8 Key Management Principles Inspired by Ray Dalio

Matthew Turner
July 10, 2019

With so many moving pieces involved inside it, leading a team is a complex undertaking. No day is ever the same. No matter how much you plan, you are never sure what will happen. People call in sick, mistakes happen, clients change their mind, and your market constantly evolves.

But none of this is to say you cannot lead a successful team that drives growth and innovation. Company leaders who achieve the most are the ones that commit to certain management principles.

Having the basic principles of management in place doesn’t remove any of the challenges inherent in leading people. But they do prepare you for them, and help lay a foundation for running a truly successful team.

They help you build a culture where people have purpose and drive. They help you create a working environment that is committed to and focused on growth. 

So, how do you implement the right management principles for your business?

A man who knows more about this than most is Ray Dalio: author of Principles, and the billionaire founder of the investment firm Bridgewater Associates. In his book, Dalio shares a blueprint of principles that serve you at home and at work. 

Here are 8 basic principles of management (inspired by Ray Dalio’s teachings) that will help you transform your team, culture and business: 

1: An Organization is a Machine Consisting of Two Major Parts: Culture and People.

It doesn’t matter what industry you’re in, the constant involved at all times is people. They are inside your business, making everything work. They are the customers you deal with, those you serve.

People are always part of the equation, meaning the culture you build is fundamental if you want your team to work well, and work happily. 

You can consciously craft your culture, or simply allow it to happen. Dalio learned it’s important to have huge intention when building your own, because that way you can bring the “right” people on-board.

As a manager, you’re at the heart of this. It’s your job to build and maintain the right culture, and to then fuel this culture with the right people.

2: Set High Standards, But Set Clearer Goals/Expectations

Many business owners have high standards, and expect a lot from themselves and those on their team. Having high-standards like this is important, but where most arguably fall short is communicating these high-standards with those around them.

In his books, Dalio frequently discussed how he learned this the hard way. Setting high-standards is a management principle you cannot sacrifice if you want to create something impactful. But what’s possibly more important is to then set clear goals and expectations for your team.

It’s a basic principle of management that many managers fail at, because having high-standards is only the beginning. What really matters is to then communicate these clearly and effectively. After all, you cannot expect your team to match your standards if you don’t communicate what they are.

3: Transparency and Truth is Key To Good Communication

Much of his first book, Principles, focussed around the commitment to radical transparency. Dalio expected his team to be honest with him, and he always offered the same in return.

At times this is hard, uncomfortable and creates conflict. It’s far easier to not do this, but easy isn’t where success lies. As a manager, one of your main roles is to moderate and facilitate these tough conversations - not to make your life easier by eradicating them.

Having a transparent culture empowers your team to set high-standards and keep one another accountable. It allows for innovative ideas, and new solutions to complex problems. It isn’t always easy, but it’s a management principle Dalio insisted upon.

4: Create Meaning, Purpose and Ownership

One of the most important management principles is to ensure your team feels like they’re part of something important. Do you want them to see their job as just a job? Or would you rather they feel part of something special?

It’s your job to fuel this; to provide meaning and purpose, and empower them to OWN their work. Once you achieve this, you may never have to micromanage another person ever again. 

Not only does it allow those on your team to focus on work that motivates them, but you build a culture full of people aligned to a greater mission. They don’t turn up each day to earn a salary. Instead, they turn up to have a massive impact.

This begins with you, as their leader. Make them feel like they belong to something meaningful, and you’ll likely see a great deal in return from them.

5: Mistakes Happen (and they are okay)

Another aspect Dalio often references in his books is mistakes: those he made, and those others did. 

Should you welcome and encourage mistakes? Not exactly…

Should you expect them and embrace them when they arrive? Yes.

Often, those on your team will make matters worse by refusing to own up to a mistake. They may allow it to rumble on, while you remain unaware of the problem until it’s too late.

Is this on them or is this on you? It depends, because if you don’t create an environment that embraces mistakes, it’s arguably on you. It’s your job to make your team feel comfortable enough to admit when they make mistakes -- and to then give them the chance to own it, and overcome it.

Mistakes are not usually a problem so long as they're dealt with quickly. The big issues only tend to arrive when someone tries to sweep it under the carpet.

6: WHO is More Important Than WHAT (set clear roles to the RIGHT people)

So much of Dalio’s basic principles of management centre around people and culture. Where many managers focus on the role, qualifications needed and prior experience (what’s involved), Dalio instead focussed on the person behind the role. He cared about the WHO over the WHAT.

Remember, people run businesses. What matters most is having the right people involved, regardless of the roles they fill. Skills are learned, and experience develops over time. So long as you have the right people doing what you need, they will grow into their role and your business will grow with it.

Whereas if you only focus on the role, you may find talented people who are good at what they do, but are not aligned with your culture, values or vision.

7: Hiring the Wrong Person is the Most Costly Mistake You Can Make

Because culture and people play such an important role in managing a successful business, the art of hiring is a fundamental management principle you cannot ignore.

However, where many managers obsess over hiring someone for the role, they overlook both the visible and invisible costs hiring the wrong person has on the business as a whole:

  • Salary (visible)
  • Office Equipment (visible)
  • Bonuses (visible)
  • Poor Sales Conversion (invisible)
  • Lost Customers (invisible)
  • You Time (invisible)

The process of hiring someone costs you money and time. It brings actual costs that you can see and easily track, but also invisible costs that are trickier to measure (yet it’s often these invisible costs that are the most impactful).

Let’s say you hire someone in your sales team who’s a bad fit. The average close rate in your team is 30%, but this person closes at just 5% over a six month period. The money they cost you isn’t literal, but the lost potential income is possibly much more damaging.

8: Constantly Monitor and Evolve

Despite decades of success and fortune, Dalio wrote that he’s still a work in progress. In Principles, he confessed that he still makes mistakes and he continues to learn. His business must evolve with or without him, and the management principles that works today may not work in the future. 

In all forms of your work and life, this holds true. You must constantly evolve and monitor, and make adjustments where necessary. These basic principles of management help you overcome many issues in your business, but it’s important to remember they bring no guarantees. It’s this ability to adapt that’s possibly the most important management principle of all.

Adapt when you need to, and always look for ways to improve

These management principles (in general), lay the foundations for success. They allow your team to do what they do best, and allow you to manage them effectively (instead of doing the work for them). They help you save time and money, and build a team that’s aligned with one another’s success

With these basic principles of management at the heart of your business, you have everything you need to overcome whatever comes your way.

Are you interested in making your workplace more efficient? Check out what Eden’s Workplace Management Platform can do for your office.

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