Principles

After the previous several chapters on understanding individuals and organizational fit, Chapters 10-13 of Part 3 return to thinking about organizational management. Dalio again utilizes metaphors of technology and machines, characterizing a manager as a “mechanic” or an “organizational engineer.” However, these chapters concentrate on managing human relationships within an organization and building a strong culture. Thus, they explore the tension between the technology metaphors Dalio uses and those that are focused on human growth.

Dalio’s suggestion for how managers should approach relationships with their employees is balanced. He recommends that managers care about employees as people but neither become so close that they micromanage nor so distant that they cannot build effective relationships. He demonstrates additional realism when emphasizing that although employees should be treated equitably, they must not all be treated the same. Dalio recommends that managers keep the big picture in mind, and he sees serving this big picture as the ultimate goal of a manager.

Dalio anticipates that problems will emerge, even within an organization operating as a machine. Sticking to principles may help avoid many issues, but managers still have a responsibility to navigate disagreements and other problems. Managers have a major responsibility to their organization, he implies, and should have their ear to the ground and never be complacent, even when things seem to be going well—as illustrated by his discussion of group think. One thing setting managers apart from other employees is that they should “[t]hink like an owner” and remember that a “vacation doesn’t mean one can neglect one’s responsibilities” (462). In other words, managers must take ownership of issues and be prepared to face them at any time.

When problems are identified, Dalio writes, it is up to managers to help solve them productively. He offers another heuristic by suggesting that they resist the urge to fix problems immediately and instead first look at the root causes. This heuristic points to the importance Dalio places on analysis and understanding data. According to him, understanding the reasons behind situations is more important than how to react to them, because in the long run understanding root causes will better equip individuals and organizations to handle situations as they arise and avoid problems as much as possible.

Dalio bolsters the importance he places in human relationships by recommending how managers should react when problems arise. He recommends that problems always be contextualized and considered in terms of the big picture, and that managers not simply focus on punishing employees. Looking for ways to maintain and improve the organizational machine, he suggests, includes supporting employees through mistakes and missteps as much as possible.

Chapters 10-13 also include principles that provide practical advice for aspects of business that are fundamental, and perhaps even neglected. Dalio provides his thoughts on straightforward matters such as org charts and reporting lines, standing meetings, oversight, and the use of consultants. By doing so, Dalio shows that he does not overlook, discredit, or belittle these basic matters of business even as he aims for something more nonconventional and ambitious.