The Power of Feedback and Radical Candor for Performance Management and Cultural Health

Billionaire Ray Dalio is one of the richest and most influential people in the world. He has run the largest hedge fund in the world, Bridgewater Associates, for the last 20 plus years and attributes much of his success to a concept he calls Radical Transparency. Bridgewater served as testing ground for this concept where almost all information is shared as broadly as possible among staff. In meetings, feedback is recorded, shared and graded on almost all interactions. Dalio’s argument for radical transparency is that it allows us to make better decisions. The more information, opinions and feedback we share with each other the less room for blindspots, ego, insecurities, weaknesses and bad ideas to go untested. In a field as competitive as hedge funds there is very little room for bad decisions and Dalio preferred testing them aggressively in the meeting room before testing them in the market.

The results speak for themselves. Bridgewater Associates is the largest hedge fund in the world because they consistently beat the performance of their peers. Yet, working at Bridgewater is not for everyone. One of the most common complaints about their culture is that the line between Radical Transparency and brutal honesty is a very thin one. When getting the right answer at all costs takes a back seat to people’s feelings some people can feel run over, abused or like they are working in a psychologically hostile workplace. You have to have a thick skin to hear the truth immediately and all the time, and Dalio freely admits that not everyone can survive at Bridgewater under that constant microscope. For those that can handle it they get to share a fortune, however that may end up being a small sliver of the general population.

The Bridgewater Radical Transparency pressure cooker is an extreme example that may not work for most companies, however moving closer to a culture of transparency can have positive benefits for performance management and cultural health. Dalio is right, truth is the great equalizer, teacher and judge. However making sure everyone’s truth is delivered and received in a respectful, productive manner is the nexus where performance and cultural health meet. In most companies the key is making it safe for people to be honest with each other, and caring for the human as much as we care for the truth.

Kim Scott, a previous senior executive at Google and Apple, wrote the best-selling book Radical Candor: Be a Kickass Boss Without Losing Your Humanity  , exactly addressing this dynamic. She defines radical candor as the nexus of challenging people directly and caring for them personally. Her argument takes a lot of the meat of Dalio’s Radical Transparency and then humanizes it by emphasizing the importance of caring. Scott suggests that radical truth without care can not only be miserable, but may actually take away from our effectiveness as leaders. The brutal-honesty-at-all-costs culture and reputation Dalio has at Bridgewater may work in hedge funds and navy submarines, but in most companies human capital is just as important as making good decisions, and requires as much weight in our concern as well.

Make promises. Then keep them.

It’s sad to say, but that alone today can differentiate you from the crowd. Some may say the cause is a booming economy, low unemployment, generational changes – but whatever the case – finding vendors who are willing to make promises – and keep them, is in short supply. If you’ve ever tried to hire a lawn service or patio guy you know exactly what I mean. However the same applies to lawyers, doctors, computer guys, marketing companies, contractors – almost every type of vendor.

The first part is making promises. That starts with telling people when you will get back to them, and then not missing that deadline. The promise part here is locking yourself down to an exact time, and then not being late or coming up with an excuse. EVERYONE has excuses – traffic, kids, too much business, too much email/voicemail, etc.

If you are in sales listen to this. Leads are your life blood, so most of you do a pretty good job with responding to a lead pretty quickly. The follow-up steps are where most sales people drop the ball. They’ll setup the first appointment right away, and for the most part know that showing up for this on time is non-negotiable. It’s after the first appointment that most sales people get off the rails. Sometimes the broken follow-up step is in being vague about when you will send a quote, sometimes its just ambiguity in setting up next steps. I get it, you are busy, you don’t want to commit. But that is my point exactly. Nobody wants to commit these days. If you simply promise a date certain that you will have a quote and then follow-through with that promise, you are different. More often than not these days I find myself as the consumer having to follow up after the first appointment BEFORE I hear from the salesperson. I was beginning to think that it was just me. Maybe I’m a PITA prospect. Maybe I ask too many questions. But then I started sharing my frustrations with other business owners and they almost ALL shared the same experiences.

Keeping promises being a good thing is pretty self-evident. Most people know that intuitively. That is why most people don’t like to make them, because they don’t want to have to say they are sorry. They think no harm in not promising and thereby retaining flexibility. They are wrong. We think more of people that make promises. It gives us safety to know someone else is taking accountability. Not making a promise is not a neutral act, it is a lessening of the other’s expectations from you – which directly correlates to how they view you. Reputation is a function of how well we exceed or miss expectations of us. If we never set expectations, that doesn’t mean others don’t have any of us. Not at all. They just choose to set their own expectations and we may never know what those are. The odds are much worse trying to meet unknown expectations than meeting expectations you set and communicate. Unsurprisingly those that can reliably set expectations, make promises, and keep them are the reputation giants in their field.

If you live your life in a way that you can make promises, keep them and never have to give excuses – you are the 1%. Maybe not in a financial way for now, but from a reputation point of view. You are special, and the world needs more of you. That is value that someone will pay a premium for so keep it up.

Some promises made that will separate you from the crowd:

  • Set an actual appointment time, not a time window
  • Show up 5 minutes early, call ahead if you are running late. If you are always calling ahead to say you are late, you are bad at planning your schedule or too optimistic a travel estimator. Acknowledge this by always leaving 15 minutes earlier than you think you have to.
  • Never leave a meeting without a promise for next step. Always promise a date/time and never miss it. If you find yourself regularly having to say you are sorry, you are the problem. Fix yourself.
  • Don’t make excuses, be transparent, own your mistakes, promise better and then do better.

You are the bottleneck to your business’s growth

The Peter Principle is real, but it starts with yourself, the business owner. What is your level of incompetence?

Starting a business and scaling a business requires two very different types of skillsets. They may be found in the same person, however, that is rarely the case unless nurtured and developed. Most startup founders hit a wall at around 15-20 employees unless they learn up on some key business skillsets and concepts …or get out of the way and hire someone that does. A business owner’s self-awareness of their own incompetence ends up being the true agent for growth. I only know this because I was ignorant of my own incompetence for far too long.

The type of personalities that start businesses are normally very confident in themselves. After all, they had the gall to think they could provide a product or service better than the existing marketplace. Launching a startup pretty much just takes ego, making it a real business takes skill, luck, grit and execution. These traits are found in most entrepreneurs who get businesses off the ground and build them up to about $3M in revenue for service businesses ($5M for product businesses) or about 15-20 employees. This is about as big as I have seen companies get with startup entrepreneurs – generally A players with loads of skill, grit, luck and an ability to execute on their business plan. These can be very successful businesses – driving tons of value to the owner and staff and providing a great service or product to the community. These are called “lifestyle businesses”. I didn’t know that is what it was called at the time, however, a lifestyle business is what Michelle and I had built Domain up to in 2012. About $2M-$3M in revenue and 10-15 employees.

Some other indicators of a lifestyle business are:

  • Most decisions made by owners, not managers.
  • Very few to no managers other than owners.
  • Staff reviews or one-on-ones are limited to non-existent.
  • Very little focus on staff career plans, HR, culture
  • Very few documented processes.
  • Owner is involved in almost everything.
  • Sales methods are driven by personality not process.
  • Goals or budgets are informal or not tracked.
  • No regular meetings, only ad hoc guidance as needed. If there are meetings, one voice dominates – that of the owner telling everyone what to do.

To scale a business requires new skills that startup entrepreneurs may not have or take to naturally. Necessary skills to scale a business such as delegation, documentation and process may not be natural to many startup entrepreneurs. Actually many entrepreneurs who have a taste of success growing to 15-20 employees may falsely think their “superpowers” can take them much bigger without hassling themselves with things that don’t interest them – like delegation, documentation and process. They incorrectly think that their personal skills that brought them this far will be the same skills that will take them to future milestones. They are wrong. There is a Peter Principle and they are Peter. Business owners who are “stuck” at 15-20 employees need to either own the fact that they are going to be a lifestyle business, learn the skills to grow past their incompetence or hire a manager/coach to get them there.

It takes a hard look in the mirror to realize you are the bottleneck. It is much easier to blame your staff as being the reason only you:

  • can have critical conversations with clients
  • make purchases
  • make hiring and compensation decisions

They’re just not good enough or can’t be trusted? Ok, maybe that is the case with one hire or maybe two, however how many does it take for you to realize you might be the problem? You likely are a great lawyer, accountant, IT nerd, advertising pro; but maybe you just are not very good at hiring or developing people. It can be a shot to the ego, but don’t despair. Problems identified are problems that can be fixed. Either learn the skills to get better at managing people or hire someone else who can.

…and by the way, after you remove your own incompetence as the bottleneck don’t be surprised if new managers repeat the same mistake when you grow to 20-50 employees and beyond. Bigger businesses also give more Peters in the org chart now the opportunity to rise to their own level of incompetence.

These Peters need to be identified and mentored so they don’t repeat the same mistakes of the owner and become new competence barriers to growth.

Here are some great books to help you and your managers get past their incompetence: