10.2 Remember that for every case you deal with, your approach should have two purposes.
1) to move you closer to your goal, and 2) to train and test your machine (i.e., your people and your design).
The second purpose is more important than the first because it is how you build a solid organization that works well in all cases. Most people focus more on the first purpose, which is a big mistake.
a. Everything is a case study.
Think about what type of case it is and what principles apply to that type of case. By doing this and helping others to do this you’ll get better at handling situations as they repeat over and over again through time.
b. When a problem occurs, conduct the discussion at two levels: 1) the machine level (why that outcome was produced) and 2) the case-at-hand level (what to do about it).
Don’t make the mistake of just having the case-at-hand discussion, because then you are micromanaging (i.e., you are doing your managee’s thinking and your managee will mistakenly think that’s okay). When having the machine-level discussion, think clearly how things should have gone and explore why they didn’t go that way. If you are in a rush to determine what to do and you have to tell the person who works for you what to do, make sure to explain what you are doing and why.
c. When making rules, explain the principles behind them.
You don’t want the people you work with to merely pay lip service to your community’s rules; they should have a high sense of ethics that makes them want to abide by them and hold others accountable for abiding by them, while also working to perfect them. The way to achieve this is via principles that are sound and that have been tested through open discussion.
d. Your policies should be natural extensions of your principles.
Principles are hierarchical—some are overarching and some are less important—but they all should inform the policies that guide your individual decisions. It pays to think those policies through to ensure that they are consistent with each other and the principles they are derived from.
When faced with a case that doesn’t have a clear policy to follow (for example, what to do about an employee whose job is to travel but who faces potential health risks because of his travel), one can’t just snatch an answer out of the blue without regard for higher-level principles. Policymakers must make policy in the same way that the judicial system creates case law—iteratively and incrementally, by dealing with specific cases and interpreting the law as it applies to them.
That is how I have tried to operate. When a case arises, I lay out the principles behind how I am handling it and get in sync with others to see if we agree on those principles or must modify them to make them better. By and large, that’s how all Bridgewater‘s principles and policies were developed.
e. While good principles and policies almost always provide good guidance, remember that there are exceptions to every rule.
While everyone has the right to make sense of things—and is in fact obliged to challenge principles and policies if they conflict with what they believe is the best approach—that’s not the same thing as having the right to change them. Changes in policies must be approved by those who made them (or someone else who has been made responsible for evolving them).
When someone wishes to make an exception to an important policy at Bridgewater, they must write up a proposed alternative policy and escalate their request to the Management Committee.
Exceptions should be extremely rare because policies that have frequent exceptions are ineffective. The Management Committee will formally consider it and either reject it, amend it, or adopt it.
* Source: Principles by Ray Dalio