Bridgewater Associates, the largest hedge fund in the world, manages $152 billion in global investments and has about 1,500 employees. Founder Ray Dalio launched the firm in his two-bedroom apartment back in 1975. Now Dalio, 66, is managing his own succession. The Wall Street Journal recently called the transition "bumpy" and asked "whether Bridgewater can pull off the rare feat of remaining as successful without its founder as it has been with him."

The WSJ partially attributed Bridgewater's succession difficulties to the "idiosyncratic" culture Dalio has established. For example, employees watch daily, 15-minute videos showing scenarios in which the company's leaders and values are tested by one challenge or another. Employees record their reactions electronically. The videos often end by quizzing employees on their knowledge of the company's values. 

Of course, there's more than one way to look at Bridgewater's culture. In the first place, "idiosyncratic" or no, the company has delivered amazing returns for its investors: The WSJ points out that Bridgewater's flagship Pure Alpha fund had an average annual return of 13 percent after fees since its start in 1991.

What's more, a recent book suggests that Bridgewater is in a better position than most to handle successions--precisely because the company has so clearly articulated the workplace it aspires to be. 

In their forthcoming book, An Everyone Culture: Becoming a Deliberately Developmental Organization, authors Robert Kegan and Lisa Lahey take a deep dive into Bridgewater's culture. They present the hedge fund more positively as a place where employees are expected to learn about their pain points--and promptly address them. The authors call companies like Bridgewater "deliberately developmental organizations," or DDOs for short. 

For example, Bridgewater has a company constitution. This document consists of 210 written-out principles, which spell out "the ways people act to foster and preserve a culture of truth and transparency," write Kegan and Lahey. The principles, they add, "set a clear bar of excellence for all decision making and are the common textual and conceptual reference for every Bridgewater employee."

Sometimes, in the absence of a founder-owner to make big decisions, a company can lose its way. But at Bridgewater, there's clearly a roadmap for managers--including Dalio's successor(s). The Everyone Culture authors say Bridgewater has set down the following as management rules:

  • Train and test people through experiences. Remember that everything is a case study. Teach your people to fish rather than give them fish.
  • Know how to perceive problems effectively. Understand that problems are the fuel for improvement. Don't tolerate badness. Don't use the anonymous "we" and "they," because that masks personal responsibility--use specific names. 
  • Evaluate people accurately, not "kindly." Understand that you and the people you manage will go through a process of personal evolution. Help people through the pain that comes with exploring their weaknesses.

Most leaders would agree that the above three rules are sound ones to manage by.

But few companies have codified their culture into written-out principles, as Bridgewater has, with the goal of empowering leaders and developing employees in this fashion of continuous improvement. 

That these procedures are so baked into Bridgewater's culture is one reason the company may actually be in a very good position, when its founder is no longer part of day-to-day operations. 

Published on: Mar 18, 2016