Process as Variance Reducing

Process brings everyone to the average—including your best performers

Eeke de Milliano
How to foster innovation and big thinking

Process as Variance Reducing

"Process, by definition, is variance reducing. You're introducing it because you worry that the variance in your org is too high. You want people to sort of meet a certain standard. And the cost of that is obviously, while you are reducing the standard and bringing folks up to the average, you're also bringing other folks down to the average. And oftentimes, the folks you're bringing down are your highest performers, your most creative thinkers." - Eeke de Milliano

What It Is

This framework provides a mental model for understanding the true cost of organizational process. While process is typically introduced to improve consistency and bring underperformers up to standard, it has an often-overlooked downside: it simultaneously constrains your highest performers.

The insight is that your most creative thinkers and best performers often don't need process to do their best work. Process exists to manage variance, but variance isn't always bad—some of that "variance" represents exceptional output that gets flattened when forced into standard templates.

This connects to a broader observation about human work: as we make work more formulaic and standardized, we make it more like what AI can produce. The unique value of human contribution often lies precisely in the variance that process eliminates.

How It Works

The Variance Reduction Effect:

  • Process sets a standard that everyone must meet
  • Lower performers get brought up to that standard (the intended benefit)
  • Higher performers get brought down to that standard (the hidden cost)
  • The organization loses the high-end outlier contributions

Why Companies Accept This Trade-off:

  • As companies grow, it becomes harder to hire only people who don't need process
  • At scale, reducing variance becomes more important than maximizing peaks
  • Coordination costs increase, making standardization more valuable

The Breaking Point Decision:

  • Some individuals are so exceptional that you should "break the org" for them
  • Claire Hughes Johnson (former Stripe COO) would ask: "Are you willing to break the org for this person?"
  • For truly exceptional performers, the answer should be yes

How to Apply It

  1. Before adding process, ask the cost question - "Am I willing to bring my best people down to this level in exchange for bringing others up?"

  2. Identify your exception-worthy performers - Who on your team genuinely doesn't need the process to do great work?

  3. Give managers air cover to make exceptions - Train managers to detect high performers and give them permission to operate differently

  4. Accept the organizational cost - Making exceptions means some "special treatment"—be willing to defend that

  5. Question whether variance is actually bad - Not all inconsistency is problematic; some represents healthy diversity of approach

When to Use It

  • When evaluating whether to introduce new organizational processes
  • When high performers complain about bureaucracy or constraints
  • When deciding whether to enforce existing processes uniformly
  • When balancing the need for consistency with the need for innovation

Source

  • Guest: Eeke de Milliano
  • Episode: "How to foster innovation and big thinking"
  • Key Discussion: (00:39:47) - Full explanation of variance-reducing nature of process
  • YouTube: Watch on YouTube

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