Thoughts on Business and Technology

High Output Management

Managers are mysterious beings in the corporate world. They are a favorite subject of cartoons and jokes, one of the reasons for this is the lack of awareness of the role managers play in an organization.  However, we admire leaders in every field who are great managers.

Who are Managers?

Someone who is in charge of a business, department, etc., someone who directs the training and performance of a team, or someone who directs the professional career development of employees in an organization – Merriam-Webster

Some of the common titles associated with management are CEO, president, human resources manager, director, site director, regional manager, general manager, and the like.

But that’s a narrow definition. In reality, many of us play the role of a manager without realizing it. This is one of the important points Andy Grove highlights in his book High Output Management. He classifies managers into two categories: people managers and know-how managers.

People managers are individuals who are in charge of a certain group of tasks or a certain subset of a company. People managers often have a staff of people who report to him or her. (Source: Wikipedia)

Know-how managers. Know-how is a key resource for business, and know-how management is a potential lever for competitive advantage. Lew Platt, a former CEO of HP, famously said, “If HP knew what HP knows, we would be three times as profitable.” Some companies have taken this to heart and developed formal systems to manage the know-how generated by their employees.

Every company has employees who are knowledge repositories or specialists. These employees have usually been around for a long time and have developed extensive knowledge (technology, processes, business, etc.) and networks within the company.Grove refers to them as know-how managers.

Know-how managers can be anyone in a company, including engineers, business analysts, product managers, sales representative, and even people managers. Know-how managers’ potential to influence the organization is enormous.

Measuring managerial output

Measuring the output of an individual contributor is well-understood. For a software engineer, it is features released with quality on schedule. For a sales representative, it is volume sold, orders booked, etc. However, employees who are people managers or know-how managers don’t contribute directly to the output of an organization.

“If you can’t measure it, you can’t fix it.” David Henike, VP of Engineering, LinkedIn

One of the reasons for the mystery and mistrust surrounding managers is the lack of understanding and articulation of the way their contributions are measured in many companies.

Activities are observable, outcomes are felt

In his seminal book on management, Andy Grove, the legendary CEO of Intel, recognizes this gap and lists some of the common misconceptions among managers.One cause of confusion is a poor understanding of the difference between output and activities. When Grove asked a group of middle managers at Intel to define their output or contribution, they mentioned the following:

  • Judgments and opinions
  • Direction
  • Allocation of resources
  • Mistakes detected
  • Teams trained and developed
  • Products planned
  • Commitments negotiated

Even though the list contains some of the factors that are critical to the success of an organization, and they are all activities that a manager performs as part of his job, they are not the output of his work.

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

Productivity is key to prosperity

Economic growth of individuals, organizations, companies and nations is influenced by many factors (increased capital expenditure, more work, higher debt spending, etc.).However, according to economic principles, in a transaction, you have to give something to get something, and how much you get depends on how much you produce. Over time we learn, and that accumulated knowledge raises our living standard; we call this productivity growth. Those who are inventive and hardworking raise their living standard faster, so in the long run, productivity matters more than any other factor.

High output management

In his book, Grove maintains that there are two ways to increase productivity:

  1. Increase activities per employee hour by working harder or reorganizing the work.
  2. Increase the ratio of output to activity by employing leverage ( e.g., automation) or work simplification (e.g., elimination of unnecessary tasks )

The productivity of any function is the output divided by the labor required to generate the output. Thus, one way to increase productivity is to do whatever we are doing now, but do it faster. This could be done by reorganizing the work area or just by working harder. We don’t change the work we do; we just institute ways to do it faster, accomplishing more activities per employee hour.

There is a second way to improve productivity. We can change the nature of the work—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 activities per employee hour remain the same. LinkedIn’s Operation InVersion is a great example. You can read more about it here.

Work smarter not harder

According to Grove, three central models have helped Intel’s managers and can help managers everywhere: applying the methods of production; utilizing managerial leverage, and tapping into an individual’s desire for peak performance. In the rest of the post, I will focus on the application of leverage to improve an organization’s output and effectiveness.


A software engineer who uses a programming language rather like English that is later translated by a compiler can solve many problems per hour of programming. His output and leverage are high. A software engineer who uses a more cumbersome programming method with ones and zeros (i.e., assembly language) requires many more hours to solve the same number of problems. His output and leverage are low.Thus, a very important way to increase productivity is to arrange the workflow to realize high output per activity, that is to say, high-leverage activities. Automation is certainly one way to improve the leverage of all types of work. The other is work simplification.

The principle of work simplification is well-adopted in the field of manufacturing, but its application to improving the productivity of the “soft professions” (i.e., administrative and managerial) has been slow to catch on.

Leverage in managerial activities

Leverage is the measure of the output generated by any given managerial activity.Managerial output can be linked to managerial activity by the equation:

Managerial Output = Output of organization = L1 X A1 + L2 X A2 + …

Where “L” is the leverage applied to specific activity “A”. A manager’s output is thus the sum of the result of individual activities that have varying degrees of leverage.

Managerial productivity can be increased in three ways.

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

Here are some examples of high-leverage activities:

  • When many people are affected by one manager.
  • When a person’s activity or behavior over a long period is affected by a manager’s brief interactions and actions.
  • When a large group’s work is affected by an individual (know-how manager), who supplies a unique, key piece of knowledge or information.

Bottom line

High output management demands relentless focus on outcomes and discipline in every aspect of management. Organizations that are managing for outcomes:

  • Have a clear vision of why they exist, what they want to achieve and how well they are achieving it.
  • Plan their work while keeping in mind a clear set of objectives, activities, outputs, outcomes and measures of success.
  • Deliver what they have planned and promised.
  • Take stock of their progress by monitoring, measuring, reviewing and evaluating as they go.
  • Learn from successes and failures and modify what they do and how they do it in response.
  • Report publicly on their results and promote transparency across the organization.
  • Have an adaptive and innovative culture and seek continuous improvement.
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