High Output Management
Tags: #business #management #leadership #productivity #teams #decision-making #technology
Authors: Andrew S. Grove
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Overview
This book offers a practical, output-oriented approach to management, drawing heavily on my experience at Intel. It’s primarily aimed at middle managers who are the backbone of any organization, as well as those who exert influence through knowledge and expertise – what I call “know-how managers.” The core premise is that a manager’s output is the output of their team. To increase this output, managers must focus on activities with high leverage, meaning those that have a significant impact on the performance of the team. I liken the challenge of managing to running a well-oiled factory, where processes are optimized for efficiency and output. I explore key managerial tasks, including setting clear objectives, measuring performance through indicators, conducting effective meetings, making sound decisions, and providing regular training. The book also delves into the complexities of hybrid organizational structures and the importance of dual reporting for effective coordination and communication. It emphasizes the need for a strong corporate culture based on shared values, trust, and open communication to enable these systems to work. The book’s principles remain relevant today, particularly in the face of globalization and rapid technological change, where organizations need to adapt quickly and leverage the skills and knowledge of their employees to stay ahead.
Book Outline
1. The Basics of Production: Delivering a Breakfast (or a College Graduate, or a Compiler, or a Convicted Criminal…)
Production can be broken down into a series of steps, much like preparing breakfast. To optimize for efficiency, we must first identify the “limiting step,” which is the task that takes the longest. All other tasks are then scheduled and arranged relative to that limiting step to ensure a smooth and timely flow.
Key concept: The key idea is that we construct our production flow by starting with the longest (or most difficult, or most sensitive, or most expensive) step and work our way back.
2. Managing the Breakfast Factory
Effective management relies heavily on using “indicators” to measure performance and guide actions. Just as a bicycle tends to go where the rider is looking, indicators focus our attention and actions towards what is being measured. It’s critical to select the right indicators to track true output and to use “paired indicators” to monitor both the effects and potential unintended consequences of our actions.
Key concept: 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.
3. Managerial Leverage
A manager’s success is not measured by their individual work, but by the output of their team. This principle applies not only to traditional hierarchical managers but also to those who exert influence through expertise and knowledge, who I call “know-how managers.” Both types of managers must focus on activities with high leverage, meaning those that have a significant impact on the output of their team and neighboring teams.
Key concept: The output of a manager is the output of the organizational units under his or her supervision or influence.
4. Meetings—The Medium of Managerial Work
Meetings are the primary medium through which managerial work is performed, serving as the platform for information exchange, decision-making, and influence. Process-oriented meetings like one-on-ones and staff meetings should be conducted regularly to provide structure and promote efficiency. Mission-oriented meetings, on the other hand, are ad hoc and focused on solving a specific problem or making a decision. Both types of meetings require careful planning, clear objectives, and strong leadership from the chairman to maximize their effectiveness.
Key concept: The single most important task of a manager is to elicit peak performance from his subordinates.
5. Decisions, Decisions
Effective decision-making in a knowledge-based business requires a shift away from traditional hierarchical authority. Instead, decisions should be made at the “lowest competent level,” where individuals closest to the situation have the necessary expertise and judgment. The ideal decision-making process involves three key stages: free discussion, where all perspectives are openly debated; a clear decision made at the appropriate time; and full support from all participants, even those who disagree, to ensure effective implementation.
Key concept: The ideal decision-making process should start with free discussion, where different viewpoints are encouraged and debated openly. This is followed by a clear decision and, finally, full support for the decision from everyone involved, even those who may not fully agree.
6. Planning: Today’s Actions for Tomorrow’s Output
Planning is an essential management function that involves analyzing the environment, assessing your current situation, and developing a strategy to close the gap between the two. The output of the planning process is not a document but a set of actions taken to address anticipated challenges and achieve desired outcomes. The focus should always be on proactively taking steps today to avoid or solve problems that may arise tomorrow.
Key concept: What do I have to do today to solve—or better, avoid—tomorrow’s problem?
7. The Breakfast Factory Goes National
As organizations grow, they inevitably evolve into a hybrid form, balancing the need for centralized efficiency and decentralized responsiveness. Mission-oriented business units focus on specific products or markets, while centralized functional groups provide specialized expertise and support. The challenge lies in finding the right balance between centralization and decentralization, and in managing the complexities of this hybrid structure.
Key concept: Grove’s Law: All large organizations with a common business purpose end up in a hybrid organizational form.
9. Dual Reporting
Dual reporting, where individuals report to both a functional manager and a mission-oriented manager, is essential for managing the complexities of a hybrid organization. It ensures that individuals receive both the technical guidance and the business-focused direction they need to succeed. This system requires trust and a strong corporate culture to function effectively, as individuals must learn to navigate the potential ambiguity and conflicting priorities that may arise from having two bosses.
Key concept: Dual reporting is the management principle that enables the hybrid organization form to work.
10. Modes of Control
There are three primary modes of control that influence behavior: free-market forces, contractual obligations, and cultural values. Each mode is appropriate for different situations, depending on the nature of the work, the individuals involved, and the level of complexity, uncertainty, and ambiguity (CUA). While cultural values based on trust and shared commitment are ideal for complex, high-CUA environments, they are not always practical or efficient. Managers must carefully assess the situation and choose the most appropriate mode of control to ensure optimal outcomes.
Key concept: There is a temptation to idealize what I’ve called cultural values as a mode of control because it is so “nice,” even utopian, because everybody presumably cares about the common good and subjugates self-interest to that common good. But this is not the most efficient mode of control under all conditions.
11. The Sports Analogy
To maximize team performance, managers must understand and leverage the principles of motivation, drawing inspiration from the world of competitive sports. Like athletes striving for their personal best, employees can be motivated to achieve peak performance when provided with clear objectives, measurable feedback, and a healthy dose of competition. The manager’s role is akin to that of a coach: inspiring, guiding, and supporting their team to reach their full potential.
Key concept: The single most important task of a manager is to elicit peak performance from his subordinates.
12. Task-Relevant Maturity
There is no single best management style. The most effective approach depends on the task-relevant maturity (TRM) of the subordinate, which reflects their experience, skills, and willingness to take responsibility for the specific task at hand. As a subordinate’s TRM grows, the manager’s style should shift from highly structured to more communication-oriented and eventually to minimal involvement, focusing on setting objectives and monitoring progress. This approach parallels the changing relationship between a parent and child as the child matures.
Key concept: The fundamental variable that determines the effective management style is the task relevant maturity of the subordinate.
13. Performance Appraisal: Manager as Judge and Jury
Performance reviews are essential for providing employees with task-relevant feedback, assessing their performance, and guiding their future development. Managers must be honest and direct in their assessments, focusing on performance rather than potential, and avoiding surprises by providing ongoing feedback throughout the year. The ultimate purpose of a performance review is to improve the subordinate’s performance, not to make the manager feel better.
Key concept: The fact is that giving such reviews is the single most important form of task-relevant feedback we as supervisors can provide.
14. Two Difficult Tasks
Interviewing is a crucial but high-risk task for managers. The goal is to identify and select individuals who will be high performers in the company’s environment. This requires careful probing into the candidate’s past experience, technical skills, performance record, and operational values. Using hypothetical situations, behavioral questions, and allowing the candidate to ask questions can provide valuable insights beyond the candidate’s self-assessment. Reference checks can also be helpful, but only if conducted carefully and with an understanding of the context in which the candidate worked.
Key concept: As I said, interviewing is a high-risk proposition…
15. Compensation as Task-Relevant Feedback
Compensation should be used as a tool for providing task-relevant feedback and motivating employees. While money is a primary motivator at lower levels of the need hierarchy, its significance shifts at higher levels, becoming more a measure of achievement than a necessity. Performance-based bonuses can be effective for providing this feedback, while base salaries should be based on a compromise between experience and merit, recognizing that competitive evaluation of individuals is necessary for any merit-based system to work.
Key concept: At higher levels of compensation, an incremental amount of money gradually will have less and less material utility to the person who gets it.
16. Why Training Is the Boss’s Job
Training is an essential responsibility of every manager, not just a task for specialists. Managers should personally train their direct subordinates, teaching both job-specific skills and broader organizational knowledge. Training should be a continuous process, not a one-time event, and should be closely tied to the actual work being done in the organization. By embracing training as a core managerial activity, managers can significantly improve the performance of their teams and achieve higher levels of output.
Key concept: Training is, quite simply, one of the highest-leverage activities a manager can perform.
Essential Questions
1. What is the fundamental measure of a manager’s success?
The manager’s output is the output of their team. This is the core principle that underpins my approach to management. Managers are responsible for creating an environment where their teams can flourish, providing the necessary training, motivation, and resources to maximize their output. This principle applies to both traditional hierarchical managers and to “know-how managers,” who exert influence through their expertise and knowledge.
2. What is “managerial leverage” and why is it crucial for high output?
Managerial leverage is the impact of a manager’s actions on the output of their team. High-leverage activities are those that significantly increase output, such as training, setting clear objectives, and providing effective feedback. Low-leverage activities, on the other hand, have minimal impact or even decrease output, such as meddling in the work of subordinates or failing to make timely decisions. Managers should focus on maximizing their leverage by prioritizing high-impact activities and delegating tasks effectively.
3. Is there a single best management style for all situations?
The most effective management style is not a one-size-fits-all approach. It depends on the task-relevant maturity (TRM) of the subordinate for the specific task at hand. A manager must assess the subordinate’s experience, skills, and willingness to take responsibility for the task, and tailor their management style accordingly. When TRM is low, a more structured, directive approach is needed, providing clear instructions and close supervision. As TRM increases, the manager can transition to a more communication-oriented style, providing support and encouragement. Finally, for highly mature subordinates, the manager can minimize involvement, focusing on setting objectives and monitoring progress.
4. What is the primary purpose of a performance review, and how can it be most effective?
Performance reviews are not just about assessing past performance but about providing valuable feedback to improve future performance. Managers must be honest and direct in their assessments, focusing on objective performance rather than subjective perceptions or potential. The review should also include actionable guidance for improvement and a clear understanding of how the subordinate’s work contributes to the overall goals of the organization.
5. Why is training considered the boss’s job, and what are the key principles for effective training?
Training is a high-leverage activity that has a significant impact on the performance of a team. Managers are responsible for personally training their subordinates, not just delegating the task to specialists. Training should be a continuous process, closely tied to the actual work being done in the organization. By teaching subordinates what they need to know to do their jobs better, managers can significantly increase their team’s output and overall productivity.
Key Takeaways
1. Identify the Limiting Step
Identifying the limiting step is crucial for optimizing any work process, from manufacturing to software development to creative endeavors. It allows you to focus your energy and resources on the most critical aspect of the operation and ensures that all other steps are aligned and synchronized to support that limiting step. By removing bottlenecks and improving the efficiency of the limiting step, you can significantly accelerate the overall process and improve output.
Practical Application:
Imagine you are leading a team developing a new AI-powered feature. The limiting step might be data acquisition or model training, depending on the specifics of the project. By identifying this step, you can focus resources on removing bottlenecks, optimizing timelines, and ensuring the smooth flow of all other related tasks.
2. Use Paired Indicators
Indicators are essential for measuring performance and driving improvement, but focusing on a single indicator can lead to unintended consequences. Pairing indicators allows you to monitor both the effects and counter-effects of your actions, ensuring a balanced and holistic approach to improvement. For example, tracking both customer acquisition and customer churn can provide a more complete picture of your marketing efforts than focusing solely on acquisition numbers.
Practical Application:
For an AI product engineer, this could mean setting objectives for model accuracy, data throughput, and code efficiency. By tracking these paired indicators, you can ensure that you are not only improving performance in one area but also monitoring the impact on other critical aspects of the project.
3. Maximize Managerial Leverage
Managers should focus their time and energy on activities that create the most impact. High-leverage activities affect the output of many people or influence outcomes over a long period of time. Delegation, when done effectively with clear objectives and proper monitoring, is another way to increase managerial leverage. Managers should identify high-impact tasks that can be delegated, train their subordinates to perform those tasks competently, and monitor their progress.
Practical Application:
For example, as an AI product engineer, you can leverage your knowledge of a new AI technique by training your team on its applications, developing best practices for its implementation, and creating tools that simplify its use for others. This amplifies your impact and contributes to the output of the entire team.
4. Make Clear Decisions and Secure Full Support
Effective decision-making is a critical skill for managers. The ideal decision-making process starts with open discussion and debate, where all perspectives are encouraged and considered. This is followed by a clear and timely decision made at the lowest competent level, meaning the level where individuals closest to the situation have the necessary knowledge and experience. Finally, and most importantly, everyone involved must give the decision full support, even those who may not agree, to ensure its effective implementation.
Practical Application:
If an AI team is debating the best architecture for a new model, a clear decision should be made, even if not everyone fully agrees. All team members should then commit to fully supporting that decision, regardless of their initial preference, to ensure efficient execution and avoid future conflict.
5. Adapt Your Management Style to Task-Relevant Maturity
There is no single “best” way to manage. The most effective approach depends on the individual and their task-relevant maturity (TRM). For employees new to a task or role, a structured, directive style is needed, providing clear instructions and close supervision. As their proficiency increases, a more collaborative and coaching-oriented approach becomes appropriate. For highly skilled and experienced individuals, a minimal involvement style, focusing on setting objectives and monitoring progress, is most effective. The key is to adapt your management style to the individual’s TRM to maximize their performance and development.
Practical Application:
For instance, if you are introducing a new AI-powered tool to your team, you should begin by providing very structured training, explaining exactly how the tool works, and closely supervising its use. As the team gains experience and proficiency, you can gradually shift to a more coaching-oriented style, offering guidance and support as needed. Eventually, the team should be able to use the tool independently with minimal supervision.
Suggested Deep Dive
Chapter: Managerial Leverage
This chapter provides a foundational framework for understanding how a manager’s actions can have a disproportionate impact on team output. It’s especially relevant to AI product engineers, who need to maximize their effectiveness in leading and influencing teams of highly skilled specialists.
Memorable Quotes
The Basics of Production. 29
The key idea is that we construct our production flow by starting with the longest (or most difficult, or most sensitive, or most expensive) step and work our way back.
Managing the Breakfast Factory. 41
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.
Managerial Leverage. 64
The output of a manager is the output of the organizational units under his or her supervision or influence.
Decisions, Decisions. 109
The ideal decision-making process should start with free discussion, where different viewpoints are encouraged and debated openly. This is followed by a clear decision and, finally, full support for the decision from everyone involved, even those who may not fully agree.
The Planning Process. 125
What do I have to do today to solve—or better, avoid—tomorrow’s problem?
Hybrid Organizations. 140
Grove’s Law: All large organizations with a common business purpose end up in a hybrid organizational form.
Making Hybrid Organizations Work. 148
Dual reporting is the management principle that enables the hybrid organization form to work.
Task-Relevant Maturity. 182
The fundamental variable that determines the effective management style is the task-relevant maturity of the subordinate.
Performance Appraisal. 188
The fact is that giving such reviews is the single most important form of task-relevant feedback we as supervisors can provide.
Why Training Is the Boss’s Job. 225
Training is, quite simply, one of the highest-leverage activities a manager can perform.
Comparative Analysis
Compared to other management classics like Peter Drucker’s “The Effective Executive” or Tom Peters’ “In Search of Excellence,” “High Output Management” stands out for its rigorous focus on output and its practical, almost engineering-like approach to management. While Drucker emphasizes effectiveness and Peters highlights the importance of culture and customer focus, my book provides a systematic framework for improving managerial productivity and leveraging the performance of teams. It shares some common ground with Drucker’s emphasis on time management and objective setting, and with Peters’ focus on empowering employees, but it goes further in providing specific tools and techniques for achieving these aims, drawing heavily on the principles of production and manufacturing. The book’s unique contribution lies in its detailed analysis of key managerial tasks like running effective meetings, making decisions, and providing training, all within the context of a hybrid organizational structure that balances centralization and decentralization.
Reflection
While the principles in “High Output Management” are broadly applicable across industries and organizational sizes, their relevance to the rapidly evolving field of AI is particularly significant. The book’s emphasis on output, leverage, and task-relevant maturity provides a valuable framework for managing AI teams, which often consist of highly skilled specialists with diverse expertise. The book’s approach to decision-making, with its emphasis on free discussion and clear decisions, is especially relevant to the field of AI, where technical complexities and ethical considerations often require careful deliberation and a balanced consideration of various viewpoints. However, some aspects of the book may need to be interpreted with nuance in the context of AI. For example, the concept of “task-relevant maturity” may need to be adapted to consider the rapid pace of technological advancement in AI, where individuals may need to continuously update their skills and knowledge. Overall, “High Output Management” offers a timeless and valuable guide for managing in a knowledge-based world, with principles that resonate strongly in the context of AI and technology.
Flashcards
What is the single most important sentence in the book?
The output of a manager is the output of the organizational units under his or her supervision or influence.
What is the limiting step?
The step in the production flow which will determine the overall shape of the operation.
What is managerial leverage?
A measure of the output generated by any given managerial activity.
What is the difference between monitoring and meddling?
Monitoring is checking to make sure an activity is proceeding in line with expectations, while meddling involves giving unnecessarily detailed instructions or assuming command of the situation.
What are the three modes of control?
Free-market forces, contractual obligations, and cultural values.
What is Task-Relevant Maturity (TRM)?
A combination of the degree of their achievement orientation and readiness to take responsibility, as well as their education, training, and experience.
What are the 3 L’s of delivering a performance review?
Level, Listen, and Leave yourself out.
What is the fundamental purpose of a performance review?
To improve the subordinate’s performance.
Why is training the boss’s job?
Training is a high-leverage activity that should be done by the manager to ensure that the subordinate has the necessary skills and knowledge to do their job well.