Be careful where you draw the lines

I’m often told my writing is too academic for a business audience. I’ve been working on that. But not today. This article has important practical implications for leaders — especially senior executives — but it does veer into the theoretical as well. If you enjoy geeking out on concepts, then read on. If that’s not your jam, you might want to skip this one.

I want to talk about boundaries — of all sorts. Anywhere you find humans, you will find boundaries drawn to separate this from that, me from you, mine from yours. We place boundaries between species; between individuals; between the parts of our anatomy; between ethnicities, cultures, and nations; between organizations and their constituent parts; between one geographic region and another…

Drawing boundaries is one of the most foundational ways we understand our world — so foundational that we’re often unaware we’ve established a boundary at all. How much time have you spent wondering where you end and the chair you’re sitting on begins? I suspect you’re so confident that you are you and the chair is the chair that you’ve never really been aware of the boundary, much less questioned whether that boundary is “real”. Often we only consider boundaries when something goes wrong. When your neighbor puts his new fence on your property or when nations have a territorial dispute.

Boundaries are helpful. I do need to know where I can and cannot put my new fence. We do need to know whether a particular piece of land is part of one jurisdiction or another. And in business we do need to know which P&L gets credit for some bit of revenue.

But like with anything that’s helpful, there’s a shadow side. There are unintended consequences of drawing boundaries and they aren’t always in our best interest.

I’m writing this to raise your consciousness about boundaries and their consequences so that you can make more informed choices about which boundaries to draw and where.

Here is the crux of the problem: It is in our nature as humans to care more about ourselves and the groups to which we belong than we do about others and the groups to which they belong. Which means that it is the nature of boundaries to create incentive differentials. The moment a boundary is drawn, there will be one set of incentives for what lies inside of the border and another for what lies outside. Those incentives will drive behavior. People will pursue their own interests without regard to — and sometimes at the expense of — the interests of others.

My skin creates a boundary between me and every other organism. If I accept that border as “real” then I will value my own survival, success, and pleasure more than that of others.

Nations are set apart from other nations primarily through geographic boundaries. These boundaries create incentive differentials as nations are generally inclined to protect and preserve that which falls within their boundaries more than that which falls without.

Corporations are set apart from other business entities by several boundaries: between their employees and the employees of other companies, between their assets and the assets of others, between their intellectual property, brands, ideas and those of others. These boundaries create incentive differentials. Companies seek to maximize their own value and only care about the value of other companies when it affects their own. Boundaries are also drawn within a corporate entity such as between functions, business units, regions, and teams.

At this point you might be wondering about all of the good that we do for each other. OK. Here goes: Yes, individuals do care about each other. Corporations and other organizations enter into partnerships. Nations enter into alliances. There is a lot of cooperation between people and the groups we create.

But I would argue that when you’re doing something good for another person, it’s because instead of focusing on the boundary between your skin and theirs — a boundary that separates you — you are focusing on what you have in common with them and a larger boundary that unites you (for example, you might both be part of the same family or cycling club). Same for corporations. When two companies enter into a partnership, they have drawn a boundary that includes both companies and excludes all others. Same with nations. NATO has drawn a boundary — 32 member states sit inside the boundary and all other nations sit outside.

You’ll note, I hope, that we all exist within a complex hierarchy of boundaries. There’s a boundary I place around me which tells me that I am me, and nobody else is me. I am inside that boundary and everyone else is outside. But that is not the only boundary I’ve drawn. There are many others. Perhaps hundreds. I draw a boundary around my family; my coworkers; my fellow Dogfish Head lovers; people who went to the same university; people who are of the same ethnicity or religion or national background; people who enjoy cycling; people who understand why purpose is so important to business…

Furthermore, there are an infinite number of boundaries we can draw, as physical matter can be broken down into forever-smaller particles on the one end, and as humans can choose to create larger or simply different aggregations of people on the other. Not every possible boundary will be relevant to a decision or action that you might consider. But since boundaries have consequences, you should choose them with extreme foresight and caution.

Boundaries are arbitrary

They do not exist in nature. We draw them where we do as a matter of will. The question is not whether they are right or wrong, but whether they serve our purposes or not.

When I say that boundaries are arbitrary, I do not mean that there is no reason for them to be placed where they are. I just mean that there is no law of nature that says a boundary must be drawn, that it must be placed in a particular spot, or that we need to pay any attention to it at all.

Physical matter is fluid and continuous. The fact that we consider our self to stop at our skin and not include the air around us, the bike we’re sitting on, or the person we’re embracing, is a choice. It’s a choice that happens to be fairly universal, but a choice nonetheless. I once read a fascinating article that highlighted the difficulty in determining where to draw the line between our bodies and the thousands of bacterial species that colonize us and often perform critical functions. For example, there are bacteria in our gut biome that play an essential role in digestion. So how certain are you that those bacteria are not “you” when you would be unable to function normally without them?

National boundaries are arbitrary. When you look at a map of Europe and see France and Germany, all you’re seeing is a set of choices that people made. France and Germany do not exist in nature. They are nothing other than an act of will. Someone got to a place and managed to have the strength to take and keep that land. That’s it. There’s no reason it had to be that way.

Same for business boundaries. We buy and sell parts of each other with regularity. We join together in trade groups and industry associations. And we all understand that these boundaries are easily changed.

Boundary selection has tangible implications on incentives and decisions

The impact of boundary selection is massive. Within one’s body, there are many examples. One could select a diet that might be optimal for weight management but suboptimal for cardiovascular health. Similarly, in the moral dimension, one could find a conflict between two deeply-held values and opt to pursue one at the expense of the other.

In both cases, the very need for a decision is predicated on the fact that a boundary was drawn. Once a boundary is drawn, there is an incentive differential that often requires a choice to favor what lies on one side of the boundary over what lies on the other. What if instead of looking at our body as a set of parts or sub-systems, we looked at our body as a single entity or system? We’d probably pursue some form of holistic healthcare that considered our overall health, wellness, and longevity.

In business, it is very much the same. When we choose to pay attention to certain boundaries within a company, we typically find incentive misalignment that leads to suboptimal results for the entire company. This could be a product launch in business unit A which will compete with business unit B. Each business unit has an incentive to maximize its own performance. The shareholders have an incentive to maximize enterprise value. Who do you think wins? Or, Supply Chain can have an incentive to minimize product returns and Sales can have an incentive to maximize revenue. Who wins? Is the company better off?

One common absurdity I see in my client work is the boundary between Marketing and HR. Both are responsible for building the reputation of the company — Marketing with customers and consumers, HR with candidates, employees, and alums. Both are responsible for designing and delivering content and experiences that engage the company’s stakeholders. In a sense, Marketing and HR are opposite sides of the same coin — HR is responsible for the inside voice of the company (culture) and Marketing is responsible for the outside voice (brand). And yet, so often they don’t collaborate. Because there’s a boundary, each function has its own goals, its own budget, its own leader, its own training, its own network of agencies and consultants… Often, Marketing will work with a set of market-research firms and creative agencies to develop the brand and, in parallel, HR will work with its own research firms and creative agencies to develop an “employer brand”. How can that lead to an optimal result for the company?

In all of these cases, the selection of which boundaries to consider “real” is critically important. We are not forced by nature to pay attention to the boundary between Marketing and HR. We don’t even have to have separate departments. That’s a choice we make. And when we do, we create an incentive differential that has to be managed.

Now I’m not suggesting that we just erase all boundaries and live as one singularity in an eternal state of kumbaya. I quite like the fact that we have experts who deeply understand our cardiovascular system, our visual system, our solar system, HVAC systems, and the like. If we were unable to draw boundaries around constituent elements and could only see the universe as one whole, we would almost certainly be far more ignorant than we are now.

Instead, what I’m suggesting is that you become more intentional about the boundaries you draw and maintain. That you know which boundaries matter for your organization — and recognize that just because a boundary is useful today does not mean it will be useful tomorrow. That you consider the unintended consequences of those boundaries. And that you figure out whether you’d be better off erasing some boundaries and adding others.

If you are a leader, then you are in the business of establishing, reinforcing, and erasing boundaries. Those choices will play no small role in guiding the behavior of those you lead. So please, make those choices wisely.