Book

High Output Management

Andrew Grove

My aunt gave me this after Dominic Cummings suggested that all civil servants should read it. Intel were very successful throughout the 80s, 90s and 2000s, but have missed a couple of steps in the mobile and AI markets. Even well-run companies can unravel as the market changes around them.

The complexity of running a semiconductor business is immense. From the pricing to delivering at scale and to specification. There was loads of good stuff in here and best of all, very little ‘consulting-ese’ and other management jargon. The rest of this post is what stood out most to me.

Once you turn things into a continuous operation, you sacrifice flexibility. The upside for customers is lower cost and predictable product quality. Large-batching has its own issues, for example if one of your production machines is misconfigured, the entire WIP is broken. You can mitigate this by doing a ‘functional’ test, taking a look at an individual piece of WIP as it comes through the system. This destroys the WIP though. Using an ‘in-process’ test e.g. a system monitor, allows you to check production without destroying WIP.
All production flows have a basic characteristic: the material becomes more valuable as it moves through the process. Therefore, detect and fix problems in production processes at the lowest-value stage possible.
Genuinely effective indicators must cover the output of the work unit and not simply the activity involved. Measure a salesman by the sales he makes, not the calls he makes
Stagger charts are useful for making managers hone in their forecasts
Forecasting accuracy is important because producing complex products at scale requires building to market need rather than specific customer orders
There is a parallel flow between manufacturing and selling: Raw material > Production > Finished goods inventory > Shipping dock Prospect > Selling > Order > Shipping dock
A balance exists between improving quality and minimal disturbance to the production process. Some techniques include gate-like inspection and monitoring steps. Gate-like holds things up, monitoring misses stuff. Employing variable inspections balances this by adjusting the frequency of tests to the levels of faults discovered
Productivity can be increased by performing work activities at a higher rate, or by increasing the leverage of activities. High leverage is more desirable. One way of gaining leverage is work simplification, draw out a process chart with every single step documented and then work to reduce the number of steps.
In the work of the soft professions, it is difficult to distinguish between output and activity. Stressing output is the key to improving productivity, whilst increasing activity can do the opposite, so identifying output becomes key
The most valuable information often comes from casual and quick verbal exchanges, so why are written reports necessary? Writing them forces the author to be more precise, hence their value stems from the discipline and thinking the writer is forced to impose upon himself as he identifies and deals with trouble spots in his presentation. Writing the report is important; reading it is often not.
On the importance of meetings: “You as a manager can do your work in a meeting, in a memo, or through a loudspeaker. But you must choose the most effective medium for what you want to accomplish, and that is the one that gives you greatest leverage”
Leverage can be positive or negative. High leverage activities take a short time, but affect an employee’s performance over a long time. An example of negative leverage is a manager putting off a decision that affects the work of others. 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 the whole organisation.
If a manager meddles in a subordinate’s work, the subordinate will learn to let the manager sort it out and may cease growing as a result.
If you set prices too low, you are giving money away
Managers have a lot on their plates. Knowing which to analyse and follow up on is where art comes into the work of a manager. The basis of this art is the intuition that behind this particular item and not others lurk deeper problems.
When delegating, the ‘-tor’ and ‘-tee’ must share a common information base and a common set of operational ideas or notions on how to go about solving problems, a requirement that is frequently not met.
Delegation without follow-through is abdication
When delegating, use the key QA principle and monitor your delegate’s work at the earliest (and lowest value) stage possible
When managing your time it must be organised around your limiting step. Determine what is immovable and manipulate the more yielding activities around it.
It is important to say “no” earlier rather than later. You can say “no” either explicitly or implicitly, because by not delivering you end up saying what amounts to “no”.
Carry an inventory of projects (not WIP projects!) that consist of things that increase a group’s productivity over the long term. Without such an inventory, a manager may end up using their free time meddling in subordinate’s projects.
A manager should allocate about half a day per week to each subordinate. Too much time results in meddling, too little results in a lack of monitoring.
On common management problems: the most common problem revealed in an Intel management study was uncontrolled interruptions, usually from subordinates or people outside the managers’ immediate organisation but whose work the managers influenced. What’s the solution? Here are some: if you can pin down what kind of interruptions you’re getting, you can prepare standard responses for those that pop up most often. Customers don’t come up with with totally new questions and problems day in and day out.
There are two kinds of meeting: process-oriented and mission-oriented. The former is an opportunity to share knowledge and exchange information, the latter aims to produce decisions and should be mostly ad-hoc affairs.
You can learn a lot by meeting in your subordinate’s office or seeing them at their desk. Are they organised or not? Do they repeatedly have to spend time looking for documents? How frequently are they interrupted?
“I take notes in just about all circumstances, and most often end up never looking at them again. I do it to keep my mind from drifting and also to help me digest the information I hear and see”
A meeting supervisor’s most important roles are being a meeting’s moderator and facilitator, and controller of its pace and thrust. Ideally, the supervisor should keep things on track, with the subordinates bearing the brunt of working the issues.
You are being paid to attend meetings. Don’t treat them as a siesta in an otherwise busy day. Say a manager’s time is about $100, then a meeting involving ten managers for two hours costs $2,000. Most expenditures at that level require some sort of approval, but a manager can call an appointment and burn $2,000 on a whim if these things aren’t tracked properly.
Eight people should be the absolute cut-off for mission-oriented meetings. Decision-making is not a spectator sport, onlookers get in the way of what needs to be done.
A real sign of malorganization is when people spend more than 25% of their time in ad hoc mission-oriented meetings

On the divergence between technical and managerial knowledge

A rapid divergence develops between power based on position and power based on knowledge, which occurs because the base of knowledge that constitutes the foundation of the business changes rapidly
Today’s veteran manager was once an outstanding engineer, he is not now the technical expert he was when he joined the company

On meeting politics

When a meeting gets heated, participants hang back, trying to sense the direction of things, saying nothing until they see what view is likely to prevail. They then throw their support behind that view to avoid being associated with a losing position
When we know a decision is controversial we want to obscure matters to avoid an argument. This is a mistake, the greater the disagreement about an issue the more important the word clarity becomes
Peers tend to look for a more senior manager, even if they are not the most competent or knowledgeable person involved, to take over and shape a meeting. Why? Because most people are afraid to stick their necks out
One thing that paralyzes both knowledge and position power possessors is the fear of sounding stupid. You should remind yourself that each time an insight or fact is witheld and an appropriate question is suppressed, the decision-making process is less good than it might have been

The six question for mission-oriented meetings:

What decision needs to be made?
When does it have to be made?
Who will decide?
Who needs to be consulted prior to making it?
Who will ratify or veto the decision?
Who will need to be informed of the decision?

On decision making

Employing consistent ways by which decisions are to be made has value beyond simply expediting the decision-making itself… if a veto comes as a surprise, however legitimate it may have been on its merits, an impression of political manoeuvring is inevitably created
Planners cannot be apart from the people implementing the plan

On organisational structures and culture

Organizations can come in two extreme forms: totally mission-oriented form and totally functional form. Mission-oriented organisations pursue their own missions, with little tie-in to other units.
Most businesses are best organised as hybrid, except for conglomerates. This is because conglomerates do not have a common business purpose
Problems that develop in one place should not subvert the entire schedule
Dual reporting allows one manage to specify how a job should be done and the second monitors how it being performed day to day
Corporate culture is a set of values and beliefs, as well as familiarity with the way things are done and should be done in a company. Strong corporate culture is essential if dual reporting and decision-making by peers are to work
Three things control our behaviour at work: 1. free-market forces; 2. Contractual obligations; 3. Cultural values
An environment can contain complexity, uncertainty and ambiguity, giving it a cua factor. The CUA factor will determine the best mode of control for a worker. A 2x2 can be created with individual motivation on the y-axis and CUA on the x-axis. Top left is self-interest and low CUA (free market forces), bottom right is High CUA and group interest (cultural values); in the top right, nothing works; in the bottom left, contractual obligations govern.
New hires don’t believe in the group yet, so they will be self-interested, accordingly you should give them a clearly structured job with low CUA. As the employee meshes you can give them a more complex role

On bad hires

When a person isn’t doing his job, there are only two reasons: they either can’t or wont. You can test this with this question: if the person’s life depended on it, could they do it? If yes, they are unmotivated; if no, they are unable
The single most important task of a manager is to elicit peak performance from subordinates
Esteem exists in the eyes of the beholder
Objectives should be set high enough so that even if individuals or organisations push themselves hard, they only have a fifty-fifty chance of making it
When one is self-actualized, money in itself is no longer a source of motivation but rather a measure of achievement
What makes the office marathon runner run? He is trying to beat other people or the stopwatch

On sports

Comparing our work to sports may also teach us how to cope with failure. As noted, one of the big impediments to a fully committed, highly motivated state of mind is preoccupation with failure. Yet we know that in any competitive sport, at least 50% of matches are lost. All participants know that from the outset, and yet rarely do they give up at any stage of a contest. Here the manager takes the role of coach. First, an ideal coach takes no personal credit for the success of his team, and because of that his players trust him. Second, he is tough on his team. By being critical, he tries to get the best performance his team members can provide.

On high performance

The inevitable conclusion is that high output is associated with particular combinations of certain managers and certain groups of workers. This also suggests that a given managerial approach is not equally effective under all conditions
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

Task relevant maturity measures your competence at the specific tasks you do. If low, you need to micro-manage with ‘what’, ‘when’, and ‘how’. If medium, you can employ individual-oriented emphasis on two-way comms, support and mutual reasoning. If high, minimum involvement, just establish objectives and monitor

On feedback, particularly what makes a bad annual appraisal

Review comments too general; mixed messages (inconsistent with rating or dollar raise); no indication of how to improve; negatives avoided; supervisor didn’t know my work; only recent performance considered; surprises
Do not assess based on ‘potential’, assess based on performance. The performance rating of a manager cannot be higher than the one accorded to their organisation. Assess actual performance, not appearances.
Some people say that when you promote a good salesman, you ruin a good salesman and get a bad manager. The best must be promoted because it sends a signal that it is performance that counts
When assessing remember to Level, Listen and Leave yourself out. Follow the three Ls
To make things work, people do not need to side with you; you only need them to commit themselves to a course of action that has been decided upon. On the job we are after a person’s performance, not our psychological comfort. Grove gives an example of where he persists in explaining something unpalatable to a junior who has already agreed to do it. He realises that his insistence is to do with making himself feel better, not running the business
Give subordinates their written reviews before the face-to-face discussion

On employees that try to quit

After they’ve declared their intention to quit, make them talk, because after the prepared points are delivered, the real issues may come out
Commitments made to you, his employer of many years, should be stronger than those made to a casual acquaintance (i.e. some new employer he wants to please)

On promotions

As a supervisor, you have to be very sensitive towards the various money needs of your subordinates and show empathy toward them. You must be especially careful not to project your own circumstances onto others
Promotions are readily seen by other members of your organisation and so take on an important role in communicating a value system to the rest of the company. Promotions must be based on performance, because that is the only way to keep the idea of performance highlighted, maintained and perpetuated

On training

Insufficiently trained employees, in spite of their best intentions, produce inefficiencies, excess costs, unhappy customers, and sometimes even dangerous situations. The importance of training rapidly becomes obvious to the manager who runs into these problems
A manager has two ways of raising individual performance: increase motivation, and increase capability
For training to be effective, it has to be closely tied to how things are actually done in your organisation