Principles

Nonfiction | Book | Adult | Published in 2011

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Summary

Chapter Summaries & Analyses

Introduction-Part 1, Chapter 4

Part 1, Chapters 5-8

Part 2, Chapters 1-3

Part 2, Chapters 4-5

Part 3, Introduction-Chapter 3

Part 3, Chapters 4-6

Part 3, Chapters 7-9

Part 3, Chapters 10-13

Part 3, Chapter 14-Conclusion

Key Figures

Themes

Index of Terms

Important Quotes

Essay Topics

Tools

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Discussion Questions

Part 3, Chapters 7-9Chapter Summaries & Analyses

Part 3: “Work Principles”

Part 3, Chapter 7 Summary: “Remember That the WHO Is More Important Than the WHAT”

Dalio argues that hiring well and ensuring that employees fit well is another essential component of a successful organization. He explores advice like: “Hire someone better than you” (400). According to him, interviewing does not end at the point of hiring. Instead, it continues through reviews and training as long as an individual is with an organization. Dalio encourages promoting people but, on the other hand, does not believe it serves a company to hold on to people who are not committed to the organization.

He tells an anecdote about a time when an executive at Bridgewater was working on a transition plan for his replacement. The plan turned out to be all about how that executive did things, with no plan for how to accommodate a person who did things differently from him. Dalio reflects on this experience and concludes that individuals must be separated from their roles, and that there should be plans to allow for individual variances within roles.

One of the most important considerations in managing roles is choosing who to deem the “Responsible Parties” (RPs) for making decisions. RPs are accountable for implementing decisions within a unit, project, or other level, but they also must bear the consequences of their decisions, for better or worse. Dalio suggests remembering that in any case, the “force behind the thing” is always people and their decisions (403).

Part 3, Chapter 8 Summary: “Hire Right, Because the Penalties for Hiring Wrong Are Huge”

Dalio goes into greater detail about the elements of good hiring by considering how to match people and positions. He argues that people should be sought to fit jobs; jobs should not be molded to fit people. He prioritizes “values, abilities, and skills […] in that order” (407). Dalio argues that skills and skill requirements will change over time, mentioning changing demands for programming languages as one example. Abilities and values, however, are more resistant to change.

Dalio favors systematic, scientifically informed hiring to identify talent for positions, suggesting that personality assessments and similar tools can help identify which people are suitable for which jobs. He also recommends thinking in terms of how people work with each other, given the importance of teams in organizations. When selecting candidates, experience, track records, and references count more than school performance and other metrics that may not be as relevant to success within an organization. People who are interested in staying with the company best serve an organization’s mission. Hiring leaders should look for people whom they believe have staying power and who are poised to move into other positions within the organization in the future.

Dalio also recommends that organizations be honest with candidates about the organization’s issues and shortcomings, as a way of ensuring a genuine fit. Strong candidates who support an organization’s mission will challenge ideas and issues. An organization can help ensure a strong culture and that employees will remain with a company by encouraging them to speak up.

Part 3, Chapter 9 Summary: “Constantly Train, Test, Evaluate, and Sort People”

Successful organizations do not stop considering an individual’s strengths and weaknesses once they are hired. Since organizations are expected to evolve constantly, the work that individuals do is a continual process of discovery, guided by training. Strengths and weaknesses will emerge. Dalio reiterates his positive view of mistakes, suggesting that it is important that employees gain experience and internalize what they learn, taking mistakes in stride.

Accurate, honest feedback that contextualizes both compliments and criticism is key. Dalio recommends that organizations not “hide [their] observations about people” (428). Feedback should be based on specifics, which Dalio regards as data, but the specifics should not be obsessed over. Instead, organizations should leverage clear and impartial metrics and look for patterns that demonstrate an individual’s strengths and weaknesses.

Dalio recommends that organizations go over performance reviews together with the individuals involved and use them as a basis for conversations. The best approach is to be supportive as people work through change and discover weaknesses. Poor performance isn’t always an employee’s fault but could instead be the result of poor training or misaligned expectations. Training and testing are better alternatives to punishments. Since values and abilities cannot be acquired in the same way through training, however, Dalio recommends that organizations not keep people in positions that do not match their values or abilities.

Part 3, Chapters 7-9 Analysis

In Chapters 7-9 of Part 3, Dalio turns attention to organizational culture, and especially hiring. He prioritizes finding “fit,” or matching “the person to the design” of the organization (407). This perspective echoes his emphasis on forging and maintaining a strong company culture. In Part 2, Dalio mentioned the usefulness of personality assessments for helping individuals discover their strengths. In Chapter 8 of Part 3, he similarly explains how such assessments and ideas from neuroscience can be “valuable tools” for organizations when thinking about which individuals can contribute to the company and how. However, Dalio also views assessment as an ongoing process that does not end at the moment of hiring.

Dalio suggests that the process of seeking and hiring employees is not simply about them proving themselves to a company. Instead, organizations have their own obligations during the process. Dalio insists that companies should share their “warts,” or faults and issues, openly with prospective employees. Such a practice demonstrates an organization’s culture of transparency from the start and sets an example for the prospective employee to follow. This suggestion is another illustration of Dalio’s principle of radical transparency at work in a practical way.

Dalio’s thoughts on hiring and employee management offer organizations a way to think about people, positions, and the differences between them. He implies that distinguishing between individuals and positions is critical. He notes the difference between three levels at which individuals can be assessed: skills, abilities, and values. Skills are set apart as trainable, “learned tools” and are integral to the position itself. Values and abilities help ensure success within a position, but they refer to “deep-seated beliefs” and “ways of thinking and behaving” that cannot be trained into a person (407). Thus, Dalio implies, it is critical that an individual’s values and abilities align with the company’s mission.

Training is an opportunity to assist employee growth, according to Dalio. At the same time, it helps to develop the organization as a whole. This idea indicates another reason why Dalio distinguishes between individuals and positions. When a position is dependent solely on the person who occupies it, an organization is vulnerable to that person’s failure or departure from the company. If the position can be designed as a component of the organization that individuals can be continually trained for, and in terms of what the position itself is responsible for, then the organization overall is healthier and in a better position for continual growth.