Thesis: Rules are for the guidance of the wise and the blind obedience of fools.

Rules are funny things. You need them, but certain rules MUST be bent and others must be sacrosanct. One way to think of rules is as blue rules and red rules.

An example of a blue rule is the old national 55 mile-per-hour speed limit (now 70 MPH). 56 MPH was not inherently bad or evil, it was just prohibited. Men and women (not that much different from you or me, other than they are called legislatures) had to make a choice to draw a line somewhere, and so they did. And as is the nature of these things, where to draw the line is always somewhat arbitrary. Driving 56 MPH does not necessarily make you a bad person, driving 54 MPH does not mean you will go to heaven. Indeed, if the goal is safety, going 54 MPH in a driving rainstorm in heavy traffic might be “more bad””than driving 56 MPH on a beautiful day with no traffic.

Red rules are things that are always inherently bad, such as “Thou shalt not kill.” But on closer examination, even red rules have a strong “guidance of the wise” component. Thou shalt not kill except 1. in cases of legitimate self-defense, 2. declarations of war by Congress (national self-defense), and more controversial, 3. the death penalty (self-defense of society?).

Blue rules are malum prohibitum (bad things because they are prohibited); red rules are malum per se (bad because they are bad in and of themselves).

Rules are necessary, but how necessary? How do we, an organization dedicated to caring for our customers, enforce rules that enhance the quality of life for all our residents while still respecting the individuality, dignity, and freedom of each individual? Well, we try to group all the “party residents” in one building and all the “quiet residents” in others.

But we must be careful because our government is on the lookout for steering and discrimination and, like everyone else, they tend to see what they are looking for. (Love my country, at times wary of my government. Very grateful I do not get all the government I pay for. Government often has wonderful people working for it. The trouble is even if you put good people in a bad system, you still get bad results. One way to create a bad system is to try to get rid of all wrongs, all bad outcomes. You end up creating more wrongs/inefficincies/expense, more bad than you do good. Some bad outcomes are just de minimis, best dealt with by putting it behind you and moving on. More harm comes from focusing on it, building your life around it. In Buddhism it is called the “second wound.” The first wound being the bad event, the second wound being your unwillingness to let go of it.)

Back to rules! A major rule we have as apartment managers is “pay your rent on time.” Just like homeowners, we have major mortgages to pay (to say nothing of payroll, utilities, lawn services, pool services, suppliers and vendors, etc.) and loan servicers can be very nasty about late payment, with late fees in the tens of thousands of dollars and very short grace periods ranging from none (a relatively recent “innovation”) to 3 days (typical), and an occasional golden oldie at 5 days.

As a result, we have late fees for our residents that generally we are pretty strict about. Fortunately, most residents actually pay on time and many pay early. Some communities even have a monthly prize drawing for those who pay early. For the chronic late payer, the late fees are strict. But how to handle the “good” resident, the one who always has paid on time, but missed it this time? I’m often not sure how much of what I espouse from headquarters gets down to the front line, but back in the day when I worked as a property manager (having built The Collier Companies from one duplex to more than 9,800 apartments over 35 years, I’ve worked virtually every possible position, including maintenance and leasing), I was delighted to give someone with a good payment history a one-time “Get Out of Jail Free””card.

The problem is that once you have bent the rule, how do you keep it strong?

I tell my director of operations that I am fine with each community manager having one get out of jail free card per month per 100 residents (more than that, they need to ask their regional managers for permission, which of course they do not like to do). This allows community managers to use their discretion but also gives a natural limit: “Delighted to waive the late fee. You have an excellent payment history and we appreciate that. I’m allowed ‘x’’waivers per month and you are getting one of them!” It is important that managers politely and diplomatically communicate the specialness of the treatment being given, and the limits of their authority, because it forestalls repeated requests and allows the rule to be flexed without being weakened. The resident is accommodated and (we hope) happy, but the system stays strong.

As a customer-centric organization that values human freedom and dignity, that is flexible and adaptable, that prides itself on being a continuously learning organization, our challenge is always to remember the underlying purpose of a rule and make sure that we serve that purpose when we apply the rule. This requires training our Team Members to be “wise” enough in the moment of decision, in the hurly-burly of the day, to recognize, to know, and to remember the ultimate customer orientation of that purpose.

The ultimate job description of every Team Member (thus the ultimate rule for business) is “To Find, Serve, and Retain Profitable Customers in a Principled Manner.”

This is a classic from the NSC Blog archive, originally posted June 24, 2008.