Operating Principles Help Employees Make Good Decisions

In my last article, I talked about company values (at length). If you haven’t read that article first, I highly suggest you go back and do so. In that same article, I promised I would continue the series by explaining company operating principles and OKRs next. How are they different from company values? How should you set them? And when should you set them?

As a reminder, this is the TL;DR we’ll be working off of:

Company values = who you hire, reward, and fire

Operating principles = Given left or right, how do you pick? 

OKRs = What is our current theory of success?

What are operating principles?

If company values are all about the people in your organization and how you choose them, operating principles are about equipping those employees with equations that take in problems on one end and output good decisions on the other side. 

In business, there are often many competing priorities and multiple good ideas at the same time. Often the hardest decision at work is what to work on with the limited time and resources we have. For example, pretend you have an early-stage sales team on your hands. Some sellers are killing it, while other, more junior salesfolks are still struggling due to a lack of resources and learning materials you can provide them. Should your top sellers focus their time more on closing more deals or coaching the more junior sales members? Well, it's a trick question, unfortunately. Both options are equally good and the answer depends on many more factors than what were listed here. That said, without guidance, some top sellers may choose option A and others option B. This is why you need operating principles. 

As a founder, you probably have your own way of thinking through that problem, experiences you are drawing on, and a gut instinct for what is better. But the problem is that all of that is trapped in your own head and only available to other employees if they find the time in your busy schedule to stop you and ask you for your opinion on the problem. If you think of your brain as a machine that takes in problems + data and outputs decisions, then operating principles are the way we take that machine out of your head and make it available to everyone in the company. 

How to set operating principles

First off, the number one thing operating principles must do is solve problems. If you are not feeling the pain of the team making decisions that you wouldn’t make as a founder, there is no need for operating principles. Don’t make the mistake of setting principles just for the sake of having them. Employees should feel relieved to be given these pieces of guidance as they should be feeling lost without them right now. If instead employees react with dismay for yet more processes they need to follow, you’ve missed the mark and need to focus elsewhere instead.

Now that you’ve recognized a real source of frustration for the team, it’s time to start the investigation process. Go back in time and find the last 3-5 times the team made a decision you wouldn’t have made around this problem. Talk to people. Ask why they made the decisions they did in a blameless way. What data were they looking at, and what pressures were they feeling at the time? Now create your “gap analysis” – what were you thinking / feeling / prioritizing that was different from your team? Okay, now turn that gap into a pithy phrase that is easy to understand and remember.

Going back to our previous example about the sales team, if you want your top sellers to focus on selling rather than coaching, a principle could be:

Your number is your job: At the end of the day, we’re a team, not a family. Every team member must be a top scoring striker to stay on the team.

If instead you want your top sellers to spend more of their time coaching, you could set a principle like:

Coach to win: We can only move as fast as our slowest member. Coach and lift up the team members around you so that we can win together.

Both are fine principles. Pick the one that makes sense for your own business and requirements. 

How long should operating principles last?

While company values should not change very often (years), it's okay to re-examine your operating principles every year. What is still important for your business? What has changed? What is still useful for employees vs what has just become overhead? Finally, the thing to look out for is when operating principles get hijacked for political purposes. Are employees using principles as air cover for mistakes or bad behavior? Operating principles are the most likely tool to be "weaponized" against one another. 

Finally, what about OKRs?

We’ll handle OKRs with the last article in the series here. Tune in next week!