High Output Management by Andrew S. Grove

(New York: Penguin Random House, 1983/2015), 251


Contents


Key Concepts

  • A manager's output is that of his organization and those he influences. The art of management consists in identifying and performing the few actions that produce significant leverage. The single most important resource we allocate is our time.
  • Meetings are the medium through which managerial work is performed.
  • Output and Leverage
  • Apply Production Principles to management, such as the concept of a "black box" process with inputs and outputs and that we see into with well-defined metrics.
  • Planning should consist in setting objectives and key results.
  • Hybrid organizations emerge as a company grows to balance flexibility with efficiency, and require dual-reporting to be effective.
  • A manager's most important responsibility is to elicit top performance from his subordinates through motivation and training.
  • Task-relevant maturity determines the appropriate leadership style for a subordinate task-relevant feedback (i.e. the performance review and compensation) is needed to communicate the importance of individual performance.

Re-read...

  • Chapter 4 to optimize meetings
  • Chapter 5 before making a major decision
  • Chapter 7 before engaging in planning
  • Chapters 8 and 9 before finalizing reporting plans
  • Chapter 13 before giving/receiving a performance review
  • Chapter 14 before conducting an interview or convincing someone to not resign
  • Chapter 15 before promoting someone or determining compensation
  • Chapter 16 before training your team or teaching a course

Introduction

1995

  • when attacked, lead with your strength (x)
  • Global labor competition (all the more relevant with post-pandemic remote work): "If the world operates as one big market, every employee will compete with every person anywhere in the world who is capable of doing the same job." (xi)
  • this book focused on Middle Managers and "Know-How Managers" (no direct reports) (xiii)
  • His motto: "Let chaos reign, then rein in chaos." (xv)
  • Three ideas from this book (xv):
    1. Output-oriented (production) approach to management
    2. Managerial leverage:
      • "The output of a manager is the output of the organizational units under his or her supervision or influence."
      • "High managerial productivity depends largely on choosing to perform tasks that possess high leverage."
    3. The Sports Analogy: give task-relevant feedback to elicit peak performance from individuals
  • Managing your own career: Continually dedicate yourself to retaining your individual competitive advantage (xviii+)
    1. Are you adding real value?
    2. Are you plugged into what's happening around you?
    3. Are you trying new ideas/techniques/technologies

Foreword

2015 by Ben Horowitz

  • Andy Grove:
    • is all substance (xxii)
    • balances the highest standards of clear thinking and performance with an undying belief in the underlying person (xxvii)
    • "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." (xxviii)
  • A manager's knowledge and skills only valuable if it gets more leverage from their team; all you can do is motivate and train (xxiii+)

Part I: The Breakfast Factory

Chapter 1: The Basics of Production

Summary: Optimize a production flow by working backwards from the "limiting step"1, and we can pull the levers of equipment capacity, manpower, and inventory against delivery time. Material becomes more valuable as it moves through the process so our goal with testing is to find issues as early as possible.

  • Production flow: start with the limiting step, work your way backwards to previous steps with offsets (4)
  • Three steps of a process: process, assembly, test
  • You can pull the levers of equipment capacity, manpower, and inventory against delivery time, creating a "menu of options" with tradeoffs (i.e. you can create a continuous operation, but at the expense of flexibility) (10)
  • Adding value: the material becomes more valuable as it moves through the process (12)
    • Therefore, test to detect and fix issues at the lowest-value stage possible

Chapter 2: Managing the Breakfast Factory

Summary: Use well-designed metrics to see inside the "black box" of production processes, a favorite being the stagger chart to create skin in the game for forecasters. Use variable inspection techniques to manage the quality of management processes, and increase productivity by growing high-leverage (high output per action) activities.

  • Indicators (KPIs) are a key tool: focus them on specific operational goals
    • Any measurement is better than none
    • Good indicators measure the output rather than the activity
    • Must be measurable
  • Indicators allow us to see inside the "black box" (isolated inputs, outputs, and labor of processes)
  • Helpful indicators
    • Linearity indicator: visually show actual progress vs required straight-line to hit target (21)
    • Stagger chart: show development of forecasts to create visibility of results and skin in the game for forecasters (23)
  • Create an automated, standardized set of indicators to aid troubleshooting
  • Exercise variable inspection as a manager: dig deeply into various activities to ensure all delegated activities are performed with thoroughness (33)
  • Focus on high-leverage activities, those with high output per activity (35)
    • Automation
    • Work simplification

Part II: Management Is a Team Game

Chapter 3: Managerial Leverage

Summary: A manager's output is that of his organization and those he influences. The art of management consists in identifying and performing the few actions that produce significant leverage. The single most important resource we allocate is our time.

  • Manager's output = output of his org + output of orgs he influences
  • Business is a team activity: but output and activity are distinct
  • "Like a housewife's, a manager's work is never done. There is always more to be done, more that should be done, always more than can be done." --> so choose wisely how you spend your time and focus it on high-leverage activities (47)
  • Some key managerial activities follow...
  • Information-gathering consumes a lot of managerial time
    • Useful information comes from quick/casual interactions (how to supplement this with remote work...?)
    • Reports serve to communicate information, but more so to instill self-discipline
    • Information sources fall in a hierarchy (casual to formal) and should compliment one another and be redundant as a form of verification
  • Convey-information
    • transmitting objectives and preferred approaches is key to delegation
  • Decision-making
    • Information gathering is the base of decision making (and all other activities)
    • You won't make all decisions, but need to nudge others
  • Being a role model
  • The single most important resource we allocate is our time. (53)
  • Leverage is the output generated by a given activity. High leverage is achieved when:
    • Your work impacts many people
    • Your work impacts another's activity over a long period of time
    • Your work supplies key knowledge to a larger group
  • Timeliness drives leverage, particularly in planning
  • Meddling and waffling create negative 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". (58-59)
  • "Managerial time has a hierarchy of values" (59)
  • Delegation as leverage:
    • Both must share common information and approach to solving problems
    • It's ok to hold onto certain tasks you enjoy, but be honest with yourself and subordinates about that fact
    • Delegation without follow-through is abdication—you can't wash your hands
    • In general, you should delegate the activities you know best to aid in follow-through
    • Monitor the lowest-value stage of work (review early), and vary your level of review based on the subordinate's familiarity with the task
    • Objective is same as approval meetings: figure out how good the thinking is without having to do all the thinking yourself
  • Use your calendar as a production-planning tool
    • Actively manage your calendar to fill holes between urgent activities with important but non-urgent activities
    • Say "no" to work beyond your capacity to handle
    • Batch similar tasks
    • Allow slack in your scheduling and carry an inventory of projects
  • Minimize fire-drills: always be looking for sources of future high-priority troubles
  • Maintain an archive of information so you don't need to do ad hoc research every time a question is answered
  • In all of this, impose a patter on your work to make is regular

Chapter 4: Meetings—the Medium of Managerial Work

Summary: Meetings are the medium through which managerial work is performed. Approach them with the required seriousness—ensure a meeting is a proper use of resources, prepare, take notes—and use them to increase your managerial leverage.

  • A meeting is the medium through which managerial work (gathering and supplying information, imparting the preferred method of action, making decisions) is performed (71)
  • Four key types of meetings
    • Process-oriented meetings: regularly scheduled meetings for information exchange
      • One-on-ones: mutual teaching and exchange of information between supervisor and subordinate
        • Subordinate's level of task-relevant maturity and pace of change determines frequency of meeting
        • It is the subordinate's meeting: prepare ahead of time (forces thinking), set the agenda and tone
        • Subordinate's focus is on flagging issues/concerns, supervisor's focus is on uncovering potential problems (Principle of Didactic Management: ask one more question)
        • Take notes during the meeting to organize thoughts and commit to actions (exchange afterwards if helpful)
        • Use a hold file to accumulate important but not urgent topics between meetings, then discuss in batch
        • Also provides a forum for heart-to-heart discussion
        • Can produce significant leverage for A) supervisor who can impact the subordinate's work between meetings, and B) subordinate who can influence peers by bringing issues to attention of their supervisor
        • Side note: can be a helpful model for family life also
      • Staff meetings: regular meeting with supervisor and all direct reports, providing opportunity for peers to engage
        • Learning is improved by listening to two people discuss who disagree on the matter
        • Have an agenda, but also open time
      • Operation reviews: forum for people who don't regularly interact to discuss issues
        • Should include formal presentation, reviewing manager sets the tone and is catalyst for discussion
    • Mission-oriented Meetings: ad hoc meetings to solve a particular problem
      • Chairman is the key person for calling the meeting, preparing, and ensuring a decision is reached
      • Consider the cost of a meeting and if an alternative can solve the problem. Have 8 people at most if a meeting is required
  • Meetings aren't a waste of time, they are the medium through which we manage. But spending more that 25% of your time in ad hoc mission-oriented meetings indicates mismanagement.

Chapter 5: Decisions, Decisions

Summary: The ideal decision-making process consists of free discussion, a clear decision, and full group support of the decision. Decisions should be made at the lowest competent group (subsidiarity).

  • Ideal decision-making process:
    • Free discussion: all points of view welcomed and debated
    • Clear decision: there should be no question what the final decisions is
    • Full support: not everyone will agree with the decision, but everyone must commit to support the group's decision
  • Make the decision at the lowest competent level: closest to the issue and most knowledgeable
  • Peer group syndrome is an obstacle to decision-making: no one wants to make a decision among peers
    • Solution is ensuring peers have self-confidence, or peer plus one approach: have a senior chairman conduct the meeting and drive for a decision
  • Apply structure ahead of the decision to guide output:
    • What decision needs to be made?
    • When does it have to be made?
    • Who will decide?
    • Who needs to be consulted?
    • Who will ratify/veto the decision?
    • Who needs to be informed of the decision?

Chapter 6: Planning: Today's Actions for Tomorrow's Output

Summary: Planning is a key management activity that can also be influenced by production principles: determine where you want to be, where you are now, and assess the gap. The output of planning is the set of actions to close the gap. The management by objectives (MBO) structure introduces objectives and key results as a system for fusing planning and execution.

  • Planning process
    1. What is the need? Customer's needs and environment landscape
    2. What is the current status? Current capabilities and projects in work
    3. Evaluate the gap between 1 and 2. What's needed to close this gap becomes your strategy
  • The output of the planning process is the set of tasks is generates
    • A gap today represents failed planning in the past --> think: what do we have to do today to solve or avoid tomorrow's problems
  • Don't plan too frequently since we need time to close the feedback loop
  • Planning is a key management activity with high leverage if planning and execution are closely coupled
  • Planning reality: saying yes to something is also saying no to everything else
  • Management by Objectives (MBO) provides focus and unites planning and execution
    • Objective: where do we want to go
    • Key result: gives us milestones to pace our progress toward the objective and make needed adjustments

Part III: Team of Teams

Chapter 7: The Breakfast Factory Goes National

Summary: This chapter illustrates the centralization-decentralization dichotomy as organizations grow. Management is not just a team game, we must fashion a team of teams.

Chapter 8: Hybrid Organizations

Summary: Organizations can be mission-oriented (decentralized, flexible to local conditions), or functional (centralized to realize economies of scale). In practice, large organizations (except conglomerates) end up with a hybrid structure.

  • Mission-oriented: enables responsiveness
    • decentralized in which each (local) individual business is fully independent
    • allows business units flexibility to respond to local conditions
  • Functional: enables leverage
    • centralized organization to increase economies of scale and the leverage of expertise
    • functional groups viewed as internal subcontractors, or "shared services"
  • Sloan: "Good management rests on a reconciliation of centralization and decentralization", or the best combination of responsiveness and leverage (123)
  • "Grove's Law": "All large organizations with a common business purpose end up in a hybrid organizational form." (127)
    • conglomerates are typically not hybrid because they don't share a common business purpose

Chapter 9: Dual Reporting

Summary: In a hybrid organization dual reporting allows an individual to report to both mission-oriented and functional supervisors (where the functional supervisor can be replaced with a group of peers). Alternatively the organization can be multi-plane in which different organization structures and hierarchies exist for different purposes.

  • dual reporting
    • pioneered in the Apollo Program
    • creates ambiguity for managers
    • requires a positive corporate culture (to enable decision-making by peers)
  • Option 1: report to both mission-oriented and functional supervisors
    • example: security team reports to both local plant manager (mission-oriented) and corporate security director (functional)
  • Option 2: report to mission-oriented supervisor as well as functional group of peers
    • example: manufacturing manager reports to both local plant manager (mission-oriented) and Manufacturing Committee (functional group of peers)
  • Option 3: Multi-plane organization in which multiple org structures and hierarchies exist for different purposes
    • example: process engineer reports to supervising engineer, and to chairman of the process engineering committee she advises

Chapter 10: Modes of Control

Summary: Our behavior is controlled by one of three means: free market forces (self-interest), contracts, or cultural values. There is always a best mode of control depending on the individual's motivation and the environment (i.e. CUA factor: complexity, uncertainty, ambiguity).

  • Free market forces: everyone openly acts in their own self-interest, based on price
  • Contracts: requires the overhead of policing, examples include employment contracts or public utilities
  • Cultural values: interest of the group takes precedence over the individual
    • requires trust and common values, objectives, and methods
    • these can be articulated but must also be created by example
  • Selecting a mode of control:
    • depends on the person's motivation
    • depends on the environment (CUA Factor: complexity, uncertainty, ambiguity)
    • See this great chart from Coleman McCormick reproducing the visual on page 149, which suggests which mode of control is best for each combination of individual motivation and CUA factor:



      Image



Part IV: The Players

Chapter 11: The Sports Analogy

Summary: A manager is the coach of the team, and your job is to elicit peak individual performance through training and motivation. Using Maslow's Hierarchy as a motivational framework, your goal is to motivate for self-actualization creating no limit to performance.

  • A manager's role is to elicit peak individual performance ("personal best") through training and motivation


    Image

    • Motivation comes from within: the manager must create an environment where motivated people can flourish
    • Motivation can only be measured through relative output at a given skill level
  • Refer to Maslow's Hierarchy of Needs
    • Physiological, safety/security, and social needs motivate people to show up for work; esteem an self-actualization drive performance
  • When someone if motivated by self-actualization their drive to perform has no limit --> this is our focus in management
    • OKR objectives should be set to push personal limits (50/50 chance of achievement)
    • Create an environment that values and emphasizes output
    • A person needs measures of achievement in self-actualization mode, including feedback on performance (see Chapter 13 on performance reviews) and money as a measure of achievement (rather than source of security)
  • Fear dominates lower levels of motivation, and fear of failure can prevent motivation driven by self-actualization
  • The Sports Analogy: endow work with the characteristics of competitive sports—establish rules of the game and ways for employees to measure themselves (through the same lens they see their own work)
    • Sports teach us how to deal with failure
    • The manager as coach takes no personal credit for his team's success, is tough on his team, and was likely a good player himself before becoming coach

Chapter 12: Task-Relevant Maturity

Summary: The best leadership style for an employee is determined by their level of Task-Relevant Maturity, ranging from structured (low TRM), to communicating (medium TRM), to monitoring (high TRM).

  • Task-Relevant Maturity: achievement orientation and readiness to take responsibility, as well as training and experience
  • Task-relevant maturity determines the best leadership approach for the situation:
    • When Low: structured, task-oriented, well what/when/how
    • When Medium: individual-oriented, emphasis on two-way communication, support, mutual reasoning
    • When High: Involvement by manager minimal, establishing objectives and monitoring
    • Structure moves from being externally imposed to internally given
    • Supervisor is responsible for transmitting the commonality of values/priorities/preferences required for leadership style to progress

Chapter 13: Performance Appraisal: Manager as a Judge and Jury

Summary: A performance review is the most important form of task-relevant feedback a manager provides, and is challenging to do well. To do so, Level with your subordinate, Listen closely to them, and Leave yourself out of it.

  • A performance review is the most important form of task-relevant feedback a manager provides
  • The purpose of a performance review is to improve the subordinate's performance: remedy lacking skills and increase motivation
  • Assessing performance and delivering the feedback are both challenging
  • Assessing performance
    • Use a combination of output measures (objective value delivered) and internal measures (subjective evaluation of the present value of future-focused activities)
    • Assess performance, not potential
    • The performance of a manager should never be higher than that of his organization
  • Delivering Assessment
    • Level: be totally frank
    • Listen: totally listen with all your senses
    • Leave yourself out: the performance review is about and for your subordinate
  • Three types of reviews
    • Mixed: a person can only absorb so much at a time, so get everything down, looks for common messages, and focus only on the most important
    • Negative: provide facts and examples to demonstrate the reality of poor performance, get them to assume responsibility, and come to a solution together
    • Ace: even though performance is excellent, focus on improving (rather than just praising) which is a very high-leverage activity—there is always room for improvement
  • Practical notes
    • He doesn't recommend a self-review
    • He recommends sharing the written review ahead of time to allow for processing and then a level conversation
    • Think about the reviews you have received to help improve your reviews

Chapter 14: Two Difficult Tasks

Summary: Interviewing is high risk but increases your chances of getting lucky. Ask questions to assess technical skills, accomplishments, discrepancies, and values, and further learn about these from the candidate's questions for you. When a valued employee quits, your first job is to drop everything and hear them out to buy time and convey they are important. You then need to work through a solution for the good of the company and ensure it is delivered.

Interviewing

  • The purpose of an interview is to:
    • select a good performer
    • education him as to who you and the company are
    • determine if a mutual match exists
    • sell him on the job
  • The candidate should do 80% of the talking
  • Interrupt them if needed to control the flow of the interview and not waste time
  • Focus your questions on:
    • Technical skills: projects, weaknesses
    • What he did with skills: past achievements/failures
    • Discrepancies: learning from failures, problems in current role
    • Operational values: why new job, why should we hire you, most important project
  • Direct questions bring direct answers, or if not at least other good insights

When a valued employee quits

  • Your initial reaction is critical: drop everything, sit him down, ask why quitting, ask questions to probe for the actual reasons. Your goal is to buy time and convey that he is important to you.
  • Then your task turns toward making it work and making sure that is carried out, even if that means him transferring to another manager.

Chapter 15: Compensation as Task-Relevant Feedback

Summary: Money can provide task-relevant feedback, especially in the form of a performance bonus. Promotions should be based on performance since they communicate values to the rest of the company.

  • We want high performance, so use money as a form of task-relevant feedback through a performance bonus
  • Construction is challenging, but for example, it may be based on a combination of individual, department, and company performance
  • Base salary can be set by experience only, merit only, or a hybrid. Note that merit-based salaries require a competitive evaluation of employees which is challenging
  • Promotions are critical because they communicate the value system of the company: promote based on performance
  • Peter Principle: an achiever alternates between "excellent" when in a job, and "average" when promoted to the next level, until he eventually settles at "average"
    • There are two types of "average": noncompetitor who is satisfied in his job and not going up, and the performer who is working for the next promotion
  • If a person is promoted too far and struggles, this is management's fault and the best response is to put them back in a role they will perform well in

Chapter 16: Why Training Is the Boss's Job

Summary: Training (along with motivation) is one of the two tools at your disposal to increase individual performance and therefore the output of your team. It is your responsibility as a manager to ensure training is implemented as a process that is immediately relevant to your team's actual work.

  • A manager's own productivity depends on increasing the individual performance of his team: he should conduct training himself
  • Training is one of the highest-leverage activities a manager can perform
  • Effective training is closely tied to the actual work of the team
  • Training should be a continuous process, not a single event
    • 2-4% of your time, or 1-2 hours per week

Chapter 17: One More Thing

Summary: This is a list of tangible activities to implement the principles of this book.

Topic: Leadership, Management

Source: Matt B

Created: 2021-04-11
Updated: 2023-01-23-Mon

  1. aka "bottleneck" from The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt ↩