Why the broken windows theory is key for building a better business

In The Tipping Point, Malcolm Gladwell details the broken windows theory. It posits that visible signs of crime, antisocial behaviour and civil disorder create an urban environment that encourages further crime. The best way to reduce crime, then, is to deal with the visible signs first — however insignificant they might appear to be. Studies undertaken in New York and the Netherlands support the effectiveness of this approach. As the journal Science reported, “One example of disorder, like graffiti or littering, can indeed encourage another, like stealing”.

Could this also hold true in business? If an organisation, say, fails to run its meetings on time, does this foster an environment in which lax governance becomes the norm? Would a high average number of people in said meetings normalise a culture in which decision-making is slow or stagnant? On a more positive note, might improving, say, the warmth of welcome given by a receptionist to a visitor boost overall levels of organisational happiness?

Finding your focus

It is worth stepping back to examine why this is an important question. Harvard Business Review asserts that in the 21st century, growth is driven by focusing on the factors that drive top line revenue growth. In turn, this mandates the need for organisations to be resilient, responsive and innovative. In simple terms, the pace at which new ideas can be surfaced, tested and embedded is a key predictor of success. Pick any business you admire and you will find this ability in spades.

In a world where what gets measured gets done, you will also find that these successful businesses measure their performance. But many organisations are far too busy looking through the rear view mirror. According to Martin Lucas, a behavioral mathematician who works with businesses to improve their productivity, most businesses are stuck in a 20th century paradigm. “Companies tend to be great at measuring their financial performance, but this is only ever a lagging indicator of performance. They aren’t measuring their pace of learning. They aren’t measuring their average time to get new ideas to market. In fact, they don’t measure anything predictive at all.” This lack of meaningful measurement poses a serious risk to organisational health.

Added to that, what limited data does exist about resilience, responsiveness and innovation potential tends to be ill-defined and unreliable. According to Lucas, “Employee engagement is a classic example of what I call meaningless measurement. Few organisations have defined what ‘engagement’ means and why it matters to them. Fewer still understand the causal links between it and the performance that they are getting.” Pulse surveys suffer a similar problem, Lucas believes.

Tackle the small issues and the big problems will follow 

The broken windows theory suggests an innovative way of solving the measurement dilemma. If the small problems in a business do predict the big ones, then the task becomes to identify where the most important correlations might exist, and start testing the impact of micro-interventions on organisational performance.

Here’s how you might do this, in practice:

1. Look across your organisation. Identify a major problem that you need to solve. Ensure that it relates to resilience, responsiveness and innovation (not financial performance, which is a net result of these characteristics).
2. Write down as many hypotheses as you can in terms of “small” ways that this problem presents in your organisation. For example, if a lack of agility is your issue, you might want to consider the number of people in your meetings, the time periods you default to in your planning processes or the frequency of your Board meetings.
3. Identify, against each hypothesis, a micro-intervention — a simple change that you can run over a few weeks.
4. Do this, measuring the before and after impact — ideally in collaboration with a data scientist or business intelligence unit.

This might sound complicated, but the reality is that most businesses do this every day — namely, find something they want to change and change it. Not only will it help you improve but, just showing you place importance on these indicators, triggers a lift in impetus, buzz and ideas amongst your team. The secret is to do this in a way that creates a learning organisation. Start by identifying your broken windows — and see what they have to teach you.

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