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Majority Rules

As company leader, it's up to you to lay down the law.

I often begin my seminars by saying, "I make the rules; I change the rules; I enforce the rules." Then I spell out the rules and the fines for breaking them. For example, if you're late: $10. If you bring food into class: $10. If your cell rings: $25. I explain that the overarching reason for rules is to preserve the sanctity of the classroom. They are created and enforced for the good of the group.

There's a second reason for being clear on the rules: Someone will always test them. Over the years, people have chosen to leave, calling me a dictator and demanding their money back. I gladly refund their money, and they leave.

You may be wondering, "Why be so tough about rules?" Without rules, there is chaos. Without rules or the enforcement of them, the value of assets decline. When the leaders of Enron broke the rules, Enron disappeared. In neighborhoods where rules aren't enforced and crime flourishes, the value of real estate declines. Imagine a football game without rules or a referee, or driving without laws or police.

As the leader, you create the rules, change the rules, enforce the rules and, most important, abide by the rules. Many businesses struggle or fail because the entrepreneur wants to be politically correct or popular. Weak leaders often have no rules, bend the rules, break the rules or lack the courage to enforce them. A weak leader builds a weak company.

A viable business needs rules. But one problem with rules is that there are so many different types: legal, ethical, cultural and moral rules. There are also communication rules. At The Rich Dad Company, we have a rule on gossip. If someone speaks derogatorily about another person, the listener is to say, "Please say that directly to so and so."

Of course, there can be too many rules. If you have too many rules, antiquated rules, unclear rules and inflexible or excessive enforcement, only robots will remain in the company. Ultimately, the story is in the results: A strong leader plus strong rules equals a strong business.

Robert Kiyosaki, author of the Rich Dad series of books, is an investor, entrepreneur and educator whose perspectives have changed the way people think about money and investing.

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This article was originally published in the September 2007 print edition of Entrepreneur with the headline: Majority Rules.

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