Both your people and your design must evolve for your machine to improve. When you get personal evolution right, the returns are exponential. As people get better and better, they are more able to think independently, probe, and help you refine your machine. The faster they evolve, the faster your outcomes will improve.

Your part in an employee’s personal evolution begins with a frank assessment of their strengths and weaknesses, followed by a plan for how their weaknesses can be mitigated either through training or by switching to a different job that taps into their strengths and preferences. At Bridgewater, new employees are often taken aback by how frank and direct such conversations can be, but it’s not personal or hierarchical—no one is exempt from this kind of criticism. While this process is generally difficult for both managers and their subordinates, in the long run it has made people happier and Bridgewater more successful. Remember that most people are happiest when they are improving and doing the things that suit them naturally and help them advance. So learning about your people’s weaknesses is just as valuable (for them and for you) as is learning their strengths.

Even as you help people develop, you must constantly assess whether they are able to fulfill their responsibilities excellently. This is not easy to do objectively since you will often have meaningful relationships with your reports and may be reluctant to evaluate them accurately if their performance isn’t at the bar. By the same token, you may be tempted to give an employee who rubs you the wrong way a worse evaluation than he or she deserves. An idea meritocracy requires objectivity. Many of the management tools we have developed were built to do just that, providing us with an unbiased picture of people and their performance independent of the biases of any one manager. This data is essential in cases where a manager and a report are out of sync on an assessment and others are called in to resolve the dispute.

Helping people acquire skills is easy—it’s typically a matter of providing them with appropriate training. Improvements in abilities are more difficult but essential to expanding what a person can be responsible for over time. And changing someone’s values is something you should never count on. In every relationship, there comes a point when you must decide whether you are meant for each other— that’s common in private life and at any organization that holds high standards. At Bridgewater, we know that we cannot compromise on the fundamentals of our culture, so if a person can’t get to the bar in an acceptable time frame, he or she must leave.

Every leader must decide between 1) getting rid of liked but incapable people to achieve their goals and 2) keeping the nice but incapable people and not achieving their goals. Whether or not you can make these hard decisions is the strongest determinant of your own success or failure. In a culture like Bridgewater’s, you have no choice. You must choose excellence, even though it might be difficult at the moment, because it’s best for everyone."