Andrew S.Grove, former Chairman and CEO of Intel, packs an amazing amount of managerial wisdom into this slim book. From the three-minute egg analogy to explain the basics of production to the breakfast factory analogy of managing a complex factory he moves on to explaining why management is a team game, how to manage large organisations which are actually a team of teams, how to motivate employees, he delves into each subject with great insight, clarity and wisdom.
Basic Production
He defines the basic requirement of production as - "to build and deliver products in response to customer demand at a scheduled time, with an expected quality and the lowest possible cost." Grove gives the example of serving a 3-minute egg, buttered toast, and coffee in a restaurant. To schedule this seemingly simple activity to customer expectations he says the waiter must know the limiting step in the entire operation (typically the one that takes longest - in this case, the egg) and work around it. The production operation consists of Process Manufacturing (the part that changes material), Assembly (where it is all put together) and Testing for quality.
When Complexity Increases
As complexity increases, management has to find out a cost-effective way of ensuring quality. Quality tests can be done by using a Functional test or an In-process test. The key idea here is that since the product adds value as it goes through the process, it is best that we fix the problem at the lowest-value stage possible.
Indicators and Measurements
To run operations well, managers must find a good set of indicators or measurements to know whether the operations are running as per time, quality and cost. He advises managers to focus each indicator on a specific operational goal. For example - Accounts payable - vouchers processed, Custodial - square feet cleaned, Customer service - sales orders entered, Data entry - transactions processed etc.
Grove asks us to look at the breakfast factory as a black box where there is input from one end, labour influencing the input and the consequence, output. To improve the process, says managers can cut windows to the black box and find leading indicators. Trend indicators and Stagger charts that compare forecasts with actuals help to control.
To control output, Grove advises
- keep inventor at lowest value state
-incoming material inspection
-in process inspection
-outgoing inspection
Key principle - reject defective material at lowest value stage
The manager's dilemma is always how to ensure quality without disturbing the production process too much. Some ways are - Gate like inspection, Monitoring steps and Variable inspection
For example, in the breakfast factory, the manager would be concerned about indicators like - sales forecast, RM inventory, equipment, manpower and quality. He suggests that managers pair indicators so effect and counter-effect are measured. Both quantity and quality must be addressed in the measures. An effective indicator covers the output of the work unit and not the activity involved. The measure should be countable, physical.
Management - A Team Game
Grove says that Leverage is the output generated by specific work-activity. All productivity driven work is generally about work simplification. To simplify work - get a flow chart, show every step of the production process, and then reduce steps. To reduce steps, question why each step is being performed and if it necessary to achieve the present objective.
Grove says that the Managers output = the output of the organisation + the output of neighbouring organisations under its influence.
To be effective, Grove says that among the many things that the manager does, he must move to the point where his leverage will be the greatest.
Information most useful to managers comes from casual conversations. This kind of information is fast and valuable. (Reports can't be done away with because they are a medium of discipline.) Since the manager's decision making depends on how well he comprehends the facts and issues facing the business. That's why information gathering is very important in a manager's life. Conveying information, making decisions and being a role model are all governed by the basis of information.
Grove says managers are role models for people in the organsation. Managers role model values and norms, not by talk and memos, but by doing things visibly.
Managerial leverage
Leverage is the measure of output generated by any given managerial activity. For every activity performed by the manager, the output of the organisation should increase by some degree. Manager's output then is L1xA1 +L2xA2... (L is Leverage, A is Activity). the manager's output is the sum of result of individual activities having varying degrees of leverage.
High leverage activities for managers
- where many people are affected by one manager
- where a person's activity or behavior over a long period of time is affected by a manager's brief, well focussed set of words or actions
- when a large group's work is affected by an individuals supplying important, key information
Manager's can also cause negative leverage by - 1) meddling 2) going into depression when things don't go well and waffling.
Delegation without follow-through is abdication.
To increase management activity, increase the ratio of performing workers. This is done by focusing on time-management. A medium of manager's forecast is his calendar. To gain control, Grove says, the manager must use his calendar as a production planning tool. The manager must take initiative to schedule work that is not time-critical between limiting steps.
Two things are important for time management
- active use of calendar to fill holes between time critical events with non-time critical though necessary activities
- say NO to work beyond your capacity to handle
How big should the team be
How many subs should a manager have? Between 6-8 says Grove. The idea behind that number is that the manager can devote half a day to each sub per week. More than that would be meddling and less would be not monitoring.
In a survey on the problem that was most limiting output he came to know that uncontrolled interruptions was the prime culprit. Grove says standardising responses and batching chores will help deal with this problem.
Meetings
Grove says 50% of an executives time goes in meetings. Drucker feels more than 25% time in meetings is a waste of time.
Grove says that a meeting is a medium through which managerial work is performed.
Meetings are
1) Process-oriented (about knowledge sharing) - these could be one-on-ones (they are primarily the subs meetings where agenda and tone is set by the sub, manager to ask questions, 90 minutes every two weeks), Staff meetings and Operational reviews,
2) Mission-oriented meetings (solve a specific problem) - here the Chairman is required to clearly understand the objective and enforce discipline
Decisions
Decisions are arrived at by free discussions. Once a clear decision is arrived at, the entire team should fully support the decision. The principle - any decision to be worked out and reached at the lowest competent level.
Grove warns against the Peer group syndrome - when a group of peers without a guiding force goes around in circles and do not reach a decision. They are scared of sounding dumb, fear being overruled
Here a senior can force a direction and a decision.
Questions that need to be asked are - what decisions need to be taken, when, who needs to take them, who will ratify/vet, who needs to be informed
Planning
1. Establish projected need
2. Establish present status
3. Compare and reconcile
Do a difference analysis. Your reaction to it is the key outcome of the planning process. Closing the gap is a strategy - what is needed to be done and what can be done.
Planning is essentially this - What do I have to do today to solve tomorrow's problems. Output of the planning process is decisions made and actions taken.
Management By Objectives
1) Where do I want to go
2) How will I pace myself to see if I am getting there
MBO is about focus. So keep focus, keep the number of objectives small
Managing a Team of Teams
Management is mostly about managing a team of teams where individual teams exist in suitable and mutually supportive relationship with each other.
Hybrid organisations - Grove says that organisations are of two types.
Mission-oriented - fully decentralised
Functional - fully centralised
Hybrid orgnisations are a mix of both. No organisation which grows can be one of the two only. Hybrid organisation succeed if the concept of dual reporting can be accepted and practiced. To make Dual Reporting work the individual may be required to voluntarily surrender individual decision making to the group.
Modes of control
Behavior in work environment is controlled by - free market forces, contractual obligations and cultural values.
Culture comes in where the environment changes more rapidly that rules can be made. The interest of the larger group takes precedence. the individual surrenders to the group her ability to protect herself. There is a common set of values, objectives and methods
Most appropriate mode of control
CUA - Complexity, Uncertainty, Ambiguity
Motivation
There are two reasons why a person is not motivated to do work - 1) cannot do or 2) won't do
Grove says one should apply this test - could he do it if his life depends on it? If he can, then he is not motivated. In such cases, Training and Motivation help perform better.
Grove says that an understanding Maslow's hierarchy of needs gives a good insight to motivate people. If people go beyond physiological (survival), security, social, self-esteem and are at the self-actualization level, they need what he says is Task Related Feedback.
People are needs driven. Many times they hold back because of the Fear of failure. Here Grove says we can use the Sports model - the concept of personal best. To get people to bring out their personal best, we must challenge and reward accordingly. The manager becomes the coach with the following attributes - take no personal credit for team success, is tough on the team so he gets the best possible performances, and he also understands the game.
The larger goal - to make them consistent winners
Grove is pretty clear that results are key - not abstract answers.
Task-related Maturity - Dealing with Different Levels of Performances
Grove uses the term Task-Relevant Maturity (TRM) to differentiate between how to handle team members. As a manager, he says it is your job to coach and get them to perform. You cannot delegate and abdicate.
A general rule he gives is as follows -
If TRM is low - give the team member a structured program, tell what, when, how until TRM improves
If TRM is medium - give individual attention, 2-way communication and support
If TRM is high - minimal involvement, set objectives, monitor
Once TRM of the team is high, managerial leverage increases
He warns that a person's TRM is environment specific. Don't expect a good performer in one environment to be at the same TRM in another.
Performance appraisal
Grove says it is the single most important task-relevant feedback. The performance appraisal can be used to improve subs performance - skill, motivation.
The two key aspects of Performance Appraisal are - Assessing and Delivering
Assessment - Define expectations, define output measures, internal measures, time factors if any, added value. Be careful to assess performance, not potential. Also an individual's assessment cannot be higher than the organisation performance
Delivering - Level (be frank), Listen (Watch carefully) and Leave yourself out (it's about the sub).
Be aware that people have a finite capacity to deal with facts. So pick your delivery well - pick key areas.
Be aware that poor performers normally ignore, deny, blame before they assume the responsibility which is where change happens. So be armed with facts and walk them along the way until they assume responsibility
Grove says we should spend more time on stars because they bring exceptional results.
Self-reviews are a good tool.
Training
Grove says it is the boss's job to train. The consequences of insufficient training can be serious. He cites an example of how one employee who was not trained properly caused a million dollar loss in a plant.
Grove says training is one of the highest leverage activities a manager can perform. It should be done from 1st lie to CEO on two areas - 1) train new members on skills to perform 2) teaching new ideas, principles or skills to present members of the organisation.
Conclusion
It's amazing how clear and direct his analysis is and how he sees issues that managers normally get to deal with. His methods are clearly about execution and high results. It is a brilliant handbook that every manager must carry and refer to every now and then. Must-read for those in managerial positions and even entrepreneurs.
Basic Production
He defines the basic requirement of production as - "to build and deliver products in response to customer demand at a scheduled time, with an expected quality and the lowest possible cost." Grove gives the example of serving a 3-minute egg, buttered toast, and coffee in a restaurant. To schedule this seemingly simple activity to customer expectations he says the waiter must know the limiting step in the entire operation (typically the one that takes longest - in this case, the egg) and work around it. The production operation consists of Process Manufacturing (the part that changes material), Assembly (where it is all put together) and Testing for quality.
When Complexity Increases
As complexity increases, management has to find out a cost-effective way of ensuring quality. Quality tests can be done by using a Functional test or an In-process test. The key idea here is that since the product adds value as it goes through the process, it is best that we fix the problem at the lowest-value stage possible.
Indicators and Measurements
To run operations well, managers must find a good set of indicators or measurements to know whether the operations are running as per time, quality and cost. He advises managers to focus each indicator on a specific operational goal. For example - Accounts payable - vouchers processed, Custodial - square feet cleaned, Customer service - sales orders entered, Data entry - transactions processed etc.
Grove asks us to look at the breakfast factory as a black box where there is input from one end, labour influencing the input and the consequence, output. To improve the process, says managers can cut windows to the black box and find leading indicators. Trend indicators and Stagger charts that compare forecasts with actuals help to control.
To control output, Grove advises
- keep inventor at lowest value state
-incoming material inspection
-in process inspection
-outgoing inspection
Key principle - reject defective material at lowest value stage
The manager's dilemma is always how to ensure quality without disturbing the production process too much. Some ways are - Gate like inspection, Monitoring steps and Variable inspection
For example, in the breakfast factory, the manager would be concerned about indicators like - sales forecast, RM inventory, equipment, manpower and quality. He suggests that managers pair indicators so effect and counter-effect are measured. Both quantity and quality must be addressed in the measures. An effective indicator covers the output of the work unit and not the activity involved. The measure should be countable, physical.
Management - A Team Game
Grove says that Leverage is the output generated by specific work-activity. All productivity driven work is generally about work simplification. To simplify work - get a flow chart, show every step of the production process, and then reduce steps. To reduce steps, question why each step is being performed and if it necessary to achieve the present objective.
Grove says that the Managers output = the output of the organisation + the output of neighbouring organisations under its influence.
To be effective, Grove says that among the many things that the manager does, he must move to the point where his leverage will be the greatest.
Information most useful to managers comes from casual conversations. This kind of information is fast and valuable. (Reports can't be done away with because they are a medium of discipline.) Since the manager's decision making depends on how well he comprehends the facts and issues facing the business. That's why information gathering is very important in a manager's life. Conveying information, making decisions and being a role model are all governed by the basis of information.
Grove says managers are role models for people in the organsation. Managers role model values and norms, not by talk and memos, but by doing things visibly.
Managerial leverage
Leverage is the measure of output generated by any given managerial activity. For every activity performed by the manager, the output of the organisation should increase by some degree. Manager's output then is L1xA1 +L2xA2... (L is Leverage, A is Activity). the manager's output is the sum of result of individual activities having varying degrees of leverage.
High leverage activities for managers
- where many people are affected by one manager
- where a person's activity or behavior over a long period of time is affected by a manager's brief, well focussed set of words or actions
- when a large group's work is affected by an individuals supplying important, key information
Manager's can also cause negative leverage by - 1) meddling 2) going into depression when things don't go well and waffling.
Delegation without follow-through is abdication.
To increase management activity, increase the ratio of performing workers. This is done by focusing on time-management. A medium of manager's forecast is his calendar. To gain control, Grove says, the manager must use his calendar as a production planning tool. The manager must take initiative to schedule work that is not time-critical between limiting steps.
Two things are important for time management
- active use of calendar to fill holes between time critical events with non-time critical though necessary activities
- say NO to work beyond your capacity to handle
How big should the team be
How many subs should a manager have? Between 6-8 says Grove. The idea behind that number is that the manager can devote half a day to each sub per week. More than that would be meddling and less would be not monitoring.
In a survey on the problem that was most limiting output he came to know that uncontrolled interruptions was the prime culprit. Grove says standardising responses and batching chores will help deal with this problem.
Meetings
Grove says 50% of an executives time goes in meetings. Drucker feels more than 25% time in meetings is a waste of time.
Grove says that a meeting is a medium through which managerial work is performed.
Meetings are
1) Process-oriented (about knowledge sharing) - these could be one-on-ones (they are primarily the subs meetings where agenda and tone is set by the sub, manager to ask questions, 90 minutes every two weeks), Staff meetings and Operational reviews,
2) Mission-oriented meetings (solve a specific problem) - here the Chairman is required to clearly understand the objective and enforce discipline
Decisions
Decisions are arrived at by free discussions. Once a clear decision is arrived at, the entire team should fully support the decision. The principle - any decision to be worked out and reached at the lowest competent level.
Grove warns against the Peer group syndrome - when a group of peers without a guiding force goes around in circles and do not reach a decision. They are scared of sounding dumb, fear being overruled
Here a senior can force a direction and a decision.
Questions that need to be asked are - what decisions need to be taken, when, who needs to take them, who will ratify/vet, who needs to be informed
Planning
1. Establish projected need
2. Establish present status
3. Compare and reconcile
Do a difference analysis. Your reaction to it is the key outcome of the planning process. Closing the gap is a strategy - what is needed to be done and what can be done.
Planning is essentially this - What do I have to do today to solve tomorrow's problems. Output of the planning process is decisions made and actions taken.
Management By Objectives
1) Where do I want to go
2) How will I pace myself to see if I am getting there
MBO is about focus. So keep focus, keep the number of objectives small
Managing a Team of Teams
Management is mostly about managing a team of teams where individual teams exist in suitable and mutually supportive relationship with each other.
Hybrid organisations - Grove says that organisations are of two types.
Mission-oriented - fully decentralised
Functional - fully centralised
Hybrid orgnisations are a mix of both. No organisation which grows can be one of the two only. Hybrid organisation succeed if the concept of dual reporting can be accepted and practiced. To make Dual Reporting work the individual may be required to voluntarily surrender individual decision making to the group.
Modes of control
Behavior in work environment is controlled by - free market forces, contractual obligations and cultural values.
Culture comes in where the environment changes more rapidly that rules can be made. The interest of the larger group takes precedence. the individual surrenders to the group her ability to protect herself. There is a common set of values, objectives and methods
Most appropriate mode of control
CUA - Complexity, Uncertainty, Ambiguity
Motivation
There are two reasons why a person is not motivated to do work - 1) cannot do or 2) won't do
Grove says one should apply this test - could he do it if his life depends on it? If he can, then he is not motivated. In such cases, Training and Motivation help perform better.
Grove says that an understanding Maslow's hierarchy of needs gives a good insight to motivate people. If people go beyond physiological (survival), security, social, self-esteem and are at the self-actualization level, they need what he says is Task Related Feedback.
People are needs driven. Many times they hold back because of the Fear of failure. Here Grove says we can use the Sports model - the concept of personal best. To get people to bring out their personal best, we must challenge and reward accordingly. The manager becomes the coach with the following attributes - take no personal credit for team success, is tough on the team so he gets the best possible performances, and he also understands the game.
The larger goal - to make them consistent winners
Grove is pretty clear that results are key - not abstract answers.
Task-related Maturity - Dealing with Different Levels of Performances
Grove uses the term Task-Relevant Maturity (TRM) to differentiate between how to handle team members. As a manager, he says it is your job to coach and get them to perform. You cannot delegate and abdicate.
A general rule he gives is as follows -
If TRM is low - give the team member a structured program, tell what, when, how until TRM improves
If TRM is medium - give individual attention, 2-way communication and support
If TRM is high - minimal involvement, set objectives, monitor
Once TRM of the team is high, managerial leverage increases
He warns that a person's TRM is environment specific. Don't expect a good performer in one environment to be at the same TRM in another.
Performance appraisal
Grove says it is the single most important task-relevant feedback. The performance appraisal can be used to improve subs performance - skill, motivation.
The two key aspects of Performance Appraisal are - Assessing and Delivering
Assessment - Define expectations, define output measures, internal measures, time factors if any, added value. Be careful to assess performance, not potential. Also an individual's assessment cannot be higher than the organisation performance
Delivering - Level (be frank), Listen (Watch carefully) and Leave yourself out (it's about the sub).
Be aware that people have a finite capacity to deal with facts. So pick your delivery well - pick key areas.
Be aware that poor performers normally ignore, deny, blame before they assume the responsibility which is where change happens. So be armed with facts and walk them along the way until they assume responsibility
Grove says we should spend more time on stars because they bring exceptional results.
Self-reviews are a good tool.
Training
Grove says it is the boss's job to train. The consequences of insufficient training can be serious. He cites an example of how one employee who was not trained properly caused a million dollar loss in a plant.
Grove says training is one of the highest leverage activities a manager can perform. It should be done from 1st lie to CEO on two areas - 1) train new members on skills to perform 2) teaching new ideas, principles or skills to present members of the organisation.
Conclusion
It's amazing how clear and direct his analysis is and how he sees issues that managers normally get to deal with. His methods are clearly about execution and high results. It is a brilliant handbook that every manager must carry and refer to every now and then. Must-read for those in managerial positions and even entrepreneurs.
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