Principles are ways of successfully dealing with reality to get what you want out of life.
Ray Dalio, one of the world’s most successful investors and entrepreneurs, cites principles as his key to success.
In 1975, Ray Dalio founded Bridgewater Associates, out of his two-bedroom apartment in New York City. Over forty years later, Bridgewater has grown into the largest hedge fund in the world and the fifth most important private company in the United States (according to Fortune magazine), and Dalio himself has been named to TIME’s list of the 100 most influential people in the world. Along the way Dalio discovered unique principles that have led to his and Bridgewater’s unique success. It is these principles, and not anything special about Dalio, that he believes are the reason behind whatever success he has had. He is now at a stage in his life that he wants to pass these principles along to others for them to judge for themselves and to do whatever they want with them.
Work Principle
Use the following "drill-down" technique to gain an 80/20 understanding of a department or sub-department that is having problems.
A drill-down is a process that allows you to gain an understanding of the root causes of the biggest problems in a department or area so you can design a plan to make the area excellent. Drill-downs are not diagnoses, but a form of broad and deep probing. They're not intended to uncover the causes of every problem: only the 20 or so percent of causes that produce 80 percent of the suboptimal effects. A drill-down takes place in two steps and is then followed by design and execution steps. If done well, the two drill-down steps can be done in about four hours. It is very important that the steps be done separately and independently, so as not to go in too many directions at once. Let me take you through the drill-down process, offering guidance and examples for each step.
Step 1: List the Problems. Quickly inventory all the core problems. Be very specific, as this is the only way to effectively find solutions. Don't generalize or use the plural "we" or "they." Name the names of the people experiencing the problems.
- Have all the relevant people from the area under scrutiny participate in the drill-down; you will benefit from their insights and it will drive their ownership of the solution.
- Don't focus on rare events or the trivial problems--nothing is perfect--but be sure they are not symptoms of systematic machine problems.
- Don't try to find solutions yet. Your focus in this step is strictly on listing the problems.
Step 2: Identify the Root Causes. For each problem, identify the deepseated reason behind the actions that caused each problem. Most problems happen for one of two reasons: 1) It isn't clear who the Responsible Party is, or 2) The Responsible Party isn't handling his/ her responsibilities well.
You must distinguish proximate causes from root causes. Proximate causes are the reasons or actions that led to the problem. When you start describing the qualities behind these reasons or actions, you are getting closer to the root cause.
To get at the root cause, keep asking "Why?" For example:
Problem:
The team is continually working late and is on the verge of burning out.
Why?
Because we don't have enough capacity to meet the demand put on the team.
Why?
Because we inherited this new responsibility without additional staff.
Why?
Because the manager did not understand the volume of work before accepting the responsibility.
Why?
Because the manager is bad at anticipating problems and creating plans. [Root Cause]
Do not exclude any relevant people from the drill-down: Besides losing the benefit of their ideas, you'll disenfranchise them from the game plan and reduce their sense of ownership. At the same time, remember that people tend to be more defensive than self-critical. 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 put them in jobs they might not want. Everyone's objective must be to get at the best answers, not the answers that will make the most people happy.
You may find that multiple problems identified in Step 1 share the same root cause. Because you are doing a drill-down in a quick session, your root cause diagnoses may only be provisional--essentially alerts about things to watch out for.
When Step 2 is completed, take a break to reflect; then come up with a plan.
Step 3: Create a Plan. Step away from the group and develop a plan that addresses the root causes. Plans are like movie scripts, where you visualize who will do what through time to achieve the goals. They are developed by iterating through multiple possibilities, weighing the likelihood of goal achievement versus costs and risks. They should have specific tasks, outcomes, Responsible Parties, tracking metrics, and timelines. Allow the key people involved to discuss the plan thoroughly. Not everyone needs to agree on the plan but the Responsible Parties and other key people must be in sync.
Step 4: Execute the Plan. Execute the agreed-upon plan and transparently track its progress. At least monthly, report on the planned and actual progress to date and the expectations for the coming period, and hold people publicly accountable for delivering their outcomes successfully and on time. Make adjustments to the plan as required to reflect reality.
Work Principle
- Diagnose Problems to Get at Their Root Causes
Use the following "drill-down" technique to gain an 80/20 understanding of a department or sub-department that is having problems.
Any person or organization can adopt Principles to better achieve their goals.
Learn what Principles are and how they are applied at Principles.com
