This site is in beta. Tell us what you think.
Chapter 2 | Principles Guidebook

How Principles Work

Principles translate mission, culture, and strategy into daily decisions and actions.

They replace processes that control behavior with guidelines that empower decision-making in context.

They tell people how to choose actions that advance your Shared Purpose, put values into practice, and move toward goals together.

Principles can provide guidance that is more subjective and situational than rules, policies, and procedures that are set in stone.

Managing by principles

Leading through principles over process changes your role as a business leader.

In a hierarchy, your main job as a leader is to manage people and processes.

You decide on the process, assign roles, and delegate authority. You determine what the people who report to you can manage themselves and what they have to ask permission to do. And when someone exceeds their authority, you decide how to handle it—and what penalties to impose.

In a more networked style of management, you empower the people beneath you to make their own choices based on purpose and principles.

When an issue gets escalated to you, your job is not to make a decision and give orders. Leaders in a networked organization take every opportunity to explain how and why they're making a “fork in the road" decision, so people can manage similar situations independently in the future.

In other words, instead of telling people what to do, your goal is to lead by giving them the clarity to decide on their own what to do.

Principles for aligned decisions

Principles translate purpose, mission, culture and strategy into daily decisions and actions.

Most organizations have a mission, values, goals, and strategies to tell people where the company is going. They also have rules, processes, policies, and procedures that tell people what to do. Some even have identified a Shared Purpose that expresses what they’re co-creating in the world.

Principles are the missing middle layer in most organizations— one that tells people how to make decisions that advance the purpose, put values into practice and move the organization toward its goals.

Translate values and goals into action

Principles are especially useful when there's a “fork in the road”—a situation where values and goals aren’t enough to tell you what to do.

It's important to be clear on the relationship between principles, values and goals:

  • Values are what’s important to you.
  • Goals are what you want to see in the world.
  • Principles help you make decisions in alignment with your values and goals.

For example, “frugality” is a value, “save money” is a goal, and “spend others’ money like your own” is a principle.

You don’t need principles in a situation where there’s an obvious choice, like an equipment purchase where one product delivers a higher return on investment than the alternatives.

However, when you face two or more choices that are equally consistent with your values and goals, a well-crafted principle empowers you to make the best decision between them.

EXAMPLE

Principles at Google

Google’s Nine Principles of Innovation help clarify the distinction between principles and values.

One of the Nine Principles is “Default to open processes.” If this were a value, it might be phrased as “Be open,” but that’s so broad that it’s not really helpful for informing decisions.

This Principle makes it clear that Google prefers open processes, while giving employees the flexibility to decide when a closed process is necessary or appropriate. It encourages them to leave a process open unless they have a good reason (like privacy or security) to close it. Google also expands on their core value of innovation with the Principle “ship and iterate.”

This Principle acknowledges that given what Google does, there’s no such thing as perfect. Instead, the entire company aligns around the idea of getting products out the door as soon as they’re good enough, then continuing to work on them while gathering feedback.

At the same time, “Ship and iterate” also gives employees the autonomy to decide for themselves when a product is ready to ship, how quickly to iterate and how incremental each iteration should be.

EXERCISE

Turn values into outcomes

One challenge in making values into principles is that it can be hard to envision what they look like in action. Use this worksheet to translate your values into outcomes, so you can get a clearer idea of what your principles will need to achieve. For each of your core values, think of an outcome that exemplifies what that value is supposed to accomplish.

Prioritize what’s important

Where values and goals compete, priorities help force a choice.

Often two or more of an organization’s values or goals are in tension with each other.

Some examples of goals in tension are profit vs. purpose, or total revenue vs. profitability. If you have to choose, which should you prioritize?

As uncomfortable as it may feel to choose between two core values or goals, hard decisions often require this kind of thinking.

Principles can help inform a choice between competing goals—or provide guidance on how to achieve both.

EXAMPLE

Agile

In the late 90s, software developers were struggling with competing goals in their projects, such as a desire to ship working software quickly vs. having a perfect product to ship. The agile software movement was born from those dilemmas, and in 2001 the Manifesto for Agile Software Development was published. It is a great example of how concise a set of principles can be while giving enough guidance to be useful and still leaving plenty of room for interpretation and innovation.

Instead of saying “Do X, not Y,” the Agile principles say, “Y is valuable, so don’t ignore it, but X is more important, and here's why.”

By codifying this level of flexibility while still setting out fundamentals, a highly distributed Agile community was able to collaborate on key development methodologies and create a distinct culture of innovation that is still going strong over 20 years later.

Exercise

Prioritize values & goals

Use this exercise to practice creating principles that prioritize values and goals. Begin by identifying a context where values or goals are often in tension with each other. Next, see if you can rank the two competing values or goals to represent the choice you would usually make between them.

Nested Principles

Nested principles are context-dependent versions of a core principle when applied to narrower use cases or specific groups.

Values may apply equally everywhere across an organization, but some decisions apply to everyone, while others are only relevant in certain contexts, departments, or roles.

Nested principles handle decisions that need to be made differently in different contexts.

For example:

  • Amazon’s fundamental principle of “customer obsession” means different things for Product Development, Marketing and Customer Service.
  • Wikipedia has specific principles for authors that align with, but are more detailed than, the more general Five Pillars.
  • The Agile movement has core principles that apply universally, and specific principles for methodologies like Kanban and scrum.

Example

Nested principles

One global Fortune 500 company shifting from a hierarchical to a more networked structure developed an outer envelope of principles for the entire organization, such as “Stay lean to go fast,” “Learn and adapt to win” and “Customers determine our success.”

Within each of those principles were more granular ones, including “Seek and trust the truth,” “Resolve conflict with empathy and transparency” and “Maintain focus and agility in the face of uncertainty.”

And nested within those were specific principles for every function, region and business unit in the company. Here are a few examples:

Corporate Communications used the principle “The ‘why’ with the ‘what’” to ensure that employees understood why the company is making a particular decision and how that supports business goals.

Marketing adopted “We are the advocate for the customer” as a reminder that executing a marketing campaign is just a means to the end of responding to and meeting customer needs.

Manufacturing and Sales aligned around “Allocate votes proportional to risk” to settle the ongoing power struggle between Sales (which wanted to maximize customization to increase sales) and Manufacturing (which wanted to minimize customization to make production easier).

To apply this principle, each department assesses its own risk for customizing vs. not customizing and votes to arrive at a decision. The manager only gets called in if they need more information to assess the risk, not to weigh in on the final decision.

Example

Nested principles

When shifting from a hierarchical to a more networked structure, GE developed an outer envelope of principles for the entire organization, such as “Stay lean to go fast,” “Learn and adapt to win” and “Customers determine our success.”

Within each of those principles were more granular ones, including “Seek and trust the truth,” “Resolve conflict with empathy and transparency” and “Maintain focus and agility in the face of uncertainty.”

And nested within those were specific principles for every function, region and business unit in the company. Here are a few examples:

Corporate Communications used the principle “The ‘why’ with the ‘what’” to ensure that employees understood why the company is making a particular decision and how that supports business goals.

Marketing adopted “We are the advocate for the customer” as a reminder that executing a marketing campaign is just a means to the end of responding to and meeting customer needs.

Manufacturing and Sales aligned around “Allocate votes proportional to risk” to settle the ongoing power struggle between Sales (which wanted to maximize customization to increase sales) and Manufacturing (which wanted to minimize customization to make production easier).

To apply this principle, each department assesses its own risk for customizing vs. not customizing and votes to arrive at a decision. The manager only gets called in if they need more information to assess the risk, not to weigh in on the final decision.

Recap

  • Leading through principles over process changes your role as a business leader.
  • Principles translate mission, culture and strategy into daily decisions and actions.
  • What creates a dilemma—a “fork in the road”—is when values and goals aren’t enough to tell you what to do.
  • Where values and goals compete, principles help you choose between them.
  • Nested principles are context-dependent subsets that apply to progressively smaller groups of people.