High Output Management

by Andrew S. Grove

The point is, the clichés of globalization and the information revolution have real meaning—potentially deadly meaning—for your career. The sad news is, nobody owes you a career. You own it as a sole proprietor. You must compete with millions of individuals every day, and every day you must enhance your value, hone your competitive advantage, learn, adapt, get out of the way, move from job to job, even from industry to industry if you must and retrench if you need to do so in order to start again. The key task is to manage your career so that you do not become a casualty.

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.

Let’s say that as manager of the breakfast factory, you will work with five indicators to meet your production goals on a daily basis. Which five would they be? Put another way, which five pieces of information would you want to look at each day, immediately upon arriving at your office?

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. If, for example, you start measuring your inventory levels carefully, you are likely to take action to drive your inventory levels down, which is good up to a point. But your inventories could become so lean that you can’t react to changes in demand without creating shortages. So 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.

To assure that the quality of our product will in fact be acceptable, all production flows, whether they “make” breakfasts, college graduates, or software modules, must possess inspection points. 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.

when a manager digs deeply into a specific activity under his jurisdiction, he’s applying the principle of variable inspection. If the manager examined everything his various subordinates did, he would be meddling, which for the most part would be a waste of his time. Even worse, his subordinates would become accustomed to not being responsible for their own work, knowing full well that their supervisor will check everything out closely. The principle of variable inspection applied to managerial work nicely skirts both problems, and, as we shall see, gives us an important tool for improving managerial productivity.

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

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 are more a medium of self-discipline than a way to communicate information. Writing the report is important; reading it often is not.

It’s obvious that your decision-making depends finally on how well you comprehend the facts and issues facing your business. This is why information-gathering is so important in a manager’s life. Other activities—conveying information, making decisions, and being a role model for your subordinates—are all governed by the base of information that you, the manager, have about the tasks, the issues, the needs, and the problems facing your organization. In short, information-gathering is the basis of all other managerial work, which is why I choose to spend so much of my day doing it.

How you handle your own time is, in my view, the single most important aspect of being a role model and leader.

Leverage can also be negative. Some managerial activities can reduce the output of an organization. I mean something very simple. Suppose I am a key participant at a meeting and I arrive unprepared. Not only do I waste the time of the people attending the meeting because of my lack of preparation—a direct cost of my carelessness—but I deprive the other participants of the opportunity to use that time to do something else.

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.

Given a choice, should you delegate activities that are familiar to you or those that aren’t? Before answering, consider the following principle: 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 the results of delegation resembles the monitoring used in quality assurance. 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. A second principle applies to the frequency with which you check your subordinates’ work. A variable approach should be employed, using different sampling schemes with various subordinates; you should increase or decrease your frequency depending on whether your subordinate is performing a newly delegated task or one that he has experience handling. How often you monitor should not be based on what you believe your subordinate can do in general, but on his experience with a specific task and his prior performance with it—his task-relevant maturity,

As a rule of thumb, a manager whose work is largely supervisory should have six to eight subordinates; three or four are too few and ten are too many. This range comes from a guideline that a manager should allocate about a half day per week to each of his subordinates. (Two days a week per subordinate would probably lead to meddling; an hour a week does not provide enough opportunity for monitoring.)

To digress a bit, I also think that one-on-ones at home can help family life. As the father of two teenage daughters, I have found that the conversation in such a time together is very different in tone and kind from what we say to each other in other circumstances. The one-on-one makes each of us take the other seriously and allows subtle and complicated matters to come up for discussion. Obviously, no notes are taken, as father and daughter usually go out for dinner at a restaurant, but a family one-on-one very much resembles a business one-on-one. I strongly recommend both practices.

An estimate of the dollar cost of a manager’s time, including overhead, is about $100 per hour. So a meeting involving ten managers for two hours costs the company $2,000. Most expenditures of $2,000 have to be approved in advance by senior people—like buying a copying machine or making a transatlantic trip—yet a manager can call a meeting and commit $2,000 worth of managerial resources at a whim.

Keep in mind that a meeting called to make a specific decision is hard to keep moving if more than six or seven people attend. Eight people should be the absolute cutoff. Decision-making is not a spectator sport, because onlookers get in the way of what needs to be done.

Once the meeting is over, the chairman must nail down exactly what happened by sending out minutes that summarize the discussion that occurred, the decision made, and the actions to be taken. And it’s very important that attendees get the minutes quickly, before they forget what happened. The minutes should also be as clear and as specific as possible, telling the reader what is to be done, who is to do it, and when.

Much confusion exists between what is strategy and what is tactics. Although the distinction is rarely of practical significance, here’s one that might be useful. As you formulate in words what you plan to do, the most abstract and general summary of those actions meaningful to you is your strategy. What you’ll do to implement the strategy is your tactics.

Who should be involved in the planning process? The operating management of the organization. Why? Because the idea that planners can be people apart from those implementing the plan simply does not work. Planning cannot be made a separate career but is instead a key managerial activity, one with enormous leverage through its impact on the future performance of an organization.

We must realize—and act on the realization—that if we try to focus on everything, we focus on nothing.

The single most important task of a manager is to elicit peak performance from his subordinates. So if two things limit high output, a manager has two ways to tackle the issue: through training and motivation.

Money in the physiological- and security-driven modes only motivates until the need is satisfied, but money as a measure of achievement will motivate without limit.

A simple test can be used to determine where someone is in the motivational hierarchy. If the absolute sum of a raise in salary an individual receives is important to him, he is working mostly within the physiological or safety modes. If, however, what matters to him is how his raise stacks up against what other people got, he is motivated by esteem/recognition or self-actualization, because in this case money is clearly a measure.

Our society respects someone’s throwing himself into sports, but anybody who works very long hours is regarded as sick, a workaholic. So the prejudices of the majority say that sports are good and fun, but work is drudgery, a necessary evil, and in no way a source of pleasure.

In my experience, the best thing to do is to give your subordinate the written review sometime before the face-to-face discussion. He can then read the whole thing privately and digest it. He can react or overreact and then look at the “messages” again. By the time the two of you get together, he will be much more prepared, both emotionally and rationally.

Most of us will sit and listen until the end out of courtesy. Instead, you should interrupt and stop him, because if you don’t, you are wasting your only asset—the interview time, in which you have to get as much information and insight as possible.

If the absolute amount of a raise in salary is important, that person is probably motivated by physiological or safety/security needs. If the relative amount of a raise—what he got compared to others—is the important issue, that person is likely to be motivated by self-actualization, because money here is a measure, not a necessity.