Meaning
Unwritten rules and past actions that guide the current behavior and decision making within an organization form the basis of the firm culture. The presence of tacit precedent is strongest in companies where the founder has led for a long time without formalizing the policies. These precedents remain influential until they are explicitly replaced by written standards or new leadership habits.
Informal Rule
Doing things the way they have always been done provides a sense of continuity but can also lead to stagnation. When tacit precedent is the main driver of choices, it can be hard for new managers to understand the logic behind the firm actions. This lack of transparency creates a barrier for those who did not grow up with the company.
Cultural Anchor
Rooting the identity of the firm in its early successes helps to maintain the original vision as it scales. Tacit precedent is often the hardest thing to change during a handover because it is not written down anywhere. It requires a significant expenditure of energy to identify these hidden rules and decide which ones should be kept and which should be discarded.
The process of making these rules explicit is a key part of professionalizing the management team.
Behavioral Norm
Shaping the expectations of the staff through consistent action creates a predictable environment. Tacit precedent is the ghost of the founder in the board room.
