High Output Management

by Andrew S. Grove

we should deliberately build a reasonable amount of “slack” into the system. And inventory is the most obvious place for it.

Ideally, inventory should be kept at the lowest-value stage, as we’ve learned before, like raw eggs kept at the breakfast factory. Also, the lower the value, the more production flexibility we obtain for a given inventory cost.

By rigorous application of the principles of forecasting, manpower can be reassigned from one area to another, and the headcount made to match the forecasted growth or decline in administrative activity. Without rigor, the staffing of administrative units would always be left at its highest level and, given Parkinson’s famous law, people would find ways to let whatever they’re doing fill the time available for its completion.

To get acceptable quality at the lowest cost, it is vitally important to reject defective material at a stage where its accumulated value is at the lowest possible level.

In short, reject before investing further value.

one should never let substandard material proceed when its defects could cause a complete failure—a reliability problem—for our customer. Simply put, because we can never assess the consequences of an unreliable product, we can’t make compromises when it comes to reliability.

one should approach the need to inspect recognizing that a balance exists between the desired result of the inspection, improved quality, and minimum disturbance to the production process itself.

for the same money we can do a lot more monitoring than gate-type inspections; if we do the former, we may well contribute more to the overall quality of the product than if we choose less frequent gate-like inspections.

As a rule of thumb, we should lean toward monitoring when experience shows we are not likely to encounter big problems.

The productivity of any function occurring within it is the output divided by the labor required to generate the output.

the concept of leverage, which is the output generated by a specific type of work activity.

An activity with high leverage will generate a high level of output; an activity with low leverage, a low level of output.

Automation is certainly one way to improve the leverage of all types of work.

work simplification. To get leverage this way, you first need to create a flow chart of the production process as it exists.

Typically, you will find that many steps exist in your work flow for no good reason. Often they are there by tradition or because formal procedure ordains it, and nothing practical requires their inclusion.

the application of the principle to improve the productivity of the “soft professions”—the administrative, professional, and managerial workplace—is new and slow to take hold. The major problem to be overcome is defining what the output of such work is or should be.

A manager can do his “own” job, his individual work, and do it well, but that does not constitute his output.

If the manager has a group of people reporting to him or a circle of people influenced by him, the manager’s output must be measured by the output created by his subordinates and associates.

If the manager is a knowledge specialist, a know-how manager, his potential for influencing “neighbori...

Thus, the definition of “manager” should be broadened: individual contributors who gather and disseminate know-how and information should also be seen as middle managers, because they exert great power within the organization.

the key definition here is that the output of a manager is a result achieved by a group either under her supervision or under her influence.

By analogy, a coach or a quarterback alone does not score touchdowns and win games. Entire teams with their participation and guidance and direction do.

output and activity are by no means the same thing.

My day always ends when I’m tired and ready to go home, not when I’m done. I am never done.

A manager must keep many balls in the air at the same time and shift his energy and attention to activities that will most increase the output of his organization. In other words, he should move to the point where his leverage will be the greatest.

reports also have another totally different function. As they are formulated and written, the author is forced to be more precise than he might be verbally. Hence their value stems from the discipline and the thinking the writer is forced to impose upon himself as he identifies and deals with trouble spots in his presentation. Reports are more a medium of self-discipline than a way to communicate information. Writing the report is important; reading it often is not.

As we will see later, the preparation of an annual plan is in itself the end, not the resulting bound volume. Similarly, our capital authorization process itself is important, not the authorization itself. To prepare and justify a capital spending request, people go through a lot of soul-searching analysis and juggling, and it is this mental exercise that is valuable. The formal authorization is useful only because it enforces the discipline of the process.

we ask our managers to participate in “Mr. Clean” inspections, in which they go to a part of the company that they normally wouldn’t visit. The managers examine the housekeeping, the arrangement of things, the labs, and the safety equipment, and in so doing spend an hour or so browsing around and getting acquainted with things firsthand.

a shared corporate culture becomes indispensable to a business. Someone adhering to the values of a corporate culture—an intelligent corporate citizen—will behave in consistent fashion under similar conditions, which means that managers don’t have to suffer the inefficiencies engendered by formal rules, procedures, and regulations that are sometimes used to get the same result.

you may be advocating a preferred course of action, but you are not issuing an instruction or a command. Yet you’re doing something stronger than merely conveying information. Let’s call it “nudging” because through it you nudge an individual or a meeting in the direction you would like. This is an immensely important managerial activity in which we engage all the time, and it should be carefully distinguished from decision-making that results in firm, clear directives.

something more subtle pervades the day of all managers. While we move about, doing what we regard as our jobs, we are role models for people in our organization—our subordinates, our peers, and even our supervisors.

Values and behavioral norms are simply not transmitted easily by talk or memo, but are conveyed very effectively by doing and doing visibly.

a supervisor in a company, large or small, who takes his work seriously exemplifies to his associates the most important managerial value of all.

the single most important resource that we allocate from one day to the next is our own time. In principle more money, more manpower, or more capital can always be made available, but our own time is the one absolutely finite resource we each have. Its allocation and use therefore deserve considerable attention. How you handle your own time is, in my view, the single most important aspect of being a role model and leader.

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Before you are horrified by how much time I spend in meetings, answer a question: which of the activities—information-gathering, information-giving, decision-making, nudging, and being a role model—could I have performed outside a meeting? The answer is practically none. Meetings provide an occasion for managerial activities. Getting together with others is not, of course, an activity—it is a medium.

for every activity a manager performs—A1, A2, and so on—the output of the organization should increase by some degree. The extent to which that output is thereby increased is determined by the leverage of that activity—L1, L2, and so on.

Managerial productivity—that is, the output of a manager per unit of time worked—can be increased in three ways: 1. Increasing the rate with which a manager performs his activities, speeding up his work. 2. Increasing the leverage associated with the various managerial activities. 3. Shifting the mix of a manager’s activities from those with lower to those with higher leverage.

HIGH-LEVERAGE ACTIVITIES These can be achieved in three basic ways: • When many people are affected by one manager. • When a person’s activity or behavior over a long period of time is affected by a manager’s brief, well-focused set of words or actions. • When a large group’s work is affected by an individual supplying a unique, key piece of knowledge or information.

Thus to maximize the leverage of his activities, a manager must keep timeliness, which is often critical, firmly in mind.

Leverage often depend on time when activity is done

A manager can also exert high leverage by engaging in an activity that takes him only a short time, but that affects another person’s performance over a long time. A performance review represents a good example of this. With the few hours’ work that a manager spends preparing and delivering the review, he can affect the work of its recipient enormously.

Another example is waffling, when a manager puts off a decision that will affect the work of other people. 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 a whole organization.

Managerial meddling is also an example of negative leverage. This occurs when a supervisor uses his superior knowledge and experience of a subordinate’s responsibilities to assume command of a situation rather than letting the subordinate work things through himself.

The negative leverage produced comes from the fact that after being exposed to many such instances, the subordinate will begin to take a much more restricted view of what is expected of him, showing less initiative in solving his own problems and referring them instead to his supervisor.

The third kind of managerial activity with high leverage is exercised by a person with unique skills and knowledge.

The person who comprehends the critical facts or has the critical insights—the “knowledge specialist” or the “know-how manager”—has tremendous authority and influence on the work of others, and therefore very high leverage.

The art of management lies in the capacity to select from the many activities of seemingly comparable significance the one or two or three that provide leverage well beyond the others and concentrate on them. For me, paying close attention to customer complaints constitutes a high-leverage activity.

We all have some things that we don’t really want to delegate simply because we like doing them and would rather not let go.

be sure to know exactly what you’re doing, and avoid the charade of insincere delegation, which can produce immense negative managerial leverage.

delegation without follow-through is abdication. You can never wash your hands of a task. Even after you delegate it, you are still responsible for its accomplishment, and monitoring the delegated task is the only practical way for you to ensure a result. Monitoring is not meddling, but means checking to make sure an activity is proceeding in line with expectations. Because it is easier to monitor something with which you are familiar, if you have a choice you should delegate those activities you know best.

We should apply quality assurance principles and monitor at the lowest-added-value stage of the process. For example, review rough drafts of reports that you have delegated; don’t wait until your subordinates have spent time polishing them into final form before you find out that you have a basic problem with the contents.