Why Good Companies Create Bad Rules


I’m staring at my expense check and notice it’s short by about $4. Must have totaled up the wrong amount when I submitted my expense report.

I pull up the report with a month’s worth of mileage, meals, hotel rooms and office supplies. I add up all the rows, and my math seems correct.

This was the first time I had ever submitted a report and gotten a check back. I sold my business just a month before, and I was now a Vice President and partner in the new acquiring company. Maybe I filled out the form wrong or don’t understand how the expense stuff works. I shoot an email off to our CFO letting him know that the check he sent me didn’t match my submission; I didn’t care about the $4 but wanted to make sure I hadn’t made an error somewhere.

The email I got back from the CFO—the man who was one of my fellow partners, the man who had just cut me a check for over a million dollars to buy my company—said:

“I deducted $4.34 because we don’t allow employees to buy Post-it notes.”

What? What the heck could be wrong with Post-it notes? I emailed back:


And he answered:

“Wasteful expense. Cheaper to tear regular paper into little squares.”

I can still remember how I felt even though this occurred over 15 years ago. Let’s just say, I sure didn’t feel vice-presidential or like a co-owner of the company. I mean, I didn’t even have the authority to choose office supplies.

And I wasn’t the only one surprised by the expense reimbursement rules. Another executive, whose company had also recently been acquired, found his expense check short by $6 because he had ordered a beer along with his dinner while he was traveling for business. He learned, after the fact, that the company policy was not to reimburse for alcohol.

What I had stumbled into would quickly become known as the “Post-it note debate.” It wasn’t about little self-sticking pieces of paper, of course. And it wasn’t about beer. It was about rules.

All of us can rattle off countless “dumb rules” we’ve encountered in the workplace. Butnobody creates rules that are dumb on purpose. Whoever created the rule must certainly believe they are doing so for the benefit of the organization.While the partnership would eventually review and rewrite our internal policies very quickly the senior leadership divided into two camps. We, of course, thought they were “those out-of-touch micromanagers in HQ” and they thought of us as “those wasteful spendthrifts who don’t care about the bottom line.”

Where do all the rules come from?

Assuming the best of intentions, rules are implemented to maintain quality, high performance, standards and also to mitigate risk.

For example, let’s say you decide to start your own company. You are employee No. 1, and there are no others, so you need no rules. You, of course, know right from wrong and trust your own decisions.

It’s a year later–your company is growing and you now have 10 employees who report to you. You still don’t need rules, because whatever your personal whims, you are still able to personally hire, train, coach and manage all of the company employees. I can remember when I had 10 team members and no official “rules,” but everyone knew that I wanted the office phone answered by the third ring, casual dress was fine (unless clients were in the office then we wore suits), and we couldn’t start our marathon games of Doom II until after 3:00 p.m.

Your company keeps growing and you now have 110 employees; 10 still report to you, but each of your direct reports is now a manager of 10 more people. And you also have more clients, more products, and more at risk. There are too many people and too many things demanding your attention. You can no longer personally hire, train and coach every single employee yourself.

Suddenly, you notice things you don’t like. David sent out a proposal with typos in it. Sloppy! Akara, while on a business trip, paid $700 to stay one night at the Ritz-Carlton. Wasteful! Angela wore four-inch stilettos and a low-cut blouse when a client was in.Unprofessional!

So, to make sure this never happens again—in order to maintain quality—you help everyone by sending an email:

Team, in order to preserve quality, professionalism and profits, I am issuing these new policies:

1. Doris must proofread all proposals before being sent to a client.

2. While on business travel, you must stay in a Motel 6.

3. You can’t wear shoes with heels higher than two inches and shirts and blouses must not show more than two inches of skin below the collarbone.

Despite the best of intentions, despite how reasonable these rules seem, we know how this ends.

Soon, your company loses a sale because your proposal was late since Doris was out sick for a week. The Motel 6 in Duluth had no vacancy, so instead of spending an extra $10 to stay at the Super 8 motel next door, your employee spent $250 on a rental car to drive four hours to a Motel 6 that had vacancies. Oh, and your managers are now walking around with a ruler so everyone begins dressing like they work at the Convent of the Sacred Heart.

So policies and rules are a natural phenomenon as a company grows; the business becomes more complex, the quality of new hires goes down and communication with top leadership becomes more difficult. Even in small companies, rules quickly multiply in the spirit of consistency—as a way to institutionalize the beliefs or standards of the CEO. And in large companies, policies and rules multiply like rabbits in an attempt to prevent or de-risk lawsuits.

Law firms that specialize in employment law spread the message that companies need more policies and contracts. From one law firm’s website, “It is in every employer’s best interest to protect itself from potential litigation by using every resource possible. An employee handbook is one tool that can aid employers in defending against such claims.” The irony is that most handbooks expand to a length that even the HR team can’t tell you what’s in them anymore.

So if rules are born from good intentions, why do they turn out to be so bad? In next week’s article, I’ll explore the downside of rules and policies and what we can do about it.

Kevin Kruse is the author of the bestselling book Employee Engagement 2.0 and the Personal Engagement Personality Quiz.


CEO of LEADx, and NY Times bestselling author, of Great Leaders Have No Rules and Employee Engagement 2.0. Get a FREE demo of the LEADx platform at https://leadx.org/preview.