PDF Summary:High Output Management, by Andrew S. Grove
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1-Page PDF Summary of High Output Management
Factories are some of the most efficient, high-output operations in existence—they churn out products continuously, on tight schedules, using hundreds of workers. The field of leadership has plenty in common with factories, and leaders can learn a lot from their operation. Just like a factory, a manager has output, which is equal to the output of her team. Her team’s output is generated by her activities and how much effect—or leverage—they have.
In High Output Management, former CEO of Intel Andrew Grove applies manufacturing principles to management. In this book, you’ll learn which management activities to prioritize, how to increase their effectiveness, how to do them faster, and how to scale them.
(continued)... 2. Stop doing activities with negative leverage. Don’t micromanage, waffle, or hold a bad attitude. All of these things will make it more difficult for your reports to get their work done and will decrease their output.
3. Adjust the number of reports you have. For maximum leverage as a manager, you should have 6-8 subordinates (or be part of 6-8 coordinating or planning groups) so you can give them each half a day of your time per week. (Half a day is ideal because it gives you enough time to effectively monitor but not enough time to micromanage.)
Managerial Productivity
Like output, there’s a formula to describe managerial productivity (how efficient a manager is):
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.
Three Steps to Production
There are three steps to production in a factory:
1. Process, which is transforming raw materials into product parts. To determine the fastest, most cost-effective way to produce products in a factory, manufacturers first determine throughput times (how long it takes to prepare individual product parts) and then offset them (start them at staggered times so they’ll all be completed at the same time and ready for assembly). The schedule is arranged around the product part that takes the longest or is the most complicated to make.
Similarly, as a manager, arrange and offset your work schedule (and the schedule of your team) to ensure that all tasks involved in a particular project complete at the same time (in other words, the project deadline).
- Example #1: If you’re working as a cook at a restaurant that makes breakfast consisting of toast, boiled eggs, and coffee, the limiting step is boiling the egg, which takes the longest at three minutes. You’ll arrange the preparation of all the other parts around the egg.
- (Shortform example #2: If you’re putting together a poetry anthology, the limiting step is acquiring permission to reproduce the most famous poet’s poems. You should apply for this permission early and then apply for the other permissions as you wait for it to come through.)
2. Assembly, which is attaching the product parts together (or, in a business context, bringing each part of a project together).
3. Testing, which examines the raw materials, parts, or the final product (or, in a business context, project) for flaws. Material gains value as it passes through each production stage (for example a whole breakfast is more valuable than a raw egg). Therefore, you should always try to catch problems at the lowest value stage to save yourself money (scrapping a faulty part is less expensive than scrapping a faulty product). To do this, test at three different points during production:
- Upon receipt of raw materials
- During the production process
- After assembly
In general, the best way to test is “monitoring,” which involves taking samples and testing them while the rest of the material moves on to the next stage. If the sample testing turns up a problem, you can stop the rest of the process.
Manufacturing Strategies for Efficiency
There are six manufacturing strategies that you can apply to management to improve your efficiency:
1. Use indicators, which are measurements that tell manufacturers (or managers) about what’s going on in the production process (or administrative process) and predict or provide information about output. To choose which indicators to pay attention to, ask yourself what information you want to know first-thing every day to head off potential problems.
- For example, you might want to know how many people you have in the office. If you’re short-staffed today, to meet your goals, you might need to call in extra help or take people off the less important jobs to cover the most important ones.
2. Forecast output. Most manufacturers predict how many orders they’re going to get and build enough inventory to satisfy their predictions (as opposed to building only after receiving an order, which results in long wait times for a customer). As a manager, you can forecast too—predict demands on your time and plan accordingly.
3. Use proven workflows. Manufacturers don’t waste time coming up with a new way to do something if there’s already a good existing way. Don’t reinvent the wheel as a manager either.
4. Batch. All processes include set-up time, and if you can do all the activities that require the same set-up together, you only have to spend the set-up time once.
- For example, it requires some time to get into the right mindset to read reports. Therefore, once you’re in the mindset, read all the reports at once.
5. Don’t overload capacity. Overloads might cause bottlenecks and materials might have to be aborted at a higher-value stage. To avoid overloads as a manager, refuse projects you don’t have time for.
6. Distribute workload. Factories try to evenly distribute their workload over time, which managers can benefit from too. The main threat to an even managerial workload is interruptions because they unexpectedly increase workload. To manage interruptions:
- Prepare standard responses to common questions.
- Keep the data you learn from indicators handy so you can use it to quickly answer questions.
- Schedule time for questions.
Meetings as a Time-Management Tool
Meetings, like manufacturing strategies, can be an effective time-management tool. Meetings are a medium in which you can do managerial activities, many of which need to be carried out in person.
There are two types of meetings, and if you use your meeting time perfectly, you’ll only ever need to hold the first kind:
1. Process-oriented. The goal is to exchange expertise and information. These meetings take place according to a regular schedule. There are three subcategories:
- One-on-ones. The goal is to exchange information and maintain relationships. The attendees are you and a single subordinate.
- Staff meetings. The goal is to facilitate peer interaction, learn the dynamics of your subordinates, and exchange information in both directions. The attendees are you and all of your subordinates.
- Operation reviews. The goal is to facilitate learning and connect people who wouldn’t normally interact, such as people who are too far apart in the organization to attend the same staff meetings. The attendees are managers, presenters, and an audience.
These meetings save time because they allow you to pre-empt problems. If an attendee sees a potential problem and alerts you right away, you have time to address it before it becomes a larger issue.
- (Shortform example: If one of your subordinates is having trouble with her computer and tells you right away, you have time to order and receive a new one before the old one breaks.)
2. Mission-oriented. The goal of these meetings is to solve a problem by making a decision. In theory, these meetings should never be called because all problems are preempted in the process-oriented meetings. In practice, however, even if things operate well, about 80% of problems will be handled in process-oriented meetings and the remaining in mission-oriented meetings.
Running a Company
Managing a whole organization, as opposed to a team, involves two elements:
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.
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PDF Summary Part 1: Managerial Output | Chapter 1: Managerial Activities
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- Are you always trying to find ways to make things work better?
- Are you aware of your environment and developments in your field?
- Are you personally experimenting with new technologies and ideas?
Event #2: Email was invented. It increased the speed and ease of communication and made the managerial activity of disseminating information less critical to the job. Keep this in mind when reading the sections on managerial activities and meetings.
What Is 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:
You 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...
PDF Summary Chapter 2: Training and Motivation
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To develop a training program, start small, with a course that includes fewer than five lectures, because teaching will likely be more difficult than you think. When preparing the course:
- Accept that the first time you teach the course, it won’t be great. Choose students who are knowledgeable and experienced so that you don’t confuse them (a beginner would be likely to just accept everything you say, even if it was wrong) and so you get good feedback.
- If a lot of people in the organization will need to take the course and you’ll have to teach it multiple times, invite people who could potentially teach the course to your first lectures so they can learn to instruct.
- Initially, outline the whole course but only put together the first lecture. Put together the second lecture after giving the first. This will allow you to learn from the experience of the first lecture and amend your teaching style according to what worked and what didn’t.
- After finishing the course, ask the participants for feedback using a survey. Some of the questions should be a numerical rating, but some should also be open-ended questions.
- **Consider the survey...
PDF Summary Chapter 3: Performance Reviewing
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For example, when Grove was reviewing one of the managers who reported to him, the manager’s output measures were all strong—for example, sales had increased. There were some signs that not all was well—for example, the manager’s organization had higher-than-usual turnover—but Grove prioritized the output measures and gave the manager a good review.
The next year, the output measures had all declined. Grove looked carefully at the situation and realized that the offset between the manager’s activity and output was about a year. The output measures were only good the first year because they had been set up by previous employees and only come to fruition years later. Therefore, the manager hadn’t deserved the good review because the outputs didn’t reflect his actual performance. Interestingly, the manager’s performance had actually improved since the first year, even though the output measure didn’t reflect this at all: His work just hadn’t come to fruition yet.
2. You need to assess both short- and long-term projects. Long-term projects may not show output for years, so to evaluate them, consider the future gains and what they’re currently worth.
- (Shortform...
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Learn more about our summaries →PDF Summary Chapter 4: Hiring and Retaining
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- Discrepancy between knowledge and actions. If a person is capable but didn’t perform, find out why. Ask about issues at her current job and what she’s learned from past mistakes.
- Values. Ask why she wants a new job and why she feels your company is a good fit. Her values will tell you how she will approach the job. (Shortform example: If you run a non-profit that rescues animals, and the applicant values humane treatment of animals, she’ll likely approach her job with a lot of passion and motivation.)
Tip #2: Listen. The applicant should talk for 80% of the time so you can learn as much about them as possible.
Tip #3: If the applicant gets off topic, interrupt her and tell her you’d like to change the subject. You only have an hour or two—use it wisely.
Tip #4: Use the same language and make sure you both understand the meaning of any jargon you use.
Tip #5: Ask the applicant to consider a hypothetical situation. For example, when Grove was interviewing an accountant, he asked him to determine the cost of a finished wafer. Grove explained the wafer manufacturing process and answered questions about the process, since the accountant didn’t know...
PDF Summary Chapter 5: Planning and Delegating
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- The projects you’re currently working on. Consider timing and whether all of the projects will actually be completed (usually, some projects get canceled).
Use the same vocabulary to describe status and demand. For example, if your demand is for “completed product designs,” refer to anything in-progress is a “partly completed product design.” That way, you can more easily compare your status and demand.
Step #3: Reconcile
In this step, you’ll change what you’re currently doing so that you can meet future environmental demand. To do this, ask yourself two questions separately:
- What needs to be done?
- What is possible to do?
Decide on your strategy (a general summary of what you plan to do) and tactics (what you’ll actually do to make your strategy come true), keeping in mind how your actions will reconcile and how long this reconciliation will take.
Make sure to involve the people who will be responsible for implementing the plan. For example, Cindy made a list and a schedule of what steps the development engineers needed to do to produce enough documentation for her needs. She spoke with the development group’s manager to negotiate what was...
PDF Summary Chapter 6: Leverage
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Technique #2: Increase the Leverage of Existing Activities
We’ve already looked at how to choose effective managerial activities. Now, we’ll look at how to make these activities more powerful, which you can do in five ways:
1. Affect a larger number of people. Often, you can do this by doing activities at the opportune moment—when you’re in the presence of or can influence many people at once.
- For example, finance manager Robin is in charge of organizing Intel’s financial planning process. If she gives all the presenters clear directions on what they should prepare in advance of the first meeting, the presenters and audience (around 200 people) will all have a clear idea of what needs to be done. If her initial directions are confusing and people don’t prepare or bring the right information to the meeting, Robin would have to have individual conversations with people after to clear things up, this would take her a long time and therefore provide low leverage.
2. Affect people for a longer period, ideally by doing something that only takes you a short amount of time.
- For example, it might only take you a few hours to prepare a performance review,...
PDF Summary Part 2: Productivity | Chapter 7: Production, Assembly, and Testing
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1. Determine the limiting stage, which is making the component that’s most time-consuming, valuable, or sensitive. You’ll organize your workflow around this stage.
- Manufacturing example: If you’re working as a cook at a restaurant that makes breakfast consisting of toast, boiled eggs, and coffee, the limiting step is boiling the egg, which takes the longest at three minutes.
- Business example: In the Intel workflow for hiring new graduates, the limiting step is inviting them to visit an Intel plant because it’s the most expensive step—Intel pays for the students’ travel and managers spend a lot of paid time showing the students around.
2. Determine how long the next-longest stage will take. You’ll time starting this stage so the component is ready at the same time as the limiting stage.
- Manufacturing example: This is toasting the bread, at one minute. You’ll start toasting the bread two minutes before the egg will be ready.
- Business example: Another step involved in hiring a new graduate is on-campus interviews, which needs to be done far enough in advance to make travel arrangements for the students who are then invited to tour the plant.
**3....
PDF Summary Chapter 8: Other Productivity-Increasing Strategies
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- Equipment condition. If something has broken down, manufacturers will need to get it fixed or adjust the process to work around it.
- Human resources. If some staff are sick, manufacturers have to call in extra help or take people off the less important jobs to cover the most important ones.
- Product or service quality. Manufacturers use a variety of measures for this indicator, such as customer satisfaction.
Indicators are very helpful in types of work besides manufacturing because they:
- Provide clarity about individual and team goals
- Make abstract tasks more objective
- Allow for comparisons between different groups
- Help solve problems. When something goes wrong, you can look at your existing data to see where and how the problem might have started. If you don’t have data, you can’t do anything until you collect it, and in the meantime, the problem will likely worsen.
People tend to overreact to what they’re paying attention to. (Shortform example: If you’re trying to avoid overstaffing, you might inadvertently reduce your staff so much you don’t have enough people to manage the workload.) To avoid overreacting to an indicator, pay...
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PDF Summary Part 3: Running a Company | Chapter 9: How to Organize a Company
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- Distance. Because units focus only on their work, departments such as engineering and manufacturing tend to be cut off from the marketplace because their work never requires dealing directly with customers. As a result, they lose touch with what customers want.
Structure #2: Mission-Oriented
In this decentralized structure, every individual business unit is responsible for both its unit-specific tasks and all other tasks that come with running a business, such as hiring, purchasing, offices, and so on. Each unit is responsible for its own hiring, purchasing, offices, and so on, and each unit reports to a regional office or the corporate executive office.
There’s only one advantage to this structure, and that’s speed of responsiveness—each unit can quickly respond to local conditions, such as bad weather that slows down delivery at one franchise location. Speed is very important—the point of businesses is to respond to their environment.
The disadvantages of this structure are:
- Inefficiency. There’s redundancy between business units—for example, each one has to set up its own HR department.
- Weak company-wide performance. Since every...
PDF Summary Chapter 10: Control Methods
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- (Shortform example #1: If you ask someone to ghostwrite a memoir for you, you can’t encompass the entirety of the job with a list. Instead, you might establish guidelines that specify that you give the writer a certain amount of money, and they give you their best effort.)
- Example #2: An electrical company might sign a contract with the government to establish that no other company is allowed to sell electricity in a particular location. In exchange for the monopoly, the contract would give the government the right to control the price of electricity.
Management is needed in this method—management helps set and enforce the guidelines.
Method #3: Culture
In this last mode, 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 or contracts because the circumstances change quickly or are unclear. Therefore, use this method when the parties are mainly motivated by group interest and CUA is high.
- (Shortform example: Brenan is a member of a strategic planning community even though...
PDF Summary Appendix: Points Exercise
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- Brainstorm some non-urgent projects you can work on when you have discretionary time. These will keep you busy and stop you from meddling with your employees’ work.
- Reflect on the tasks you’ve done over the last week and rate them on leverage. How could you stop doing some of the low-leverage activities, giving yourself time to work on more high-leverage ones instead?
- Reflect on what you’ll be doing next week, considering how much time you’ll spend in mission-oriented meetings. If you expect them to take more than 25% of your time, how could you reduce this?
- Write a list of the upcoming decisions you have to make. Choose three and walk yourself through the six-question approach of management activity #3.
- Reflect on where you and all of your reports fall on the Maslow hierarchy of needs.
- Make a list of the task-relevant feedback your employees have access to. Determine if they can assess their own progress.
- Determine the TRM of each of your reports (high, medium, or low) and what management style would be most effective for them. Consider if your management style matches their TRM.
- Redo a performance review that you wrote in the past, keeping in...