Freedom or Control

This is a dilemma which appears in many aspects of life. Most of us have a natural inclination towards one side or the other, but the truth, as so often, is that each has its place depending on the situation to be addressed.

Over recent months I have come to get to understand a company working in one of countries in Central Europe that used to be under Russian control. The natural way of working in this economy before 1989 was all about control. Decisions were made centrally, people were not trusted, and extra effort did not yield extra reward.
What is less well known is the positive side. Everyone received a decent education, everyone could afford to live, albeit modestly, professionals had respect, and the lights never went out.

However, the model proved unsustainable, as a lack of any innovation destroyed productivity and competitiveness.

After the wall came down, all hell broke loose. Suddenly people were free to express their views, travel, and pursue their own choices. But a lack of sound institutions and safeguards meant that the result was very unfair, with lots of scope for criminality and hardship for many. However, slowly things have swung back, like a pendulum slowly finding its best spot.

I see this in the company I have been studying. The company only started during the wild days of few rules, and the founder was autocratic and worked on the edge , yet somehow charismatic and inspired.

Yet the company grew too quickly, the context changed even quicker, and the staff, recruited in the image of the founder, took too many short cuts and built a business with poor foundations. The founder had one last trick up his sleeve, to sell the company for more than it was worth and get out of the way.

Under the new owners the pendulum swung back to control, an understandable move with chaos all around. The upshot was a period of confusion and stagnation, with some fear returning among staff.

Only now might it be possible to swing more gently back towards freedom, with some trust, but backed up by well-defined rules and grounded by adequate systems.
The company could be a microcosm for the economies of the whole region, and it is salutary. In the cold war, we were brought up to believe that freedom is always right, and of course in some areas of life it is. But there is a balance to be struck, and the negative consequences of lurches between control and freedom have not been widely publicised or understood.

The worst example was Russia itself, where the West rather stupidly imposed an ungrounded freedom regime after 1989, under Yeltsin. A few got rich, many suffered, and the net result for the economy was at best not as beneficial as had been predicted. Then Putin came in there and swung the pendulum back hard in the other direction. Again, the net result appears not to have been good, at least not for the majority or competitiveness.

Similar dilemmas occur in smaller scale everywhere. Consider parenting. We start with a bias to freedom or control. Extremes on either side are usually wrong. The best choice depends a lot on the characteristics of the child, and to a lesser extent the parents. Wild lurches from one extreme to the other will often have negative consequences, but moving within the spectrum over time as needs change is a good idea. Often, these moves should be marginal, but in some situations a more radical shake up may be necessary, taking care not that the medicine does not do more harm than the ailment.

It is the same in any company. Consider outsourcing, which is equivalent to a move in the direction of freedom – the people actually performing the activity are not taking daily instruction, but rather operating with freedom to choose how they achieve defined goals. Similar choices occur when a chain can choose to operate stores directly or to use some sort of franchise model.

It is useful to think of some criteria to help guide these choices.

It seems a paradox, but the less well you understand your business or market, the more control you must keep. If the market is new or you are a new entrant, it is better to learn the skills yourself and adjust as you go. If you outsource or franchise too early then your partners will keep too much power and maybe it will be difficult to recover. By the same token, the other time to move towards control is when there is a major shift in conditions, in how money can be made in the market. Finally, if the legal or regulation framework makes things risky contractually, it may be necessary to keep control longer. Many companies franchise in mature markets, but run their own stores in China.

But in a stable environment when you know your business well, that is the time to swing to freedom. Partners will often innovate, especially in parts of your business where they can specialise and focus. You can retain enough knowledge to avoid a loss of power, and use your contracts to protect your brand and standards, while simplifying what you retain in house.

So this is about context as much as it is about ideology. It is reasonable to have a bias, but not to apply it blindly. Freedom will often win out, but only if the market does not take an unexpected lurch, or if you get lazy about retaining core skills or some levers over your partners. It can also make sense to move some elements of a business towards freedom at the same time as taking back control in others. What always works is continuously analysing market trends and partners, to avoid being caught out more often than necessary.

It can also be right to swing gently from one side to the other. Cynical staff often complain that their managers make a decision and then an opposite decision five years later, yet both decisions might be strategically justified. The company I am working with is being recommended to swing towards freedom just now. It could well be in five to ten years that it could be recommended to move back to more control. And both recommendations could be right.