There is no denying that rules and regulations play an integral part in the behaviour of individuals at the workplace. Although rules provide fairness and consistency, an overload can impede the process and prevent employees from being proactive, which is not a good sign for an organisation.
According to Natasha Hamilton-Hart, Professor in the Department of Management and International Business at the University of Auckland Business School, rules may turn detrimental when they hinder one’s ability to perform effectively. Even though they are supposed to regulate power and provide control, rules do not always lead to people being accountable for their actions. Therefore, Natasha claims that the solution is to have more authority within the organisation, which enables individuals to make decisions, and delete those rules that are unnecessary. Too many rules are an issue in many organisations as they prevent them from making progress and hamper leaders’ actions. With no authority, it is even harder for leaders to work with people and evaluate their performance.
Professor Natasha Hamilton-Hart has extensively published on governance systems in Southeast Asia, focusing on state institutions and property rights. Her current research explores the relationship between the economics-security nexus in East Asia, as well as the role of hierarchy, which she wrote about extensively in her recently released book ’Stupid Rules: Reducing Red Tape and Making Organisations More Effective and Accountable’ (Agenda Publishing). Natasha earned her PhD from Cornell University and has previously held positions at the Australian National University and the National University of Singapore.
In an exclusive interview with International Finance, Professor Natasha Hamilton-Hart discusses the negative impact of too many rules on organisational effectiveness, claiming that accountability is better achieved through proper delegation of authority. She stresses how rules-based organisations tend to discourage decision-making, inhibit leadership, and impede progress, accentuating the importance of hierarchical empowerment, which allows people to make decisions and remove bureaucratic barriers.
In your book ’Stupid Rules: Reducing Red Tape and Making Organisations More Effective and Accountable’, you argue that some rules reduce productivity. What led you to question rule-heavy systems in the first place?
I returned to New Zealand after many years working in Singapore, and found processes surprisingly cumbersome. I had far less control over several aspects of my work, and the rule book was much longer. I then noticed that much of the country seemed to be ’stuck’, unable to deliver public infrastructure efficiently, bogged down in litigation, and many people were fearful of action in case they broke the rules.
In what ways does authority make people more responsible for their decisions?
It is perhaps paradoxical, but if someone has clearly defined authority, meaning they can make decisions based on discretionary judgement, then they can be held to account for those decisions. In contrast, if a manager is reduced to only following and enforcing rules, he or she is not really accountable when things go wrong despite rule-following.
Organisations often introduce new rules after mistakes occur. Why does this response fail to address the underlying issue?
In some cases, a new rule may fix the problem, if the situation really does call for a non-discretionary rule. We can consider a few examples where this might apply, such as speed limits for driving or the requirement to file expense claims within a certain number of days. But often, the problem is a ’mistake’ that is unlikely to be fixed with a simple rule. That could be because the person who made the ’mistake’ has bad judgement, or is a bully, or something like that. In that scenario, a longer, more detailed rule book on its own won’t fix the problem. It just means everyone, including high-functioning personnel, is tied down by red tape, and you still have the incompetent or abusive person to deal with. In other situations, it may be that sometimes mistakes are inevitable, and it does not necessarily signal that the person is incompetent. There are simply situations where the correct decision is not obvious. It is a classic insight originally put forward by Frank Knight, that management in a hierarchy is there to make decisions under uncertainty. Sometimes, the decision may turn out to be the wrong one. It is up to the organisation’s more senior levels to figure out whether the manager is not up to the job, or whether the decision was in fact a reasonable one in the circumstances.
Having studied governance systems in Southeast Asia for more than two decades, how did that research shape your views on authority and bureaucracy?
Southeast Asia showcases a huge variety of bureaucratic systems, both in government and business. Some systems are very informal in practice, meaning that a person’s actual authority may not correspond to their position on the organisation’s chart. Other systems can deliver in a purposeful and disciplined manner. What I noticed was that these more purposeful organisations were not actually rule-bound: decision-makers had quite wide latitude to make choices. But they were still constrained to pursue organisational purpose (rather than their own whims or private interests) by the hierarchy above them.
Some people worry that giving more authority could lead to abuse of power, so how can organisations balance authority with democratic accountability?
Accountability mechanisms are definitely important. But not every organisation needs to be a democracy. Inside the organisation, the primary accountability mechanism should be a well-functioning hierarchy, with oversight and understanding systems that hold managers responsible for detecting and dealing with bad behaviour, such as fraud or harassment. But then, organisations themselves need to be held accountable to ensure their purpose is aligned with what society accepts. My view is that this alignment is best ensured by democratic mechanisms for making and enforcing laws, which may include delegating authority to regulatory agencies or the police, but which ultimately places the decisions about what is or is not acceptable in the hands of the voting public. But other mechanisms might serve the same functions. In some theories, the threat of war or rebellion creates incentives for good government. But this obviously does not always work.
Modern organisations frequently give leaders responsibility without real authority. How does this gap influence decision-making and performance?
Responsibility without authority is a terrible mix. There is a quote in the book from Edmund Burke, who detected this problem in the aftermath of the French Revolution. If you have responsibility but lack the authority to execute, you will either get nothing done or be forced to deliver by taking shortcuts that can have disastrous consequences. It results in poor quality outputs and places undue pressure on staff, ultimately leading to low morale and burnout.
People sometimes resist decision-making authority even while complaining about too many rules. Why do individuals feel uncomfortable with that responsibility?
Well, it probably depends a bit on cultural habits. In societies like New Zealand’s, which is quite egalitarian and conflict-averse, people often find it uncomfortable to tell others what to do, or to point out that their work was not up to standard. So, they prefer to be able to point to a rule book or set of independent, supposedly objective standards, as a kind of backup. And of course, if you don’t exercise personal discretion, you are less to blame if things go badly.
If organisations or governments want to reduce “stupid rules,” what practical steps should they take first?
The first place to look is probably the areas where rules (including standards) or procedural requirements have grown lengthy and complex. The ten-page dress code that General Motors used to have is a light-hearted example. It was reduced to two words: ’dress appropriately’. A simple rule, but it needs a dose of authority as a backstop. In technical areas, there could well be a need for complexity and detail. But if detailed standards and procedures appear to be trying to specify and standardise things that are really context-specific or uncertain, then rule proliferation or increasingly detailed formalised standards could well be replaced with something much simpler: a basic statement of purpose. That allows people the discretion to exercise their professional judgement and skill at all levels in the hierarchy.