In MBA school in my mid-fifties, some of what I learned was just attaching bigger words to stuff I already knew from experience. Others, such as the three-legged stool lesson taught by Jay Barney in Organizational Architecture class planted fundamental lessons that will never leave me.

The stool is a relatively obscure concept from Dr. Barney’s chosen textbook written by Brinkley, Smith and Zimmerman. Visualizing the concept as it regards your organization looks like this:

Barney’s words made it even simpler for me. He said “all businesses are built on three legs and great firms strive to keep them in equal balance.” Here’s how he described each leg:

• Decision rights – Who has the right to make each key decision in your organization? 
• Reward System – How is that person rewarded for making the right decision? 
• Performance Evaluation System – How will they and we know it was the right decision?

The easiest way to make the concept more real is to apply it to our restaurant company.

• Decision rights – In our restaurant business, the most important decisions are made thousands of times an hour by our lowest paid employees since they are our sole interface with the customer. Important yet less urgent decisions are made on a higher level and contribute to our longer term success. Setting boundaries yet providing enough decision power to please the customer is the goal in the front of the house. Supporting the long term growth of the brand is the goal at HQ. 
  o This leg is in balance when I know when I should “shoot” and when I should “pass the ball.”
• Reward System – “What’s in it for me if I make the right decision?” That’s the seemingly obvious question and yet most restaurants strangle their customer-facing employees with monotonous rules and low pay. Our chain guards against that and also against rewarding our best “politicians” at the higher levels. (Neither is easy.)
  o This leg of the stool is in balance when I know what I get for what I give. 
• Performance Evaluation System – How does management know if the right decisions are being made? I think of this as the “fairness factor.” There is power in clarity of expectations and in having an even handed system of measuring who is succeeding and who is consistently underperforming in their decisions. 
  o This leg is in balance when it’s clear how my decisions will be measured.

To me, the three-legged stool concept is a great example of Aristotle’s “golden mean,” the desirable middle between two extremes.

Most organizations act like most people – they ebb and flow from “centralization to decentralization” and “empowerment to discipline” just like we jump from a strict diet to eating whatever we want.

Good organizations and good people find the balance, in this case the three-legged stool.

Peace,

Tim McCarthy