High Output Management - critical summary review

Successful management isn’t easy to achieve. But Grove’s “High Output Management” makes it a lot easier to get there. In this 1983 landmark publication, the former CEO of Intel shares his wisdom on how to manage a company - advice which still retains much of its relevance today. So whether you’re in charge of a large or small business, or you’re striving to become a manager – get ready to learn how to successfully manage your company.

What’s breakfast got to do with Intel?

If you’ve ever worked as a server in a restaurant, you have already received the perfect training to become a manager. Being a server is all about understanding and managing the principles of production.

Imagine you’re in charge of serving a breakfast that includes a three-minute soft-boiled egg. The challenge here is to serve the breakfast at the scheduled time, with great quality and at a low cost. So how do you go about delivering the perfect breakfast?

First, you have to identify the so-called limiting step – the step that determines the overall flow of the operation. In this case, the breakfast item that takes the most consideration is the boiled egg. This is the operation around which you must structure all other steps:  the assembling of the breakfast tray, the toasting of the bread and the pouring of the hot coffee.

Preparing this breakfast essentially summarizes the three fundamental production operations: process manufacturing, assembly, and test. The same principles apply in managing a large company like Intel.

Of course, you are probably going to encounter problems when preparing the ideal breakfast. There could be limited toasters available, or the eggs may have gone bad. Your job as a manager is to try and detect problems at the lowest-value stage, since “all production flows have a basic characteristic: the material becomes more valuable as it moves through the process.” This, in the breakfast factory, would mean checking the eggs upon delivery, to ensure their quality.

Managing the breakfast factory

To effectively manage a company, in this case, your breakfast factory, you need a few production indicators - the measurements to determine the output of your company. In this case, this refers to the number of breakfasts delivered, the profits you make and the satisfaction of the customers.

To do so, you could use five good indicators: sales forecast, inventory, equipment, manpower, and quality. These should be checked every morning to spot and correct any potential problems that might occur. How many breakfasts are likely to be sold today? How many eggs (or slices of toast, or pounds of coffee) are available? Is the toaster broken? Have any servers called in sick? Finally, to check the quality, you could set up a customer complaint log and check this at the beginning of the workday.

To be most effective, start pairing the indicators. For example, you could check off the inventory levels against the sales forecast to make sure you’ve always got enough raw materials to deliver the requested amounts of breakfasts. Good indicators measure physical, countable things. This allows for objective measurements and makes it easier for your employees to know what their objectives are.

What makes a good manager?

Now that you know the basics of production and how to run your own company, you must learn to effectively manage your employees. First of all, it’s important to recognize that any product you create is a team effort. 

Any kind of business – be it in sports, in government, or in medicine – is always the result of teamwork: “The output of a manager is a result achieved by a group either under her supervision or under her influence.” The job of the manager is to increase her output, meaning to increase the output of her team.

One of the main jobs of managers is to acquire information. To receive information, it is necessary to talk to your employees, and to do it often. These days, the quick acquisition of information that transcends company levels has been enormously simplified by email correspondence. Even a quick chat at the coffee maker can give you all the information you need in a timely manner.

Still, written reports are also important. Mainly because they are more precise than any verbal report, and additionally because they force the writer to think about trouble spots and enforce self-discipline. As a manager, aim for a healthy mix of both written and verbal reports.

Apart from gathering information, it is also your duty to distribute information to your employees. Finally, a manager must also be a role model for the people in his organization. As a manager, it is your duty to lead by example. “Each time a manager imparts his knowledge, skills, or values to a group, his leverage is high, as members of the group will carry what they learn to many others.”

Successful Managing

To successfully coordinate the workings of their teams, managers can apply managerial leverage. These are activities that have some influence on your overall output, meaning the performance of your team.

One way of exercising managerial leverage is through performance reports: you spend a small amount of time to review an individual’s performance, and it can have a potential long-term effect on the overall output of your team. Managerial leverage isn’t always positive though. Quite often, you will find managers who use their authority to meddle with the efforts of their employees. This will ultimately lead to team members having less initiative, as well as a very restricted view of their duties. 

As a manager, you will have to choose the activities which represent high leverage, meaning that they will have the biggest impact on your team’s performance. At Intel for example, this meant paying close attention to customer complaints.

There is no such thing as a perfect management style. It always depends on the circumstances you work in, but there is one way in which you can adjust your managerial style and that is by paying attention to task-relevant maturity (TRM). This describes an employee’s ability to deal with a job, their expertise, as well as their sense of responsibility. 

When their TRM is low, they will need more guidance by the manager in the form of detailed instructions. Similarly, when it is high, they should be given more freedom. Just like bringing up a child, the more experience an employee gathers, the less support they will need. 

Regardless of the TRM, your job as a manager is to  regularly monitor your employees closely enough to avoid surprises.

Planning and decision making

A manager is also in charge of decision-making, which makes the collection of information all the more important. Especially in modern information-based businesses, there are two types of managers: the know-how manager, (someone who influences through the amount of knowledge and expertise she has), and the actual manager, (who officially holds a managing position.)

Hence, decision-making at information-based companies such as Intel must be encouraged through free discussion of the problem. This should happen without reservation or judgement. The next step is making a clear decision, even when it is controversial. Decisions should be reached at the level of lowest competence, as these are the people closest to the problem. And finally, the decision should be reached with the full support of the group, meaning everyone is willing to back it.

The two basic managerial tasks of gathering and distributing information, and making decisions, depend on communication. That’s why meetings are one of the most important tools you have in your work as a manager. You might consider them the curse of your existence, but try and use the time allocated to meetings as efficiently as possible. 

Intel’s success largely relies on the regular one-on-one meetings between supervisors and subordinates. These offer opportunities for  mutual teaching and an open exchange of information. When the author started supervising engineering and manufacturing at Intel, he used scheduled one-on-one meetings to learn about memory design and manufacturing from two of his associates.

Along with all the other important duties, a manager must also plan for the future of the company. Especially in today’s ever-changing economy defined by a global free market, it is important that future plans are not fixed, but rather help the company to steer through troublesome waters and react to sudden changes in the industry.

Motivating your team

Your team will only ever perform as well as the individuals on it. One of the most crucial tasks of a manager is to motivate their team, and in doing so, their job becomes remarkably similar to that of a sports coach.

First, you should never take personal credit for the success of your team. This builds trust. Second, you must be tough and critical to get your team to deliver at peak performance. And finally, a good manager has expertise in the field and understands the work he is coordinating.

When someone does not perform as well as they should, it is either because they don’t have the skill or because they are not motivated. To find out which of the two it is, simply ask, “Would they be able to perform the task if their lives depended on it?” If the answer is “yes,” then the problem lies in motivation.

Motivation always has to come from within, so the choices you have to encourage motivation as a manager are limited: you have to create an environment in which motivated people can flourish.

To create such an environment, you need to recognize the needs of your workers. Abraham Maslow, in his theory of motivation, created a pyramid of a hierarchy of needs with self-actualization at the top, and physiological needs, such as food and clothes, at the bottom. Once a need is satisfied, we move on to the next-higher level of needs.

Hence, financial rewards only work to a certain level. Once you have achieved a comfortable standard of life, earning more or less will make little difference in your motivation to work.

As a manager, you have to find out what the needs of your employees are and how to satisfy those. A strong motivator for most people is competition – a desire to succeed over others. 

For example, in order to increase cleanliness at some of the Intel buildings, a competitive system between the buildings was introduced. Buildings would be graded on their standards of cleanliness, and this immediately resulted in improved maintenance conditions in all Intel buildings.

Final Notes

    A successful manager is familiar with the steps in the production process, gathers and distributes information and motivates his team. Good management output consists of the efforts of the team.

Ben Horowitz, in the foreword to the 2015 edition, describes Grove’s publication as a work of almost legendary status. Written by the successful CEO of Intel with first-hand insights into the techniques of being a successful manager, made this work a treasure trove for all the best managers at the time. And it retains much of that value for managers to this day!

12min Tip

    Try and learn from your employees as much as they learn from you.