israeli army, I learned first hand the power of having leaders who believed in their team, gave them the vision for what they could accomplish, along with the support and encouragement they needed to believe in themselves, then got out of the way and let the group move forward to attain their goals. Those valuable leadership lessons learned through this experience have shaped my leadership style throughout my career.

The six simple rules outlined by Yves Morieux and Peter Tollman in their new book, Six SImple Rules: How to Manage Complexity without Getting Complicated, reinforce some of these very same learnings. I’m glad to be able to share an excerpt from the book with you, and hope it sparks conversation and action within your organization.

Excerpts from the Book

Smart Simplicity

The simple rules are a way for managers to break out of this doom loop and start moving beyond the hard and soft approaches in order to deal effectively with business complexity (see “The Six Simple Rules Overview” below). The primary goal is to create more value by better managing business complexity. However, as managers peel away the stitches and patches that have accumulated through the use of approaches that are obsolete in today’s world, the by-product is also the elimination of complicatedness and its attendant costs. In this respect, the six rules constitute a third revolution in management—”smart simplicity.” By helping manage complexity and remove complicatedness, the simple rules allow organizations simultaneously to improve performance and engagement. What’s more, the doom loop is transformed into a virtuous circle: better performance leads to more opportunities for people; more opportunities generate more engagement; more engagement nurtures higher aspirations and contributes to even better performance.

The rules are based on the premise that the key to managing complexity is the combination of autonomy and cooperation. These are two words people rarely think of as going together, but it is precisely the combination of the two that is required to handle complexity without complicatedness. Individual autonomy harnesses people’s flexibility and agility; meanwhile, cooperation brings synergy so that everyone’s efforts are multiplied in the most effective way for the group.

The purpose of the simple rules is to create situations in which each person’s autonomy—in using judgment and energy—is made more effective by the rest of the group, and in which people put their autonomy in the service of the group. The rules are designed to create an organizational context in which cooperation becomes the best choice for each individual. In other words, these rules help organize and manage in a way that makes cooperation an individually useful behavior—a “rational strategy”—for people. The simple rules do not aim at controlling employees by imposing formal guidelines and processes; rather, they create an environment in which employees work together to develop creative solutions to complex challenges. The cooperation achieved thanks to the simple rules is such that, at any time, people are mutually advantaged and impelled by others to come up with the right solutions to deal with performance requirements, even if what is right cannot be specified in advance. Simplifying in a naive way—by ignoring or discarding business complexity—is a dead end. You have to be smart and play on people’s smartness. You have to recognize business complexity and simplify in a way that leverages people’s intelligence and judgment. The combination of autonomy and cooperation allows you to do this.

Why not fewer than six rules? We know that the six rules cannot be boiled down to fewer rules because no rule can be deducted from the five others. None of the six rules is superfluous. Vice versa, we have never encountered a situation in which the solution would not be a combination of some of the six rules. It is not necessary to add another rule. Together the six rules constitute a minimum sufficient set to confront complexity.

The first three rules are designed to give people an advantage in the way they mobilize their intelligence and energy at work by providing them with relevant knowledge, room for maneuver, power, and the resource of cooperation. The first simple rule is about understanding what people do and why they do it. The second rule is about the utilization of power to foster cooperation. The third rule is about the production of power. These first three rules create the conditions for individual autonomy so that its effectiveness can be multiplied through cooperation from others.

Simple rules four, five, and six are designed to impel people to confront complexity and to use their autonomy to cooperate with others, by embedding feedback loops that expose them as directly as possible to the consequences of their actions, without the need for extra supervision and structure or for the bureaucracy of compliance metrics and incentives. The fourth and fifth rules create direct feedback loops that are intrinsically embedded into work processes and activities. The direct feedback loops created by the fourth rule are based on interdependencies— space, so to speak. The feedback loops of the fifth rule are based on time, directly gratifying or penalizing people depending on how well they do today for tomorrow. When work processes do not allow for direct feedback loops, management intervention is needed as a last resort to close them, through evaluation. This is the role of the sixth rule.

In summary, the first three rules use the group effect to give people’s autonomy an advantage in best using their energy and judgment, while the last three rules impel people to put their autonomy in the best service of the group. Whenever people apply their full energy and intelligence to the greater range of possible solutions that arises from cooperation, they are bound to reach superior solutions to those predefined or hard-wired in procedures and structures and to the loose compromises of collaboration within informal, consensus-seeking groups.

By calling the rules “simple,” we don’t mean to imply that they are necessarily easy to put into practice. Using them requires managers to think differently and work differently. Nor do we mean that managers should pursue simplification as a goal in itself. What we do mean, however, is that these rules allow executives to create competitive advantage by exploiting complexity without getting complicated.

The Six Simple Rules Overview

1. Understand what your people do. This rule is about getting a true understanding of performance—what people actually do and why they do it—and avoiding the smokescreen of the hard and soft approaches. With this understanding, you can then use the other simple rules to intervene.

2. Reinforce integrators. This rule involves giving to units and individuals the power and interest to foster cooperation; integrators, when reinforced, allow each one to benefit from the cooperation of others.

3. Increase the total quantity of power. This rule shows how to create new power—not just shift existing power—so that the organization is able to effectively mobilize people to satisfy the multiple performance requirements of complexity.

4. Increase reciprocity. This rule and rules five and six shift from creating the conditions for effective autonomy to ensuring that people put their autonomy in the service of the group to deal with complexity; rule four achieves this through rich objectives, the elimination of internal monopolies, and the removal of some resources.

5. Extend the shadow of the future. This rule harnesses the natural power of time—rather than the use of supervision, metrics, and incentives—to create direct feedback loops that impel people to do their own work today in a way that also contributes to the satisfaction of performance requirements that matter in the future.

6. Reward those who cooperate. This rule radically changes the managerial dialogue—covering the entire spectrum from target setting to evaluation—in a way that makes transparency, innovation, and ambitious aspirations become the best choice for individuals and teams.

The Scientific Basis of the Six Simple Rules

The six rules are based on fundamental developments in the social sciences that can be traced back to the work of Herbert Simon and Thomas Schelling. Simon received the Nobel Prize in 1978 for his study of decision making, and Schelling in 2005 for his game- theoretic work on conflicts and cooperation. Simon’s research brought a radically new perspective on cognitive processes, how the individual decides and acts, while Schelling’s helped us better understand interactions between individuals and the effect of these interactions on overall results, which can be very different from their individual intent. Other important intellectual con- tributors are Michel Crozier and Robert Axelrod. Crozier started his career by studying labor movements in the United States after World War II and then created a new approach called the strategic analysis of organizations. Axelrod is a political scientist who has helped us better understand cooperation as an evolutionary process and also coined concepts we have used to name some of the simple rules.

These developments have led to a variety of new perspectives on organizations and to useful insights about human behavior that are extremely relevant to how organizations manage complexity. For example:

• Human behavior is strategic. People adapt to their environment strategically (in the sense that game theory uses the term) in order to fulfill certain objectives or goals. They may be more or less conscious of those goals, but the goals can be identified by studying carefully how they act. In this respect, human behavior can always be analyzed as a rational strategy in an individual’s context; there are always “good reasons” (in the sense of reasons with explanatory power) for how people behave.
• Formal rules and procedures don’t have a predetermined effect on people’s behavior. Rather, people actively interpret rules and use them as a resource to fulfill their goals. What matters are not the rules, but the ways people use them.
• Cooperation isn’t just some taken-for-granted value or goal (the desire that people “work together as a team”). It is a complex social process, hard to create and easy to destroy. Organizations have to create the right context for cooperation.
• Power isn’t a necessary evil or source of coercion. It is a critical resource for the individual in organizations and for mobilizing collective action.

These concepts are the basis on which the six rules operate and why these rules work, especially given the complexity that is making all traditional hard and soft management approaches obsolete. Our focus with the six simple rules has been on making these concepts actionable—that is, to help managers to use them in their day-to-day work running business organizations. You can think of the six simple rules as guidelines for practice. Because all performance issues arise from people’s actions, deci- sions, and interactions—what we call behaviors in this book— the six rules provide the basis for tackling the whole lineup of organizational challenges, including productivity, innovation, growth, and cultural transformation.

The above is reprinted by permission of Harvard Business Review Press. Excerpted from Six Simple Rules: How to Manage Complexity without Getting Complicated. Copyright 2014 The Boston Consulting Group, Inc. All rights reserved.

How Do You Manage Business Complexity?

Have you set any of these rules in motion in your organization? Share your tips on managing organizational complexity in the comments.