Ray Dalio: “Firing People is Not a Big Deal”

You gotta give this guy some guy credit.

 Ray Dalio, the founder of Bridgewater Associates, LP, a global investment management firm, lets you know what to expect if you want to or if you do work  at the firm.

 What you are in for isn’t pretty.

 Dalio has published a 123-page document  entitled “Principles” on the firm’s web site outlining his management beliefs.  To put it kindly, Dalio’s principles reflect the outsized ego of a captain of industry who seems to have little patience for any human frailty that might get between Bridgewater and a buck.

What is particularly interesting about the document is Dalio’s obvious disdain for Human Resources personnel.  One  might imagine some hapless HR Director, long since fired, suggesting that Dalio’s management principles could be… uh … more humane.  (“Sir, Mr. Dalio, Sir …  might I suggest that firing people is a big deal to the people being fired?”)

There’s no doubt that Dalio’s principles work for him. According to Forbes he is the 44th richest person in America and the 88th richest person in the world with a net worth of $10 billion as of March 2012.  But God help you if you are an employee who happens to be a single mom with urgent childcare demands; a worker whose ‘game’ is thrown off by divorce, sickness, death of a loved one; or if you just can’t take the stress of being evaluated like a micro-circuit board on an assembly line.

 So on this Labor Day 2013, it is without pleasure that I present some excerpts from  Ray Dalio’s “Principles”:

• Evaluate people accurately, not “Kindly.” 
• Maintain “baseball cards” and/or “believability matrixes” for your people. Imagine if you had baseball cards that showed all the performance stats for your people: batting averages, home runs, errors, ERAs, win/loss records … You can and should keep such records of your people … . I use ratings, forced rankings, metrics, results, and credentials.
• Remember that convincing people of their strengths is generally much easier than convincing them of their weaknesses … At Bridgewater, because we always seek excellence, more time is spent discussing weaknesses. … . This is great because we focus on improving, not celebrating how great we are, which is in fact how we get to be great. For people who don’t understand this fact, the environment can be difficult. 
• Don’t collect people. Firing people is not a big deal—certainly nowhere near as big a deal as keeping badly performing people, because keeping a person in a job they are not suited for is terrible both for the person (because it prevents personal evolution) and our community (because we all bear the consequences and it erodes meritocracy). 
• When people are “without a box,” consider whether there is an open box at Bridgewater that would be a better fit. If not, fire them. Remember that we hire people not to fill their first job at Bridgewater nor primarily for their skills. We are trying to select people with whom we’d like to share our lives. We expect everyone to evolve here.
• It is your job as a manager to get at truth and excellence, not to make people happy. For example, the correct path might be to fire some people and replace them with better people, or to put people in jobs they might not want, etc.
• It is far better to find a few smart people and give them the best technology than to have a greater number of ordinary and less well-equipped people …  Usually it is the person’s capacity that limits the scope of his understanding and control.
• A higher percentage of the population than you might imagine will cheat if given an opportunity, and most people who are given the choice of being “fair” with you and taking more for themselves will choose taking more for themselves.
• Use “double-do” rather than “double-check” to make sure mission-critical tasks are done correctly. When people double-check someone else’s work, there is a much lower rate of catching errors than when two parties independently do the work and the results are compared. Double-doing is having two different people doing the same task on the same job so that two independent answers are derived.
• I  often hear people say, “It’s getting better,” as though that is good enough when “it” is both below that bar and improving at an inadequate rate. That isn’t good enough.  Everything important you manage has to be on a trajectory to be “above the bar” and headed for “excellent” at an acceptable pace.
• Don’t try to please everyone. Not everyone is going to be happy about every decision you make, especially the decisions that say they can’t do something.

And Don’t Listen to HR!

•  Watch out for “department slip.” This happens when a support department, such as HR or Facilities, mistakes its responsibilities to provide support with a responsibility to determine how the thing they are supporting should be done. An example of this sort of mistake is if  … people in HR think they should determine what our employment policies should be …  While support departments should know the goals of the people they’re supporting and provide feedback regarding possible choices, they are not the ones to determine the vision.
• Assign responsibilities based on workflow design and people’s abilities, not job titles … .For example, just because someone is responsible for “human resources,” “recruiting,” “legal,” “programming,” etc., doesn’t necessarily mean they are the appropriate person to do everything associated with those functions. For example, though “Human Resources” people help with hiring, firing, and providing benefits, it would be a mistake to give them the responsibility of determining who gets hired and fired and what benefits are provided to employees.

I became aware of Ray Dalio’s management principles in a recent story by Rachel Feintzeig in the Wall Street Journal, about the cost of incivility in the workplace.  The article notes that networking-equipment company Cisco Systems Inc. in 2007 estimated the cost of incivility in its organization topped $8.3 million annually. Costs include account turnover, employees’ weakened commitment to the company and work time that was lost to worrying about future bad behavior.