“High Output Management” – Part 3

We established the fact that the game of management is a team game: a manager’s output is the output of the organizations under his supervision or influence. 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.

💡Hybrid organizations

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 balancing act to get the best combination of responsiveness and leverage.

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. All other considerations favor the functional-type of organization. But the purpose 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.

Here I would like to propose Grove’s Law: All large organizations with a common business purpose end up in a hybrid organizational form.

💡Dual reporting

To put a men on the moon, NASA asked several major contractors and many subcontractors to work together, each on different aspect of the project. An unintended consequence of the moon shot was the development of a new organizational approach: matrix management. This provided the means through which the work of various contractors could be coordinated and managed so that if problems developed in one place, they did not subvert the entire schedule. Resources could be diverted, for example, from a strong organization to one that was slipping in order to help the latter make up lost time.

Where should plant security report?

The discovered conclusion is that, for example, security personnel should report jointly to the corporate security manager and the local plant manager. The first would specify how the job ought to be done, and the second would monitor how it was being performed day by day.

Could an employee in fact have two bosses? The answer was a tentative “yes”, and the culture of joint reporting relationships, dual reporting, was born. It was a slow, laborious birth.

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.

Based on author perspective, it’s not because Intel loved ambiguity that they became hybrid organization. They have tried everything else, and while other models may have been less ambiguous, they simply didn’t work. 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.

💡Modes of control

Let’s look at the ways in which our actions can be controlled or influenced. Say you need new tires for your car. You go down the street to the dealer and take a look at the various lines he has to offer. Then you’ll probably go up the street to see what the competition has. Maybe later you’ll turn to a consumer magazine to help you choose. Eventually, you’ll make a decision based on one thing: your own self-interest. You want to buy the tires you think will meet your needs at the lowest cost to you. It is quite unlikely that any personal feelings toward that tire dealer will come to mind. You are not concerned about his welfare – there’s not much chance that you would say to him that he isn’t charging you enough for the tires.

Now you have the tires on your car and you drive off. After a while, you come to a red light. You stop. Do you think about it? No. It’s a law established by the society at large that everybody stops at a red light and you unquestioningly accept and live by it. Vehicular chaos would reign if all drivers had not entered into a contract to stop. The traffic cop monitors adherence and penalizes those who break the law.

After the light changes, you continue on down the road and come upon the scene of a major accident. Quite likely, you’ll forget about laws like not stopping on a freeway and also forget about your own self-interest: you’ll probably do everything you can to help the accident victims and, in the meantime, expose yourself to all kinds of dangers and risks. What motivates you now is not at all what did when you were shopping for tires or stopping at the red light: not self-interest or obeying the law, but concern about someone else’s life.

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

There is always a most appropriate mode of control, which we as managers should find and use. How do we do that? There are two variables here: first, the nature of a person’s motivation; and second the nature of the environment in which he works. An imaginary composite index can be applied to measure an environment’s complexity, uncertainty and ambiguity, which we’ll call the CUA factor.

Let’s apply our model to the work of a new employee. What is his motivation? It is very much based on self-interest. So you should give him a clearly structured job with a low CUA factor. If he does well, he will begin to feel more at home, worry less about himself, and start to care more about his team. He learns that if he is on a boat and wants to get ahead, it is better for him to help row than to run to the bow. The employee can then be promoted into a more complex, uncertain and ambiguous job.

This is the 4th article built as a summary from the book “High Output Management” by Andrew Grove. Enjoy it and feel free to leave a comment if you have questions or any kind of observations. And if you like it please share! Thank you for reading! 🤗

1 thought on ““High Output Management” – Part 3

  1. Pingback: “High Output Management” – Part 4 | alin miu

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