High Output Management by Andrew Grove

Foreword

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

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.

Part I: The Breakfast Factory

Because each alternative costs money, your task is to find the most cost-effective way to deploy your resources—the key to optimizing all types of productive work. Bear in mind that 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.

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.

The first rule is that a measurement—any measurement—is better than none. But 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).

In short, reject before investing further value.

Thus, one way to increase productivity is to do whatever we are now doing, but faster.

Part II: Management is a Team Game

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

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“neighboring” organizations is enormous.

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.

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.

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.

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

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.

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.

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.

Similarly, if a manager has a number of reports to read or a number of performance reviews to approve, he should set aside a block of time and do a batch of them together, one after the other, to maximize the use of the mental set-up time needed for the task.

A factory, on the other hand, is usually run by forecast and not by individual order. From my experience a large portion of managerial work can be forecasted. Accordingly, forecasting those things you can and setting yourself up to do them is only common sense and an important way to minimize the feeling and the reality of fragmentation experienced in managerial work. Forecasting and planning your time around key events are literally like running an efficient factory.

You should say“no” at the outset to work beyond your capacity to handle. It is important to say“no” earlier rather than later because we’ve learned that to wait until something reaches a higher value stage and then abort due to lack of capacity means losing more money and time.

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.

So as a rule of thumb, if a manager is both a hierarchical supervisor and a supplier of know-how, he should try to have a total of six to eight subordinates or their equivalent.

Earlier we said that a big part of a middle manager’s work is to supply information and know-how, and to impart a sense of the preferred method of handling things to the groups under his control and influence. A manager also makes and helps to make decisions. Both kinds of basic managerial tasks can only occur during face-to-face encounters, and therefore only during meetings.

In my own case, I get a much better understanding of an issue with which I am not familiar by listening to two people with opposing views discuss it than I do by listening to one side only.

What should be discussed at a staff meeting? Anything that affects more than two of the people present. If the meeting degenerates into a conversation between two people working on a problem affecting only them, the supervisor should break it off and move on to something else that will include more of the staff, while suggesting that the two continue their exchange later.

The figure opposite shows that the supervisor’s most important roles are being a meeting’s moderator and facilitator, and controller of its pace and thrust.

All it produces is bad decisions, because if knowledgeable people withhold opinions, whatever is decided will be based on information and insight less complete than it could have been otherwise.

As a manager, you should remind yourself that each time an insight or fact is withheld and an appropriate question is suppressed, the decision-making process is less good than it might have been.

What do I have to do today to solve—or better, avoid—tomorrow’s problem?

At Intel, we put ourselves through an annual strategic long-range planning effort in which we examine our future five years off. But what is really being influenced here? It is the next year—and only the next year. We will have another chance to replan the second of the five years in the next year’s long-range planning meeting, when that year will become the first year of the five. So, keep in mind that you implement only that portion of a plan that lies within the time window between now and the next time you go through the exercise.

Finally, remember that by saying“yes”—to projects, a course of action, or whatever—you are implicitly saying“no” to something else. Each time you make a commitment, you forfeit your chance to commit to something else.

The relationship between Isabella’s and Columbus’ objectives is clear. The Queen wanted to increase her nation’s wealth, while Columbus wanted to find a safe trade route to the Orient. And we see a nesting hierarchy of objectives: if the subordinate’s objectives are met, the supervisor’s will be as well.

Did Columbus perform well even though he failed by strict MBO terms? He did discover the New World, and that was a source of incalculable wealth for Spain. So it is entirely possible for a subordinate to perform well and be rated well even though he missed his specified objective. The MBO system is meant to pace a person—to put a stopwatch in his own hand so he can gauge his own performance. It is not a legal document upon which to base a performance review, but should be just one input used to determine how well an individual is doing. If the supervisor mechanically relies on the MBO system to evaluate his subordinate’s performance, or if the subordinate uses it rigidly and forgoes taking advantage of an emerging opportunity because it was not a specified objective or key result, then both are behaving in a petty and unprofessional fashion.

Part III: Team of Teams

But the business of any business is to respond to the demands and needs of its environment, and the need to be responsive is so important that it always leads to much of any organization being grouped in mission-oriented units.

Consequently, the controller for a business unit should report to someone in both the functional and the mission-oriented organizations, with the type of supervision reflecting the varying needs of the two. The divisional general manager gives the controller mission-oriented priorities by asking him to work on specific business problems. The finance manager makes sure that the controller is trained to do his work in a technically proficient manner, supervises and monitors his technical performance, and looks after his career inside finance, promoting him, perhaps, to the position of controller of a bigger, more complex division if he performs well. Again, as shown opposite, this is dual reporting, the management principle that enables the hybrid organization form to work.

Similarly, our behavior in a work environment can be controlled by three invisible and pervasive means. These are: • free-market forces • contractual obligations • cultural values

Part IV: The Players

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.

Output will tend to be greater when everybody strives for a level of achievement beyond his immediate grasp, even though trying means failure half the time. Such goal-setting is extremely important if what you want is peak performance from yourself and your subordinates.

Let’s consider an army encampment where nothing ever happens. The sergeant in command has come to know each of his soldiers very well, and by and large maintains an informal relationship with them. The routines are so well established that he rarely has to tell anyone what to do; appropriate to the high TRM of the group, the sergeant contents himself with merely monitoring their activity. One day a jeepload of the enemy suddenly appears, coming over the hill and shooting at the camp. Instantly the sergeant reverts to a structured, task-oriented leadership style, barking orders at everyone, telling each of his soldiers what to do, when, and how…. After a while, if these skirmishes continue and the group keeps on fighting from the same place for a couple of months, this too will eventually become routine. With that, the TRM of the group for the new task—fighting—will increase. The sergeant can then gradually ease off telling everybody what to do.

the review will influence a subordinate’s performance—positively or negatively—for a long time, which makes the appraisal one of the manager’s highest-leverage activities. In short, the review is an extremely powerful mechanism, and it is little wonder that opinions and feelings about it are strong and diverse.

Anybody who supervises professionals, therefore, walks a tightrope: he needs to be objective, but must not be afraid of using his judgment, even though judgment is by definition subjective.

To make an assessment less difficult, a supervisor should clarify in his own mind in advance what it is that he expects from a subordinate and then attempt to judge whether he performed to expectations. The biggest problem with most reviews is that we don’t usually define what it is we want from our subordinates, and, as noted earlier, if we don’t know what we want, we are surely not going to get it.

A similar kind of trade-off also has to be considered here: weighing long-term-oriented against short-term-oriented performance. An engineer working on the design of a product needs to complete the project on a strict schedule to generate revenue. He may also be working on a design method that will make it easier for others to design similar products in the future. The engineer obviously needs both activities evaluated and reviewed. Which is more significant? A way to help weigh questions like this is the idea of“present value” used in finance: how much will the future-oriented activity pay back over time? And how much is that worth today?

Finally, as you review a manager, should you be judging his performance or the performance of the group under his supervision? You should be doing both. Ultimately what you are after is the performance of the group, but the manager is there to add value in some way. You need to determine what that is. You must ask: Is he doing anything with his group? Is he hiring new people? Is he training the people he has, and doing other things that are likely to improve the output of the team in the future? The most difficult issues in determining a professional’s performance will be based on asking questions and making judgments of this sort.

the performance rating of a manager cannot be higher than the one we would accord to his organization! It is very important to assess actual performance, not appearances; real output, not good form. Had the manager been given a high rating, Intel would have signaled to all at the company that to do well, you must“act” like a good manager, talk like one, and emulate one—but you don’t need to perform like one.

The old saying has it that when we promote our best salesman and make him a manager, we ruin a good salesman and get a bad manager. But if we think about it, we see we have no choice but to promote the good salesman. Should our worst salesman get the job? When we promote our best, we are saying to our subordinates that performance is what counts.

The purpose of the review is not to cleanse your system of all the truths you may have observed about your subordinate, but to improve his performance.

I feel very strongly that any outcome that includes a commitment to action is acceptable. Complex issues do not lend themselves easily to universal agreement. If your subordinate says he’s committed to change things, you have to assume he’s sincere. The key word here is acceptable.

Don’t confuse emotional comfort with operational need. To make things work, people do not need to side with you; you only need them to commit themselves to pursue a course of action that has been decided upon. There seems to be something not quite nice about expecting a person to walk down a path he’d rather not be on. But on the job we are after a person’s performance, not our psychological comfort.

“This is what I, as your boss, am instructing you to do. I understand that you do not see it my way. You may be right or I may be right. But I am not only empowered, I am required by the organization for which we both work to give you instructions, and this is what I want you to do…”

If supervisors permit themselves to be prompted in one way or another, their leadership and their capacity for it will begin to appear false. So the integrity of the supervisors’ judgment here must be preserved at all costs, and they must commit themselves through an up-front judgment of their subordinates’ performance if the health and vitality of the review process are to be maintained.

The point is, he is not your leader; you are his. And under no circumstances should you pretend that you and your subordinates are equal during performance reviews.

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.

When you ask a question, a garrulous or nervous person might go on and on with his answer long after you’ve lost interest. 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. So when things go off the track, get them back on quickly. Apologize if you like, and say,“I would like to change the subject to X, Y, or Z.” The interview is yours to control, and if you don’t, you have only yourself to blame.

He might go on to say that you’re only doing it now because he forced you into it, his feeling being that“If I stay, you’ll think of me as the blackmailer forever!” You now have to make him feel comfortable with the new arrangement. You might say something like,“You did not blackmail us into doing anything we shouldn’t have done anyway. When you almost quit, you shook us up and made us aware of the error of our ways. We are just doing what we should have done without any of this happening.”

But you must give it your best shot, because the good of the company is involved and the issue is even more important than keeping one valued employee. This subordinate is valuable and important because he has attributes that make him so. Other employees respect him; and if they are like him, they identify with him. So other superior performers like him will track what happens to him, and their morale and commitment to the company will hinge on the outcome of this person’s fate.

In my experience, middle managers are usually paid well enough that money does not have crucial material significance to them, but not well enough that it is without any material significance.

As we have seen, promotions are also readily seen by other members of the organization, and so take on a vitally important role in communicating a value system to the rest of the company. Promotions must be based on performance, because that is the only way to keep the idea of performance highlighted, maintained, and perpetuated.

If we take a person at point B and don’t offer him more work and greater challenges even though he“exceeds the requirements” of Job 1, we are not fully utilizing a human resource of the company. In time, he will atrophy, and his performance will return to a“meets requirements” level and stay there.

Insufficiently trained employees, in spite of their best intentions, produce inefficiencies, excess costs, unhappy customers, and sometimes even dangerous situations. The importance of training rapidly becomes obvious to the manager who runs into these problems.

In my view a manager’s output is the output of his organization—no more, no less. A manager’s own productivity thus depends on eliciting more output from his team.

Training is, quite simply, one of the highest-leverage activities a manager can perform. Consider for a moment the possibility of your putting on a series of four lectures for members of your department. Let’s count on three hours of preparation for each hour of course time—twelve hours of work in total. Say that you have ten students in your class. Next year they will work a total of about twenty thousand hours for your organization. If your training efforts result in a 1 percent improvement in your subordinates’ performance, your company will gain the equivalent of two hundred hours of work as the result of the expenditure of your twelve hours.

For instance, a department that has 10 percent annual turnover and grows 10 percent per year has to teach 20 percent of its staff the basics of their work each year. Training even 20 percent of your employees can be a huge undertaking.

If we want to train all of our staff within a year, the task will be five times as large as the annual task of training the 20 percent who represent new members. Recently I looked at the cost of delivering a new one-day course to our middle-management staff. The cost of the students’ time alone was over one million dollars. Obviously such a task should not be entered into lightly.

Regard the first time you teach the course as a throwaway—it won’t be great, because no matter how hard you try, you’ll have to go through one version that won’t be. Rather than agonize over it, accept the inevitability of the first time being unsatisfactory and consider it the path to a more satisfactory second round. To make sure that your first attempt causes no damage, teach this course to the more knowledgeable of your subordinates, who won’t be confused by it but who will help you perfect the course through interaction and critique.

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