The Strategist

How to turn your business into a well-oiled machine


09/14/2018 - 16:18



Excellent leaders are not philosophers, not entertainers, not performers and not artists. They are engineer. They perceive the company as a mechanism and pedantically work on its preservation and improvement.



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They create process flow sheets to show how this mechanism works and to evaluate the action plan. They develop indicators to clarify how effectively each of the components (mainly people) and the mechanism as a whole function. And they continuously study the way people and actions are taken to make both better.

How to turn a company into a mechanism? Here are some tips from Ray Dalio's book.

Constantly compare actual result and goal

You must simultaneously strive to achieve the goal and evaluate effectiveness of people and the plan, as any result will be an indicator of the mechanism’s operation. Every time you discover a problem, you need to determine whether it is caused by a mistake in the action plan or by the way people perform their duties.

The size of the sample matters. Any problem can be of a one-time nature or a symptom of disease. If you analyze enough problems, you will quickly classify them.

Design metric systems

The indicators reflect how efficiently the mechanism works and, if necessary, act as warning lights. This is an objective way of assessing. If you have created the right set of indicators, you will get a full and accurate picture of what your employees are doing and how successful have you practically build all the system.

When setting the indicators, think about the most important questions you need answer, and decide which numbers will suit you.

Do not look at those that you already have, and do not try to match them to your goals, because that's how you fail to get what you want. Instead, start with the most important questions and think about how the answers can be measured.

Do not overlook the mechanism

If you are too absorbed in individual tasks, you will inevitably get bogged down in the quagmire of petty affairs. If, instead, you create a mechanism and manage it, you will be rewarded many times.

Do not be distracted by bright baubles

Whatever the quality of the project or plan, there is always something unexpected that appears to be the most important, urgent or attractive, on which you want to concentrate. These bright trinkets can be a trap that can distract from system thinking, so do not lose your vigilance and do not let yourself be deceived.

Any situation is an analysis of a case study

Think about type of this situation and what principles apply to it. By acting in this way and helping others do the same, you learn to manage different situations more effectively, because they inevitably repeat again and again over time.

If there is a problem, conduct a discussion on two levels

The first level is the mechanism: why this result was obtained. The second is a concrete situation: what to do with it. Do not make a mistake and do not discuss only a specific situation, since this is actually micromanagement (you think for your subordinates, and they can mistakenly decide that this is normal).

When discussing at the mechanism level, clearly indicate what the result should be, and analyze why something went wrong. If you need to urgently decide what to do and give instructions to a subordinate, be sure to explain what you are doing and why.

When setting the rules, explain the principles underlying them

Your employees should not just obediently obey corporate rules, but be motivated to consciously follow them and stimulate others to do it, and also work on their improvement. This can be achieved with the help of rational principles that have been tested in an open discussion.

Managing people is like go skiing with them 

You should have the same close contact with your employees as a mountain ski instructor with his students on the slope. Thus, you can assess strengths and weaknesses of your immediate subordinates, when they do the work. There must always be an exchange of views as they learn through trial and error. In time, you will understand where they can be given independence, and where not.

based on "Principles: Life and Work" by Ray Dalio