Page 274 - Ray Dalio - Principles

• An organization is a machine consisting of

two major parts: culture and people.

Each influences the other, because the people who make up an
organization determine the kind of culture it has, and the culture of
the organization determines the kinds of people who fit in.

a. A great organization has both great people and a great culture. Companies that
get progressively better over time have both. Nothing is more
important or more difficult than to get the culture and people right.

b. Great people have both great character and great capabilities. By great
character, I mean they are radically truthful, radically transparent,
and deeply committed to the mission of the organization. By great
capabilities, I mean they have the abilities and skills to do their jobs
excellently. People who have one without the other are dangerous
and should be removed from the organization. People who have both
are rare and should be treasured.

c. Great cultures bring problems and disagreements to the surface and solve them
well, and they love imagining and building great things that haven’t been built before.
Doing that sustains their evolution. In our case, we do that by having
an idea meritocracy that strives for meaningful work and meaningful
relationships through radical truth and radical transparency. By
meaningful work, I mean work that people are excited to get their
heads into, and by meaningful relationships I mean those in which
there is genuine caring for each other (like an extended family). I
find that these reinforce each other and that being radically truthful
and radically transparent with each other makes both the work and
the relationships go better.

By constantly looking down on the machine, its managers can
objectively compare the outcomes it produces with their goals. If
those outcomes are consistent with those goals, then the machine is
working effectively; if the outcomes are inconsistent with the goals,
then something is wrong with either the design of the machine or the
people who are a part of it and the problem needs to be diagnosed so
the machine can be modified. As laid out in Chapter Two of Life
Principles, this ideally happens in a 5-Step Process: 1) having clear
goals, 2) identifying the problems preventing the goals from being
achieved, 3) diagnosing what parts of the machine (i.e., which
people or which designs) are not working well, 4) designing
changes, and 5) doing what is needed. This is the fastest and most
efficient way that an organization improves.