Managing by Principles and Processes

Principles 

I’ve spoken in this space before about how some really great cultures use principles over rules to manage their business. In short, too many leadership teams manage through rules and authority: problems arise, they set a rule. But they quickly learn that every rule has an exception, which requires them to change the rule. Over time, the rules get so complicated and confusing, that no one knows what is right and what is wrong, leaving people frustrated and annoyed with their bosses and their company. 

A few examples of rules and principles can be seen in the table below. 

Don’t get me wrong, some rules are necessary! Join all meetings on time, submit your change orders in 72 hours, 7 am start time, etc. But as I continue to observe construction companies all over the country, those with too many rules have a lot of friction. Meanwhile, principles-based cultures continue to demonstrate higher levels of employee engagement and retention.  

But I’ve also noticed that this principles-based culture model is incomplete, because great culture doesn’t always equate to profitability. And after all, companies are in business to make money. There’s another layer we need to add on top of being principles-based. And that is having fantastic processes. 

Processes 

Processes are the literal steps for how things get done in your business. There is a process for sending a change order. There is a process for completing your billings. Bidding a job requires a process. There is a process for setting up a new job in your accounting software. One Project Exec laughed recently as he told me he was writing a process for how to name file folders! 

Process becomes powerful when you set a standard process for all the repeatable tasks your team undertakes. Consider the change order example mentioned above. If you have 6 project managers, theoretically, each of them could have their own process for getting a change sent to the customer. But that does not guarantee that each process is the most efficient, or that each delivers the same result for the client. With standard process comes uniformity. And consistency. And repeatable results. 

You’ve got to have standard processes for all the key activities in your business if you want to be profitable over long stretches of time. Otherwise, you are constantly re-inventing the wheel each time you start a new project—and each time you bring on a new person! So much room for error. So much room for lost monies. 

Principles + Processes 

Principles ensure your team understands how to act, what is acceptable, how they should carry themselves. Processes give them the guardrails to operate within. 

With both in mind, it’s important to note that from time to time, you will suspend your process in order to live out your principles. For example, your process would say to submit every field-driven change order in 72 hours. But if you’ve been struggling to stay on top of that project, and your principle is to be customer service-oriented, then your PM may call her counterpart to notify them of the change, but that you will be doing it for free. And, as the boss, you have to have her back, because you know that in the long run, living our principles is essential to our integrity as a team and company. 

Choose your principles carefully and reward your people for sticking to them. But also set the standard process clearly, so the team has guardrails for success.

Win-win-win 

The ideal situation is to take the aggregation of your principles and processes into a fully functioning machine. If this machine is built right (with the right principles and processes), it takes a new project, and spits profit out the other end. In other words, you don’t need superstars with superhuman abilities to make money on a project. Instead, you have solid, principles-based people following standard processes inside of a well-made machine that allows them to be successful. 

You’re happy. 

They’re happy. 

The customer is happy. 

It’s a win-win-win. And it’s the beginning of a flywheel effect where things keep working better and better the more you stick to it. 

Spark Notes:

• Rules can be limiting and create friction, while principles offer a flexible framework that fosters employee engagement and retention, but principles alone aren't sufficient for profitability.

• Processes standardize repeatable tasks, ensuring efficiency, consistency, and uniformity, reducing errors, and enabling long-term profitability by avoiding constant reinvention.

• Combining principles and processes provides both a cultural foundation and operational guardrails, allowing teams to act with integrity while achieving consistent, repeatable success.

• A well-designed system integrating principles and processes becomes a self-sustaining "machine" that delivers profitability, satisfaction for employees and customers, and a flywheel effect for continuous improvement.