Principled Leadership is Always Superior to Rules-Based Methods
Regardless of your profession, I am convinced there is a conflict between those that believe in principle-driven decisions (Principled Leadership) and those that are rule-driven. I can guarantee you that in accounting this is true.
Our principles are outstanding. There are six of them.
We have duties to:
- Enhance and Develop Your Profession
– if you don’t take care of yourself how can you ever take care of anyone else?
- Protect the Public
– We have a duty to think about the users of our work, reports, and opinions. When there is a conflict between what say management wants and what protects the public from mismanagement and financial irregularities, we must choose the public
– We must perform all of our services with integrity and one thing we understand is that “we” don’t determine if we (as individuals) have integrity, those around us (hence the public) determines this. Our behaviors have consequences (both positive and negative).
- Objectivity and Independence
– We must be objective in the services we provide and the processes we use to form our conclusions. We must also remain independent enough from our customer to maintain objectivity so that users believe we have no conscious biases to force our conclusions in one direction or another
- Due Care
– We must perform all our services with due professional care to deliver a professional quality service
- Scope and Nature of Services
– We must be mindful about how we determine our capabilities to accept engagements and deliver meaningful results that help our customers
The above six principles are simple, clear, and elegant. However, they may be difficult for people to conclude if they meet the spirit and intent. What is the solution? Oh, to craft Rules to define the principles.
For accounting professionals, the Principles for us are six-pages long; the rules are several hundred, and the rules are overly complex and over time will become more so. The reason we have so many rules is that of lawyers. Lawyers file lawsuits and it is simpler for people to defend their work when they can point to a Set-of-Rules (checklist) they followed rather than “conceptual-principles”. Too often a lawyer is akin to bayonetting the wounded after the battle, once they are already down and injured. Principles should help people make better decisions. Rules are used to defend an outcome.
Americans litigate more frequently and litigation is akin to legal-blackmail. Witnesses and professionals fear being asked to defend their work. And like it less when they must defend their work on Principles. They feel better with Rules. Note, Enron followed nearly all the rules yet violated the Principles. Rules confuse the truth as often as enlighten them.
We don’t need a rulebook to conclude that certain public figures violated both community standards and a plethora of laws. Some of these folks are unprincipled. Rules can only do so much. Principle-driven leadership provides a stronger framework for future difficult decisions when the rules may not even be developed.
Living a principle-driven life is difficult. Why? Because principles require judgment,
and judgments require wisdom. Wisdom comes from experience. We form judgment over time and with proper coaching, teaching, mentoring, and exemplified leadership. Think about the leaders you have had the privilege experience. The best ones simply had better judgment and were less concerned about leaning on the rulebook as they were about what was right and just.
Rules may be necessary. Less is likely better. None might be better yet. Principles are frameworks that make sense. When I was teaching my children how to drive, I emphasized two principles over all other rules and ideas: observe the basic rule of never driving beyond the conditions present and always leave two seconds or more between you and the car ahead of you. Follow these and the likelihood of you causing a crash is significantly reduced. Follow the DMV rulebook always and the outcome is likely different. One can be technically correct and concurrently wrong.
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