We often rely on rules and principles to guide our decision-making. Rules provide clear boundaries, while principles allow room for judgment. Knowing when to use one versus the other can build your leadership skills.

Rules offer comfort. A rule says "thou shalt not cross this line." They give us security in their defined edges. Want predictability in your supply chain? Implement rules. Seeking to mitigate risks or prevent disasters? Rules to the rescue.

Without rules, we might careen out of control, right?

Not necessarily.

Alongside the safety of rules, we have the option of principles.

If rules erect fences, principles point out the stars to navigate by. Principles embody our values and priorities. They involve human judgment over blanket edicts.

As leaders, we must discern when rules support healthy growth and when they unintentionally restrain it.

The Danger of Too Many Rules

Rules arise from past problems and seek to prevent recurrence. When new challenges arise, strict rules struggle to adapt.

Recall Blockbuster Video’s late fees. They protected profits on physical media. Yet the policy alienated customers as streaming emerged. Adhering to past rules limited innovation.

Or examine standardized test scores as a metric of teacher performance. Clear and quantifiable, yes. But the fixation on tests corrodes creative teaching.

When we lead primarily by rules, we codify the status quo. We implicitly reject the possibility of progress. Above all, insistence on rule-following stunts our ability to respond to new opportunities.

Of course, some rules remain essential. Yet excess rigidity backfires over time. Command-and-control management built on enforcement and punishment achieves compliance, not commitment. Micromanagement suppresses initiative.

Think Guiding Principles

Effective leadership requires rules—and principles. Principles expand possibilities by opening space for human judgment. They guide decisions while avoiding over-prescription.

For example, an outdoor retailer might operate on principles like “connect people to life outdoors” and “lead change through courage, integrity and inclusion.” These values will shape decisions from product design to Black Friday policy. Yet they leave room for interpretation. The board and staff are asked to exercise wisdom instead of just checking boxes.

The Golden Rule “treat others as you wish to be treated” works similarly. This principle transcends context. It asks us to consider the impact on people, not just compliance with a protocol.

Principles empower decentralized leadership. At the video game company Valve, authority rests with small teams instead of senior execs. To maintain alignment, Valve encourages employees to practice principles like “value creativity over efficiency.” Workers have immense latitude to operate by these north stars.

Yes, principles permit more conflict—and more breakthroughs. As leaders we must sometimes protect people and margins. Other times, we need to champion experimental growth fueled by principles.

When to Use Each Approach

Selecting between rules and principles is an art, not a science. Certain contexts call us to establish non-negotiable rules, especially in highly regulated or mission-critical businesses. In other cases, principles better serve people and mission.

We adopt rules to enforce safety requirements, ethical norms, legal standards, and other foundations. Principles won’t suffice where behavior causes direct harm. Clear rules that establish guardrails make sense here, even if they feel constricting.

Beyond these baseline matters, principles often excel. Principles allow people to internalize purpose and priorities. When people share principles, mutual trust emerges. Guidelines shape decisions while avoiding control. Team members exercise judgment, aligning actions to shared values. Creativity and meaning can flourish. For more on this check out Patrick Lencioni's "The Five Dysfunctions of a Team."

Of course, environments driven entirely by principle and devoid of boundaries carry risks, too. People may inconsistently interpret values. Plus, even ethical principles require practical rules for implementation.

As leaders we get to manage this balance.

When facing a growth limitation, consider asking:

• Does this rule preserve integrity, or mostly protect status quo?
• Are we enforcing compliance over caring for people?
• Do principles exist that could guide judgment instead?

Your answers illuminate whether principles offer possibility.

Innovation Demands Principles

General Stanley McChrystal swapped out hierarchy for shared principles among his team. He opened space for nimble responses to complex threats. In rapidly changing situations, McChrystal urges us to augment rules made for predictability with principles that promote agility. Principles helm the most resilient organizations; see Ray Dalio for more on this.

So lead with courage: challenge assumptions governing growth. Does a rule established for yesterday’s conditions now inhibit serving tomorrow’s customers? By balancing principles and rules, we build responsive organizations prepared to flourish.

The future is all uncertain, requiring judgment aligned with priorities. People committed to shared principles exercise this wisdom daily. Therefore, leaders use principles to bring out the potential in people. Guide growth through purpose, not control. Liberating principles with sound rules helps teams face opportunities.