“Thus managers rise to their level of incompetence” (Andy Grove)
Introduction
Andy Grove was President, CEO and ultimately chairman of the board at Intel. It's worth noting this as High Output Management draws significantly on this experience.
It is difficult book to summarise as Grove mixes his own management theory, with case studies and personal reflection. Unlike for instance Zero to One, where Theil presents and reiterates several core themes, each chapter of High Output Management feels self contained.
But to apply some overarching structure to the text, I would suggest that it begins with a mostly theoretical discussion and moves to more practical analysis. Grove evaluates general management concepts, moving to consider organisational structure and ultimately to practical topics such as hiring, staff motivation and employee evaluation.
I would suggest there are 2 core ideas to this book:
An output-orientated approach to management
The work of modern organisations is done by teams not individuals. Hence to maximise output managers must maximise the output of all their subordinates
How can managers optimise output? The first question should be what is output. For Grove it is a concept, that broadly describes the impact a manager has on her firm’s capacity to reach its goals. It is also fundamentally a group phenomenon. Grove writes: "A manager can do his "own" job, his individual work, and do it well, but that does not constitute his output.”
Essentially a manager’s goal is to maximise his subordiantes’ abilities to perform and thereby influence the direction of the firm. As result managers should primarily be evaluated on the output the produce for the firm.
As the breadth of Grove’s text is significant this review shall just consider two topics: the implications for organisational management and people management. However it is a rich text and well worth a look by anyone in a management irrespective of organisational size and type.
i) Organisational implications
The rationale for Grove’s team focus is that the nature of work for modern firms is founded on a knowledge asymmetry to between senior managers and subordinates.
Of course there has always been an asymmetry between new and old employees but this one is of a new type. Traditionally it has been the case that senior employees will know more that their subordinates and new hires to the company. In technology companies, however this is not necessarily the case. Obviously senior employees continue to have greater knowledge of the firm, its processes and more perhaps more general understanding of how to work in an office environment, but fresh employees can have more up to date knowledge on cutting edge research (which is particularly important for manufacturing and engineering industries), this means that managers must work with the subordinates in a way that was not essential before. Managers must be able to evaluate and implement the knowledge that their subordinates can brings.
Clearly Grove was working for a firm in which new hires would have update knowledge on manufacturing that their managers may not have since they only recently graduated. The question then is, does the theory for organisation less dependent on cutting edge research and development?
While there may be an argument that this information asymmetry is not so prevalent in other types of companies, the broader focus on output I believe is very useful. Indeed in other respects Grove’s argument is quite traditional.
Although he emphasise the importance of having a strong team culture, when it comes to decision making, Grove’s idea is hierarchal Ultimately there must be one decision maker, otherwise discussions will go around in circles (peer-group syndrome) until a mushy consensus develops.
Management by objectives must be very focused. We must consider where we want to go (objective) and how we want to get there (milestones, key results). Objectives between supervisors and their subordinates should be aligned so that as the subordinate reaches their objective the supervisor also reaches theirs.
Be careful not to be too specific in assessing the completion of objectives. The main thing is to have objectives in place, but of course as time moves forward unexpected events and opportunities might arise so discretion is essential
Another important note is it is not essential that everyone agrees with the ultimate decision but it is important that everyone supports the decision. This can be particularly troublesome for middle managers but recent graduates and more experienced manager understand this approach
From an organizational standpoint, Grove argues that once an organisation reaches a certain size it will tend to drift towards one of two structures:
Mission-oriented
Functional-oriented
Mission orientated companies are highly regional, autonomous from the central organisation, and will often be competitive with other regions for resources for the main organisation. Functional oriented companies on the other hand are highly centralise and can often be much quicker to implement strategy. Most organisations are a hybrid between these two extremes, often firms will shift from one to another during their life
Grove also believes that for firms to be successful they must adopt a hybrid structure that encompasses elements of boss forms.
The only exceptions to this rule being small startup where roles are in general flexible and large conglomerates that own businesses without common business purposes.
ii) People management
In general, even with the best managerial techniques the success of an organisation will depend on the quality of the people. Therefore all managers can do is create an environment in which good people can thrive.
Another crucial aspect that managers must consider is the motivating factors of their staff and the type of organisation environment they work in.
Grove suggest that individual behavior is controlled by three factors:
Free market force - price and self-interest
Contractual obligations - price is too difficult to determine (more mutually interests)
Cultural values - too complex to control through contracts (can be completely selfless)
Managers must also consider the working culture of their office (CUA factors)
Complex
Uncertain
Ambiguous
An office that has high self-interest and high ambiguity will be chaos.
Another to bear in mind is the timing of when an employee is hired. Employees will tend to high self-interest at first with this diminishing over time. For low level employees this not such a problem but what if you must appoint a new senior hirer?
It is also crucial for managers to evaluate their subordinates on an ongoing basis and vary these principles when looking to hire new staff or pursued a valuable employee not to quit.
Final one of the more intriguing concepts of the text is the Peter principle which is that candidates for promotion are selected based on their performance in their current role, hence all staff will eventually rise “to their level of incompetence. Grove suggests that management should accept this phenomena as their problem and attempt to recycle employees in such circumstances back down to roles they are capable of."