The headquarters of Bridgewater Associates at 1 Glendinning Pl. in Westport, Conn.

Which companies are at the forefront of organisational design AND economic results? The case can be made that this list will include these three companies: Bridgewater, Buurtzorg and Haier.

  • Bridgewater, argueably the worlds most successful hedgefund over the last decades with 125 Billion Dollars of Assets under management
  • Buurtzorg, a Dutch Health Care Company which grew from zero to 14500 co-oworkes within twelve years
  • Haier, the worlds dominant manufacturer of white goods (e.g. washing machines), which gained prominence by buying GE Appliances in 2017 – and by its CEO smashing sub-standard washing machines with a sledge hammer

These three companies are all leaders within their markets. They are quite different from one another, but all of them share one common focus: Work Designs. They use a configuration of work designs that contributes to their mission. Not only that, they experimented with work designs over years to come up with ever better versions of themselves. By zooming in on these progressive organisations it becomes blindingly obvious, that their success is rooted in their obsession over work designs.

Bridgewater, Buurtzorg, Haier – companies that know that their success is rooted in their obsession to design ever better ways for people to work together.

The concept of work designs and configuring companies has been introduced preciously in my blog, especially in the last post. Starting with this post, I like to analyse the configuration of these three leading companies, one company at a time. Let’s start in this post with Bridgewater.

The configuration of Bridgewater

Bridgewater is all about learning. For a global hedge fund, it is all-important to get the big decisions right, the ones involving billions of dollars. Consequently, Ray Dalio, the founder and guiding spirit of the company, has configured it with work designs that strive to get one thing right: making big decisions. Learning is the sustainable advantage that Bridgewater seeks in order to make ever better decisions.

Bridgewater can be characterized as a hierarchical organization that relies not on orders but on mission command. Through its management practices Bridgewater strives to develop people from a socialized mindset (“team players”) to a self-authoring mindset. It wants people to become more autonomous, independent problem solvers. A framework of adult development, proposed by Harvard researcher Robert Kegan, whom we met before, underlies Bridgewater’s choice of work designs. In his 2018 book, Ray Dalio describes his organization as “a machine to produce good decisions through the optimal use of the collective power of self-authoring minds”.[1]Let us look at how Bridgewater achieves this, category by category.

The structure of the above map is explained in in the last post.

Some of these work designs might be unknown to you. Feel free to investigate them in the compendium of management practices.

Organization

Bridgewater has not abandoned the traditional hierarchical structure. It focuses much more on learning and reflective practices, while expecting managers to empower employees so that people take charge of their own development. Managers are to refrain from ordering and requesting obedience. They should use mission command instead. Personal development at Bridgewater is decentralized: everyone is a coach and a mentor, as well as  being coached and mentored.

Decisions

This is the area where Bridgewater is very special and very focused. Most decisions are still made by individuals and hierarchical superiors, but the most important decisions are made using a unique process called “believability-weighted decision making”. In a very structured meeting format, decisions are made by voting on alternatives. The number of votes that everyone gets depends on their track record of making good decisions. More experienced, more competent, more knowledgeable people with better track records get more votes than novices without much experience in the subject that is to be decided upon. Hierarchical rank does not matter – but competence in the subject to be discussed does.

The thinking behind believability-weighted decision making is that voting is good, as it allows an organization to use collective intelligence, but it is better still if the voting is done by competent people ‒ an idea that is as reasonable as it is fraught with difficulty and danger. Who determines the competence levels, the individual believability of people? At Bridgewater that competence level can be set by a superior, it can be voted upon by a group, it can be established by data analysis (for example on the basis of CVs or psychometric testing), or a combination of these three methods.

Believability-weighted decision making is an attempt to make high-stakes decision making in companies more effective. In democracies, anyone proposing this kind of decision making would be rightly accused of Orwellian elitism. Every national assembly, even the founding fathers of American democracy, has struggled with this issue: “Surely, we can’t give equal voting rights to the plebs, the uneducated masses! We aristocrats/bishops/merchants/educated people need to lead.” In a company setting, the jury is still out on the believability-weighted decision-making idea. Ray Dalio is sure that this kind of decision making is a huge part of the reason why Bridgewater is – by some measures ‒ the most successful hedge fund in the world.

More conventional, participative decision making, delegation of decisions, the advice processand other decision practices are also used. Routine decisions, those that can be safely trusted to a number-crunching machine, are routinely engineered into algorithms. Especially in the financial sector, machines are making many decisions on their own or are an integral part of a combined machine‒human decision process. While other companies approach decision making by machines haphazardly, as mere minor features of this or that process, Bridgewater has elevated algorithmic decision making into a work design.

Meetings

Bridgewater is strong on meeting structures. It recognizes that everyone must be heard. It employs a time limit of a maximum of two minutes of uninterrupted talk in small meetings. And it expects people to make themselves heard, too: staying silent is not an option. Even in large-scale meetings, people are obliged to give feedback about their feelings and the performance of other meeting participants, using an online app that displays the feedback in real time on screens, while the meeting is still in progress. People are supposed to be open-minded and assertive. Meeting structures drive these two behaviors to the fore.

Control

Bridgewater employs most of the usual practices of a hierarchical organization: target setting, budgets, dashboards, standard operating procedures, job descriptions and reports. The most significant practice to align and control the work of people at Bridgewater is mission command, although Ray Dalio doesn’t call it that. The nature of mission command fits the overarching target of creating and utilizing self-authoring minds perfectly, as it is squarely based on the independent problem solver. On top of mission command, people are also expected to pick challenges themselves. The self-authoring mind writes their own destiny in service of the mission that a superior or the company has defined.

Bridgewater uses toolscaping intensively to supply its people with integrated tools to manage the business. Far beyond the usual communication and business process supporting systems, it goes so far as to provide apps for interpersonal conflict moderation and interpersonal transparency, and cloud systems to stream videos of meetings. It appears that founder and CEO Ray Dalio takes a personal interest in an ever-expanding, ever more integrated tool set.

People 

Bridgewater emphasizes three kind of people practices: testing, coaching and feedback. Testing is pervasive. New hires remain in a special “onboarding” status for as long as reviews are not good enough for them to be allowed to move into the line organization. Dalio writes that a 30 percent attrition rate is acceptable, and onboarding may take up to 18 months. Even people inside the organization are re-evaluated regularly by co-workers at all levels and through the use of psychometric testing. Dalio speaks of “oiling the machine”, a questionable and telling metaphor for his utilitarian outlook on people.

Performance management is centered on coaching. Being a manager at Bridgewater means being a coach; without outstanding listening skills and questioning techniques no one at Bridgewater should be able to climb the ranks, or indeed, retain their job for long.

Transparency

Transparency is extremely highly valued:

  • Videotaping.Every meeting is videotaped and accessible for everyone.  
  • Issue filter. Everything people feel about the company and job is supposed to be captured in a system for all to see.
  • Baseball cards. Every person is described with a small number of key personal attributes determined by psychometric testing and co-worker feedback. 
  • Open reports. Every report is available to everyone. Classified reports do exist but are a rare exception. 
  • Daily updates. Every day, everyone in the organization posts their answers to three questions: What did I do yesterday? What is to be done today? What are my reflections, the thing or feeling that is most in my mind? These posts can be seen by everyone in the organization. 

Bridgewater is definitely operating on a “all there is to know” basis ‒ and not on a conventional “need to know” basis. Its overarching target is to supply all the information that “self-authoring” minds at all levels can process, learn and use to provide feedback or come up with better decisions. This degree of openness is radical and can easily appear dystopian. Is a place of work where the light of transparency is everywhere and there are few dark corners to hide and rest still a place for humans? Is this degree of transparency making people show compliant behavior on the outside while keeping their true views to themselves? Many people are quite skeptical about Bridgewater’s configuration of work designs, while others, like philanthropist Bill Gates, appear to be supportive of Dalio’s practices. [2]

Projects

Little can be obtained from the sources about any special work designs for projects. However, it seems fair to speculate that Dalio’s outlook on projects is bound to be determined by the three cornerstones on which he built Bridgewater: elaborate decision making; learning; and feedback and radical transparency. This means Bridgewater would be expected to use more mature work designs for its projects, like agile methods, but I found nothing to substantiate this claim.

Learning

Dalio’s core idea for his company is learning. He wants Bridgewater to be a meritocracy of ideas,  a place where the best ideas are produced and where people that consistently produce these great ideas rise to the top. He even provides a formula for this: “Idea Meritocracy = Radical Truth + Radical Transparency + Believability-weighted decision making”. The target is to create a culture of learning, where failure is allowed, and the resulting pain is distilled by (brutally honest) reflection into learning. Everyone is expected to teach everyone all the time in a work environment saturated with learning opportunities. 

Reflection

Reflection in an environment of “radical truthfulness” means ignoring social impulses to dampen one’s critique to the point of being perceived as unkind and rude. Dalio calls this way of giving feedback “tough love”. As well as reflective microstructurespeer feedbackskip-level feedback and talking partners, two more radical practices stand out from the host of opportunities for self-reflection at Bridgewater: the dot collector and the pain button (see Chapter 8).

Bridgewater clearly puts the collective interest of the company ahead of the individual interest of comfort and self-preservation. Bridgewater is a very challenging workplace where you need to display an uncompromising willingness to learn. There is nowhere to hide from personal injury of the ego in a place of radical openness and radical transparency. Unlike other elitist organizations, no one is able to rest on their laurels. Its central ideas are:

  • An idea of technology that sees technology and people as co-workers.
  • An idea of performance centered on making ever better decisions.
  • An idea of ruling based on a hierarchy which nurtures people to become self-authoring.
  • An idea of work based on never-ending, relentless growth in a machine of learning.
  • An idea of life based on mental awareness.

You might feel fascination or abhorrence at these radical practices. But one thing is for certain: they are a great experiment.

Conclusion

Bridgewater uses a staggering number of work designs: Seventy five. A typical, run-of the mill company uses just about a third of these, usually about 25 to 30. This proliferation of work designs is typical for progressive companies. It seems counter-intuitive, but Bridgewater is regulating the work between people heavily in order to make it easy for them to speak their mind freely.

The paradox of progressive organisations: In order to liberate people you need to regulate a psychologically safe work space into being.

It is a complex story, but basically if you want people within a hierarchy (which Bridgewater is) to speak up, you got to restrict the arbitrary power that managers have over people. The way to do that is by using mandatory work designs.

In the next post, I will contrast Bridgewater configuration of work designs with the one of a more traditional organisation, before proceeding with analysing Buurtzorg and Haier. I like to end with a teaser: Here is a chart comparing the average liberation level of Bridgewaters work designs to the ones of a traditional, purely hierarchical company.

Hope you enjoyed the post. Sign up the the emailing list of the upcoming book “Liberated Companies” if you like what you see.

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[1]Ray Dalio,(2018) Principles (Simon & Schuster)

[2]A critique can be found at https://www.nytimes.com/2017/09/08/business/dealbook/bridgewaters-ray-dalio-spreads-his-gospel-of-radical-transparency.html, retrieved 5thof  June 2019

I have posted about Bridgewater before if you like to learn more just search for Bridgewater” on the Blog side.

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