High Output Management

by Andrew S. Grove

The consequence of all this is very simple. 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. There are a lot of them, and many of them are very hungry.

The output of a manager is the output of the organizational units under his or her supervision or influence. The question then becomes, what can managers do to increase the output of their teams?

the concept of managerial leverage, which measures the impact of what managers do to increase the output of their teams. High managerial productivity, I argue, depends largely on choosing to perform tasks that possess high leverage.

A team will perform well only if peak performance is elicited from the individuals in it.

One of the fundamental tenets of Intel’s managerial philosophy is the one-on-one meeting between a supervisor and a subordinate. Its main purposes are mutual education and the exchange of information.

you have to accept that no matter where you work, you are not an employee—you are in a business with one employee: yourself.

you may be tempted to look around your workplace and point to your fellow workers as rivals, but they are not. They are outnumbered—a thousand to one, one hundred thousand to one, a million to one—by people who work for organizations that compete with your firm.

if you want to work and continue to work, you must continually dedicate yourself to retaining your individual competitive advantage.

Are you adding real value or merely passing information along? How do you add more value? By continually looking for ways to make things truly better in your department. You are a manager. The central thought of my book is that the output of a manager is the output of his organization. In principle, every hour of your day should be spent increasing the output or the value of the output of the people whom you’re responsible for.

Are you plugged into what’s happening around you? And that includes what’s happening inside your company as well as inside your industry as a whole. Or do you wait for a supervisor or others to interpret whatever is happening? Are you a node connected to a network of plugged-in people or are you floating by yourself?

Are you trying new ideas, new techniques, and new technologies, and I mean personally trying them, not just reading about them? Or are you waiting for others to figure out how they can re-en...

The key to survival is to learn to add more value—and that ultimately is what this book is about.

A manager’s output = the output of his organization + the output of the neighboring organizations under his influence.

A manager’s skills and knowledge are only valuable if she uses them to get more leverage from her people.

you know more about our product’s viral loop than anyone in the company? That’s worth exactly nothing unless you can effectively transfer that knowledge to the rest of the organization. That’s what being a manager is about. It’s not about how smart you are or how well you know your business; it’s about how that translates to the team’s performance and output.

“When a person is not doing his job, there can only be two reasons for it. The person either can’t do it or won’t do it; he is either not capable or not motivated.” This insight enables a manager to dramatically focus her efforts. All you can do to improve the output of an employee is motivate and train. There is nothing else.

“I have seen far too many people who upon recognizing today’s gap try very hard to determine what decision has to be made to close it. But today’s gap represents a failure of planning sometime in the past.”

energy put in early in the process pays off tenfold and energy put in at the end of the program pays off negative tenfold.

one-on-one is not only a fundamental element in the manager/employee relationship, but perhaps the best source for organizational knowledge that a manager can get.

managers who don’t have one-on-ones understand very little about what’s happening in their organizations.

Everyone must decide for himself what is professional and appropriate here. A test might be to imagine yourself delivering a tough performance review to your friend. Do you cringe at the thought? If so, don’t make friends at work.

there are only two ways in which a manager can impact an employee’s output: motivation and training. If you are not training, then you are basically neglecting half the job.

breakfast. In the making of it, we find present the three fundamental types of production operations: process manufacturing, an activity that physically or chemically changes material just as boiling changes an egg; assembly, in which components are put together to constitute a new entity just as the egg, the toast, and the coffee together make a breakfast; and test, which subjects the components or the total to an examination of its characteristics.

alternatives do exist: equipment capacity, manpower, and inventory can be traded off against each other and then balanced against delivery time.

in this and in other such situations there is a right answer, the one that can give you the best delivery time and product quality at the lowest possible cost. To find that right answer, you must develop a clear understanding of the trade-offs between the various factors—manpower, capacity, and inventory—and you must reduce the understanding to a quantifiable set of relationships.

The point is that whenever possible, you should choose in-process tests over those that destroy product.

All production flows have a basic characteristic: the material becomes more valuable as it moves through the process.

A common rule we should always try to heed is to detect and fix any problem in a production process at the lowest-value stage possible.

If we make some reasoned assumptions about the percentages that move forward at each stage and the costs associated with each, we arrive at some striking conclusions. If we compile the cost of the effort that goes into securing a conviction and assign it only to those criminals who actually end up in jail, we find that the cost of a single conviction works out to be well over a million dollars—an absolutely staggering sum.

Not to jail a criminal in whom society has invested over a million dollars for lack of an $80,000 jail cell clearly misuses society’s total investment in the criminal justice system. And this happens because we permit the wrong step (the availability of jail cells) to limit the overall process.

First, you’ll want to know your sales forecast for the day.

next key indicator is raw material inventory.

What is it for Software Engineering? Coffee and food? :)

condition of your equipment.

For SE the equipment is the brain and the hardware. Looks to me that hardware is rarely a problem.

manpower.

quality indicator.

All these indicators measure factors essential to running your factory. If you look at them early every day, you will often be able to do something to correct a potential problem before it becomes a real one during the course of the day.

because indicators direct one’s activities, you should guard against overreacting. This you can do by pairing indicators, so that together both effect and counter-effect are measured. Thus, in the inventory example, you need to monitor both inventory levels and the incidence of shortages. A rise in the latter will obviously lead you to do things to keep inventories from becoming too low.

a genuinely effective indicator will cover the output of the work unit and not simply the activity involved. Obviously, you measure a salesman by the orders he gets (output), not by the calls he makes (activity).

measure by which various administrative groups performing the same function in different organizations can be compared with each other.

if indicators are put in place, the competitive spirit engendered frequently has an electrifying effect on the motivation each group brings to its work, along with a parallel improvement in performance.

Leading indicators give you one way to look inside the black box by showing you in advance what the future might look like. And because they give you time to take corrective action, they make it possible for you to avoid problems. Of course, for leading indicators to do you any good, you must believe in their validity.

the indicators you choose should be credible, so that you will, in fact, act whenever they flash warning signals.

Also valuable are trend indicators. These show output (breakfasts delivered, software modules completed, vouchers processed) measured against time (performance this month versus performance over a series of previous months), and also against some standard or expected level.

Another sound way to anticipate the future is through the use of the stagger chart,

important, the improvement or deterioration of the forecasted outlook from one month to the next provides the most valuable indicator of business trends that I have ever seen. I would go as far as to say that it’s too bad that all economists and investment advisers aren’t obliged to display their forecasts in a stagger chart form.

Finally, indicators can be a big help in solving all types of problems. If something goes wrong, you will have a bank of information that readily shows all the parameters of your operation, allowing you to scan them for unhealthy departures from the norm. If you do not systematically collect and maintain an archive of indicators, you will have to do an awful lot of quick research to get the information you need, and by the time you have it, the problem is likely to have gotten worse.

you will have to build to forecast, which is a contemplation of future orders.

“building” to forecast is a very common business practice.

A manufacturing flow must occur in which the raw material moves through various production steps and finally enters the finished goods warehouse, as illustrated below. Simultaneously, a salesman finds a prospect and sells to that prospect, who eventually places an order with the manufacturer. Ideally, the order for the product and the product itself should arrive on the shipping dock at the same time.

What works better is to ask both the manufacturing and the sales departments to prepare a forecast, so that people are responsible for performing against their own predictions.