BUSINESS & IT

5 Simple Rules for Easy Management Decisions

They can cover almost every decision-making.

Introduction: simple rules as a management principle

My last article was about simple rules and how they can be used in a management environment. The takeaways were:

• Many companies respond to uncertainty with complex sets of rules rather than simplification
• Simple Rules or heuristics are shortcuts in thinking
• Simple Rules provide good solutions, especially in uncertain situations
• Complex rules and inflexible project management can hinder companies
• Five Simple Rules cover the most important decisions in a management context
• Simple Rules form the basis for agile models.

This article describes the five simple rules covering the most important decisions in a management context.

Break Through Complex Rules With Simple Rules

Simple rules work quickly, require little information, and are easy to understand.

They are also robust and usable in many situations. Simple Rules can replace complex sets of rules if employees know when they apply.

Example: There is a requirement to always use the latest machines. But the newer version of an existing machine constantly breaks down.

This could be avoided with the following simple rule: “If there is a production bottleneck, find and fix the bottleneck by all means!”

This way, employees know that they can choose to deviate from the rule to use the latest machines if production is hindered.

1 — Boundary Rules

Boundary rules help make either-or decisions and select the best from several options.

Example: With boundary rules, you can use clear principles to decide whether a product is developed using traditional or agile project management.

2 — How-to-Rules

How-to rules give simple instructions on how to do something.

Example: When a customer reaches the $1 billion revenue mark, give them a discount of 30%.

3 — Prioritizing Rules

They help rank multiple choices.

Example: If two job candidates are equally qualified, a simple rule could help to choose. Hire a candidate, who is recommended by a current employee.

4 — Timing Rules

This simple rule allows ranking by order, such as a sequence, tempo, or rhythm.

Example: Which customer groups do you target in which order? How quickly are customer actions launched one after the other?

5 — Stopping Rules

Rules of thumb that define:

• the withdrawal from a transaction or
• the revision of an earlier decision.

Such rules prevent the so-called Icarus effect. This says successful companies suddenly fail because they react too late to changing environmental conditions.

Summary

In the management context, five simple rules are basically possible. These help with different types of decision-making.

“Simple Rules are fast, economical, transparent and robust.”

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