During the 2007-2009 period, big financial capitals of the globe had witnessed and dragged into a massive and dramatic recession. In these years, many of financial systems faced with enormously slumps and significant number of banks and investment institutions were bankrupted or were rescued by bailout programs issued by governments. Many of investment management firms like hedge funds faced with dramatic losses and some of them bankrupted. However, in this catastrophic environment, Bridgewater Associates LP., which is established by Raymond (Ray) Dalio in 1972, has placed the first place in hedge fund growth charts, since 2009. For example, according to Business Insider article (2018), Bridgewater Associates ranked first, among all other hedge funds in 2018, with $124.70 billion assets under management which is even more than budget of some countries. In this paper, I want to show organisational framework behind the success of this firm.
The Organisation: Goals and Objectives
Bridgewater Associates LP. Is hedge fund company located in Westport, Connecticut, which is nearly located to New York City. According to official web site, the company focused on to understand how global economy and financial markets work. The company manages nearly $125 billion AUM, which are invested by clients including huge institutions like pension funds, supranational wealth funds and central banks. Furthermore, the company sells its analyses, namely “Daily Observations” bulletin to its customers who have been subscripted.
The Organisation: Structure
Bridgewater Associates consists approximately 1700 employees, which makes it as large-scale organisation in its sector. Its main operations are in USA. However, with the help of emerging technology, the company exert its operations “globally”. The structure of the organisation could be shown appropriately if we analyse it through classical concept of organisational structure, which consists levels of specialisation, centralisation, configuration, formalisation and standardisation.
Level of Specialisation The nature of the investment management requires a certain level of specialisation; however, this does not mean specialisation like in Taylorian and Fordist sense. Level of specialisation is based on goals. According to his book, The Principles: Life and Work, Ray Dalio (2017) says building the organisation rests upon goals, not tasks. This makes the company’s specialisation goal oriented. This century, in which major technological developments occur rapidly, it is appropriate to focus goals, because tasks are becoming easier and attainability of goals become more complicated. For example, if we talk for stock markets, dealing and selling tasks have evolved to easy task, only consists pushing the button. However, goals become more complicated. Therefore, company specified job opportunities through its goals, in its website. There are departments which are created for main goals of both company and people. If we list them, it would be like this:
- Investment: To understand global economy and cause-effect relationships which drives whole system.
- Management: For governance of company and its future through principles of company.
- Technology: To adoption of technology for systemic understanding of the world.
- Business support: Supplementary group who helps technical things related business (business analysts, etc.)
- Another specialised goals.
Level of Centralisation That could be commented that there is a middle-level hierarchy. Departments are self sufficient and can reach approximately every kind of resource they need, to achieve their goals. The main relationship between superior and subordinate is limited on protection of mutual understanding and high-quality communication between peers. In the management style part, decision making process will be explicitly explained.
Level of Configuration Hierarchical configuration of Bridgewater LP. is rest upon the pyramid style shape, which consists non-crossing vertical lines to prevent inter-departmental goal confusion and sustain departmental slip (Dalio, 2017). Cross-departmental issues are supervised by top management if it would be necessary. The pyramid consists low levels of hierarchical layers, because of self sufficient nature of departments. This easies the mutual communication because in the nature of investment management, rapidity is important. Without rapid system, time lost in decision making cost expensive and therefore, the whole configurated system must be respond rapidly for immediate changes in markets.
Level of Formalisation and Standardisation This could be commented that there is a certain level of formalisation, but it is not like in bureaucratic systems. In the nature of this job, dealing with investment, companies should formalise certain things for the supervisionary activities of regulatory agencies. In this organisation, reporting is an important tool. According to Dalio (2017), using checklists during work is beneficial method, and stakeholder should perform what he/she set out to do. This is important to see what have been done and do not have to be done. Reportage is another important thing for this organisation. Because the organisation deals with investment and macroeconomic issues generally, reportage provides better understanding of daily, monthly and annual situation in economic sector of general environment and location of organisation within this sector.
The Organisation: Management Style
If we see appropriately how the company managed, we could mention “idea meritocracy” collective decision-making implementation in Systems Theory, which can be named as “brain”. In this organisation, important decisions within each vertical line of hierarchical pyramid are taken through the collaborative system. Everyone becomes part of decision-making process. The difference of this system, however, rests upon the meritocracy of ideas. The process could be listed like this:
- Everyone comments an idea during collective meetings.
- The one who share its ideas (including the high management itself) is graded by other participants, grades were ranged to 1 to 10.
- In the end of whole system, with the help of technological tools, the historical data of best ideas and their owners collected, which clearly shows who commented best ideas for related situation.
This kind of “idea meritocracy” helps feedback loop and therefore more accurate decisions could be taken. This kind of idea meritocracy enables double loop learning, and organisation can learn easily and implement relevant policies. It differs from single loop process, because the system has an accurate capability to learn and take appropriate decisions through “idea meritocracy”.
The Organisation: Its Environment
Environmental elements consist three levels; inter-organisational, general and international ones. Understanding through this scheme is appropriate to discover environmental issues faced by the company.
The first element is inter-organisational level. In this level, Bridgewater LP. have to deal with customers, competitors, regulatory agencies. Customers consists both corporate and private investors. For example, this organisation has been doing consulting activities for several central banks in the World, furthermore, some private or public pension funds invest their money to this organisation. Main competitors are could be named other hedge funds, the biggest ones can be seen in the list done by Business Insider (2018), which is mentioned in the first paragraph of the paper. Regulatory agencies consist the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), which are established for regulation and supervision of hedge fund managers in the United States. Regulatory activities have been tightened after the 2007-2009 Crisis.
The second element consist general level. This level consists highly diverse sectors, consisting social, cultural, legal, political, economic, technological and physical ones. The most important one is economical sector. Because the company is a hedge fund manager, macroeconomic situation is totally crucial for implementation of policies. Political and legal sector effects rules and regulations, but also the economy. Social backgrounds of the participants are highly diverse, because the Bridgewater LP. is an international company and consist participants from India to China, and it is important to understand cultural effects of this sector of environment. Also, improvements in technological sector directly effects, because the organisation rests upon technological advances for its decision-making process, namely “idea meritocracy”. For appropriate implementation and sustainable application of it, technological sector enables more application. Physically, the organisation has to deal with meteorological events in the State of Connecticut, for example massive typhoons may affect participation of workers dramatically.
The third element consists the international level. Actions and policies of international agencies like IMF and the World Bank may affect financial markets, and as a result, the Bridgewater LP. may be affected. Furthermore, international treaties related to commerce have affects on policy implementation related to international markets.
The Organisation and its Survival
Bridgewater LP. is biggest hedge fund manager in the World. To sustain this success and the survival of the company, it must follow technological advancements and implement them to their decision-making system. Furthermore, the company should give more attention to material and psychological wellness of its participants, because they construct main body of the organisation, with “idea meritocracy” system. The company should implement policies to improve the creativity of the stakeholders of organisation, because more creative sphere may affect decision-making processes positively. Furthermore, social activities may improve communication within the company and this may affect positively on corporate culture.
The Organisation: Its Culture
Bridgewater Associates has unique culture, which differs it from another organisations, that rests upon excessive openness. Ray Dalio (2017) comments this as “Radical Truth and Radical Transparency”. By doing this, organisation focuses that knowing the truth is not a fearful thing. Through this sense, there is a corporate culture which asserts stakeholder should “have to right to understand what makes sense and no one has the right to hold a critical opinion without speaking up” (Dalio, 2017). Moreover, making mistakes more acceptable than to learn something from these mistakes. The one has a possibility to make a mistake, however he or she should learn something from that to do not repeat it. This is important, because the company is a hedge fund manager, the system is open to big and dangerous situations, like excessive loss of money by miscalculation. Learning from mistakes may minimise the occurrence of this kind of problems and in any dangerous situations, people may be well-trained to how to act bad situations.
Dalio, R. (2017). Principles: Life and Work. Simon & Schuster.
Selby-Green, M. (2018). RANKED: The 10 biggest hedge funds in the US – Business Insider Nordic. Retrieved May 20, 2018, from https://nordic.businessinsider.com/ranked-the-10-biggest-hedge-funds-in-the-us-2018-5