Book Notes: High Output Management
High-Output Management
The Basics of Production
The three minute egg: an encapsulation of production in a well-known scenario. Let’s dive into the process needed to create a breakfast consisting of a cup of coffee, buttered toast, and a boiling egg.
We must first find the limiting step - in this case, it’s the boiling of the egg. We can work backward from the time of delivery, with an understanding of the limiting step, to determine when to start each step other step, leaving time for assembly.
Production Operations
Three fundamental types:
- Process: activity that physically or chemically changes material
- Assembly: components are put together to constitute a new entity
- Test: components are subjected to an examination of its characteristics
These steps can be readily applied to very different kinds of productive work, such as training a sales force to sell a new product.
What happens when other complications such as a line for the toaster emerge? We could
- hire specialists to run each part of the system, although this involves a ton of overhead and costs a lot
- Ask another waiter to help, though results are likely more unpredictable
- Add another toaster, although this is costly capital equipment
- Run the toaster continuously and build up an inventory, throwing away everything not used
If we built an automated machine, we would be sacrificing flexibility for continuous delivery. To ensure that things are working, we need to add a test step, either taking a finalized product and testing it or measuring various proxies during the process.
We must also determine what our raw material inventory should be. Inventory costs money, but if incoming materials are delayed or unsatisfactory, the raw material inventory can be used to continue production without stoppage.
As materials flow through the process, each step adds value. We must try to fix problems at the lowest-value step.
Managing the Breakfast Factory
To determine output and efficiency, you need indicators. The 5 basic indicators that provide a good sense of what’s happening are:
- Sales forecast for the day
- Raw material inventory - too little and order more, too much and cancel incoming orders
- Equipment - is anything broken?
- Manpower - are people out sick or unavailable to work?
- Quality. Customer complaint log? Your business depends on people wanting what you sell
Indicators can cause us to overreact, as we focus and optimize for them. Indicators should be paired with a counter-effect, so that if we’re focused on lowering inventory levels, we should also monitor the incidence of shortages.
Indicators should measure output, not activity involved. Countable things should be paired with quality indicators.
Leading indicators give one a view inside the black box of production. They can help prevent a problem before it becomes a problem. However, you should only use ones you trust; otherwise, all they give you is anxiety.
Linearity indicator provides a simple and helpful leading indicator over time, allowing us to determine future rates of return required over observed. Trend indicators let’s us extrapolate from past results to the future.
Controlling Future Output
Some industries are build to order: you make a purchase, then they build it. However, to decrease the time between purchase and receipt of goods, one will need to build to forecast and contemplate future orders. However, this causes some inventory risk.
Productivity
Productivity is the measure of output over time/labor. Increasing productivity should always be in the mind of a manager. There are a few ways to do this:
- increase employee activities per hour, by hiring more employees
- Increase the leverage of each employee, allowing or output per employee
- Reduce activity need to product. Work simplification, the process of identifying all of the steps of the process and eliminating friction points, can often reduce the number of steps by 30-50%
Management is a Team Game
Managerial Leverage
A managers output is the output of their organization and the output of the neighboring organizations under their influence. Why? Because work is done by teams.
Usually the most casual verbal exchanges are where the most useful information comes. So why are written reports necessary? They:
- provide an archive
- Validate ad hoc inputs
- Allow catching of anything missed They also are mediums of self-discipline for the writer: the author is forced to be more precise than they might be verbally. The writer is forced to impose upon himself as he identifies and deals with trouble spots in his presentation
There is a hierarchy of information - verbal offhand comments are valuable but often sketchy and incomplete, while written reports may have a positive spin but are well constructed.
Can managerial activity such as information gathering, information giving, decision making, nudging, and being a role model happen outside of meetings? Getting together with others is not an activity, but rather a meeting, for managers to do work.
To delegate effectively, both parties have to have a shared base of knowledge - otherwise, instructions need to be described in detail.
Delegation without follow through is abdication - you can never wash your hands if a task. You are still responsible for it.
Delegate the activities you know best, as you can truly monitor their progress. Adjust monitoring cadence based on the task-relevant maturity that that person has, reducing over time as they gain experience.
Think of the managers calendar as a medium of production. It should not be a repository of orders (people putting time on their calendar) but should be a production and forecast planning tool, scheduling work that is not time critical between the limiting steps in the day. Like a factory, managers should understand their capacity and say no at the outset and keep the start level from overloading the system, otherwise a backup at a bottleneck might arise.
A manager should have raw material inventory - projects that need to happen but don’t need to finish right away - when slack or pauses in schedules come up. Try to standardize what we do, and leverage the early time we spent thinking about a process.
Meetings - The Medium of Managerial Work
Since part of a managers role is to co very information and preferred methods of approach, meetings are a necessity. We should not be fighting their existence but rather using the time spent as efficiently as possible.
1:1s are the subordinates meeting. For good reason - each subordinate has to prepare only once per meeting, or the manager would have to prepare 8 times.
1:1s cadence should be proportional to the subordinates task maturity.
Staff meetings should only include discussions that are relevant to more than two people in the meeting. The discussion and confrontation between subordinates is a great way to learn detailed information a manager might not get elsewhere.
I didn’t take notes after a certain amount, as I read through the rest of the book racing against the clock to finish this book by the end of 2021, to complete my books-read goal.
