High Output Management

Metadata

• Title: High Output Management
• Author: Andrew S. Grove
• Book URL: https://amazon.com/dp/B015VACHOK?tag=malvaonlin-20
• Open in Kindle: kindle://book/?action=open&asin=B015VACHOK
• Last Updated on: Thursday, July 15, 2021

Highlights & Notes

While this adjustment sounds quite logical and straightforward in theory, in reality its implementation required us to move and redeploy a lot of our employees, let some of them go, and shutter a number of factories. We did all this because under this strong attack, we learned that we must lead with our strength. Being second best in a tough environment is just not good enough.

If the world operates as one big market, every employee will compete with every person anywhere in the world who is capable of doing the same job. There are a lot of them, and many of them are very hungry.

Middle managers are the muscle and bone of every sizable organization, no matter how loose or “flattened” the hierarchy, but they are largely ignored despite their immense importance to our society and economy.

In fact, as our world becomes ever more information- and service-oriented, know-how managers will acquire greater importance as members of middle management.

What are the rules of the new environment? First, everything happens faster. Second, anything that can be done will be done, if not by you, then by someone else. Let there be no misunderstanding: These changes lead to a less kind, less gentle, and less predictable workplace.

You need to try to do the impossible, to anticipate the unexpected. And when the unexpected happens, you should double your efforts to make order from the disorder it creates in your life. The motto I’m advocating is “Let chaos reign, then rein in chaos.”

As a middle manager, of any sort, you are in effect a chief executive of an organization yourself.

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 bureacracy, of most forms of human activity, is something pursued not by individuals but by teams.

The output of a manager is the output of the organizational units under his or her supervision or influence.

High managerial productivity, I argue, depends largely on choosing to perform tasks that possess high leverage.

A team will perform well only if peak performance is elicited from the individuals in it.

You need to plan the way a fire department plans. It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event.

a responsive company should have fewer levels of managers.

With fewer levels in today’s organization, each manager will have larger numbers of employees reporting to him than was the case ten years ago.

one-on-one meeting between a supervisor and a subordinate. Its main purposes are mutual education and the exchange of information. By talking about specific problems and situations, the supervisor teaches the subordinate his skills and know-how, and suggests ways to approach things. At the same time, the subordinate provides the supervisor with detailed information about what he is doing and what he is concerned about.

As a general rule, you have to accept that no matter where you work, you are not an employee—you are in a business with one employee: yourself. You are in competition with millions of similar businesses. There are millions of others all over the world, picking up the pace, capable of doing the same work that you can do and perhaps more eager to do it.

Are you adding real value or merely passing information along? How do you add more value?

The central thought of my book is that the output of a manager is the output of his organization. In principle, every hour of your day should be spent increasing the output or the value of the output of the people whom you’re responsible for.

2. Are you plugged into what’s happening around you? And that includes what’s happening inside your company as well as inside your industry as a whole. Or do you wait for a supervisor or others to interpret whatever is happening? Are you a node connected to a network of plugged-in people or are you floating by yourself?

Are you trying new ideas, new techniques, and new technologies, and I mean personally trying them, not just reading about them?

the key to increased productivity: generating more and better goods and services to meet people’s needs. I am an optimist and believe our potential to increase our wealth has hardly been tapped.

The key to survival is to learn to add more value—

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

A manager’s skills and knowledge are only valuable if she uses them to get more leverage from her people.

So, Ms. Manager, you know more about our product’s viral loop than anyone in the company? That’s worth exactly nothing unless you can effectively transfer that knowledge to the rest of the organization. That’s what being a manager is about. 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.

If you only understand one thing about building products, you must understand that energy put in early in the process pays off tenfold and energy put in at the end of the program pays off negative tenfold.

Why is he doing this? It turns out that the one-on-one is not only a fundamental element in the manager/employee relationship, but perhaps the best source for organizational knowledge that a manager can get.

Everyone must decide for himself what is professional and appropriate here. A test might be to imagine yourself delivering a tough performance review to your friend. Do you cringe at the thought? If so, don’t make friends at work. If your stomach remains unaffected, you are likely to be someone whose personal relationships will strengthen work relationships.

“Is it better to be a hands-on or hands-off manager?”

It seems like a simple enough question, but it sorts out the 95 percent of managers who never think deeply about their craft from the 5 percent who do. The answer, as Andy explains, is that it depends. Specifically, it depends on the employee. If the employee is immature in the task, then hands-on training is essential. If the employee is more mature, then a delegate approach is warranted. Andy presents a great example of this: “The subordinate did poor work. My associate’s reaction: ‘He has to make his own mistakes. That’s how he learns!’ The problem with this is that the subordinate’s tuition is paid by his customers. And that is absolutely wrong.”

“CEOs always act on leading indicators of good news, but only act on lagging indicators of bad news.”

“In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.”

The task here encompasses the basic requirements of production. These are to build and deliver products in response to the demands of the customer at a scheduled delivery time, at an acceptable quality level, and at the lowest possible cost.

Instead, a manufacturer should accept the responsibility of delivering a product at the time committed to—in this case, by implication, about five to ten minutes after the customer arrives at our breakfast establishment. And we must make our breakfast at a cost that enables us to sell it at a competitive price and still make an acceptable profit.

The first thing we must do is to pin down the step in the flow that will determine the overall shape of our operation, which we’ll call the limiting step.

The key idea is that we construct our production flow by starting with the longest (or most difficult, or most sensitive, or most expensive) step and work our way back.

Other production principles underlie the preparation of our breakfast. In the making of it, we find present the three fundamental types of production operations: process manufacturing, an activity that physically or chemically changes material just as boiling changes an egg; assembly, in which components are put together to constitute a new entity just as the egg, the toast, and the coffee together make a breakfast; and test, which subjects the components or the total to an examination of its characteristics. There are, for example, visual tests made at points in the breakfast production process: you can see that the coffee is steaming and that the toast is brown.

But when you have to depend on someone else, the results are likely to be less predictable.

But at least you know that alternatives do exist: equipment capacity, manpower, and inventory can be traded off against each other and then balanced against delivery time.

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.

We have now turned things into a continuous operation at the expense of flexibility, and we can no longer prepare each customer’s order exactly when and how he requests it. So our customers have to adjust their expectations if they want to enjoy the benefits of our new mode: lower cost and more predictable product quality.

But continuous operation does not automatically mean lower cost and better quality.

The point is that whenever possible, you should choose in-process tests over those that destroy product.

To avoid that, you need a raw material inventory. But how large should it be? The principle to be applied here is that you should have enough to cover your consumption rate for the length of time it takes to replace your raw material.

All production flows have a basic characteristic: the material becomes more valuable as it moves through the process. A boiled egg is more valuable than a raw one, a fully assembled breakfast is more valuable than its constituent parts, and finally, the breakfast placed in front of the customer is more valuable still.

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.

Just to get a fix on your output, you need a number of indicators; to get efficiency and high output, you need even more of them.

but for any set of them to be useful, you have to focus each indicator on a specific operational goal.

First, you’ll want to know your sales forecast for the day.

Your next key indicator is raw material inventory.

Another important piece of information is the condition of your equipment.

You also must get a fix on your manpower.

Finally, you want to have some kind of quality indicator.

All these indicators measure factors essential to running your factory. If you look at them early every day, you will often be able to do something to correct a potential problem before it becomes a real one during the course of the day.

Indicators tend to direct your attention toward what they are monitoring. It is like riding a bicycle: you will probably steer it where you are looking.

This you can do by pairing indicators, so that together both effect and counter-effect are measured.

The principle here was evident many times in the development of a compiler. Measuring the completion date of each software unit against its capability is one example. Watching this pair of indicators should help us to avoid working on the perfect compiler that will never be ready, and also to avoid rushing to finish one that is inadequate. In sum, joint monitoring is likely to keep things in the optimum middle ground.

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).

The second criterion for a good indicator is that what you measure should be a physical, countable thing.

Such indicators have many uses. First, they spell out very clearly what the objectives of an individual or group are. Second, they provide a degree of objectivity when measuring an administrative function. Third, and as important as any, they give us a measure by which various administrative groups performing the same function in different organizations can be compared with each other.

In fact, if indicators are put in place, the competitive spirit engendered frequently has an electrifying effect on the motivation each group brings to its work, along with a parallel improvement in performance.

Leading indicators give you one way to look inside the black box by showing you in advance what the future might look like. And because they give you time to take corrective action, they make it possible for you to avoid problems. Of course, for leading indicators to do you any good, you must believe in their validity. While this may seem obvious, in practice, confidence is not as easy to come by as it sounds. To take big, costly, or worrisome steps when you are not yet sure you have a problem is hard. But unless you are prepared to act on what your leading indicators are telling you, all you will get from monitoring them is anxiety. Thus, the indicators you choose should be credible, so that you will, in fact, act whenever they flash warning signals.

Leading indicators might include the daily monitors we use to run our breakfast factory, from machine downtime records to an index of customer satisfaction—both of which can tell us if problems lie down the road. A generally applicable example of a “window” cut into the black box is the linearity indicator.

Also valuable are trend indicators. These show output (breakfasts delivered, software modules completed, vouchers processed) measured against time (performance this month versus performance over a series of previous months), and also against some standard or expected level.

Also, measurement against a standard makes you think through why the results were what they were, and not what the standard said they would be.

Another sound way to anticipate the future is through the use of the stagger chart, which forecasts an output over the next several months.

Finally, indicators can be a big help in solving all types of problems. If something goes wrong, you will have a bank of information that readily shows all the parameters of your operation, allowing you to scan them for unhealthy departures from the norm. If you do not systematically collect and maintain an archive of indicators, you will have to do an awful lot of quick research to get the information you need, and by the time you have it, the problem is likely to have gotten worse.

To build to forecast, you risk capital to respond to anticipated future demand in good order.

Ideally, the order for the product and the product itself should arrive on the shipping dock at the same time.

Because the art and science of forecasting is so complex, you might be tempted to give all forecasting responsibility to a single manager who can be made accountable for it. But this usually does not work very well. What works better is to ask both the manufacturing and the sales departments to prepare a forecast, so that people are responsible for performing against their own predictions.

It is a good idea to use stagger charts in both the manufacturing and sales forecasts. As noted, they will show the trend of change from one forecast to another, as well as the actual results. By repeatedly observing the variance of one forecast from another, you will continually pin down the causes of inaccuracy and improve your ability to forecast both orders and the availability of product.

But if we have carefully chosen indicators that characterize an administrative unit and watch them closely, we are ready to apply the methods of factory control to administrative work.

There is no question that having standards and believing in them and staffing an administrative unit objectively using forecasted workloads will help you to maintain and enhance productivity.

As we have said, manufacturing’s charter is to deliver product at a quality level acceptable to the customer at minimum cost.

To get acceptable quality at the lowest cost, it is vitally important to reject defective material at a stage where its accumulated value is at the lowest possible level. Thus, as noted, we are better off catching a bad raw egg than a cooked one, and screening out our college applicant before he visits Intel. In short, reject before investing further value.

• @sergeiw

In the language of production, the lowest-value-point inspection where we inspect raw material is called incoming material inspection or receiving inspection.

Simply put, because we can never assess the consequences of an unreliable product, we can’t make compromises when it comes to reliability.

Inspections, of course, cost money to perform and further add to expense by interfering with the manufacturing flow and making it more complicated.

There is a gate-like inspection and a monitoring step. In the former, all material is held at the “gate” until the inspection tests are completed. If the material passes, it is moved on to the next stage in the production process; if the material fails, it will be returned to an earlier stage, where it will be reworked or scrapped. In the latter, a sample of the material is taken, and if it fails, a notation is made from which a failure rate is calculated. The bulk of the material is not held as the sample is taken but continues to move through the manufacturing process. The smoothness of the flow is maintained, but if, for example, three successive samples fail the monitoring test, we can stop the line.

For instance, if for weeks we don’t find problems, it would seem logical to check less often. But if problems begin to develop, we can test ever more frequently until quality again returns to the previous high levels.

The productivity of any function occurring within it is the output divided by the labor required to generate the output. Thus, one way to increase productivity is to do whatever we are now doing, but faster. This could be done by reorganizing the work area or just by working harder. Here we’ve not changed what work we do, we’ve just instituted ways to do it faster—getting more activities per employee-hour to go on inside the black box. Because the output of the black box is proportional to the activity that occurs within it, we will get more output per hour. There is a second way to improve productivity. We can change the nature of the work performed: what we do, not how fast we do it. We want to increase the ratio of output to activity, thereby increasing output even if the activity per employee-hour remains the same. As the slogan has it, we want to “work smarter, not harder.”

Here I’d like to introduce the concept of leverage, which is the output generated by a specific type of work activity. An activity with high leverage will generate a high level of output; an activity with low leverage, a low level of output.

Thus, a very important way to increase productivity is to arrange the work flow inside our black box so that it will be characterized by high output per activity, which is to say high-leverage activities.

But in both widget manufacturing and administrative work, something else can also increase the productivity of the black box. This is called work simplification. To get leverage this way, you first need to create a flow chart of the production process as it exists. Every single step must be shown on it; no step should be omitted in order to pretty things up on paper. Second, count the number of steps in the flow chart so that you know how many you started with. Third, set a rough target for reduction of the number of steps. In the first round of work simplification, our experience shows that you can reasonably expect a 30 to 50 percent reduction.

To implement the actual simplification, you must question why each step is performed.

So no matter what reason may be given for a step, you must critically question each and throw out those that common sense says you can do without.

The major problem to be overcome is defining what the output of such work is or should be.

As we will see, in the work of the soft professions, it becomes very difficult to distinguish between output and activity. And as noted, stressing output is the key to improving productivity, while looking to increase activity can result in just the opposite.

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

A manager can do his “own” job, his individual work, and do it well, but that does not constitute his output. 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. The internal consultant who supplies needed insight to a group struggling with a problem will affect the work and the output of the entire group.

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.

But the key definition here is that the output of a manager is a result achieved by a group either under her supervision or under her influence.

My day always ends when I’m tired and ready to go home, not when I’m done. I am never done. Like a housewife’s, a manager’s work is never done. There is always more to be done, more that should be done, always more than can be done.

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.

As you can see, much of my day is spent acquiring information. And as you can also see, I use many ways to get it.

I have to confess that the information most useful to me, and I suspect most useful to all managers, comes from quick, often casual verbal exchanges. This usually reaches a manager much faster than anything written down. And usually the more timely the information, the more valuable it is.

So why are written reports necessary at all? They obviously can’t provide timely information. What they do is constitute an archive of data, help to validate ad hoc inputs, and catch, in safety-net fashion, anything you may have missed.

But reports also have another totally different function. As they are formulated and written, the author is forced to be more precise than he might be verbally. Hence their value stems from the discipline and the thinking the writer is forced to impose upon himself as he identifies and deals with trouble spots in his presentation.

Reports are more a medium of self-discipline than a way to communicate information. Writing the report is important; reading it often is not.

There are many parallels to this. As we will see later, the preparation of an annual plan is in itself the end, not the resulting bound volume. Similarly, our capital authorization process itself is important, not the authorization itself. 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.

To improve and maintain your capacity to get information, you have to understand the way it comes to you. There’s a hierarchy involved. Verbal sources are the most valuable, but what they provide is also sketchy, incomplete, and sometimes inaccurate, like a newspaper headline that can give you only the general idea of a story.

Your information sources should complement one another, and also be redundant because that gives you a way to verify what you’ve learned.

There is an especially efficient way to get information, much neglected by most managers. That is to visit a particular place in the company and observe what’s going on there.

But if a manager walks through an area and sees a person with whom he has a two-minute concern, he can simply stop, cover it, and be on his way. Ditto for the subordinate when he initiates conversation. Accordingly, such visits are an extremely effective and efficient way to transact managerial business.

Beyond relaying facts, a manager must also communicate his objectives, priorities, and preferences as they bear on the way certain tasks are approached. This is extremely important, because only if the manager imparts these will his subordinates know how to make decisions themselves that will be acceptable to the manager, their supervisor.

The third major kind of managerial activity, of course, is decision-making. To be sure, once in a while we managers in fact make a decision. But for every time that happens, we participate in the making of many, many others, and we do that in a variety of ways. We provide factual inputs or just offer opinions, we debate the pros and cons of alternatives and thereby force a better decision to emerge, we review decisions made or about to be made by others, encourage or discourage them, ratify or veto them.

In short, information-gathering is the basis of all other managerial work, which is why I choose to spend so much of my day doing it.

You often do things at the office designed to influence events slightly, maybe making a phone call to an associate suggesting that a decision be made in a certain way, or sending a note or a memo that shows how you see a particular situation, or making a comment during an oral presentation. In such instances you may be advocating a preferred course of action, but you are not issuing an instruction or a command. Yet you’re doing something stronger than merely conveying information. Let’s call it “nudging” because through it you nudge an individual or a meeting in the direction you would like. This is an immensely important managerial activity in which we engage all the time, and it should be carefully distinguished from decision-making that results in firm, clear directives. In reality, for every unambiguous decision we make, we probably nudge things a dozen times.

Finally, something more subtle pervades the day of all managers. While we move about, doing what we regard as our jobs, we are role models for people in our organization—our subordinates, our peers, and even our supervisors.

Values and behavioral norms are simply not transmitted easily by talk or memo, but are conveyed very effectively by doing and doing visibly.

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

Meetings provide an occasion for managerial activities. Getting together with others is not, of course, an activity—it is a medium. You as a manager can do your work in a meeting, in a memo, or through a loudspeaker for that matter. But you must choose the most effective medium for what you want to accomplish, and that is the one that gives you the greatest leverage.

Leverage is the measure of the output generated by any given managerial activity.

A manager’s output is thus the sum of the result of individual activities having varying degrees of leverage. Clearly the key to high output means being sensitive to the leverage of what you do during the day.

Increasing the rate with which a manager performs his activities, speeding up his work. 2.  Increasing the leverage associated with the various managerial activities. 3.  Shifting the mix of a manager’s activities from those with lower to those with higher leverage.

•  When many people are affected by one manager. •  When a person’s activity or behavior over a long period of time is affected by a manager’s brief, well-focused set of words or actions. •  When a large group’s work is affected by an individual supplying a unique, key piece of knowledge or information.

Thus to maximize the leverage of his activities, a manager must keep timeliness, which is often critical, firmly in mind.

Some managerial activities can reduce the output of an organization.

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.

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.

• @sergeiw

Both the depressed and the waffling manager can have virtually unlimited negative leverage. If people are badly affected by a poor sales training effort, the situation can be handled by retraining the group. But the negative leverage produced by depression and waffling is very hard to counter because their impact on an organization is both so pervasive and so elusive.

Managerial meddling is also an example of negative leverage. This occurs when a supervisor uses his superior knowledge and experience of a subordinate’s responsibilities to assume command of a situation rather than letting the subordinate work things through himself.

The person who comprehends the critical facts or has the critical insights—the “knowledge specialist” or the “know-how manager”—has tremendous authority and influence on the work of others, and therefore very high leverage.

The art of management lies in the capacity to select from the many activities of seemingly comparable significance the one or two or three that provide leverage well beyond the others and concentrate on them.

For me, paying close attention to customer complaints constitutes a high-leverage activity. Aside from making a customer happy, the pursuit tends to produce important insights into the workings of my own operation.

Because managerial time has a hierarchy of values, delegation is an essential aspect of management. The “delegator” and “delegatee” must share a common information base and a common set of operational ideas or notions on how to go about solving problems, a requirement that is frequently not met. Unless both parties share the relevant common base, the delegatee can become an effective proxy only with specific instructions. As in meddling, where specific activities are prescribed in detail, this produces low managerial leverage.

But be sure to know exactly what you’re doing, and avoid the charade of insincere delegation, which can produce immense negative managerial leverage.

delegation without follow-through is abdication. You can never wash your hands of a task. 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.

Monitoring the results of delegation resembles the monitoring used in quality assurance. We should apply quality assurance principles and monitor at the lowest-added-value stage of the process. 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. A second principle applies to the frequency with which you check your subordinates’ work. A variable approach should be employed, using different sampling schemes with various subordinates; you should increase or decrease your frequency depending on whether your subordinate is performing a newly delegated task or one that he has experience handling. How often you monitor should not be based on what you believe your subordinate can do in general, but on his experience with a specific task and his prior performance with it—his task-relevant maturity, something I’ll talk about in detail later.

To use quality assurance principles effectively, the manager should only go into details randomly, just enough to try to ensure that the subordinate is moving ahead satisfactorily. To check into all the details of a delegated task would be like quality assurance testing 100 percent of what manufacturing turned out.

Making certain types of decisions is something managers frequently delegate to subordinates. How is this best done? By monitoring their decision-making process. How do you do that? Let’s examine what Intel goes through to approve a capital equipment purchase. We ask a subordinate to think through the entire matter carefully before presenting a request for approval. And to monitor how good his thinking is, we ask him quite specific questions about his request during a review meeting. If he answers them convincingly, we’ll approve what he wants. This technique allows us to find out how good the thinking is without having to go through it ourselves.

if we determine what is immovable and manipulate the more yielding activities around it, we can work more efficiently.

Set-up time has many parallels in managerial work. For example, once we have prepared a set of illustrations for a training class, we will obviously increase our productivity if we can use the same set over and over again with other classes or groups. 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.

Forecasting and planning your time around key events are literally like running an efficient factory.

What is the medium of a manager’s forecast? It is something very simple: his calendar. Most people use their calendars as a repository of “orders” that come in. Someone throws an order to a manager for his time, and it automatically shows up on his calendar. This is mindless passivity. To gain better control of his time, the manager should use his calendar as a “production” planning tool, taking a firm initiative to schedule work that is not time-critical between those “limiting steps” in the day.

To use your calendar as a production-planning tool, you must accept responsibility for two things: 1.  You should move toward the active use of your calendar, taking the initiative to fill the holes between the time-critical events with non-time-critical though necessary activities. 2.  You should say “no” at the outset to work beyond your capacity to handle.

There is an optimum degree of loading, with enough slack built in so that one unanticipated phone call will not ruin your schedule for the rest of the day. You need some slack.

Another production principle is very nearly the opposite. A manager should carry a raw material inventory in terms of projects. This is not to be confused with his work-in-process inventory, because that, like eggs in a continuous boiler, tends to spoil or become obsolete over time. Instead this inventory should consist of things you need to do but don’t need to finish right away—discretionary projects, the kind the manager can work on to increase his group’s productivity over the long term. Without such an inventory of projects, a manager will most probably use his free time meddling in his subordinates’ work.

This means that even as we try to standardize what we do, we should continue to think critically about what we do and the approaches we use.

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.

But because you must coordinate your work with that of other managers, you can only move toward regularity if others do too. In other words, the same blocks of time must be used for like activities. For example, at Intel Monday mornings have been set aside throughout the corporation as the time when planning groups meet. So anybody who belongs to one can count on Monday for that purpose and be free of scheduling conflicts.

In any case, a manager should try to force his frequent interrupters to make an active decision about whether an issue can wait.

understand that interrupters have legitimate problems that need to be handled. That’s why they’re bringing them to you. But you can channel the time needed to deal with them into organized, scheduled form by providing an alternative to interruption—a scheduled meeting or an office hour.

The point is to impose a pattern on the way a manager copes with problems. To make something regular that was once irregular is a fundamental production principle, and that’s how you should try to handle the interruptions that plague you.

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.

a meeting is nothing less than the medium through which managerial work is performed.

The two basic managerial roles produce two basic kinds of meetings. In the first kind of meeting, called a process-oriented meeting, knowledge is shared and information is exchanged. Such meetings take place on a regularly scheduled basis. The purpose of the second kind of meeting is to solve a specific problem. Meetings of this sort, called mission-oriented, frequently produce a decision. They are ad hoc affairs, not scheduled long in advance, because they usually can’t be.

the people attending should know how the meeting is run, what kinds of substantive matters are discussed, and what is to be accomplished.

At Intel, a one-on-one is a meeting between a supervisor and a subordinate, and it is the principal way their business relationship is maintained. Its main purpose is mutual teaching and exchange of information. By talking about specific problems and situations, the supervisor teaches the subordinate his skills and know-how, and suggests ways to approach things. At the same time, the subordinate provides the supervisor with detailed information about what he is doing and what he is concerned about.

Accordingly, you should have one-on-ones frequently (for example, once a week) with a subordinate who is inexperienced in a specific situation and less frequently (perhaps once every few weeks) with an experienced veteran.

A key point about a one-on-one: It should be regarded as the subordinate’s meeting, with its agenda and tone set by him. There’s good reason for this. Somebody needs to prepare for the meeting. The supervisor with eight subordinates would have to prepare eight times; the subordinate only once. So the latter should be asked to prepare an outline, which is very important because it forces him to think through in advance all of the issues and points he plans to raise.

An outline also provides a framework for supporting information, which the subordinate should prepare in advance. The subordinate should then walk the supervisor through all the material.

What should be covered in a one-on-one? We can start with performance figures, indicators used by the subordinate, such as incoming order rates, production output, or project status. Emphasis should be on indicators that signal trouble. The meeting should also cover anything important that has happened since the last meeting: current hiring problems, people problems in general, organizational problems and future plans, and—very, very important—potential problems.

What is the role of the supervisor in a one-on-one? He should facilitate the subordinate’s expression of what’s going on and what’s bothering him. The supervisor is there to learn and to coach.

“The good time users among managers do not talk to their subordinates about their problems but they know how to make the subordinates talk about theirs.”

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.

It should be mostly controlled, with an agenda issued far enough in advance that the subordinates will have had the chance to prepare their thoughts for the meeting. But it should also include an “open session”—a designated period of time for the staff to bring up anything they want.

A supervisor should never use staff meetings to pontificate, which is the surest way to undermine free discussion and hence the meeting’s basic purpose.

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. Ideally, the supervisor should keep things on track, with the subordinates bearing the brunt of working the issues.

OPERATION REVIEWS This is the medium of interaction for people who don’t otherwise have much opportunity to deal with one another. The format here should include formal presentations in which managers describe their work to other managers who are not their immediate supervisors, and to peers in other parts of the company.

Who are the players at an operation review? The organizing manager, the reviewing manager, the presenters, and the audience. Each of these players has a distinct role to play if the review is to be a useful one.

He should help the presenters decide what issues should be talked about and what should not, what should be emphasized, and what level of detail to go into. The supervisor should also be in charge of housekeeping (the meeting room, visual materials, invitations, and so on). Finally, he should be the timekeeper, scheduling the presentations and keeping them moving along.

Remember, you are being paid to attend the meeting, which is not meant to be a siesta in the midst of an otherwise busy day. Regard attendance at the meeting for what it is: work.

The absolute truth is that if you don’t know what you want, you won’t get it. So before calling a meeting, ask yourself: What am I trying to accomplish? Then ask, is a meeting necessary? Or desirable? Or justifiable? Don’t call a meeting if all the answers aren’t yes.

Determine the purpose of a meeting before committing your time and your company’s resources.

Keep in mind that a meeting called to make a specific decision is hard to keep moving if more than six or seven people attend. Eight people should be the absolute cutoff. Decision-making is not a spectator sport, because onlookers get in the way of what needs to be done.

It is criminal for him to allow people to be late and waste everyone’s time. Remember, wasting time here really means that you are wasting the company’s money, with the meter ticking away at the rate of $100perhourperperson.Donotworryaboutconfrontingthelatearriver.Justasyouwouldnotpermitafellowemployeetostealapieceofofficeequipmentworth$2,000, you shouldn’t let anyone walk away with the time of his fellow managers.

Once the meeting is over, the chairman must nail down exactly what happened by sending out minutes that summarize the discussion that occurred, the decision made, and the actions to be taken. And it’s very important that attendees get the minutes quickly, before they forget what happened. The minutes should also be as clear and as specific as possible, telling the reader what is to be done, who is to do it, and when.

the real sign of malorganization is when people spend more than 25 percent of their time in ad hoc mission-oriented meetings.

Put another way, even if today’s veteran manager was once an outstanding engineer, he is not now the technical expert he was when he joined the company. At Intel, anyway, we managers get a little more obsolete every day.

Again, our tendency is to do just the opposite: when we know a decision is controversial we want to obscure matters to avoid an argument. But the argument is not avoided by our being mealy-mouthed, merely postponed. People who don’t like a decision will be a lot madder if they don’t get a prompt and straight story about it.

Many people have trouble supporting a decision with which they do not agree, but that they need to do so is simply inevitable. Even when we all have the same facts and we all have the interests of an organization in mind, we tend to have honest, strongly felt, real differences of opinion. No matter how much time we may spend trying to forge agreement, we just won’t be able to get it on many issues. But an organization does not live by its members agreeing with one another at all times about everything. It lives instead by people committing to support the decisions and the moves of the business. All a manager can expect is that the commitment to support is honestly present, and this is something he can and must get from everyone.

Another desirable and important feature of the model is that any decision be worked out and reached at the lowest competent level. The reason is that this is where it will be made by people who are closest to the situation and know the most about it.

Thus, ideally, decision-making should occur in the middle ground, between reliance on technical knowledge on the one hand, and on the bruises one has received from having tried to implement and apply such knowledge on the other. To make a decision, if you can’t find people with both qualities, you should aim to get the best possible mix of participants available.

We named this the peer-plus-one approach, and have used it since then to aid decision-making where we must. Peers tend to look for a more senior manager, even if he is not the most competent or knowledgeable person involved, to take over and shape a meeting. Why? Because most people are afraid to stick their necks out.

One of the reasons why people are reluctant to come out with an opinion in the presence of their peers is the fear of going against the group by stating an opinion that is different from that of the group. Consequently, the group as a whole wanders around for a while, feeling each other out, waiting for a consensus to develop before anyone risks taking a position. If and when a group consensus emerges, one of the members will state it as a group opinion (“I think our position seems to be…”), not as a personal position. After a weak statement of the group position, if the rest of the mob buys in, the position becomes more solid and is restated more forcefully.

In the former instance, the people were expected to wait for their supervisor to state his opinion first. In the latter, members of the group were waiting for a consensus to develop. The dynamics are different, but the bottom line in both is that people didn’t really speak their minds freely. That certainly makes it harder for a manager to make the right decisions.

But in the end self-confidence mostly comes from a gut-level realization that nobody has ever died from making a wrong business decision, or taking inappropriate action, or being overruled. And everyone in your operation should be made to understand this.

If the peer-group syndrome manifests itself, and the meeting has no formal chairman, the person who has the most at stake should take charge. If that doesn’t work, one can always ask the senior person present to assume control. He is likely to be no more expert in the issues at hand than other members of the group—perhaps less expert—but he is likely to act as a godfather, a repository of knowledge about how decisions should be made, and give the group the confidence needed to make a decision.

One thing that paralyzes both knowledge and position power possessors is the fear of simply sounding dumb. For the senior person, this is likely to keep him from asking the questions he should ask. The same fear will make other participants merely think their thoughts privately rather than articulate them for all to hear; at best they will whisper what they have to say to a neighbor. 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.

A related phenomenon influences lower-level people present in the meeting. This group has to overcome the fear of being overruled, which might mean embarrassment: if the rest of the group or a senior-level manager vetoed a junior person or opposed a position he was advocating, the junior manager might lose face in front of his peers. This, even more than fear of sanctions or even of the loss of job, makes junior people hang back and let the more senior people set the likely direction of decision-making.

We are all human beings endowed with intelligence and blessed with willpower. Both can be drawn upon to help us overcome our fear of sounding dumb or of being overruled, and lead us to initiate discussion and come out front with a stand.

Sometimes no amount of discussion will produce a consensus, yet the time for a decision has clearly arrived. When this happens, the senior person (or “peer-plus-one”) who until now has guided, coached, and prodded the group along has no choice but to make a decision himself. If the decision-making process has proceeded correctly up to this point, the senior manager will be making the decision having had the full benefit of free discussion wherein all points of view, facts, opinions, and judgments were aired without position-power prejudice. In other words, it is legitimate—in fact, sometimes unavoidable—for the senior person to wield position-power authority if the clear decision stage is reached and no consensus has developed. It is not legitimate—in fact, it is destructive—for him to wield that authority any earlier. This is often not easy. We Americans tend to be reluctant to exercise position power deliberately and explicitly—it is just “not nice” to give orders. Such reluctance on the part of the senior manager can prolong the first phase of the decision-making process—the time of free discussion—past the optimum point, and the decision will be put off.

If you either enter the decision-making stage too early or wait too long, you won’t derive the full benefit of open discussion.

Sometimes free discussion goes on in an unending search for consensus. But, if that happens, people can drift away from the near consensus when they are close to being right, diminishing the chances of reaching the correct decision. So moving on to make the decision at the right time is crucial.

•  What decision needs to be made? •  When does it have to be made? •  Who will decide? •  Who will need to be consulted prior to making the decision? •  Who will ratify or veto the decision? •  Who will need to be informed of the decision?

People invest a great deal of energy and emotion in coming up with a decision. Then somebody who has an important say-so or the right to veto it may come across the decision later. If he does veto it, he can be regarded as a Johnny-come-lately who upsets the decision-making applecart. This, of course, will frustrate and demoralize the people who may have been working on it for a long time. If the veto comes as a surprise, however legitimate it may have been on its merits, an impression of political maneuvering is inevitably created. Politics and manipulation or even their appearance should be avoided at all costs. And I can think of no better way to make the decision-making process straightforward than to apply before the fact the structure imposed by our six questions.

He explained that if he could make decisions without consulting anybody, so could everybody else.

How one plans at the factory can then be summarized as follows: step 1, determine the market demand for product; step 2, establish what the factory will produce if no adjustment is made; and step 3, reconcile the projected factory output with the projected market demand by adjusting the production schedule.

Your general planning process should consist of analogous thinking. Step 1 is to establish projected need or demand: What will the environment demand from you, your business, or your organization? Step 2 is to establish your present status: What are you producing now? What will you be producing as your projects in the pipeline are completed? Put another way, where will your business be if you do nothing different from what you are now doing? Step 3 is to compare and reconcile steps 1 and 2. Namely, what more (or less) do you need to do to produce what your environment will demand?

What should you look for when you examine your environment? You should attempt to determine your customers’ expectations and their perception of your performance. You should keep abreast of technological developments like electronic mail and other alternative ways of doing your job. You should evaluate the performance of your vendors. You should also evaluate the performance of other groups in the organization to which you belong. Does some other group (like the traffic department) affect how well you can do your work? Can that group meet your needs?

Once you have established what constitutes your environment, you need to examine it in two time frames—now, and sometime in the future, let’s say in a year. The questions then become: What do my customers want from me now? Am I satisfying them? What will they expect from me one year from now? You need to focus on the difference between what your environment demands from you now and what you expect it to demand from you a year from now. Such a difference analysis is crucial, because if your current activities satisfy the current demands placed on your business, anything more and new should be undertaken to match this difference. How you react to this difference is in fact the key outcome of the planning process.

The final step of planning consists of undertaking new tasks or modifying old ones to close the gap between your environmental demand and what your present activities will yield. The first question is, What do you need to do to close the gap? The second is, What can you do to close the gap? Consider each question separately, and then decide what you actually will do, evaluating what effect your actions will have on narrowing the gap, and when. The set of actions you decide upon is your strategy.

As you formulate in words what you plan to do, the most abstract and general summary of those actions meaningful to you is your strategy. What you’ll do to implement the strategy is your tactics. Frequently, a strategy at one managerial level is the tactical concern of the next higher level.

The key to both Bruce’s and Cindy’s efforts is that their planning produced tasks that had to be performed now in order to affect future events. I have seen far too many people who upon recognizing today’s gap try very hard to determine what decision has to be made to close it. But today’s gap represents a failure of planning sometime in the past. By analogy, forcing ourselves to concentrate on the decisions needed to fix today’s problem is like scurrying after our car has already run out of gas. Clearly we should have filled up earlier. To avoid such a fate, remember that as you plan you must answer the question: What do I have to do today to solve—or better, avoid—tomorrow’s problem?

Thus, the true output of the planning process is the set of tasks it causes to be implemented.

In other words, the output of the planning process is the decisions made and the actions taken as a result of the process.

How far ahead should the planners look? 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. Everything else you can look at again. We should also be careful not to plan too frequently, allowing ourselves time to judge the impact of the decisions we made and to determine whether our decisions were on the right track or not. In other words, we need the feedback that will be indispensable to our planning the next time around.

Planning cannot be made a separate career but is instead a key managerial activity, one with enormous leverage through its impact on the future performance of an organization.

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. This, of course, is an inevitable, inescapable consequence of allocating any finite resource. People who plan have to have the guts, honesty, and discipline to drop projects as well as to initiate them, to shake their heads “no” as well as to smile “yes.”

A successful MBO system needs only to answer two questions: 1.  Where do I want to go? (The answer provides the objective.) 2.  How will I pace myself to see if I am getting there? (The answer gives us milestones, or key results.)

To illustrate an objective and a key result, consider the following: I want to go to the airport to catch a plane in an hour. That is my objective. I know that I must drive through towns A, B, and C on my way there. My key results become reaching A, B, and C in 10, 20, and 30 minutes respectively. If I have been driving for 20 minutes and haven’t yet made town A, I know I’m lost. Unless I get off the highway and ask someone for directions, I probably won’t make my flight.

A few extremely well-chosen objectives impart a clear message about what we say “yes” to and what we say “no” to—which is what we must have if an MBO system is to work.

And we see a nesting hierarchy of objectives: if the subordinate’s objectives are met, the supervisor’s will be as well.

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.

Accordingly, to be useful a key result must contain very specific wording and dates, so that when deadline time arrives, there is no room for ambiguity.

A manager’s objectives are supported by an appropriate set of key results. His objectives in turn are tied to his supervisor’s objectives so that if the manager meets his objectives, his supervisor will meet his. But the MBO system cannot be run mechanically by a computer. The system requires judgment and common sense to set the hierarchy of objectives and the key results that support them. Both judgment and common sense are also required when using MBO to guide you in your work from one day to the next.

We now discover that management is not just a team game, it is a game in which we have to fashion a team of teams, where the various individual teams exist in some suitable and mutually supportive relationship with each other.

Though most are mixed, organizations can come in two extreme forms: in totally mission-oriented form or in totally functional form.

In the mission-oriented organization (a), which is completely decentralized, each individual business unit pursues what it does—its mission—with little tie-in to other units.

At the other extreme is the totally functional organization (b), which is completely centralized.

Alfred Sloan summed up decades of experience at General Motors by saying, “Good management rests on a reconciliation of centralization and decentralization.” Or, we might say, on a balancing act to get the best combination of responsiveness and leverage.

The functional groups can be viewed as if they were internal subcontractors. Let’s take a sales organization as an example. Though a lot of companies use outside sales representatives, an internal group presumably provides the service at less expense and with greater responsiveness. Likewise, manufacturing, finance, or data processing can all be regarded as functional groups, which, as internal subcontractors, provide services to all the business units.

What are some of the advantages of organizing much of a company in a mission-oriented form? There is only one. It is that the individual units can stay in touch with the needs of their business or product areas and initiate changes rapidly when those needs change. That is it.

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.

Grove’s Law: All large organizations with a common business purpose end up in a hybrid organizational form.

the shift back and forth between the two types of organizations can and should be initiated to match the operational styles and aptitudes of the managers running the individual units.

In our business culture, the allocation of shared resources and the reconciliation of the conflicting needs and desires of the independent business units are theoretically the function of corporate management.

For middle managers to succeed at this high-leverage task, two things are necessary. First, they must accept the inevitability of the hybrid organizational form if they are to serve its workings. Second, they must develop and master the practice through which a hybrid organization can be managed.

But the core idea was that a project manager, somebody outside any of the contractors involved, could wield as much influence on the work of units within a given company as could the company management itself.

The first would specify how the job ought to be done, and the second would monitor how it was being performed day by day.

We want the immediacy and the operating priorities coming from the general manager as well as a technical supervisory relationship. The solution is dual reporting.

At work, surrendering individual decision-making depends on trusting the soundness of actions taken by your group of peers.

Trust in no way relates to an organizational principle but is instead an aspect of the corporate culture,

Put simply, it is a set of values and beliefs, as well as familiarity with the way things are done and should be done in a company. The point is that a strong and positive corporate culture is absolutely essential if dual reporting and decision-making by peers are to work.

A strictly functional organization, which is clear conceptually, tends to remove engineering and manufacturing (or the equivalent groups in your firm) from the marketplace, leaving them with no idea of what the customers want. A highly mission-oriented organization, in turn, may have definite crisp reporting relationships and clear and unambiguous objectives at all times. However, the fragmented state of affairs that results causes inefficiency and poor overall performance.

Hybrid organizations and the accompanying dual reporting principle, like a democracy, are not great in and of themselves. They just happen to be the best way for any business to be organized.

To make hybrid organizations work, you need a way to coordinate the mission-oriented units and the functional groups so that the resources of the latter are allocated and delivered to meet the needs of the former.

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.

So to put it yet another way, the hybrid organizational form is the inevitable consequence of enjoying the benefits of being part of a large organization—a company or university or whatever.

The point is that the two- (or multi-) plane organization is very useful. Without it I could only participate if I were in charge of everything I was part of. I don’t have that kind of time, and often I’m not the most qualified person around to lead. The multi-plane organization enables me to serve as a foot soldier rather than as a general when appropriate and useful. This gives the organization important flexibility.

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

The nature of control is now based on contractual obligations, which define the kind of work you will do and the standards that will govern it. Because I can’t specify in advance exactly what you will do from day to day, I must have a fair amount of generalized authority over your work. So you must give to me as part of the contract the right to monitor and evaluate and, if necessary, correct your work. We agree on other guidelines and work out rules that we will both obey.

When the environment changes more rapidly than one can change rules, or when a set of circumstances is so ambiguous and unclear that a contract between the parties that attempted to cover all possibilities would be prohibitively complicated, we need another mode of control, which is based on cultural values.

Its most important characteristic is that the interest of the larger group to which an individual belongs takes precedence over the interest of the individual himself.

These, in turn, can only be developed by a great deal of common, shared experience.

The Role of Management You don’t need management to supervise the workings of free-market forces; no one supervises sales made at a flea market. In a contractual obligation, management has a role in setting and modifying the rules, monitoring adherence to them, and evaluating and improving performance. As for cultural values, management has to develop and nurture the common set of values, objectives, and methods essential for the existence of trust. How do we do that? One way is by articulation, by spelling out these values, objectives, and methods. The other, even more important, way is by example. If our behavior at work will be regarded as in line with the values we profess, that fosters the development of a group culture.

There are two variables here: first, the nature of a person’s motivation; and second, the nature of the environment in which he works.

The point is, expectations can be as binding as a legal document.

Belief and faith are not aspects of the market mode, but stem from adherence to cultural values.

Put another way, this means that management is a team activity. But no matter how well a team is put together, no matter how well it is directed, the team will perform only as well as the individuals on it.

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. To determine which, we can employ a simple mental test: if the person’s life depended on doing the work, could he do it? If the answer is yes, that person is not motivated; if the answer is no, he is not capable.

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.

How does a manager motivate his subordinates? For most of us, the word implies doing something to another person. But I don’t think that can happen, because motivation has to come from within somebody. Accordingly, all a manager can do is create an environment in which motivated people can flourish.

Because better motivation means better performance, not a change of attitude or feeling, a subordinate’s saying “I feel motivated” means nothing. What matters is if he performs better or worse because his environment changed. An attitude may constitute an indicator, a “window into the black box” of human motivation, but it is not the desired result or output. Better performance at a given skill level is.

For most of Western history, including the early days of the Industrial Revolution, motivation was based mostly on fear of punishment.

In other words, fear won’t work as well with computer architects as with galley slaves; hence, new approaches to motivation are needed.

For Maslow, motivation is closely tied to the idea of needs, which cause people to have drives, which in turn result in motivation.

Simply put, if we are to create and maintain a high degree of motivation, we must keep some needs unsatisfied at all times.

The social needs stem from the inherent desire of human beings to belong to some group or other. But people don’t want to belong to just any group; they need to belong to one whose members possess something in common with themselves.

As one’s environment or condition in life changes, one’s desire to satisfy a particular set of needs is replaced by a desire to satisfy another set.

All of the sources of motivation we’ve talked about so far are self-limiting. That is, when a need is gratified, it can no longer motivate a person. Once a predetermined goal or level of achievement is reached, the need to go any further loses urgency. A friend of mine was thrust into a premature “mid-life crisis” when, in recognition of the excellent work he had been doing, he was named a vice president of the corporation. Such a position had been a life-long goal. When he had suddenly attained it, he found himself looking for some other way to motivate himself.

For Maslow, self-actualization stems from a personal realization that “what I can be, I must be.” The title of a movie about athletes, Personal Best, captures what self-actualization means: the need to achieve one’s utter personal best in a chosen field of endeavor.

Once someone’s source of motivation is self-actualization, his drive to perform has no limit. Thus, its most important characteristic is that unlike other sources of motivation, which extinguish themselves after the needs are fulfilled, self-actualization continues to motivate people to ever higher levels of performance.

Two inner forces can drive a person to use all of his capabilities. He can be competence-driven or achievement-driven. The former concerns itself with job or task mastery.

The same teenager may not sit still for ten minutes to do homework, but on a skateboard he is relentless, driven by the self-actualization need, a need to get better that has no limit.

The achievement-driven path to self-actualization is not quite like this. Some people—not the majority—are moved by an abstract need to achieve in all that they do. A psychology lab experiment illustrated the behavior of such people. Some volunteers were put into a room in which pegs were set at various places on the floor. Each person was given some rings but not instructed what to do with them. People eventually started to toss the rings onto the pegs. Some casually tossed the rings at faraway pegs; others stood over the pegs and dropped the rings down onto them. Still others walked just far enough away from the pegs so that to toss a ring onto a peg constituted a challenge. These people worked at the boundary of their capability.

• sound familiar? @gabrielhdm

The point is that both competence- and achievement-oriented people spontaneously try to test the outer limits of their abilities.

When the need to stretch is not spontaneous, management needs to create an environment to foster it. In an MBO system, for example, objectives should be set at a point high enough so that even if the individual (or organization) pushes himself hard, he will still only have a fifty-fifty chance of making them.

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.

Moreover, if we want to cultivate achievement-driven motivation, we need to create an environment that values and emphasizes output.

They were driven to know more, but not necessarily to know more in order to produce concrete results. Consequently, relatively little was actually achieved. The value system at Intel is completely the reverse. The Ph.D. in computer science who knows an answer in the abstract, yet does not apply it to create some tangible output, gets little recognition, but a junior engineer who produces results is highly valued and esteemed. And that is how it should be.

We now come to the question of how money motivates people. At the lower levels of the motivation hierarchy, money is obviously important, needed to buy the necessities of life. Once there is enough money to bring a person up to a level he expects of himself, more money will not motivate.

So it appears that at the upper level of the need hierarchy, when one is self-actualized, money in itself is no longer a source of motivation but rather a measure of achievement.

Money in the physiological- and security-driven modes only motivates until the need is satisfied, but money as a measure of achievement will motivate without limit. Thus the second ten million can be just as important to the venture capitalist as the first, since it is not the utilitarian need for the money that drives him but the achievement that it implies, and the need for achievement is boundless.

A simple test can be used to determine where someone is in the motivational hierarchy. If the absolute sum of a raise in salary an individual receives is important to him, he is working mostly within the physiological or safety modes. If, however, what matters to him is how his raise stacks up against what other people got, he is motivated by esteem/recognition or self-actualization, because in this case money is clearly a measure.

Once in the self-actualization mode, a person needs measures to gauge his progress and achievement. The most important type of measure is feedback on his performance. For the self-actualized person driven to improve his competence, the feedback mechanism lies within that individual himself.

The most appropriate measures tie an employee’s performance to the workings of the organization. If performance indicators and milestones in a management-by-objectives system are linked to the performance of the individual, they will gauge his degree of success and will enhance his progress.

The most important form of such task-relevant feedback is the performance review every subordinate should receive from his supervisor.

Fear In physiological and security/safety need-dominated motivation, one fears the loss of life or limb or loss of job or liberty. Does fear have a place in the esteem or self-actualized modes? It does, but here it becomes the fear of failure. But is that a positive or negative source of motivation? It can be either. Given a specific task, fear of failure can spur a person on, but if it becomes a preoccupation, a person driven by a need to achieve will simply become conservative. Let’s think back to the ring tossers. If a person got an electrical shock each time he threw a ring and missed, soon enough he would walk over to the peg and drop the ring from directly over it to eliminate the pain associated with failure. In general, in the upper levels of motivation, fear is not something coming from the outside. It is instead fear of not satisfying yourself that causes you to back off. You cannot stay in the self-actualized mode if you’re always worried about failure.

Why does a person who is not terribly interested in his work at the office stretch himself to the limit running a marathon? What makes him run? He is trying to beat other people or the stopwatch. This is a simple model of self-actualization, wherein people will exert themselves to previously undreamed heights, forcing themselves to run farther or faster, while their efforts fill barrels with sweat. They will do this not for money, but just to beat the distance, the clock, or other people.

endow work with the characteristics of competitive sports. And the best way to get that spirit into the workplace is to establish some rules of the game and ways for employees to measure themselves.

Eliciting peak performance means going up against something or somebody.

This is key to the manager’s approach and involvement: he has to see the work as it is seen by the people who do that work every day and then create indicators so that his subordinates can watch their “racetrack” take shape.

Comparing our work to sports may also teach us how to cope with failure. As noted, one of the big impediments to a fully committed, highly motivated state of mind is preoccupation with failure. Yet we know that in any competitive sport, at least 50 percent of all matches are lost. All participants know that from the outset, and yet rarely do they give up at any stage of a contest.

The role of the manager here is also clear: it is that of the coach. First, an ideal coach takes no personal credit for the success of his team, and because of that his players trust him. Second, he is tough on his team. By being critical, he tries to get the best performance his team members can provide. Third, a good coach was likely a good player himself at one time. And having played the game well, he also understands it well.

Turning the workplace into a playing field can turn our subordinates into “athletes” dedicated to performing at the limit of their capabilities—the key to making our team consistent winners.

I’ll say again that a manager’s most important responsibility is to elicit top performance from his subordinates.

the hard findings simply would not show that one style of leadership was better than another. It was hard to escape the conclusion that no optimal management style existed.

The inevitable conclusion is that high output is associated with particular combinations of certain managers and certain groups of workers. This also suggests that a given managerial approach is not equally effective under all conditions.

Some researchers in this field argue that there is a fundamental variable that tells you what the best management style is in a particular situation. That variable is the task-relevant maturity (TRM) of the subordinates, which is a combination of the degree of their achievement orientation and readiness to take responsibility, as well as their education, training, and experience.

we confused the manager’s general competence and maturity with his task-relevant maturity.

Similarly, a person’s TRM can be very high given a certain level of complexity, uncertainty, and ambiguity, but if the pace of the job accelerates or if the job itself abruptly changes, the TRM of that individual will drop. It’s a bit like a person with many years’ experience driving on small country roads being suddenly asked to drive on a crowded metropolitan freeway. His TRM driving his own car will drop precipitously.

Specifically, when the TRM is low, the most effective approach is one that offers very precise and detailed instructions, wherein the supervisor tells the subordinate what needs to be done, when, and how: in other words, a highly structured approach. As the TRM of the subordinate grows, the most effective style moves from the structured to one more given to communication, emotional support, and encouragement, in which the manager pays more attention to the subordinate as an individual than to the task at hand. As the TRM becomes even greater, the effective management style changes again. Here the manager’s involvement should be kept to a minimum, and should primarily consist of making sure that the objectives toward which the subordinate is working are mutually agreed upon. But regardless of what the TRM may be, the manager should always monitor a subordinate’s work closely enough to avoid surprises. The presence or absence of monitoring, as we’ve said before, is the difference between a supervisor’s delegating a task and abdicating it. The characteristics of the effective management style for the supervisor given the varying degrees of TRM are summarized in the table below.

A word of caution is in order: do not make a value judgment and consider a structured management style less worthy than a communication-oriented one. What is “nice” or “not nice” should have no place in how you think or what you do. Remember, we are after what is most effective.

The fundamental variable that determines the effective management style is the task-relevant maturity of the subordinate.

Structure moves from being externally imposed to being internally given.

Accordingly, the responsibility for transmitting common values rests squarely with the supervisor. He is, after all, accountable for the output of the people who report to him; then, too, without a shared set of values a supervisor cannot effectively delegate.

That’s how he learns!” The problem with this is that the subordinate’s tuition is paid by his customers. And that is absolutely wrong. The responsibility for teaching the subordinate must be assumed by his supervisor, and not paid for by the customers of his organization, internal or external.

Moreover, once operational values are learned and TRM is high enough, the supervisor can delegate tasks to the subordinate, thus increasing his managerial leverage.

Put another way, a manager’s ability to operate in a style based on communication and mutual understanding depends on there being enough time for it. Though monitoring is on paper a manager’s most productive approach, we have to work our way up to it in the real world. Even if we achieve it, if things suddenly change we have to revert quickly to the what-when-how mode.

We managers must learn to fight such prejudices and regard any management mode not as either good or bad but rather as effective or not effective, given the TRM of our subordinates within a specific working environment.

Another problem here is a manager’s perception of himself. We tend to see ourselves more as communicators and delegators than we really are, certainly much more than do our subordinates.

There is a huge distinction between a social relationship and a communicating management style, which is a caring involvement in the work of the subordinate.

A test might be to imagine yourself delivering a tough performance review to your friend. Do you cringe at the thought? If so, don’t make friends at work. If your stomach remains unaffected, you are likely to be someone whose personal relationships will strengthen work relationships.

The fact is that giving such reviews is the single most important form of task-relevant feedback we as supervisors can provide. It is how we assess our subordinates’ level of performance and how we deliver that assessment to them individually. It is also how we allocate the rewards—promotions, dollars, stock options, or whatever we may use.

it is to improve the subordinate’s performance.

The review is usually dedicated to two things: first, the skill level of the subordinate, to determine what skills are missing and to find ways to remedy that lack; and second, to intensify the subordinate’s motivation in order to get him on a higher performance curve for the same skill level (see the illustration on this page).

The review process also represents the most formal type of institutionalized leadership. It is the only time a manager is mandated to act as judge and jury: we managers are required by the organization that employs us to make a judgment regarding a fellow worker and then to deliver that judgment to him, face to face.

if performance matters in your operation, performance reviews are absolutely necessary.

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.

Let’s think back to our concept of the managerial “black box.” Using it, we can characterize performance by output measures and internal measures. The first represent the output of the black box, and include such things as completing designs, meeting sales quotas, or increasing the yield in a production process—things we can and should plot on charts. The internal measures take into account activities that go on inside the black box: whatever is being done to create output for the period under review and also that which sets the stage for the output of future periods. Are we reaching our current production goals in such a way that two months from now we are likely to face a group of disgruntled production employees? Are we positioning and developing people in the organization in such a way that our business can handle its tasks in the future? Are we doing all of the things that add up to a well-run department?

A similar kind of trade-off also has to be considered here: weighing long-term-oriented against short-term-oriented performance.

As managers, we are really called upon to judge performance, not just to see and record it when it’s in plain sight.

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.

This cut no ice with me because 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.

By elevating someone, we are, in effect, creating role models for others in our organization.

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. It is hard enough for us to assess our subordinates’ performance, but we must also try to improve it. No matter how well a subordinate has done his job, we can always find ways to suggest improvement, something about which a manager need not feel embarrassed. Blessed with 20/20 hindsight, we can compare what the subordinate did against what he might have done, and the variance can tell both of us how to do things better in the future.

There are three L’s to keep in mind when delivering a review: Level, listen, and leave yourself out.

Words themselves are nothing but a means; getting the right thought communicated is the end.

This is what I mean by listening: employing your entire arsenal of sensory capabilities to make certain your points are being properly interpreted by your subordinate’s brain.

So don’t imitate your worst professors while delivering performance reviews. Listen with all your might to make sure your subordinate is receiving your message, and don’t stop delivering it until you are satisfied that he is.

It is very important for you to understand that the performance review is about and for your subordinate. So your own insecurities, anxieties, guilt, or whatever should be kept out of it. At issue are the subordinate’s problems, not the supervisor’s, and it is the subordinate’s day in court. Anyone called upon to assess the performance of another person is likely to have strong emotions before and during the review, just as actors have stage fright. You should work to control these emotions so that they don’t affect your task, though they will well up no matter how many reviews you’ve given. Let us now consider three types of performance reviews.

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.

You should scan material such as progress reports, performance against quarterly objectives, and one-on-one meeting notes.

As you consider your subordinate’s performance, write everything down on the paper. Do not edit in your head. Get everything down, knowing that doing so doesn’t commit you to do anything.

Now, from your worksheet, look for relationships between the various items listed. You will probably begin to notice that certain items are different manifestations of the same phenomenon, and that there may be some indications why a certain strength or weakness exists.

Preferably, a review should not contain any surprises, but if you uncover one, swallow hard and bring it up.

A poor performer has a strong tendency to ignore his problem. Here a manager needs facts and examples so that he can demonstrate its reality.

He has to take the biggest step: namely assuming responsibility. He has to say not only that there is a problem but that it is his problem. This is fateful, because it means work: “If it is my problem, I have to do something about it. If I have to do something, it is likely to be unpleasant and will definitely mean a lot of work on my part.”

Once responsibility has been assumed, however, finding the solution is relatively easy. This is because the move from blaming others to assuming responsibility constitutes an emotional step, while the move from assuming responsibility to finding the solution is an intellectual one, and the latter is easier.

• @gabrielhdm @sergeiw

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. It is certainly more desirable for you and your subordinate to agree about the problem and the solution, because that will make you feel that he will enthusiastically work toward remedying it.

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.

I learned the distinction between the two during one of the first reviews I had to give. I was trying very hard to persuade my subordinate to see things my way. He simply would not go along with me and finally said to me, “Andy, you will never convince me, but why do you insist on wanting to convince me? I’ve already said I will do what you say.” I shut up, embarrassed, not knowing why. It took me a long time before I realized I was embarrassed because my insistence had a lot to do with making me feel better and little to do with the running of the business.

“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…” And proceed to secure your subordinate’s commitment to the course of action you want and thereafter monitor his performance against that commitment.

I think we have our priorities reversed. Shouldn’t we spend more time trying to improve the performance of our stars? After all, these people account for a disproportionately large share of the work in any organization. Put another way, concentrating on the stars is a high-leverage activity: if they get better, the impact on group output is very great indeed.

We must keep in mind, however, that no matter how stellar a person’s performance level is, there is always room for improvement.

Reviewing the performance of subordinates is a formal act of leadership.

What about asking your subordinate to evaluate your performance as his supervisor? I think this might be a good idea.

For a good meeting of minds, your subordinate should have time to work out his reactions to what’s in the review.

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.

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There are two other emotionally charged tasks a manager must perform. They are interviewing a potential employee and trying to talk a valued employee out of quitting.

The purpose of the interview is to: •  select a good performer •  educate him as to who you and the company are •  determine if a mutual match exists •  sell him on the job

If performance appraisal is difficult, interviewing is just about impossible.

In short, make sure the words used mean the same thing to both of you.

The ultimate purpose of interviewing is to make a judgment about how the candidate would perform in your company’s environment.

Within the hour or so at your disposal, you must move between the world of the past employer and your own, and project the candidate’s future performance in a new environment based on his own description of past performance. This managerial task is clearly tricky and high-risk, but unfortunately unavoidable.

Don’t worry about being blunt; direct questions tend to bring direct answers, and when they don’t, they produce other forms of insight into the candidate.

So in the end careful interviewing doesn’t guarantee you anything, it merely increases your odds of getting lucky.

“I Quit!” This is what I most dread as a manager: a subordinate, highly valued and esteemed, decides to quit. I am talking not about someone whose motives are more money and better perks at another company, but about an employee who is dedicated and loyal yet feels his work is not appreciated. You and the company don’t want to lose him, and his decision to leave reflects on you. If he feels his efforts have gone unrecognized, you have not done your job and have failed as his manager.

If the absolute amount of a raise in salary is important, that person is probably motivated by physiological or safety/security needs. If the relative amount of a raise—what he got compared to others—is the important issue, that person is likely to be motivated by self-actualization, because money here is a measure, not a necessity.

As a supervisor, you have to be very sensitive toward the various money needs of your subordinates and show empathy toward them. You must be especially careful not to project your own circumstances onto others.

As managers, our concern is to get a high level of performance from our subordinates. So we want to dispense, allocate, and use money as a way to deliver task-relevant feedback. To do this, compensation should obviously be tied to performance, but that, as we’ve seen, is very hard to assess precisely. Because a middle manager cannot be paid by the piece, his job can never be defined by simple output. And because his performance is woven into the performance of a team, it is hard to design a compensation scheme tied directly to the individual performance of a middle manager.

Thus, for a highly paid senior manager, for whom the absolute dollars make relatively little difference, the performance bonus should be as high as 50 percent, while a middle manager should receive more in the range of 10 to 25 percent of his total compensation this way.

We need to figure out if the performance is linked to a team or if it is mostly related to individual work. If it is the former, who makes up the team? Is it a project team, a division, or the entire corporation? We also need to figure out what period the performance bonus should cover, realizing again that cause and effect tend to be offset from each other, often by a long time, but a bonus needs to be paid close enough to the time the work was done that the subordinate can remember why it was awarded. Furthermore, we must think about whether the bonus should be based strictly on countable items (financial performance, for example), on achieving measurable objectives, or on some subjective elements that might get us drawn into a beauty contest. Finally, of course, we don’t want to devise something that pays out lavishly even as the company is going bankrupt.

For example, you might have a scheme in which a manager’s performance bonus is based on three factors. The first would include his individual performance only, as judged by his supervisor. The second would account for his immediate team’s objective performance, his department perhaps. The third factor would be linked to the overall financial performance of the corporation. When you take, let’s say, 20 percent of a manager’s compensation and split it into three parts, any one will have only a small impact on total compensation, yet attention will still be called to its significance.

The shapes of all of them approximate the curve representing the experience-only approach, but as you can see, while people start at the same salary level, they move up at different speeds and arrive at different places, depending upon individual performance.

If we want to use such schemes, we have to come to terms with the principle—troubling to many managers—that any merit-based system requires a competitive, comparative evaluation of individuals.

Merit-based compensation simply cannot work unless we understand that if someone is going to be first, somebody else has to be last.

Promotions, defined as a substantial change in a person’s job, are very important to the health of any organization and should be considered with great care. Obviously, for the individual concerned, promotions often produce a big raise. 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 are going to consider promotions, we have to consider the Peter Principle, which says that when someone is good at his job, he is promoted; he keeps getting promoted until he reaches his level of incompetence and then stays there. Like all good caricatures, this one captures at least some of what really happens in a merit-based promotion system.

Thus, you’ll find two basic types of “meets” performers. One has no motivation to do more or faces no challenge to do more. This is the noncompetitor, who has become settled and satisfied in his job. The other type of “meets” performer is the competitor. Each time he reaches a level of “exceeds requirements,” he becomes a candidate for promotion. Upon being promoted, he very likely becomes a “meets” performer again.

But we really have no choice but to promote until a level of “incompetence” is reached. At least this way we drive our subordinates toward higher performance, and while they may perform at a “meets” level half the time, they will do that at an increasingly more challenging and difficult job level.

There are times when a person is promoted into a position so much over his head that he performs in a below-average fashion for too long a time. The solution is to recycle him: to put him back into the job he did well before he was promoted.

In sum, we managers must be responsible and provide our subordinates with honest performance ratings and honest merit-based compensation. If we do, the eventual result will be performance valued for its own sake throughout our organization.

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.

A manager’s own productivity thus depends on eliciting more output from his team.

A manager generally has two ways to raise the level of individual performance of his subordinates: by increasing motivation, the desire of each person to do his job well, and by increasing individual capability, which is where training comes in. It is generally accepted that motivating employees is a key task of all managers, one that can’t be delegated to someone else. Why shouldn’t the same be true for the other principal means at a manager’s disposal for increasing output?

Training is, quite simply, one of the highest-leverage activities a manager can perform.

For training to be effective, it has to be closely tied to how things are actually done in your organization.

For training to be effective, it also has to maintain a reliable, consistent presence. Employees should be able to count on something systematic and scheduled, not a rescue effort summoned to solve the problem of the moment. In other words, training should be a process, not an event.

If you accept that training, along with motivation, is the way to improve the performance of your subordinates, and that what you teach must be closely tied to what you practice, and that training needs to be a continuing process rather than a one-time event, it is clear that the who of the training is you, the manager.

The person standing in front of the class should be seen as a believable, practicing authority on the subject taught.

Some 2 percent to 4 percent of our employees’ time is spent in classroom learning, and much of the instruction is given by our own managerial staff.

At Intel we distinguish between two different training tasks. The first task is teaching new members of our organization the skills needed to perform their jobs. The second task is teaching new ideas, principles, or skills to the present members of our organization.