"Folly" exists everywhere in organizations.
I particularly remember some "people who tell lies that are immediately exposed." You could even call it a "pathological lying habit."
For example, it goes like this:
・"Report the number of customer visits." → "I've cleared the target value." (A cross-check revealed it was a false number)
・"Did you get the contract?" → "I got the purchase order!" (It was a forgery)
・"How were the survey results?" → "90% satisfaction!" (In reality, they were hiding bad surveys)
These are things I have actually seen, but there were more than a few people in organizations who would tell makeshift lies for self-preservation.
However, lies are quickly exposed.
If performance is significantly inferior, customer complaints come in, or you accompany them on a visit, it immediately becomes a conversation of "This isn't what you said."
The Result of Creating Rules and Systems to Match the "Troublemakers"
But these incidents are not just the individual's problem. The "responsibility of the management side" is also questioned.
And "conscientious people" say:
"The system that induces fraud and false reporting is bad," or
"Humans make mistakes, so design business operations based on that premise."
Of course, these are valid points.
Therefore, rules and systems are created to match the "troublemakers."
Things like "systematization."
"Thorough reporting."
"Double checks."
"Cross-checking."
"Approval processes."
In this way, "rules" and "constraints" multiply.
Even though they only account for a tiny percentage, because rules and systems are made to match the "troublemakers," the rules proliferate.
Thus, "organizational operating costs" skyrocket as the organization grows larger, and eventually, a "rigid, inflexible organization" is created.
This is the birth of "big company disease."
Of course, "rules" are not inherently bad.
In organizations where deviations can involve human lives and "safety first, no mistakes" is the top priority, rules must be strict.
However, in organizations where being innovative is important, an increase in rules is nothing but a shackle.
Is it possible to prevent "folly" while keeping rules to a minimum?
Netflix: The "Rule-Free Organization"
One answer can be found in the book "No Rules: Netflix and the Culture of Reinvention," written by founder Reed Hastings, which describes the detailed internal workings of Netflix.
NO RULES: Netflix and the Culture of Reinvention (Nikkei Publishing)
According to this, Netflix has abolished "rules that bind employees" to the extreme.
There are no vacation policies, and no approval processes for travel expenses or reimbursements.
Information, including HR data, is always shared openly, and there are no approval processes for decision-making.
When an employee starts a new initiative, as long as they report it, they don't need their boss's permission at all. (In other words, "do it freely.")
It is truly "No Rules."
Especially regarding information sharing, they are thorough about sharing all of the following:
・Performance and financial information
・Organizational restructuring information
・Employee dismissals
・The failures of everyone's challenges
Netflix demands the best work from its employees above all else and provides "maximum freedom."
The "Price of Freedom" Netflix Demands from Employees
But there is a price to pay for "No Rules."
That is "thoughtfulness" and "responsibility for results."
Netflix is based on the premise that employees possess excellent judgment. (...) And they believe that judgment, not process, is the key to solving problems without clear answers. But on the flip side, (...) employees are expected to produce incredibly high levels of results. If they can't, they are quickly shown the exit (with a generous severance package).
Therefore, Netflix has no "rules," but rather "slogans" and "norms" that serve as criteria for judgment.
For example, regarding communication:
Netflix employees are required to:
"Speak up candidly with dissenting opinions"
"Point out poor performance"
But that doesn't mean being rude.
As evidence, Netflix has the slogan: "Only say things about someone that you would say to their face."
This requires high-level communication skills. It's stressful for anyone to be pointed out. But the pointing out must be done. So employees are told to "do it well."
Or regarding "expenses":
Netflix has the following norm for expenses:
"Act in Netflix's best interest."
So, what constitutes acting in "Netflix's" best interest? There are no clear rules.
They are told, "You judge responsibly," as follows:
Before you buy something, imagine yourself explaining to me or your direct supervisor why you decided to buy that plane ticket, hotel, or smartphone. If you feel you can proudly explain that the expenditure was the best choice for the company, you don't need to ask your boss. Just go ahead and buy it. But if you feel awkward explaining your choice, stop the purchase and consult your boss, or buy something cheaper. (Source: NO RULES: Netflix and the Culture of Reinvention)
Of course, even with norms, there are people who abuse freedom at Netflix.
In fact, in 2014, a content acquisition director reportedly downloaded a large amount of confidential data and took it to a rival company they were moving to. Netflix had to invest significant resources into litigation.
But they say they won't overreact and increase rules because of that.
Conditions for Trusting Employees' "Judgment"
In other words, when you can sufficiently trust the judgment of employees, it becomes possible to operate an organization without "binding them with rules."
That is to say, it is impossible unless the following three conditions are met, where the "responsibility to judge" can be placed on the members of the organization:
・The members' abilities are sufficiently high
・They are receiving sufficient compensation
・The norms are sufficiently permeated
This is Netflix's conclusion.
However, I have a slightly different view.
It was 30 years ago, but the junior and senior high school I attended had no "school rules" at all.
True No Rules. What happens when you give children such "freedom"?
Of course, there are students who abuse it and deviate.
Guys smoking on the roof, guys eating lunch during class, guys playing mahjong in the classroom, guys who picked up a refrigerator from the trash dump and set it up in the classroom to use, and some who even got in trouble with the police.
In the first place, it was free to attend class or skip it.
Because of that, there were guys who didn't study at all and whose grades hit rock bottom. (I am ashamed to say I was one of them.)
But most of them became decent adults.
Perhaps the teachers were watching us without us knowing, so that we wouldn't make a "true deviation."
And above all, I think the teachers "trusted" us, even after we messed up in various ways.
Social psychologist Toshio Yamagishi, in his book "From a Society of Security to a Society of Trust," defines it as:
・What you get by binding the other party with rules or the possibility of retaliation is "security." ・"Trust" is accepting the other party in the midst of uncertainty, placing weight on their humanity.
He also reports research results that "the more a person strongly trusts others, the more carefully they are watching them."
From a Society of Security to a Society of Trust: The Future of the Japanese System (Chuko Shinsho)
In other words, trust is something born from "interest and concern for the other party," not from rules.
Certainly, "No Rules" works at Netflix and at the school I was at because it takes a lot of effort, but strong interest and concern are poured into the members.
So, isn't the fundamental problem with "troublemakers" that no one is paying attention to them?
It's natural for people who feel ignored to act without considering the interests of the organization or the nuisance to those around them.
Therefore,
Instead of trying to stop "folly" only through control measures such as:
"Strengthening rules"
"Introducing systems"
Building a mutual relationship of trust with them by strengthening interest and concern for them.
I think that is the essence of "reducing rules."
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