Book Notes: High Output Management
All employees produce in some sense.
As we (Andy Grove and the Intel leadership team) founded, organized, and managed Intel, we found that all our employees “produce” in some sense—some make chips, others prepare bills, while still others create software designs or advertising copy. We also found that when we approached any work done at Intel with this basic understanding in mind, the principles and discipline of production gave us a systematic way of managing it, much as the language and concepts of finance created a common approach to evaluating and managing investments of any sort.
On Managerial leverage:
A manager’s output = the output of his organization + the output of the neighboring organizations under his influence. In principle, every hour of your day should be spent increasing the output or the value of the output of the people whom you’re responsible for.
Managerial productivity—that is, the output of a manager per unit of time worked—can be increased in three ways:
Increasing the rate with which a manager performs his activities, speeding up his work
Increasing the leverage associated with the various managerial activities
Shifting the mix of a manager’s activities from those with lower to those with higher leverage
The art of management lies in the capacity to select from the many activities of seemingly comparable significance the one or two or three that provide leverage well beyond the others and concentrate on them.
Leverage can also be negative. Suppose I am a key participant at a meeting and I arrive unprepared. Not only do I waste the time of the people attending the meeting because of my lack of preparation—a direct cost of my carelessness—but I deprive the other participants of the opportunity to use that time to do something else. Another example is waffling, when a manager puts off a decision that will affect the work of other people. In effect, the lack of a decision is the same as a negative decision; no green light is a red light, and work can stop for a whole organization.
All you can do to improve the output of an employee is to motivate and train. There is nothing else.
When a person is not doing his job, there can only be two reasons for it. The person either can’t do it or won’t do it; he is either not capable or not motivated.
Detect and fix any problem in a production process at the lowest-value stage possible.
Example: To get acceptable quality at the lowest cost, it is vitally important to reject defective material at a stage where its accumulated value is at the lowest possible level. Thus, as noted, we are better off catching a bad raw egg than a cooked one.
Indicators tend to direct your attention toward what they are monitoring. It is like riding a bicycle: you will probably steer it where you are looking. If, for example, you start measuring your inventory levels carefully, you are likely to take action to drive your inventory levels down, which is good up to a point. But your inventories could become so lean that you can’t react to changes in demand without creating shortages. So because indicators direct one’s activities, you should guard against overreacting. This you can do by pairing indicators, so that together both effect and counter-effect are measured. Thus, in the inventory example, you need to monitor both inventory levels and the incidence of shortages. A rise in the latter will obviously lead you to do things to keep inventories from becoming too low.
The order for the product and the product itself should arrive at the shipping dock at the same time.
Delivering a product that was built to forecast to a customer consists of two simultaneous processes, each with a separate time cycle. A manufacturing flow must occur in which the raw material moves through various production steps and finally enters the finished goods warehouse, as illustrated below. Simultaneously, a salesman finds a prospect and sells to that prospect, who eventually places an order with the manufacturer. Ideally, the order for the product and the product itself should arrive on the shipping dock at the same time.
At Intel we try to match the two parallel flows with as much precision as possible. If there’s no match, we end up with a customer order that we can’t satisfy or with a finished product for which we have no customer. Either way we have problems.
Information-gathering is the basis of all other managerial work.
Other activities—conveying information, making decisions, and being a role model for your subordinates—are all governed by the base of information that you, the manager, have about the tasks, the issues, the needs, and the problems facing your organization. In short, information-gathering is the basis of all other managerial work, which is why I choose to spend so much of my day doing it.
How you handle your own time is the single most important aspect of being a role model and leader.
A great deal of a manager’s work has to do with allocating resources: manpower, money, and capital. But the single most important resource that we allocate from one day to the next is our own time. In principle more money, more manpower, or more capital can always be made available, but our own time is the one absolutely finite resource we each have. Its allocation and use therefore deserve considerable attention.
Delegation without follow-through is abdication.
Even after you delegate it, you are still responsible for its (the delegated work/task) accomplishment, and monitoring the delegated task is the only practical way for you to ensure a result.
Monitoring the results of delegation resembles the monitoring used in quality assurance. We should apply quality assurance principles and monitor at the lowest-added-value stage of the process. For example, review rough drafts of reports that you have delegated; don’t wait until your subordinates have spent time polishing them into final form before you find out that you have a basic problem with the contents.
How often you monitor should not be based on what you believe your subordinate can do in general, but on his experience with a specific task and his prior performance with it—his task-relevant maturity.
Managerial roles produce two basic kinds of meetings. In the first kind of meeting, called a process-oriented meeting, knowledge is shared and information is exchanged. Such meetings take place on a regularly scheduled basis. The purpose of the second kind of meeting is to solve a specific problem. Meetings of this sort, called mission-oriented, frequently produce a decision.
Unlike a process-oriented meeting, which is a regularly scheduled affair held to exchange knowledge and information, the mission-oriented meeting is usually held ad hoc and is designed to produce a specific output, frequently a decision. The key to success here is what the chairman does.
When a mission-oriented meeting fails to accomplish the purpose for which it was called, the blame belongs to the chairman. Thus the chairman must have a clear understanding of the meeting’s objective—what needs to happen and what decision has to be made. The absolute truth is that if you don’t know what you want, you won’t get it. So before calling a meeting, ask yourself: What am I trying to accomplish? Then ask, is a meeting necessary? Or desirable? Or justifiable? Don’t call a meeting if all the answers aren’t yes.
The greater the disagreement about the issue, the more important becomes the word clear. In fact, particular pains should be taken to frame the terms of the decision with utter clarity. Again, our tendency is to do just the opposite: when we know a decision is controversial we want to obscure matters to avoid an argument. But the argument is not avoided by our being mealy-mouthed, merely postponed.
You’ll find two basic types of “meets” performers. One has no motivation to do more or faces no challenge to do more. This is the non-competitor, who has become settled and satisfied in his job. The other type of “meets” performer is the competitor. Each time he reaches a level of “exceeds requirements,” he becomes a candidate for promotion. Upon being promoted, he very likely becomes a “meets” performer again.
Some people are moved by an abstract need to achieve in all that they do. A psychology lab experiment illustrated the behavior of such people. Some volunteers were put into a room in which pegs were set at various places on the floor. Each person was given some rings but not instructed what to do with them. People eventually started to toss the rings onto the pegs. Some casually tossed the rings at faraway pegs; others stood over the pegs and dropped the rings down onto them. Still others walked just far enough away from the pegs so that to toss a ring onto a peg constituted a challenge. These people worked at the boundary of their capability.
Researchers classified the three types of behavior. The first group, termed gamblers, took high risks but exerted no influence on the outcome of events. The second group, termed conservatives, were people who took very little risk. The third group, termed achievers, had to test the limits of what they could do, and with no prompting demonstrated the point of the experiment: namely, that some people simply must test themselves. By challenging themselves, these people were likely to miss a peg several times, but when they began to ring the peg consistently, they gained satisfaction and a sense of achievement. The point is that both competence and achievement oriented people spontaneously try to test the outer limits of their abilities.
Thus, our role as managers is, first, to train the individuals, and, second, to bring them to the point where self-actualization motivates them, because once there, their motivation will be self-sustaining and limitless.
Varying management styles are needed as task-relevant maturity varies.
When the TRM (Task relevant maturity) is low, the most effective approach is one that offers very precise and detailed instructions, wherein the supervisor tells the subordinate what needs to be done, when, and how: in other words, a highly structured approach. As the TRM of the subordinate grows, the most effective style moves from the structured to one more given to communication, emotional support, and encouragement, in which the manager pays more attention to the subordinate as an individual than to the task at hand.
As supervisors, we should try to raise the task-relevant maturity of our subordinates as rapidly as possible for obvious pragmatic reasons. The appropriate management style for an employee with high TRM takes less time than detailed, structured, supervision requires. Moreover, once operational values are learned and TRM is high enough, the supervisor can delegate tasks to the subordinate, thus increasing his managerial leverage.
Deciding the TRM of your subordinates is not easy. Moreover, even if a manager knows what the TRM is, his personal preferences tend to override the logical and proper choice of management style. For instance, even if a manager sees that his subordinate’s TRM is “medium” (see the table on this page), in the real world the manager will likely opt for either the “structured” or “minimal” style.
Managers must learn to fight such prejudices and regard any management mode not as either good or bad but rather as effective or not effective.
A word of caution is in order: do not make a value judgment and consider a structured management style less worthy than a communication-oriented one. What is “nice” or “not nice” should have no place in how you think or what you do. Remember, we are after what is most effective.
When products and services become largely indistinguishable from each other, all there is by the way of competitive advantage is time.
You need to try to do the impossible, to anticipate the unexpected. And when the unexpected happens, you should double your efforts to make order from the disorder it creates in your life. The motto I’m advocating is “Let chaos reign, then rein in chaos.”
“In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.”
The point is, the clichés of globalization and the information revolution have real meaning—potentially deadly meaning—for your career. The sad news is, nobody owes you a career. You own it as a sole proprietor. You must compete with millions of individuals every day, and every day you must enhance your value, hone your competitive advantage, learn, adapt, get out of the way, move from job to job, even from industry to industry if you must and retrench if you need to do so in order to start again. The key task is to manage your career so that you do not become a casualty.
Reports are more a medium of self-discipline than a way to communicate information. Writing the report is important; reading it often is not. As we will see later, the preparation of an annual plan is in itself the end, not the resulting bound volume. Similarly, our capital authorization process itself is important, not the authorization itself.
Ideally, inventory should be kept at the lowest-value stage, as we’ve learned before, like raw eggs kept at the breakfast factory. Also, the lower the value, the more production flexibility we obtain for a given inventory cost.
One big pitfall to be avoided is the “potential trap.” At all times you should force yourself to assess performance, not potential. By “potential” I mean form rather than substance.