I’ve been thinking about tariffs as of late. Mostly thinking about them as a blunt instrument. Economics, politics and history would tell us that they are not a very effective way to deal with “inequities”, though certainly they are implemented to try to correct a wrong or even the playing field.

If free trade is to flourish on a global basis the low-cost provider or the one with the best product should and usually does win over the long run. If governments intervene in the name of saving jobs, they really just mess up free trade and spread the cost of saving obsolescent skills over the rest of us. Your automobile costs more, but some guy in a factory will keep his job for a few years longer. The politicians look good for saving that guy’s job and you may not notice that you paid more for your car. Not so dangerous in small quantities, but centralized control doesn’t work any better in the United States than it does in Venezuela or Cuba, we just have less of it. Some things cannot be fixed by rules or control from the top.

The same general concept, me thinks, applies to business.

Everyone does not always do the right thing and we all need guidance on occasion. However, I have noticed that in general the businesses that have to rely deeply on rules to get the right behavior from their people are putting a tariff on themselves. The same applies to the other side of the equation. Unions purporting to protect their members try to control the business and that also is troubling in the long run by protecting obsolete skills and allowing bad behavior (and charging the consumers more than they should pay).

What I most often observe working better than a rules-based business is a business that has three characteristics. First, they have a clear vision and strategy so that everyone knows where they are going and what they are doing to get there. Second, they have clear values so that everyone knows what is appropriate and where the guard rails are. Lastly, they have talented management that provides clear feedback, both positive and negative. Good performance is rewarded both monetarily and with actions and words. Bad performance is corrected. (Bad people are fired.)

It is your choice. You can manage with a rules-based organization or you can be more of a free market leader where parties have all the information they need to succeed and work with each other by choice. 

The Ritz Carlton says, “We are Ladies and Gentlemen serving Ladies and Gentlemen” to guide behavior. What guides the behavior of your people? Do you have the three necessary characteristics in place to succeed or are you going to keep writing rules?!