purpose: guide your routine reflection on your business, or any other “machine,” you are running to take stock and inspect how it can be improved
“Those who are most successful are capable of “higher level thinking” —i.e., they are able to step back and design a “machine” consisting of the right people doing the right things to get what they want. They are able to assess and improve how their “machine” works by comparing the outcomes that the machine is producing with the goals.” Dalio – Principals, page 22
“That schematic is meant to convey that your goals will determine the “machine” that you create to achieve them; that machine will produce outcomes that you should compare with your goals to judge how your machine is working. Your “machine” will consist of the design and people you choose to achieve the goals…While having the right design is essential, it is only half the battle. It is equally important to put the right people in each of these positions. They need different qualities to play their positions well… If your outcomes are inconsistent with your goals (e.g., if you are having problems), you need to modify your “machine,” which means that you either have to modify your design/culture or modify your people.” Dalio – Principals, page 22
“Every organization works like a machine to achieve its goals. This machine produces outcomes. By comparing the outcomes to the goals, those running the machine can see how well the machine is working. This is the feedback loop that those who are responsible for the machine need to run well in order to improve the machine. Based on the feedback, the machine can be adjusted to improve. The machine consists of two big parts—the culture and the people. If the outcomes are inconsistent with the goals, something must be wrong with the machine, which means that something must be wrong with the culture and/or the people. By diagnosing what is wrong, designing improvements and implementing those improvements, the machine will evolve. In short, the evolutionary process is as follows.”Dalio – Principals, page 38
8 questions after reading
what are the components of the machine you are responsible for?
what is the leading-goal for each of those components?
is that component meeting, exceeding, or failing those goals? how?
if a component is failing, is it due to machine design (i.e. the prescribed process is poorly described/formulated), culture (not able to speak up about problem), information flow, poor goal setting?
who is on each team responsible for those components?
If your machine is producing outcomes that you don’t want, either the design is flawed or the parts/people that you dropped into the design are malfunctioning. Most, but not all, problems happen because 1) it isn’t clear who the “responsible party” is for making sure things go well or 2) the responsible party isn’t handling his or her responsibilities well (in other words, isn’t operating according to the principles to eliminate the problem). Dalio Principals – page 105
is each of those people meeting, exceeding, or failing those goals? how?
if they are failing is due to skills, mindset, capability, or lack of resources?
“If someone is doing their job poorly, consider whether this is due to inadequate learning (i.e., training/experience) or inadequate ability. A weakness due to a lack of experience or training or due to inadequate time can be fixed. A lack of inherent ability cannot.” Dalio – Principals page 91
with regards to a particular problem, which part of the machine is causing it?
“Think about each problem individually, and as the product of root causes—like the outcomes produced by a machine. Then think about how the machine should be changed to produce good outcomes rather than bad ones. There are typically many paths toward achieving your goals, and you need to find only one of them that works, so it’s almost always doable.” Dalio – Principals, page 33
Or just use what Ray Dalio prescribes… page 101-102 principals
1) Ask the person who experienced the problem: What suboptimality did you experience?
2) Ask the manager of the area:
- Is there a clear responsible party for the machine as a whole who can describe the machine to you and answer your questions about how the machine performed compared with expectations?
- Who owns this responsibility?
- Do not mask personal responsibility—use specific names.
3) Ask the responsible party: What is the “mental map” of how it was supposed to work?
- A “mental map” is essentially the visualization of what should have happened.
- To be practical, “mental maps” (i.e., the designs that you would have expected would have worked well) should account for the fact that people are imperfect. They should lead to success anyway.
4) Ask the owner of the responsibility: What, if anything, broke in this situation? Were there problems with the design (i.e., who is supposed to do what) or with how the people in the design behaved?
- Compare the mental map of “what should have happened” to “what did happen” in order to identify the gap.
- If the machine steps were followed, ask, “Is the machine designed well?” If not, what’s wrong with the machine?5) Ask the people involved why they handled the issue the way they did. What are the proximate causes of the problem (e.g., “Did not do XYZ”)? They will be described using verbs—for example, “Harry did XYZ.” What are the root causes? They will be descriptions. For example: inadequate training/experience, lack of vision, lack of ability, lack of judgment, etc. In other words, root cause is not an action or a reaction—it is a reason.
- Be willing to touch the nerve.
6) Ask the people involved: Is this broadly consistent with prior patterns (yes/no/unsure)? What is the systematic solution? How should the people / machines / responsibilities evolve as a result of this issue?
- Confirm that the short-term resolution of the issue has been addressed.
- Determine the steps to be taken for long-term solutions and who is responsible for thosesteps. Specifically:
a. Are there responsibilities that need either assigning or greater clarification? b. Are there machine designs that need to be reworked?
c. Are there people whose fit for their roles needs to be evaluated?