Operating Principles – The Complete Guide

Operating principles are the holy grail of every single company or industry out there. Exceptionally designed operating principles could be the difference between a sightless, futureless business and a flourishing enterprise. If your company does not have properly constructed concrete principles, this article is for you. Use it to educate yourself and then push yourself into investing in developing operating principles. This article covers everything you need to know about operating principles.

Operating Principles - The Complete Guide

What Exactly Are Operating Principles?

Operating principles are certain rules that guide the workings of an organization. They are the rendition of the values of the company. They even further influence the values of the company. 

Also known as the company’s operating system, operating principles show the big picture, long-term goals of an organization. They are written statements that direct the communications and workings of an organization. They inspire the values and the culture of a company. 

The goal of an Operating Principle is to provide a basic frame of reference for striking a balance between priorities and motives when deciding how to act and what to do in various situations. These principles create a boundary around a company’s objectives and expectations, they communicate what should not be done, as well as what should be done, what should be expected and what would not be tolerated in the workplace. 

“Operating principles can serve as guides, helping people make sound decisions, building trust, and enabling greater innovation.”

Jeff Bezos Career Advice
Jeff Bezos Career Advice

Google, let us take, for example, has about nine or ten operating principles including- there is more information out there, you don’t have to be in a suit to be serious, it’s best to pay attention to one task at a time, and more. Whole Foods Market, Inc. has a core value for team members which is, “We take responsibility for our success and failures. We celebrate success and see failures as opportunities for growth…”

Operating principles, in short, are values in action. 

Why are Operating Principles So Important?

There is no scarcity of motives as to why operating principles are imperative. The direct and indirect benefits, some might remark, are unending. Some of these are included in the list below. 

  • Based on certain behaviors, operating principles describe the intended future culture and the style of working together toward the achievement of the goal and vision. They provide advice on how to attain objectives, establish clear expectations, and motivate personal progress.
  • Every business aims at providing the best customer service to be able to exist in the market for a long time. Operating principles help the business in achieving certain qualities that promote customer satisfaction such as transparency, empowerment of consumers, approachability, competence, precision, accessibility, accurateness, speed, etc. 
  • Operating principles communicate to the world about the priorities of a company. It shows how and on what a company spends its time on. 
  • The conveying of the priorities of a company creates a boundary for that company. This empowers the employees as they recognize what areas do not require their time and effort. Because of this, the employees participate in tasks that are meaningful and liberating. 
  • The boundaries and guidelines help to formulate strategies and in making the right decisions and constructing trust. As a result, it will facilitate greater innovation and improvement in the business.
  • Managers and leaders can utilize this approach to strategy to convey objectives and long-term goals, with operating principles providing advice on how everyone can participate through their decisions and actions.

Difference Between Core Values And Operating Principles

Core values have been so abundantly discussed as being a central part of operating principles, which sometimes leads to the conclusion that they are the same. Nevertheless, there is a certain dissimilarity between the two. Understanding the difference between operating principles and all other related concepts is the key to creating and maintaining effective principles for a company.

Values are central to the success of an organization. Core values are an organization’s purpose statement, its fundamental genetic code, its DNA. An example of a core value could be ‘reliability’, ‘customer satisfaction, etc. They are backed up by the precise performance required to demonstrate the value.

Operating principles, on the other hand, offer much more specific detail about how the members of a company aim to behave and operate every day. For example, research is the first step to starting a new project. These are informed by the core values. Expression of values takes place when it is described how the values will be implemented in the form of operating principles. 

To understand the difference better, for example, if the core value of an organization is ‘teamwork’, then the corresponding operating principle for this core value would be, ‘Issues affecting the business will be discussed weekly. So that everyone stays in the loop, information will be shared in these meetings, issues, and concerns of all the employees and the company will be discussed and the correct course of action for the company will be decided on.’ 

How To Document Operating Principles?

As we know, operating principles influence the culture of an organization. And, culture matters. A lot. 

The culture of an organization sets the tone for everything starting from hiring new employees to the work done by the employees to the benefits given to the employees after retirement. The culture of an organization gives it an edge and provides it with a competitive advantage. A company with a strong culture is more likely to attract and retain top talent. An engaged and cohesive team culture is created when a company’s preferred manner of doing things is clearly stated and all employees are aligned.

All of it is done by developing effective operating principles. 

The first step to developing principles is identifying and accepting a need for them. They can be evolved by recognizing a time when the company was at its best and then pinpointing the values behind such success. Next, settling on behaviors and workings of an organization can lead to the practice of those values. Workshops, interviews, and discussions can be conducted to define the core values and come up with operating principles.

Later, to follow up and keep a check over its persistent application, check-in sessions can be held where the management can investigate the progress. Every worker gets into a discussion with their manager to debate how they have picked to depict the operating principles. 

Specific steps that can be followed for documenting the operating principles of a company are listed below. They can be utilized if your company is experiencing difficulties in converting values into actions and results.

  1. “What do these basic values seem like on a day-to-day basis?” ask these four questions. “Can you describe these essential values?” “Which values would be a good match?” “Should core values be accepted when and how?”
  2. Asking for feedback and input. This can be done weekly even. Employees must feel involved and invested to make the process a success. Transparency regarding goals must be maintained.
  3. Equal access to tenets of operations must be given. 
  4. Publishing the final version. 
  5. Recapitulating the principles regularly in the future. 

Operating Principles For Teams

An organization runs like a team sport. And teams have different guidelines than that of individuals. Team operating principles come in a variety of shapes and sizes. They might be brief and simple or extensive and intricate. The most important thing is to spend time defining them. You wouldn’t play baseball or football without first establishing the rules. It’s the same in the office.

Engagement is the best method for framing team operational principles. This fosters a sense of ownership. For team principles, as a process, the leader must create a first draft of the principles themselves and then engage and interact with the employees of the team in molding, refining, and perfecting them. The outcome would be guidelines that would lead to the success of the team. Commitment to these principles is how the success would be perpetuated. 

Let us understand with an example, “When work needs to get done, we all pitch in, regardless of job or status,” says the CEO of a $500 million non-profit that provides services to individuals with disabilities. They ask stakeholders to meet once a month to discuss the quality of services they deliver. They feed folks lunch and collect a lot of vital information. And who cleans up when the conference is finished and everyone has left the room? The CEO and his executive team are in charge of the company.

Operating Principles Guides Company To Change Trajectory And How

There are several reasons an organization could wish to switch paths and change its trajectory, it could be because it might be lacking behind in the market, or it might need an edge over its competitors, or it might need a boost to get itself out of a ditch. Whatever the reason might be for improvement, in many cases such situations are an initial step towards strategy development.

Strategic goals are insufficient in and of themselves because people want instruction on how to put the strategy into practice. Operating principles assist with this by serving as a navigational tool. It’s like having an organizational counterpart of satellite navigation, which provides constant guidance on how to work to modify the organization’s course. They can assist in aligning change initiatives with the desired future and serve as a leading indicator of progress. They give an objective foundation for determining if the organization is moving in the right direction and for making any necessary mid-course corrections.

If a firm is going through a difficult period and wants to change its course, the most crucial step is to make educated decisions about what needs to be done differently and what needs to be prevented from happening again to steer the company in a new direction. All too frequently, strategies are cumulative, failing to explicitly state that the organization’s goal is to achieve “this” and “stop doing “that.”

A good strategy must not only chart a new course but also involve employees at all levels in a way that is important to them. The days of customers remaining loyal without organizations aggressively pursuing them for their allegiance are long gone.

If the strategy is primarily about making decisions, these decisions can be expressed using a set of principles. The power of defining strategy through a set of operational principles is that it makes the strategy significant to everybody in the company. It tells them which options have been chosen — and which have been rejected. It also outlines how the organization’s leadership wants the organization to run in the future, as well as how everyone may contribute via their decisions and actions. Changing an organization’s trajectory is similar to changing the course of an ocean liner – it takes time. The more employees who understand how following the operational principles would influence their organization’s trajectory, the more likely they are to participate. 

When using principles to define strategy, it’s not about being right or wrong; it’s about communicating and confronting the fundamental ramifications of these decisions and being realistic about what has to be in place to achieve the strategic goal.

Helpful Operating Principles That Could Be Incorporated Into A Company

Now that we know the importance and significance of operating principles, I am sure you must be looking for examples of some of the best principles you could incorporate in your organization to make it much better. Below is a list of such principles. This list is in no way an exhaustive one. The operating principles elected by a company depend on the personal goals, objectives, values, and limitations of a company and thus the number of principles that can be developed are endless. 

These guidelines foster a positive atmosphere and establish clear boundaries. They must be carefully knit into the fabric of the organization, with new hires being instructed on them during on-boarding and existing employees being evaluated on them regularly.

  • Always aim Higher- constantly driving for improvement and encouraging employees to grow by making bold choices will keep the company in the game for longer.
  • Always add Value- Adding value and maximizing the benefit of clients, managers, teammates, etc. takes you and thus the company far. 
  • Customer is the Hero- Customers’ satisfaction is what makes or breaks a company. So listen, learn from and anticipate their needs – and then always deliver.
  • Trust is a must- A company’s culture is constructed on trust and empathy. Building truthful relationships with employees, colleagues, customers alike by championing empathy, honesty, respect, and kindness is the way to a happy, healthy and prospering workplace. 
  • Communication is Key- Clear communication is critical, both in working with clients and in interactions with the staff. Communicating all the relevant details to the team, clients, and the customers while managing a project and even after that is essential. Be it good or bad, everything must be communicated. 
  • Think and Act positively- Being positive will never go wrong. The energy and demeanor of the employees influence the client and those around them. Employees must always think the best of each other and always think that the other person comes with good intentions. When things go wrong or there’s conflict, always follow the ‘innocent until proven guilty’ concept and give them your best and sincerest efforts. As a starting point, any professional is entitled to dignity. Set emotions aside and gain a clear picture of the facts to deal with challenging situations. Instead of focusing on who is to blame, consider the best next measures and how to avoid the issue in the future. When it comes to the company and its personnel, never make assumptions.
  • Responsiveness- Responding timely creates trust and trust builds connection. Connection and loyalty are crucial for a business. Replying to emails and texts of the employees as quickly as possible is something employees and the company can seek for. 
  • Pay Attention to Detail- Attention to detail is crucial as representatives of the clients to the outside world. Before sending draughts to a client, slowing down to proofread and getting a second set of eyes on them is fruitful. Reviewing to-do lists thoroughly to prevent dropping balls later. People are stronger and better as a team as a result of this approach, collaboration on the minor stuff and the major stuff to achieve perfection, in the end, is the best outcome for the clients and the business.
  • Take Charge- Every individual’s actions leads the company closer to success. So every employee must be encouraged and supported into exploring themselves and taking initiative.
  • Win with the Team, Grow as Individual- Working in a team is how an individual unlocks his/her hidden potential. People help each other in developing and growing through supporting and challenging each other, especially in a company and at all levels. Welcome, all kinds of perspectives, ideologies, and collaboration.
  • Make an Impact- Focusing on doing the right thing and bringing about effective change with it that makes an impact is how individual and organizational goals are achieved. Every team member has the influence and opportunity to make an impact on our success.

How To Increase The Effectiveness of the Principles?

  • Principles must be experienced- Operating principles must be lived before they can have an influence, and before they can have an impact, they must be accepted, and before they can be accepted, they must be understood. The challenge is to communicate the concepts in a way that people can grasp what they need to change. They must do more than declare the obvious, and they must be in sync with what is measured – or, more accurately, what is measured must be in sync with the principles. If the only thing supervised and performed upon is process competence, having a principle that declares “we focus on offering the customer a captivating end-to-end experience” instead of “we focus on driving internal process efficiency” will be pointless. 

Operating principles must be experienced in a way that strengthens their inherent comportment. And most essentially they must provide a strong streak of vision to the objective future.

  • What’s unseen must be brought out and made obviously- It is both indispensable and constructive to discuss the operating principles by which leaders want their organization to run in the future. Its value comes from bringing to light the extent to which members of the leadership team — typically from various businesses, roles, and locations – share similar perspectives on the world. There will inevitably be tension and disagreement in the beginning, but articulating operating principles is an efficient way of resolving problems and aligning both thinking and action. The difficulty with having too many strategies is that the choices they make are implicit rather than explicit. Principles are mindful selections and hence by definition ones that need to be voiced, discussed, and understood in the open.
     
  • Default operating principles lead to a default future- Operating principles exist in all organizations; the only question is how explicit they are and how well they are connected with the strategy. Operating principles are a key element in defining an organization’s trajectory, and if they aren’t properly managed, they can lead to difficult-to-change organizational behaviors. Understanding today’s operational principles and replacing them with those required to change a company’s trajectory is an important aspect of the strategy formulation process.

Conclusion

Operating principles depict an organization’s large picture, long-term objectives. They are written guidelines that direct an organization’s communications and everyday operations and they even have an impact on the principles and culture of a company.

When selecting what to do and how to act in different conditions, operating principles deliver a dynamic structure of reference for harmonizing contrasting motivations and priorities.

Operating Principles can act as a strong glue in the creation of a trusting, cohesive, and mutually supporting workplace. They’re only useful if everyone, from top management to the newest employee, pays attention to them. There is no one-size-fits-all set of “right” guiding ideas; what matters is that they are implemented rather than being hollow platitudes. Leadership must make a real effort to model the guiding values through their actions and words so that cynicism does not build around them. When employees feel comfortable to say to any other employee, including a manager, “Your behaviours are not compatible with our agreed-upon principles,” you know you have a strong guiding principle.

Now, get cracking and bring your organisation to new heights using operating principles. 

Operating Principles – The Complete Guide

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