This article is an excerpt from the Shortform book guide to "High Output Management" by Andrew S. Grove. Shortform has the world's best summaries and analyses of books you should be reading.
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What is Andrew Grove’s High Output Management book about? How does Grove explain maximizing output and productivity?
According to Andrew Grove, high output management is a style of management that uses manufacturing principles to manage other aspects of a company.
Read more about Andrew Grove, high output management, and what it means.
Andrew Grove: High Output Management
In High Output Management, Andrew Grove, former CEO of Intel, shares what he’s learned about management over his decades-long career. One of his main insights is that manufacturing principles, which focus on output and productivity, are very applicable to yet rarely used in management.
In this summary, you’ll learn all about the Andrew Grove high output management strategy:
- How to increase your managerial output
- How to increase your managerial productivity
- How to manage on a larger scale
Managerial Output
The output of some processes, such as manufacturing, is very obvious—at a factory that makes breakfasts, the output is breakfast. Your own output as a manager, however, is less concrete. It’s not the output of your own individual work; it’s the output of all the teams you influence. Their output is determined by the activities you do and how much of an effect—or leverage—these activities have.
Written mathematically:
Your managerial output = team outputs = output of your team + output of teams you influence = (managerial activity #1 × leverage of activity #1) + (managerial activity #2 × leverage of activity #2) + …
Therefore, you can increase your managerial output by increasing the output of your team or the teams you influence, and/or increasing the value of your activities or your leverage.
Managerial Productivity: Andrew Grove’s High Output Management Advice
Like output, there’s a formula to describe managerial productivity (how efficient a manager is):
According to Andrew Grove in High Output Management, managerial productivity = managerial output ÷ time = activity ÷ time required for the activity You can improve your productivity using the strategies to improve output (because activity and leverage are part of the equations) and one additional strategy: Speed up how long it takes you to do your activities.
To learn how to speed up, we’ll take inspiration from production manufacturing because it uses excellent time management techniques.
First, we’ll look at strategies directly inspired by the three steps of manufacturing. Then, we’ll look at some more general strategies used in manufacturing.
Running a Company: Andrew Grove’s Advice in High Output Management
Managing a whole organization, as opposed to a team, involves two elements according to Andrew Grove in High Output Management:
Element #1: Organizational Structures
Organizational structures are arrangements of the organizational chart: for instance, they show which unit in the business does what, and how these units work together (if they do at all).
There are three organizational structures:
1. Functional. In this centralized structure, individual business units are only responsible for their unit-specific tasks. Any function that they share with another unit (for example, human resources), is handled by a functional group that handles the shared function for all units. The advantages of this structure are economies of scale, the opportunity to share expertise (experts can share their knowledge across the whole company, not just their unit), and units having the ability to focus on their work, not administration. The disadvantages are increased bureaucracy when trying to get help from functional groups, and resource competition between the distinct units.
2. Mission-oriented. In this decentralized structure, every business unit is responsible for both its unit-specific tasks and all the other tasks that come with running a business, such as hiring, purchasing, offices, and so on. Each unit reports to a regional office or the corporate executive office. The only advantage of this structure is speed of responsiveness; units don’t have to wait on other departments to do anything. The disadvantages are the inability to collaborate with other units and redundancy (for example, each unit has an HR department when really, the company only needs one).
3. Hybrid. This structure is a combination of functional and mission-oriented. Individuals can report to multiple supervisors and be part of multiple organizational charts, which allows them to fulfill both functional and mission-oriented responsibilities.
- For example, Intel has four functional units (sales, technology development, administration, and manufacturing) and three business units (component, microcomputer, and system). All of the units report to the executive office.
Ideally, the hybrid structure harnesses all the advantages of each system and dispenses with the disadvantages. According to Grove’s law, as businesses grow, they’ll eventually need to transition to this structure because as they get bigger, they have more things to keep track of and need the advantages of a functional structure as well as those of the mission-oriented approach.
Element #2: Control Methods
There’s no universally optimal way to control people’s behavior—the most effective approach always depends on the circumstances.
There are three different control modes applicable to the workplace:
1. Free-market forces. In this mode, people’s behavior is controlled by price (whoever is buying wants to pay the lowest price, and whoever is selling wants to sell at the highest price possible) and self-interest. No management is needed because everyone openly does whatever is in their best interest.
- (Shortform example: Buying a car is managed by free-market forces—the salesperson wants to make as much money as possible, and the buyer wants to spend as little as possible.)
2. Contracts. In this mode, people’s behavior is controlled by mutually agreed-upon guidelines that outline what each party will do to what standards and who has the right to monitor work. Contracts are useful when exchanging goods or services that don’t have a defined value, like the contribution of an individual engineer. Management is needed in this method—management helps set and enforce the contract guidelines.
3. Culture. In this last mode, people’s behavior is controlled by culture—people believe and trust that the whole group shares ways of doing things, values, and goals. Culture is a useful control method when it would be impossible to define dollar values of or contracts surrounding behavior. Management’s role is to develop and establish culture by explaining ways of doing things, values, and goals and also visibly demonstrating them.
Andrew Grove’s high output management strategy can help you learn to succeed by using unique strategies to increase output.
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Here's what you'll find in our full High Output Management summary :
- How to increase your managerial output and productivity
- The 11 activities that offer a higher impact on output
- How meetings can be used as a time management tool
