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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