Page 431 - Ray Dalio - Principles

of your own “stepping out,” but the selection and training and governance of the new leaders who
“step up,” and most importantly, the preservation of the culture and its values.

The best approach I’ve seen for doing this is what companies and organizations like GE, 3G,
and the Chinese Politburo do, which is to build a pyramid-like “succession pipeline” in which the
next generation of leaders is exposed to the thinking and decision making of the current leaders so
they can both learn and be tested.
k. Don’t just pay attention to your job; pay attention to how your job will be done if you are no longer around. I wrote
about key-man risk earlier, which applies the most to those with the largest areas of responsibility,
especially the head of an organization. If that’s you, then you should designate the people who
could replace you and have them do your job for a while so they can be vetted and tested. These
results should be documented in a manual that the appropriate people can go to if you should be
hit by a bus. If all the key people in the organization do this, you will have a strong “farm team,”
or at least a clear understanding of vulnerabilities and a plan to deal with them. Remember that a
ninja manager is somebody who can sit back and watch beauty happen—i.e., an orchestrator. If
you are always trying to hire somebody who is as good as or better than you at your job, that will
both free you up to go on to other things and build your succession pipeline.
Beyond that, visualizing your replacement is an enlightening and productive experience. In
addition to taking stock of what you are doing and coming up with both bad and good names, you
will start to think about how to get your best people into slots that don’t yet exist. Knowing that
you will have to test them by letting them do your job without interference, you will be motivated
to train them properly before the test. And, of course, the stress-testing will help you learn and
adapt, which will lead to better results.
l. Use “double-do” rather than “double-check” to make sure mission-critical tasks are done correctly. Double-
checking has a much higher rate of errors than double-doing, which is having two different people
do the same task so that they produce two independent answers. This not only ensures better
answers but will allow you to see the differences in people’s performance and abilities. I use
double-do’s in critical areas such as finance, where large amounts of money are at risk.
And because an audit is only as effective as the auditor is knowledgeable, remember that a
good double-check can only be done by someone capable of double-doing. If the person double-
checking the work isn’t capable of doing the work himself, how could he possibly evaluate it
accurately?
m. Use consultants wisely and watch out for consultant addiction. Sometimes hiring an external consultant is
the best fit for your design. Doing so can get you precisely the amount of specialized expertise
you need to tackle a problem. When you can outsource you don’t have to worry about managing,
and that’s a real advantage. If a position is part-time and requires highly specialized knowledge, I
would prefer to have it done by consultants or outsiders.
At the same time, you need to beware of the chronic use of consultants to do work that should
be done by employees. This will cost you in the long run and erode your culture. Also make sure
you are careful not to ask consultants to do things that they don’t normally do. They will almost
certainly revert to doing things in their usual way; their own employers will demand that.
When evaluating whether to use a consultant, consider the following factors:
1. Quality Control. When someone doing work for you is an employee, you are responsible
for the quality of their work. But when the person working for you works for another
company, you’re operating by their standards, so it’s important to know whether their
standards are as high or higher than yours.

2. Economics. If a full-time person is required, it is almost certainly more cost-effective to
create a position. Consultants’ daily rates add up to considerably more than the annualized
cost of a full-time person.
3. Institutionalization of Knowledge. Someone who is around your environment on an
ongoing basis will gain knowledge and an appreciation of your culture that no outsider can.
4. Security. Having outsiders do the job substantially increases your security risks, especially
if you can’t see them at work (and monitor whether they follow proper precautions, like not
leaving sensitive documents on their desks).