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Principles by Ray Dalio

Work Principles

As per Ray, for any organization to function well, it is necessary that the principles of its employees/ partners are aligned with the principles of the organization on the whole. This sole match can motivate the people around and make the organization prosper. This does not necessarily mean that every principal should be matched, it just means that the majority of those which are most important should match.

 

What is an organization? An organization is a machine with two main parts – Culture and People.

 

 

a. Great organizations have both great people and great culture. Tata Group, Bajaj Finance, Asian Paints and a host of other successful generation old companies are considered to have embedded a common culture across the organization. Some of the examples may be, trust among employees and managers, motivating employees to switch roles within the organization to suit their interests, etc. all motivate employees. Companies with great culture encourage employees to discuss their issues/mistakes and work together to improve on them.


b. Great people have both great character and great capabilities. Both the factors are important and hence should be looked in pair rather than individually. A person with great character and low on capabilities, will be a burden for the organization and vice-versa, a person with great capabilities and low on character, has a chance of deceiving the company.


c. Putting comfort ahead of success produces worse results. Hence organizations are advised to not force culture/ principles on employees, rather have it on a mutual consent basis.

 

Idea Meritocracy = Radical Truth + Radical Transparency + Believability Weighted Decision Making

 

Let’s understand each of the concepts one by one.

 

Idea meritocracy is a term coined by Ray Dalio. It defines a culture in the organization where each and every person is allowed to express their ideas very fluently and openly.

 

Radical Truth – It’s important to be truthful to the employees. No matter how important the position may be, managers should be able to communicate their views with utter honesty.


Radical Transparency – Every procedure in an organization should be done with utmost transparency. For example, annual appraisals should list out exactly what was expected from the employee and how  it performs on each of the matrices. Having a proper quantitative rule for it, gives employees satisfaction.


Believability Weighted Decision Making – The appraisal system should be such that everyone is able to believe in it. Basically, the organization should use some quantitative computer-based software (algorithm) that will nullify any emotions in decision making. 

 

This is a self-reinforcing spiral that leads to success of an organization over the long term.

 

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Units 10/13