Page 383 - Ray Dalio - Principles

9 Constantly Train, Test, Evaluate, and

Sort People

Both your people and your design must evolve for your machine to improve. When you get
personal evolution right, the returns are exponential. As people get better and better, they are more
able to think independently, probe, and help you refine your machine. The faster they evolve, the
faster your outcomes will improve.
Your part in an employee’s personal evolution begins with a frank assessment of their strengths
and weaknesses, followed by a plan for how their weaknesses can be mitigated either through
training or by switching to a different job that taps into their strengths and preferences. At
Bridgewater, new employees are often taken aback by how frank and direct such conversations can
be, but it’s not personal or hierarchical—no one is exempt from this kind of criticism. While this
process is generally difficult for both managers and their subordinates, in the long run it has made
people happier and Bridgewater more successful. Remember that most people are happiest when
they are improving and doing the things that suit them naturally and help them advance. So learning
about your people’s weaknesses is just as valuable (for them and for you) as is learning their
strengths.
Even as you help people develop, you must constantly assess whether they are able to fulfill their
responsibilities excellently. This is not easy to do objectively since you will often have meaningful
relationships with your reports and may be reluctant to evaluate them accurately if their
performance isn’t at the bar. By the same token, you may be tempted to give an employee who rubs
you the wrong way a worse evaluation than he or she deserves. An idea meritocracy requires
objectivity. Many of the management tools we have developed were built to do just that, providing
us with an unbiased picture of people and their performance independent of the biases of any one
manager. This data is essential in cases where a manager and a report are out of sync on an
assessment and others are called in to resolve the dispute.
A few years ago, one of our employees was serving in a trial role as a department head. The prior
department head had left the firm, and Greg, who was then CEO, was assessing whether this
employee, who had previously been a deputy, had the right abilities to step into the role. The
employee thought he did; Greg and others thought he did not. But this decision was not as simple as
the CEO “making the call.” We want decisions to be more evidence-based. As a result of our Dot
Collector system of constant feedback, we had literally hundreds of data points on the specific
attributes required for the job, including synthesis, knowing what he didn’t know, and managing at
the right level. So we put all this data onto the screen and stared hard at it together. We then asked
the employee to look at that body of evidence and reflect on what he would do if he were in the
position of deciding whether he’d hire himself for the job. Once he was able to step back and look at
the objective evidence, he agreed to move on and try another role at Bridgewater more suited to his
strengths.
Helping people acquire skills is easy—it’s typically a matter of providing them with appropriate
training. Improvements in abilities are more difficult but essential to expanding what a person can
be responsible for over time. And changing someone’s values is something you should never count
on. In every relationship, there comes a point when you must decide whether you are meant for each
other—that’s common in private life and at any organization that holds high standards. At
Bridgewater, we know that we cannot compromise on the fundamentals of our culture, so if a person
can’t get to the bar in an acceptable time frame, he or she must leave.
Every leader must decide between 1) getting rid of liked but incapable people to achieve their
goals and 2) keeping the nice but incapable people and not achieving their goals. Whether or not
you can make these hard decisions is the strongest determinant of your own success or failure. In a