Paperback | 243 pp. | Vintage Books | 01/01/1995 | 2nd Edition
High Output Management has been for long considered a kind of a “Bible” for Management, which is probably why I resisted reading it for so long. Written by Andrew Grove, former chairman and CEO of Intel, it is a book dense of concepts (contrary to many management books that instead tend to sell only a straightforward idea, repeating it several times). All in all, a refreshing reading, mainly because it focuses on Management rather than the omnipresent Leadership buzzword. Probably because it is a book written by an engineer for engineers, the book is thoroughly pragmatic to the core. Which maybe is also its only limit: against the background, there’s the constant metaphor of the “well-oiled machine” of the mechanical organisation.
First published back in 1983, the book applies production principles to Management. Many of these principles resonate well today also because the concepts of productions have now been enlarged, thanks to Agile principles, in many reviewed or entirely new roles, which is probably why the book has become legendary in Silicon Valley. It’s a crash course for middle managers. I read the second edition that appeared in 1995, the same one that has the beautiful foreword by Ben Horowitz.
Ultimately, the power of High Output Management is that it creates experts rather than merely competent managers.Ben Horowitz, Foreword to High Output Management, 1995 ed.
Grove himself summarises perfectly the content of the book in the introduction, mentioning three key themes that he explores in the book.
The first is an output-oriented approach to management. That is to say, we apply some of the principles and the discipline of the most output-oriented of endeavors – manufacturing – to other forms of business enterprise, including most emphatically the work of managers.
The second idea is that the work of a business, of a government bureaucracy, of most forms of human activity, is something pursued not by individuals but by teams. This idea is summed up in what I regard as the single most important sentence of this book: The output of a manager is the output of the organizational units under his or her supervision or influence.
A team will perform well only if peak performance is elicited from the individuals in it. This is the third idea of the book.Andrew Grove, High Output Management, p. 4. Emphasis mine.
The content of the book can be split on several themes, that are then explored in the chapters. Here my quick recap.
Output oriented approach to Management
As I mentioned, the background concept is mechanic, and this is the focus of the first two chapters. Everything is process. Any activity at work or in your private sphere can be modelled as a repeatable production process. A famous example is that of making breakfast. Understanding all of the elements of production (inputs, outputs, quality controls, variability) is therefore essential. He correctly points out the concept of Limiting Step, i.e. the step in the overall shape of the production flow that will determine the overall shape of a company’s operation. In his example of making breakfast, it is the amount of time to boil an egg. As a manager, you need to be fully conscious of what these steps are and start from there to plan your production process. This way, you can create all the “machinery” that is needed to fulfil your organisational goals, by achieving high-quality results in less time with least waste.
In chapter 2, he introduces the concept of Black Box. The black box sorts out what the inputs, the output, and the labor are in the production process. This is how daily operations in an organisation are like, which is why it is essential to Focus on vital, measurable indicators of output, as these allow you to sneak into these processes. It is crucial to select a small number of objective, quantifiable measures of output, with leading and trending indicators, that can be reviewed daily and help continuous improvement. It’s here that he mentions one of its most famous quotes: Activity is not output. Avoid measures of activity, subjective measures and unquantifiable measures. As a manager, your job is to identify, closely monitor and effectively manage the “vital few” indicators of performance over the “compelling many”.
Grove introduces the concept of Leverage. It is through this concept that management operators, as it is through the Leverage that manager dramatically impacts the organisational output. Managers “leverage” their time by spending relatively small amounts to have significant impacts through three activities:
- Information gathering
- Decision Making
- “Nudging” others.
Doing it right means positive high leverage actions: delegation with supervision, training, and influencing processes with unique skills or knowledge. Doing it wrong means negative high leverage actions: delaying decisions, meddling, abdication, and unnecessary interruption.
A manager’s output = The output of his organisation + The output of the neighbouring organisations under his influence
Chapter 4 of High Output Management is very interesting as it relates to the usage of meetings as a way of working. These are considered an essential medium for the work of a manager, as long as these are purposeful and well-executed. Grove identifies different types of meetings:
- Process-oriented meetings are held regularly to process substantive matters in batches, and come in three sub-types:
- one-on-one meetings between one manager and one staff member, are used to exchange information, discuss issues, uncover problems and review essential but not urgent items.
- Staff meetings among a manager and team for structured free discussion, sharing of different points of view, and decision making.
- Operational reviews, where one department presents to others to share information and receive questions and feedback.
- Mission-oriented meetings are instead created ad-hoc to reach a decision. These should be rare (less than 25% of your time).
Decision Making is one of the critical activities for a Manager, and chapter 5 explores this aspect. According to Grove, six questions should frame the decision process:
- What decision is needed?
- By when?
- Who should be consulted?
- Who decides?
- Who ratifies or vetoes?
- Who needs to be informed?
This which seems pretty much a RACI matrix is vital especially as managers rarely take decisions alone, but need to make sure they bring along the right minds to be able to discuss and get a clear decision. Also, what is essential is to ensure that support for the output is achieved even from people that might not agree. Grove then speaks of a vital delegation principle: Decisions should be made at the lowest competent level by someone with both detailed technical understanding and past experiences, both good and bad, from different implementation approaches. When no one has both create a composite opinion from the people available.
In chapter 6 Grove gives a great lesson on planning.
- Step 1 — Establish projected need or demand: What will the environment demand from you, your business, or your organisation?
- Step 2 — Established your present status: What are you producing now? What will you be producing as your projects in the pipeline are completed?
- Step 3 — Compare and reconcile steps 1 and 2: What more (or less) do you need to do to produce what your environment will demand?
This is where he introduces a methodology that we have already encountered: OKRs. To move toward a long term plan, you should use short-term Objectives (sub-goals) and corresponding Key Results (clear, unambiguous milestones to pace progress). Cascade “OKRs” across organisations, so one manager’s key results might make up the objectives of their direct reports, and so on. This way, OKR will be able to provide clarity and alignment. OKR alone, however, does not make the company run on auto-pilot. Managers need to continually put in their judgement to guide constant prioritisation that is required.
Leading a Company
Chapter 7 of High Output Management talks about what happens when Leverage is applied at an entire organisation level. As an organisation grows, speed decreases, while leveraging increases. This seems to be the primary “law” that Grove establishes, seen from an engineering perspective. Complexity grows and with it, the risk of duplications across the organisation. So the typical organisation design dualism of centralisation vs decentralisation becomes for Grove a constant tension between consistency and greater Leverage on one side versus higher speed on the other.
This is also reflected in chapter 8, where he introduces the concept that also functional organisations (that produce centralisation) allow for greater Leverage, but at the cost of increased complexity and delay in managing requests coming from the individual business units. The alternative is to use mission-oriented organisations that are decentralised and purse objectives mostly independent of other parts of the enterprise, trading off Leverage for speed. In his words: Speed is the only benefit to mission-oriented organisations, in all other cases, functional organisations are superior.
Which brings to his view on the Matrix Organisation Model, where individuals would report in both mission-oriented and functional teams, thus increasing both Leverage and speed at the organisational level. While this solution creates complexity, the cost of complexity is outweighed by the benefits of operating in both functional and mission-oriented teams.
The last part of High Output Management is probably the most interesting, as it focuses on the role of managers as “people managers” in guiding their teams. The key focus points here are:
- You need to manage your team by setting clear expectations and cultural values. In a scenario where the VUCA elements (he uses “CUA” as an acronym for Complexity, Uncertainty and Ambiguity…) are low, the team’s performance will be influenced by expectations (often in the form of formal elements such as job descriptions or so). When the VUCA elements are high instead, behaviours will be more influenced by cultural values: not the one written on the wall, but rather those exemplified by the manager.
- Increasing motivation and training are the only ways that managers can improve individual performance. To increase motivation, you need to understand an individual’s highest level needs, whether it’s expanding competence or achievement, and preferred measure, whether compared to others or objective benchmarks. Then, like a coach motivating athletes, you can “shape the field” to create the motivation to grow every individual in the team to the limit of their abilities.
- Management style should be adapted to the maturity level of the employee in terms of task-relevant maturity. If your team member as high task-relevant maturity, you should only be involved in directing that person output. But if you transfer that person in a different role, he will initially have a low task-relevant maturity, which means that you will be more productive by adopting a task-oriented management style (you need to teach him how to perform the tasks). The issue is that for many managers, this is difficult, as they are unable to assess task-relevant maturity.
- Use Performance Reviews in a robust way. This chapter is very detailed and does much good in driving a good performance review process.
- Think of any team member leaving as a manager’s fault. In most cases, the decision of an employee going comes because of unmanaged expectations from both sides, which is why retention should be a key priority.
- Be careful about Overpromotion. Grove is very conscious about the Peter principle and explains that achievers that are promoted, regularly cycle between an “exceed expectations” at their current job level and “meets expectations” in the new job after taking greater responsibility. You need to avoid promoting people too quickly, as this can create “below expectations” issues. If that happens, it is better to prevent persisting, and maybe recycle the individual into another role.
- Training is the primary job of a manager. He describes it as the highest leverage activity a manager can do to increase the output of an organisation. Which is why managers need to invest their own time in training, and not delegate outsiders.
The final chapter delivers a self-assessment, giving a kind of “homework” for the reader on how to apply the ideas in the book. By completing at least 100 points of the total possible 320, you will be a better manager. The concept of measuring output cannot have a better ending than providing a way to measure the output of the book itself.
Conclusion: High Output Management
Despite being almost 40 years old now, High Output Management provides a truly great handbook for any manager. The reasonings in the book are genuinely linear and are so much focused on the execution side, that they make it a recipe for success, at least in a simple to medium complexity contexts. As I mentioned at the beginning, this book is not about leadership, but about excellent Management measured on the output. And is considerably consistent in giving all the necessary tools to achieve that.
The downside of this book is that it interprets the organisation as a simple mechanism. Everything can be reduced to a production process, and we know that this is not the absolute truth. The consistency that this book advocates for is essential, but has its limits. Something that quickly tracked in Grove’s view of the organisation, with its idea of the supremacy of the Matrix model. For sure, this has been a winning model, but today we are also pretty aware of some of its limits. With this warning in our mind, I still find this book to be precious.
If the average manager were really achieving the 100 points of the final assessment, we would have much better companies as a whole.
High Output Management lives to the expectations of its title. It is a book about managing output, and it does it by giving a substantial performance basis. It does not, however, poses questions about the inputs, on how to define them, or how to address the expectations of those that need to receive the outputs. But again, this is not a book on strategy or on leadership. And between these boundaries, it is probably one of the most solid management books I have read.