The Power of Pre-Approval: How Trust and Freedom can Drive Innovation

We had a 19-year-old in charge of our café. She wanted to make it better. We agreed to a budget, checked she understood the values of Happy, and left her to decide how to do it. I saw it for the first time when she had already created it. Imagine how she felt, just three months into her first job. She was absolutely proud to walk into her café. Notice that we didn’t form a committee to look at it. We didn’t ask her to submit a report, and get others to feedback on it. We just let her do it.

Have you ever been in a situation where you had to submit something? And after others added their ideas, the result no longer reflected what you wanted to achieve?

Pre-approval: Trusting employees to make decisions

In the early days of the web, I used to be involved in our website. I would often ask the web-site manager to add this or take that away, to the point where they came to think they weren’t really in charge of the site. So this time we decided to pre-approve the project.

This doesn’t mean giving people complete freedom. I have asked thousands of people if they prefer “being told what to do”, “complete freedom” or “freedom within guidelines”. Very few like to be told what to do. A few anarchists like complete freedom. But most want a framework within which they have freedom.

Regarding the new project, our input was a set of brand guidelines. We agreed metrics, how many people to visit, and how much income we wanted. Then we sent Jonny on the best search engine optimisation course we could find. And we insisted that Jonny talk to our customers. We didn’t need to know what they said. We just needed to know that he was using their ideas too.

I saw the website just before it was launched. I didn’t especially like it, but it was completely within the guidelines. So up it went. A couple of months later, visitors to the site had tripled and income had doubled. Even without the benefit of my expertise! Or especially without the benefit of my expertise?

Rackspace: Empowering employees

There is an interesting example of pre-approval in Dom Monkhouse’s book “Mind your f**ing business”. Dom built two hosting businesses from zero to £30 million in five years. The first, Rackspace, had a philosophy of “fanatical support”. Dom explains that some of his female staff came to him about maternity pay. It was currently at the bare minimum rate, which certainly didn’t embody fanatical support.

He told them they were right and got them to investigate what “best in class” looked like for maternity leave. “I promised them that whatever they proposed I would accept.” They “came up with an outstanding proposal and stayed on as happy employees”, and many are still at Rackspace.

Google has a phrase, “Beware of HIPPOS”. These are not swamp based African animals. It means to beware of the Highest Paid Person’s Opinion. Often, the HIPPO is the person that people listen to, but they are generally the furthest from the front-line and your customers. It's little surprise that they will be the least likely to have ideas that speak directly to the client.

Netflix: Reducing bureaucracy and delays

In the book No Rules Rules, the Netflix story, there is an interesting piece about Jennifer Nierva. When she was previously at HP she came up with a $200,000 consultancy project. A project of that value needed 20 levels of approval. It took her endless phone calls and six weeks of work to get it approved.

When she came to Netflix, she came up with a project needing 1 million dollars. She asked her manager who she needed to get approval from, and he said, “Nobody. If you are happy with it, just sign it off.”

Netflix CEO Reed Hastings says: “At most companies, the boss is there to approve or block the decisions of employees. This is a sure-fire way to limit innovation and slow growth. When the boss steps out of the role of ‘decision approver’, the entire business speeds up and innovation increases.”

Now you might think that a project of $1 million needs some sign off. The question is how to do it without limiting innovation and slowing down growth. This is where pre-approval comes in. Instead of approving at the end of the project, work out all the guidelines the person needs to understand.

It will probably include a budget. It is likely to include who they need to talk to. It might include some regulatory or compliance issues. Maybe it involves talking to customers. It could include branding.

Adopting a culture of trust and accountability

In the early days of pre-approval at Happy, we would include all these elements. As we have moved towards a self-managing organization, we tend not to do that. The key is that people are working within company values. Then they take real accountability and responsibility.

I have asked thousands of people when they have worked at their best. It’s rarely about pay, and it’s only occasionally about how good communication is. For over 90% of people, it’s about being given trust and freedom to make decisions.

Set up pre-approval throughout your organization and see the innovation and speeding up of the business that Reed Hasting talks about. You can do it in a self-managing organization or in an organization where the manager is prepared to try something new.

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