BACK IN March 2020, business leaders faced a decisive choice regarding work-from-home policies. The prevailing situation demanded a snap response, and business leaders pondered over the decision, knowing that it would set a precedent for future policies within their respective organizations. The impact of this such decisive choice continues to affect organizations today as they strive to find the right balance for work-from-home policies, negotiating and debating these policies with stakeholders, especially employees.
The power of precedent is something that many business leaders often overlook, especially those who do not sweat the details and are not used to keeping receipts. However, how business leaders oversee situations sets the tone for everything—company culture, decision-making, and even the bottom line. Setting precedence is creating a rule by example based on what has been done before. It is like setting unwritten guidance that everyone follows, whether it is formalized in a policy or just the way things are around the office. It can also be purposely set by the leadership guiding the actions and behavior of stakeholders, specifically the employees.
The actions and decisions of the senior management often set the tone for the entire organization. For example, when leaders consistently make ethical choices and prioritize transparency, these behaviors become a precedent for others to follow. Organizations with a strong, values-based culture tend to establish precedence naturally. When core values align with decision-making, employees are more likely to adopt these values in their own actions. Learning from past successes and failures can also contribute to the establishment of precedence. Identifying what worked and what did not in previous situations helps organizations make informed decisions in the future.
Setting the right precedence is crucial in business for several reasons. It ensures consistency in decision-making and behavior across the organization. When employees know what to expect, it fosters a sense of stability and reliability. It helps build trust with stakeholders, including customers, partners, and employees. It demonstrates a commitment to doing the right thing, even in challenging circumstances—in times when no one is looking. It can streamline decision-making processes by providing a framework for assessing and addressing shared issues and challenges. This, in turn, enhances efficiency and productivity.
Conversely, setting precedence incorrectly or neglecting it can lead to adverse outcomes. Ill-conceived and half-baked precedents can erode trust with stakeholders and even damage the organization’s reputation. Without clearly defined guidance, decision-making processes can become disordered, leading to inefficiencies and confusion among employees. Unjust precedents can create disparities among employees, leading to dissatisfaction and, worse, potential legal issues. Overly rigid precedents can hinder innovation and agility, causing organizations to fall behind in a fast-changing market. In short, it would lead to a domino effect of negative consequences. Setting precedence is a slippery aspect of effective leadership; thus, it requires careful thought and consideration.
Alignment
First, business leaders should ensure that precedents connect with the organization’s core values and long-term objectives. This supports consistency and reinforces the idea that setting precedence is not an arbitrary act but a carefully planned step forward. Precedents that reflect the organization’s principles are more likely to resonate with employees and customers, fostering a powerful sense of purpose and identity.
Transparency and communication
To avoid confusion and guesstimates, clearly communicate the thought process behind the decision, that is, the factors considered, and the challenges being addressed. Sharing this information shows stakeholders that business leaders considered the situation carefully and helps them understand the reasoning behind the precedent. Well-received precedents encourage questions and feedback among stakeholders. This shows value to stakeholders’ input and commitment to refine the decision if necessary. It also allows us to identify any potential issues before they snowball.
Implications
Setting precedents is not just about the immediate circumstance. Anticipate consequences by considering the potential cascading effects and long-term impacts of the precedent on various stakeholders. The actions of leaders significantly influence employee morale and engagement. Consider how the precedent might impact the motivation, job satisfaction, and loyalty of the workforce.
Flexibility and adaptability
Business leaders often encounter situations demanding rapid response and there are times that precedents might not be the best for the long-term horizon. Business leaders should be open to adapting precedents as circumstances change. Flexibility is essential to ensure that precedents remain relevant and effective in evolving business environments.
Setting precedents can be a powerful tool. When done thoughtfully, it can create success stories, ensuring actions align with core values and foster a balanced, efficient work environment. However, business leaders must tread carefully, as hasty, or unwise decisions can have far-reaching consequences. Remember, setting precedence is not just making a choice now; it is about defining the future of the organization. Thus, it is crucial in business.
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Seb Serrano is a director from the Advisory Services Practice Area at P&A Grant Thornton. One of the leading audit, tax, advisory, and outsourcing firms in the Philippines, P&A Grant Thornton is composed of 29 Partners and 1,500 staff members. We’d like to hear from you! Connect with us on LinkedIn and like us on Facebook: P&A Grant Thornton and email your comments to pagrantthornton@ph.gt.com. For more information, visit our website: www.grantthornton.com.ph.
