Disruption Reflections – Rules Matter

If COVID 19 has proved anything to me is that in crisis we as a society are lost without rules. In their absence, anarchy reigns and best interests are misconstrued. It is why many have asked for extreme rules (like lockdowns) to be applied because half measures (ie <100 people indoors, 2*2 metres between tables) cause fear, avoidance and misinterpretation. Restaurants and cafes were placed in a parlous scenario where people were encouraged to support local business at the same time as being told to ‘social distance’. Accordingly, owners were forced to pay staff knowing that consumers were too scared to enter. Owners preferred to be in a ‘coma’ than to die by a thousand cuts. Consistent communication is critical in times of crisis and ‘shocking’ rules can enable the understanding.

Ben Horowitz, the high-profile venture capitalist behind some of Silicon Valley’s fastest-growing startups, is out with an intriguing book, called What You Do Is Who You Are, that emphasizes the power of culture, rather than technology or money, as a driver of business success. One of his most intriguing insights is that powerful cultures are built around what he calls “shocking rules” — rituals and practices that are memorable, so “bizarre,” that people inside the organization “encounter almost daily” and that people who hear about them wonder why they are necessary.

Horowitz’s argument is as simple as it is powerful: You can’t create something unique and compelling in the marketplace unless you first create something unique and compelling in the workplace. Truly great organizations work as distinctively as they hope to compete.

That’s why Tom Coughlin — head coach of the New York Giants from 2004 to 2015, whose fanatical attention to detail on the field helped his team win two Super Bowls — insisted that his players arrive at meetings five minutes before the scheduled start time. If they arrived on time, they were officially considered late and subject to a fine. It was called “Coughlin Time,” and it set the rhythm for the whole organization.

It’s also why Jeff Bezos insisted for years — even as Amazon was growing by leaps and bounds — that desks at the company “were built by buying cheap doors from Home Depot and nailing legs to them.” Of course, a company with tens of thousands of employees and billions of dollars in revenue could pay for elegant desks for its programmers and executives. But this shocking rule reminded everyone that “We look for every opportunity to save money so we can deliver the best products for the lowest cost.”

The moment I encountered Horowitz’s argument in support of shocking rules, I realized that it explained so many of the fascinating, colorful, one-of-a-kind practices at so many of the high-performing organizations I’ve studied.

Detroit-based Quicken Loans, the hard-charging financial-services company that began as a digital disruptor, is now the largest originator of home mortgages in the USA. Its culture is obsessed with a non-negotiable rule: Every customer phone call or email must be returned on the same day it is received — even if it arrives minutes before an employee is about to leave. “We are zealots about this,” Dan Gilbert, the company’s founder, told new hires at a training session:“We are on the lunatic fringe.”

In fact, Gilbert gave every person at the meeting — literally hundreds of them — his direct-dial extension and told them: “If you’re too busy to” return a customer voice mail, “I’ll do it for you.” Why such fierce attention to this rule? Because one of the key competitive principles at Quicken Loans is that “a sense of urgency is the ante to play,” and this rule brings that sense of urgency to life. It’s Dan Gilbert’s version of Coughlin Time.

Shocking rules emanate in the colorful (and highly successful) world of Cranium, the Seattle-based maker of board games that reinvigorated a tired category of family entertainment and produced some of the most iconic titles of the last several decades. Everywhere one goes — everyone would question whether a particular product, or process, or meeting was CHIFF.

What’s CHIFF? It stands for clever, high quality, innovative, friendly, and fun, and it was an ethos that was meant to infuse every aspect of how the company did business — from its games to its hiring process to its meetings to how the offices were designed.

Importantly, CHIFF was more than an abstract ethos. In the company, a senior executive has a formal title “CHIFF champion.” Her job is to examine every ritual, practice, and process at the company and make sure it lives up to CHIFF standards. Moreover, employees have the right to question and object to any part of organizational life that they believed fell short of the standard. “This doesn’t feel CHIFF,” they’d say, or, “Can’t we make this more CHIFF?”

And they have an expression, which they have been reciting for decades, to capture what makes their culture so distinct: “From the outside looking in, you can’t understand it. From the inside looking out, you can’t explain it.”

That’s a neat way to capture the power of culture in organizations from all sorts of fields: To build something distinctive in the marketplace, you first have to build something distinctive in the workplace. It also speaks to the role of “shocking rules” as a building block of a powerful culture. In other words, if you’re doing things at your company that outsiders can’t quite understand, you may just be doing it right.

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