Strategic Discipline Blog

“Mediocre people don’t like high-achievers – and high-achievers don’t like mediocre people.” Nick Saban, Alabama football coach.

In Humanocracy – Bureaucracy Threatens Meritocracy we shared the goal of Humanocracy to create an environment where everyone is inspired to give their best. We also provided a scorecard to grade your organization on 7 dimensions.

How do you build meritocracy in your business?

Connecticut-based Bridgewater Associates, the world’s largest hedge fund, takes a radical approach to building a meritocratic organization.

Bridgewater’s Dot Collector

In Principles, Ray Dalio describes his company as “an idea meritocracy, not an autocracy in which I lead and others follow, and not a democracy in which everyone’s vote is equal, but a meritocracy that encourages thoughtful disagreements and explores and weighs people’s opinions in proportion to their merits.”

To operationalize the notion of a meritocracy, Bridgewater developed “Dot Collector”—a real-time feedback app to give employees the opportunity to rate one another on a one-to-ten scale across more than a hundred attributes.    

A typical Bridgewater associate garners more than two thousand dots annually, roughly eight per day. Senior leaders receive many times that amount. You can see your average rating across ten broad areas, such as “practical thinking,” “management skills,” and “determination.”

Dot profiles are scrutinized when making staffing decisions. Dalio’s own experience with criticism reflects his decision to create dots.

Reading Principles about the dot collector system, I was skeptical. An “always-on,” hyper transparent review process seems unnecessarily stressful.

Bridgewater’s approach highlights expertise, improves the fit between aptitude and responsibility, encourages leaders to be honest about their limits, and creates incentives for personal growth. It reduces the risk of single-rater bias. The Dot Collector is an essential tool to create an honest appraisal of individual capabilities.

Does it get results?

Bridgewater’s Secret Sauce - Results

At the height of the European debt crisis in 2012 Bridgewater debated what to do. Some expected the European Central Bank (ECB) to break with precedent and buy large chunks of sovereign debt. Others thought the ECB would oppose a bailout. The debate ended in virtual deadlocked poll. Humanocracy describes the final decision. “As a final step, the opinion of each team member was assigned a credibility score based on their relevant Dot Collector ratings. It quickly became clear that those who were the most credible thought the ECB would print money to buy government debt. That judgment became the investment team’s consensus and was proven right a few days later when Mario Draghi, ECB president, announced the bank would do “whatever it takes” to save the euro.”

At Bridgewater, influence is a product not of tenure or title but of an individual’s peer-attested “believability.” Dalio feels believability-based decision making … “Eliminates what I believe to be one of the greatest tragedies of mankind, and that is people arrogantly, naively holding opinions in their minds that are wrong, and acting on them, and not putting them out there to stress test them. Collective decision-making is so much better than individual decision-making if it’s done well. It’s been the secret sauce behind our success. It’s why we’ve made more money for our clients than any other hedge fund in existence and made money 23 out of the last 26 years.”

In Dalio’s forty-five years at Bridgewater, he’s never decided contrary to the believability-weighted advice of his peers, because “to do so [would be] arrogant and counter to the spirit of the idea meritocracy.” Dalio feels the risk of reverting back to positional authority is he’d, “lose both the best thinking and the best thinkers, and … be stuck with either kiss-asses or subversives who kept their disagreements and hidden resentments to themselves.”

See how the dot collector system works. It’s now available on Zoom.

Meritocracy - Getting Started

Here’s a short menu to build a genuine meritocracy in your organization:

1. Ask your peers to rate your expertise across a range of categories. Share your ratings with those in your network. Ask them for advice on how you can improve. Invite others to follow your lead.
2. Ensure competence and performance ratings are peer-based, with at least five assessors for every individual. Make these ratings transparent to all.
3. Give significant weight to peer assessments in all hiring and promotion decisions.
4. Wherever possible, divorce compensation from rank and tie it more closely to peer-based ratings.
5. Redesign decision processes to give a greater share of voice to those with relevant, peer-attested competence. Downgrade the influence of positional power in decision making.
6. Give teams the right to “fire” incompetent or tyrannical leaders.
7. Create more opportunities for individuals to become meritorious. Rotate team members across roles, challenge people with stretching assignments, open management training to frontline team members, and take time to mentor others.

Scaling your business requires Meritocracy. The Right People, doing the Right Things, Right. To create an environment where everyone is inspired to give their best, contact us today to schedule a free exploratory meeting.

Growth demands Strategic Discipline.

To build an enduring great organization, requires disciplined people, disciplined thought, disciplined action, to produce superior results, and make a distinctive impact in the world.

Discipline sustains momentum, over a long period of time, laying the foundations for lasting endurance.

A winning habit starts with 3 Strategic Disciplines: Priority, Metrics and Meeting Rhythms.   Forecasting, accountability, individual, and team performance improve dramatically.

Meeting Rhythms achieve a disciplined focus on performance metrics to drive growth.

Let Positioning Systems help your business achieve these outcomes on the Four most Important Decisions your business faces:

Positioning Systems helps mid-sized ($5M - $250M) business Scale-UP. We align your business to focus on Your One Thing! Contact dwick@positioningsystems.com to Scale Up your business! Take our Four Decisions Needs Assessment to discover how your business measures against other Scaled Up companies. We’ll contact you.

NEXT BLOG – Humanocracy Example – Michelin

Humanocracy provides many business examples. The Michelin story is a bottom up approach. We’ll share that story and the dramatic results next blog.