Managerial Leverage

By Andy Grove

Activities are what managers do as they try to create a final result, or output.
All these are necessary to achieve output. But output and activity are by no means the same thing.

What is a manager’s output?

At Intel, if a manager is in charge of a wafer fabrication plant, his output consists of completed, high quality, fully processed silicon wafers.

If he supervises a design group, his output consists of completed designs that work correctly and are ready to go into manufacturing.

If a manager is the principle of a high school, his output will be trained and educated students who have either completed their schooling or are ready to move on to the next year of their studies.

If a manager is a surgeon, his output is a fully recovered, healed patient.

We can sum matters up with the proposition that:

A manager output = The output of his organization
+
The output of his neighboring organization under his influence

The output of a manager is a result achieved by a group either under his supervision or under his influence.

Cindy, an engineer at Intel, supervises an engineering group in a wafer fabrication plant. As a supervising engineer, she performs activities that increase the output of the plant in which she works.
She also spends some of her time as a member of an advisory body that establishes standard procedures by which all the plants throughout the company perform a certain technical process. As a member of the advisory body, she provides specialized knowledge that will influence and increase the output of neighboring organizations – all the other Intel wafer fabrication plants.
In both roles, Cindy contributes to the output of the wafer fabrication plants.

Business and education and even surgery represent work done by teams. Business is a team activity. And, always, it takes a team to win.

If a 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.

A manager can do his own job, his individual work, and do it well, but that does not constitute his output. While the manager’s own work is clearly very important, that in itself does not create output. His organization does.

By analogy, a coach or a quarterback alone does not score touchdowns and win games. Entire teams with their participation and guidance and direction do.

If a manager is a knowledge specialist, a know-how manager, his potential for influencing neighboring organization 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.

Individuals who gather and disseminate know-how and information should also be seen as middle managers, because they exert great power within the organization.

Consider my own managerial role. As president of a company, I can affect output through my direct subordinates – group general managers and others like them – by performing supervisory activities.

I can also influence groups not under my direct supervision by making observations and suggestions to those who manage them

Both type of activity will, I hope, contribute to the output of the company as a whole.

I was once asked by a middle manager at Intel how I could teach in-plant courses, visit manufacturing plants, concern myself with the problems of people several levels removed from me in the organization, and still have time to do my job. I asked him what he thought my job was. He thought for a moment, and then answered his own question, “I guess those things are your job too, aren’t they? They are absolutely my job – not my entire job, but part of it, because they help add to the output of Intel.

What we actually do is difficult to pin down and sum up. Much of it often seems so inconsequential that our position in the business hardly seems justified. Part of the problem here stems from the distinction between our activities, which is what we actually do, and our output, which is what we achieve.

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.

Much of my day is spent acquiring information. I use many ways to get it. I read standard reports and memos but also get information ad hoc. I talk to people inside and outside the company, managers at the other firms or financial analysts or members of the press. Customer complaints, both external and internal, are also a very important source of information. I dealt with things in seemingly random fashion.

For example, the Intel training organization, which I serve as an instructor, is an internal customer of mine. To cut myself off from the casual complaints of people in that group would be a mistake because I would miss getting an evaluation of my performance as an internal supplier.

People also tell us things because they want us to do something for them; to advance their case, they will sometimes shower us with useful information. This is something we should remember, apart from whether we do as they ask.

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 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:
· 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.
· The preparation of an annual plan is in itself the end, not the resulting bound volume.

To improve and maintain your capacity to get information, you have to understand the way it comes to you. 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. 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.

A manager not only gathers information but is also a source of it. He must convey his knowledge to members of his own organization and to other groups he influences.

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. Thus, transmitting objectives and preferred approaches constitutes a key to successful delegation.

It’s obvious that your decision-making depends finally on how well you comprehend the facts and issues facing your business. This is why information gathering is so important in a manager’s life.

Other activities – conveying information, making decisions, and being a role model for your subordinates – are all governed by the based of information that you, the manager have about the tasks, the issues, and the problems facing your organization. In short, information gathering is the basis of all other managerial work, which is why I choose to spend so much time of my day doing it.

Through your suggestion you nudge an individual or a meeting in the direction you would like. This is 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.

While we move about, doing what we regards as our jobs, we are role models for people in our organization – our subordinates, our peers, and even our supervisors. Nothing leads as well as example. Values and behavioral norms are simply not transmitted easily by talk or memo, but are conveyed very effectively by doing and doing it visibly.

A supervisor in a company, large or small, who takes his work seriously, exemplifies to his associates the most important managerial value of all.

The single most important resource that we allocate from one day to the next is our own time. Our own time is the one absolutely finite resource we each have. Its allocation and use therefore deserve considerable attention. How you handle your time is, in my view, the single most important aspect of being a role model and leader.

In a typical day of mine one can count some twenty-five separate activities in which I participated, mostly information-gathering and –giving, but also decision-making and nudging.

You can also see that some two thirds of my time was spent in a meeting of one kind or another. Before you are horrified by how much time I spend in meetings, answer a question:
Which of the activities – information gathering, information giving, decision-making, nudging, and being a role model – could I have performed outside a meeting? The answer is practically none.

Meeting provides an occasion for managerial activities. Getting together with others is not of course, an activity – it is a medium. You must choose the most effective medium you want to accomplish, that is one that gives you the greatest leverage.


Leverage of managerial activity

The output of a manager is the output of the various organizations under his control and his influence.

What can a manager do to increase his output? Let’s look at the concept of leverage.
Leverage is the measure of the output generated by any given managerial activity.

Managerial output = Output of organization = L1xA1 + L2xA2 + L3xA3 + . . ..
This equation says that for every activity a manager performs – A1, A2, and so on – the output of the organization should increase by some degree. The extent to which that output is thereby increased is determined by the leverage of that activity – L1, L2, and so on.

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.

Managerial activities can be increased in three ways:
1. Speeding up his work (increasing the rate with which a manager performs 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.


High leverage activities:

· When many people are affected by one manager.

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. An example of leverage that I hope can be positive is my talk in the orientation course. During the two hours I have, I try to impart a great deal of information about Intel – its history, its objectives, its values, its style – to a group of two hundred new employees. Beside what I say specifically, my approach toward answering questions and my conduct in general communicate our way of doing things to these employees when they are most impressionable.

Cindy, as you recall, is a member of a technical coordinating body in which she tries to disseminate her understanding of a specific technology to all of the company manufacturing groups. In effect, she uses the coordinating body as an informal training vehicle to effect high leverage on her counterparts in neighboring Intel organizations.

· 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.

A manager can also exert a high leverage by engaging in an activity that takes him only a short time, but those effects another person’s performance over a long time. A performance review represents a good example of this. With the few hours’ work that a manager spends preparing and delivering the review, he can affect the work of its recipient enormously. Here too a manager can exert either positive or negative leverage. A subordinate can be motivated and even redirected in his efforts, or the review can discourage and demoralize him for who knows how long.

Example of high negative leverage abound.
The manager becomes depressed. Though he didn’t realize it, he almost immediately began to effect people around him and soon depression spread throughout his organization.
Another example is waffling, when a manager puts off a decision that will affect the work of other people. In effect, the lack of decision is the same as a negative decision; no green light is a red light, and work can stop for a whole organization.

Both 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. Because the output of the organization will consequently be reduced in the long run, meddling is clearly an activity having negative managerial leverage.

· When a large group’s work is affected by an individual supplying a unique, key piece of knowledge or information.

This kind of leverage is exercised by a person with unique skills and knowledge. Designers, test engineers, etc. All are specialists whose work is important for the work of their organization at large. The person who comprehends the critical facts or has 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 provides leverage well beyond the others and concentrates on them.

For me, paying close attention to customer complaints constitutes high-leverage activity. Aside from making the customer happy, the pursuit tends to produce important insights into the workings of my own operation. Such complaints may be numerous, and though all of them need to be followed up by someone, they don’t all require or wouldn’t all benefit from my personal attention.

Which one out of ten or twenty complaints to dig into, analyze, and follow up is where art comes into the work of a manager. The basis of that art is an intuition that behind this complaint and not the other, lurk many deeper problems.


Delegation as leverage

The delegator and delegegatee 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 instruction. As in meddling, where specific activities are prescribed in detail, this produces low managerial leverage.

Picture this. I am your supervisor, and I walk over to you with pencil in hand and tell you to take it. You reach for the pencil, but I won’t let go. So I say, “What is wrong with you? Why can’t I delegate the pencil to you?”

We all have some things that we don’t really want to delegate simply because we like doing them and would rather not let go.

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. Because it is easier to monitor something with which you are familiar, if you have a choice you should delegate those activities you know best.

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.

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. As the subordinate’s work improves over time, you should respond with a corresponding reduction in the intensity of the monitoring.

To use quality insurance 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 production test turned out.

Making a certain types of decisions is something managers frequently delegate to subordinates. This is the 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 that he wants. This technique allows us to find out how good the thinking is without having to go through it ourselves.

Increasing Managerial Activity Rate: Speeding Up the Line.

Managerial output / time = L x Activity performed / time

L is the leverage of the activity.


Identify limiting step

In manager’s life some things really have to happen on a schedule that is absolute. For me, an example is the class I teach. (This is the time critical event). I know when it is going to meet, and I know I must prepare for it because over two hundred students will be expecting me. Accordingly, I have to create offsets and schedule my other work around this limiting step. In short, if we determine what is immovable and manipulate the more yielding activities around it, we can work efficiently.


Batching similar tasks

For our work to proceed efficiently, we should use the same set-up effort to apply across a group of similar activities. 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 needed for the task.

From my experience a large portion of managerial work can be forecasted. Accordingly, forecasting those things you can and setting yourself up to do them is only common sense and an important way to minimize the feeling and reality of fragmentation experienced in managerial work.

A factory is usually run by forecast and not by individual order. Forecasting and planning your time around key events are literally like running an efficient factory.

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.

Another production principle can be applied here: The manufacturing people won’t allow material to begin its journey through the factory if they think it is already operating at capacity. If they did, material may go halfway through and back up behind a bottleneck Instead, factory managers say “no” at the outset and keep the start level from overloading the system.

How much time do you need to read your email, to write your reports, to meet with colleagues? You may not know precisely, but you surely have a feel for the time required.

Your calendar as production planning tool:
1. You move toward the active use of your time calendar, taking the initiative to fill the holes between the time-critical events (limiting step) with non-time-critical events.
2. You should say “No” at the outset to work beyond your capacity to handle.

It is important to say “No” earlier rather than later because we’ve learned that to wait until something reaches a higher value stage and then abort due to lack of capacity means losing more money and time.

Remember too that your time is your one finite resource, and when you say “Yes” to one thing you are inevitably saying “No” to another.

Allow slack – a bit of looseness in your scheduling. There is optimum degree of loading, with enough slack built in so that one unanticipated event will not ruin your schedule for the rest of the day.

A manager should carry inventory in terms of projects. This inventory should consists 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 subordinate’s work.

Most production practices follow well-established procedures and, rather than reinventing the wheel repeatedly, we use a specific method that has been shown to work before. But managers tend to be inconsistent and bring a welter of approaches to the same task. We should work to change that.

As we become more consistent, we should also remember that the value of an administrative procedure is contained not in formal statements but in the real thinking that led to its establishment. 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.


Built-In Leverage: How Many Subordinates Should You Have . . .

As a role 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. The six to eight rule is for the classically hierarchical manager whose work is the supervision of others.

What about a know-how manager, the middle manager who mainly supplies expertise and information?
Even if he works without a single subordinate, servicing a number of varied “customers” as an internal consultant can in itself be a full-time job.

We should do everything we can to prevent little stops and starts in our day. The most common problem was uncontrolled interruptions, which in remarkably uniform fashion affected both supervisory and know-how managers.

Interruptions had a common source; most frequently coming from subordinates and from people outside the manager’s immediate organization but whose work the managers influenced.

If you can pin down what kind of interruptions you are getting, you can prepare those that pop up most often. Customer don’t come up with totally new questions and problems day in and day out, and because the same one tend to surface repeatedly, a manager can reduce time spent handling interruptions using standard responses. Having them available also means that a manager can delegate much of the job to less experienced personnel.

If you handle a group of similar chores at one time (batching), many interruptions that come from your subordinates can be accumulated and handled at staff and at one-on-one meetings. If such meetings are held regularly, people can’t protest too much if they’re asked to batch questions and problems for scheduled times, instead of interrupting you whenever they want.

The use of indicators, especially the bank of indicators kept over time. How fast you can answer a question depends on how fast you can put your finger on the information you need for a response. By maintaining an archive of information, a manager doesn’t have to do ad hoc research every time the request comes.

Understand that interrupters have legitimate problems that need to be handled. That’s why they are 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.