What should I work on? Whenever I enter a new problem, the first question is where to start. Where should I focus? The answer is often to look for leverage. If you’d like more explainers like this to help you find leverage in your work, hit that subscribe button.
Three Thoughts from Nate
If someone asked me to replace my MBA with books, the first book I’d pick is High Output Management by Andy Grove, the first CEO and longtime chairman of Intel. It’s more potent than any other business book out there. We’re going to talk about my favorite bits today.
In the first chapter, Grove uses a restaurant to illustrate how a product or service gets completed. Egg sandwiches specifically. When a customer orders an egg sandwich, there are a number of steps. Here’s the illustration found on page 5. (Not gunna lie sounds like a pretty lame egg sammy cause it has boiled eggs, but it was written in 1995, so we’ll let that go).
1. Limiting steps – By looking at the process, we can see that one step is longer than the others. Boiling the eggs. It takes longer than making the toast and pouring the coffee. So if we were trying to make this process faster, getting a better toaster wouldn’t help. We need to start with the limiting step.
a. Are there ways that the eggs could be boiled faster? Yes. By batching the eggs (boiling a whole bunch that morning) or by continuous production (a conveyor belt that moves an egg through boiling water). Which one is better? Can’t tell at this point.
2. Productivity – Increasing productivity doesn’t just mean doing the process faster. It’s doing the process faster, for the same or less cost, within an acceptable quality range. We could batch the eggs, but an already lame egg sammy would get even more lame if it had cold eggs on it. That’s outside the acceptable range. We could buy that continuous egg boiler, but how much is it? How many egg sandwiches do we need to make to recoup the cost?
3. Leverage – Suppose you have a star employee who can operate two egg boilers and toasters at the same time, making two sandwiches at once. You also have an employee who can only do one at a time.
a. The star employee has higher output (she’s making more) per activity than the regular employee. She has found a way “work smarter not harder” by increasing her process leverage.
b. Then, suppose that you as the manager decided to teach all of your employees how to operate like the star employee. This is managerial leverage. You can do one training at the beginning of an employee’s career and help them to increase the productivity of an entire system.
c. This leads to what I think is the most important line in the entire book. “Managerial Output = Leverage1 X Activity1 + Leverage2 X Activity2 + Leverage3 X Activity3”
d. If we are looking to increase the output, either we can work more frenetically and increase our activity OR we can figure out how to increase the leverage for that activity. (HINT. It’s almost always better to increase leverage). If you want to dramatically increase the sum, focus on the parts that are multiplied, rather than the parts that are added.
A Long Quote From a Book
This concept is so important that it’s the long quote for today too.
“Consider Robin, an Intel finance manager, responsible for setting up the annual financial planning process for the company. When Robin defines in advance exactly what information needs to be gathered and presented at each stage of the planning process and lays out who is responsible for what, she directly affects the subsequent work of perhaps two hundred people who participate in the planning process. By spending a certain amount of time in advance of the planning activities, Robin will help to eliminate confusion and ambiguity for a large population of managers over an extended period of time. Consequently, her work contributes to the productivity of the entire organization and clearly has great leverage, leverage that depends, however, on when it is performed. Work done in advance of the planning meeting obviously has great leverage. If Robin has to scramble later to help a manager define guidelines and milestones, her work will have much less leverage....
Leverage can also be negative. Some managerial activities can reduce the output of an organization. I mean something very simple. Suppose I am a key participant at a meeting and I arrive unprepared. Not only do I waste the time of the people attending the meeting because of my lack of preparation – a direct cost of my carelessness –but I deprive the other participants of the opportunity to use that time to do something else.”
We’ve all likely had managers who were high leverage giving us the tools we need, when we need them, to do better work. We’ve probably also had low leverage managers. Managers who make things WAY harder than they have to be by focusing only on rate of activity, rather than leverage for the activity.
The trick is, we’ve also all been both of those managers for ourselves. Sometime today, sit quietly with yourself and see if you the manager can help you the employee find some leverage. One question that I’ve often found helpful is from Gary Keller, of Keller Williams Real Estate.
“What’s the ONE thing I can do, such that by doing it, everything else will be easier or unnecessary?”
Try it. You might find some leverage!
Until soon,
-Nate