General Management, Session 1

Defining Management

Using historical documents and some first-hand accounts from managers, we will try to agree on a definition of “management.” In this session, we will also discuss some wildly different management situations – a textile mill, a railroad, a semiconductor maker among them – to see what we can learn from each.

Assignment

Course materials

• Grove, introduction, Chapters 1-2, and pages 43-47.
• McCallum, as numbered in document, pages 33-35 and 45-48 (“Telegraph Rules”).
• Prepare to discuss the following:
  • What is management to you?
  • Do McCallum and Grove agree or disagree with you? With each other?
  • What was hard about McCallum’s job? Grove’s?
  • Compare Grove’s schedule to your own for a typical day. What do you notice?

Why is everyone here?

I want to get better.
I want to raise my game.
I don't want to be the worst boss ever.
I care about what I do.
I want to do a good job.
I want to have opportunities in the future, in my career.

This is happy ambition.

Real Self

I'm having a hard time with ___. I need help to ___, so that I can ___.

What is special about these sentences? We're asking for help – rare in the day to day of a A++ person. We're offering vulnerability.

Incredibly human picture of someone who is vulnerable enough to ask for help, and brave enough to set a path for where they're going.

Lukas Fittl: I am having a hard time with scaling beyond my own efforts in my own startup. I need help to delegate better, so that I can focus on growing the business.

John Toth: I have a hard time prioritizing and responding timely to things asked of me, especially the important things. I need help to get organized so that I can execute at a hight level.

Audrey Liu: I am having a hard time carving out enough time for myself to think at work. I need help prioritizing and saying now, so that I can focus on what really matters for my team like setting vision.

Chris Romer: I’m having a hard time finding great candidates for my department. I need help to recruit the right people so that I can get the right talent.

Ehsan Noursalehi: I am having a hard time handling situations at work where I see my coworkers making mistakes I have made before. I need help providing more constructive feedback so that I can be more effective at helping my team.

Brandon: I am having a hard time with managing expectations with clients and presenting results in a clear manner. I need help to improve my communications so. I can create better outcomes for clients.

Adam Kazwell: I’m having a hard time with chasing too many initiatives. I need help to reign in scope, so that I can deliver more, faster - to build momentum with the team.

Diogo Guerra: I am having a hard time with scaling my second line of managers. I need help to make them better managers so that I can spen less time on tactical needs and focus on strategic needs of the company.

Will Robins: I’m having a hard time trusting my teammates abroad to deliver quality work, on time. I need help with setting objectives with them so that I can better track their progress and ensure what’s being worked on aligns with the need

Michael Eggers: I’m having a hard time scaling my hands-on management style as the team grows. I need help to redefine my management style so I can help my team do great things for the company.

Ryan Hamilton: I am having a hard time prioritizing. I need help articulating a clear strategy, so that I can help my team achieve their goals and manage their employees

Jessica Rusin: I am having a hard time with prioritization as our company scales. I need help with priorities, so that I can ensure I am focused on the highest impact projects enabling the business grow efficiently

Juliana Albano: I’m having a hard time with motivating my team. I need help to prioritize their work through deadlines and goals, so that I can reach my larger departmental goals so our programs can grow.

Andrew Alger: I am having a hard time defining objectives & career paths. I need help developing strategies, so that I can empower designers I work with.

Matthew O'Connor: I’m having a hard time managing confidently. I need help with the delegation/execution balance so I can optimize our team’s performance and happiness.

Terrence Cummings: I am having a hard time with understanding context in my company. I need to help understand our fundamental performance, so that I can maximize my contribution.

Eric Greenstein: I am having a hard time with being the youngest person on my team and new to the company / industry. I need help gaining the trust of my colleagues and becoming more influential.

Gina Pak: I am having a hard time with thinking quickly on my feet. I need help to be more confident so that I can be a better leader.

Brittany Stich: I am having a hard time prioritizing the urgent versus the important. I need help debating these various priorities so I can use my time more effectively to help support my team meet critical objectives and move our business forward.

Christian Warden: I am having a hard time growing my business. I need help learning to how to hire or outsource effectively so I can avoid being a bottleneck in taking on additional business.

Me: I'm having a hard time balancing IC work vs management, planning vs execution, friendships vs professional relationships, work vs life in general. I need help to manage time and critically measure outcomes, so that I can be as successful as possible in every direction.

J-Ro: I am having a hard time with prioritizing obstacles and opportunities. I need help to focus, so that I can move into my next career phase helping founders more effectively.

It's incredibly easy to assume that everyone around you is not struggling with anything. It's a relief to know we're all struggling with something.

🃏 Build Your Deck: Real Self

World GDP per capita

Flat for 800 years from AD 1000-1800; then a rocket ship took off going into year 2000. Per-person productivity went through the roof.

For most of human history, we've spent our energy on finding food, killing, conquest, invasion, slavery, suppression of all political belief outside of the 1-2 people in power, total exclusion of half the population from any sort of economic and political freedom.

What changed in the inflection point in the 1800s was everything. Industrialization happened. The steam engine provided new sources of power and the ability to mechanize and operate at outrageous scales and speed. Machines that were powered by something other than an animal or a person were strung together in productive chains.

This economic engine gave us the financial means to fix the very worst parts of life on Earth.

This great wealth came with one other requirement: general management. Alfred Chandler, a historian at Harvard, basically invented the field of business history. He lauded Joseph Schumpeter for "creative destruction" as entrepreneurship

And it's not just about the short-term pursuit of wealth – it's the lasting impact on civilization. Increases in wealth are allocated to schools, to research institutions, to public services.

Wealth stimulates the economy and generates returns that go back to investors, for sure. But keep in mind that most of the money funding Silicon Valley is from public institutions: pension funds, research institutes, etc. Don't think of the two things as separate. Don't think that individual wealth is separated from civilization.

Civilization depends on you. (no pressure)

We're going to zoom in on three parts of the GDP curve:

• 1800s – textile revolution in New England
• 1850s
• 1950-2000 – technology revoluatino

In each of these periods, the best and the worst of us are woven together.

Sam Slater (from reading) had an amazing story and transformed industry, but his innovation came from slavery – American slaves picked every piece of cotton that went through his mill.

It's OK to hold both of those thoughts in your head at once.

Some grounding:

• Relax – all of this has happened before.
• General management scales founder genius. Key ingredient in that inflection point – not just entrepreneurs and inventors, but people who could make 50, 500 people work together.
• The best and worst of us are woven together. Every single case we talk about in the class is human, and they were people of their times.

🃏 Build Your Deck: Industrial Revolution

McCallum

Played a huge role in the victory of the Union over the Confederacy in the Civil War. Glad he was on our side – if he fought for the Confederacy, we would be talking about something else right now.

Born in 1815 in Scotland; came to upstate New York as a 7 year old boy. Father was a tailor. Became an architect, then started building bridges, which ended up as the "unlocking moment" of his career.

Self-taught bridge builder; created a patentable design for a bridge: the rigid arched truss bridge. Cheaper to build and maintain than any other wood bridge of its time.

Was an individual contributor building bridges, promoted to manager, promoted to director of a whole branch of the Susquehanna Railroad, then ultimately promoted to general manager of the whole thing. Suddenly became in charge of everything involved in a railroad (labor, etc) with zero general management experience.

This is the context of the letter he wrote – after taking over the railroad, proposed a new plan for organizing the company (without ever managing a company before).

What's hard about running the railroad?

The scale of the operation was really scary. Coordination and communication between people was extremely difficult.

Between the 50 mile railroad he was used to, and the overall, stitched together 500 mile road, there were many differences:

• Hard to communicate that far
• People knew each other on the 50 mile road; not so much for 500
• Cost per mile wasn't what everyone expected

Cost per mile was much greater for the 500 mile road than the 50 – exactly the opposite of expectations. Why is it going up instead of down?

• Trying to fix far away problems without full context – bandaids instead of real solutions.
• A lot more overhead and headcount; have to hire a ton of people on the ground.
• The catastrophic cost of being wrong on the road is real – accidents, sloppy waste, people dying.
• Need more complex systems to manage the longer road.

This 50 mile vs 500 mile device is very useful. In your world, it’s sometimes useful to analogize it to a 5 person team to a 50 person team.

What does he think his job is? How does he implement his idea of management?

Quality control, perfection.

No idea of what he was doing, so might as well make a list for how to do his job – doesn't that sound familiar?

How to divide power, how to hold people responsible. McCallum's General Principles defined authority: which roles/people can make which decisions.

A proper division of responsibilities.Sufficient power conferred to enable the same to be fully carried out, that such responsibilities may be real in their character.The means of knowing whether such responsibilities are faithfully executed.Great promptness in the report of all derelictions of duty, that evils may be at once corrected.Such information, to be obtained through a system of daily reports and checks that will not embarrass principal officers, nor lessen their influence with their subordinates.The adoption of a system, as a whole, which will not only enable the General Superintendent to detect errors immediately, but will also point out the delinquent.

All stick and no carrot – "two sticks". If we were to make it a perfectly operating system, then it'll be great; the cost per mile will definitely go down.

Thinks that he can anticipate and solve any problem that he will ever encounter. Like the telegraph rules, he wrote how he could deal with and solve every conflict.

McCallum's definition of management

🃏 Build Your Deck: McCallum's Five DutiesGet a group of people together to work on common goals.
Give people the right amount of responsibility.
Make sure the job gets done.
Know how things are going along the way and improve them.
Do all this with respect for others.

You will play this card all the time – there's not a day where Michael Dearing doesn't pull it out to do a diagnostic.

Give yourself a 1-10 score on each of those. The low-scoring things are what you need to zoom in on as a general manager.

If you only had this one card in your deck, you would be in the 90th percentile of all general managers.

Diogo Guerra: I think one of the biggest challenges with managers is about delegation but the hard part is that we need to empower people. However once empowered they will not ace at doing that task/challenge. We need to see it working to ignore the initial failures as part of the long term success.

What happened to McCallum?

Everything you would expect from a two sticks, no carrot approach.

His workers went on strike three times – 70 years before striking became part of the labor playbook of America.

Diogo Guerra: McCallum built a "company of dummies". No one thought for themselves. When problems arose, only he could solve them. Maybe not as critical those times, but currently is very big problem.
I'm been facing this problem as well. I've gone through a phase of over prescribing roles / org. Specially engineers love it, is like a user manual. However what I've observed is that then people limit themselves and assume boundaries that we never thought.

So McCallum quit, a failure of being a general manager. But his MO ended up being amazing for being the master of railroads of the Union Army: he was able to commandeer the railroads to supply General Sherman in his march to the South. And his attempt to manage that ended up destroying the institution of slavery in the US – again, the best and worst of humans existing simultaneously.

Andy Grove

Book notes here

Hungarian Jew, escaped from revolution in Europe shortly after World War II, came to the US to get his graduate degree at Cal. Incredibly accomplished engineer, got attention from managers, learned how to run a great business.

By the time I was twenty, I had lived through a Hungarian Fascist dictatorship, German military occupation, the Nazis' "Final Solution," the siege of Budapest by the Soviet Red Army, a period of chaotic democracy in the years immediately after the war, a variety of repressive Communist regimes, and a popular uprising that was put down at gunpoint... [where] many young people were killed; countless others were interned. Some two hundred thousand Hungarians escaped to the West. I was one of them.

What's hard about running Intel?

• Intel had to transition from making memory to making CPUs, a very uncertain transition
• Competition was very intense
• Tech was changing fast and unpredictably so
• Intel had a lot of really smart, old school technologists, all hugely in demand and minutes away from getting a job offer at twice the salary. The talent market was crazy.

How does Grove implement his idea of management?

To bother with writing down the story of the stupid egg-making machine, really emphasized how important it was to him that people understand process and scaling processes.

Underlying principles are simple. If you can learn the principles in something simple like scaling a breakfast-making factory, then you can apply them anywhere.

• Manage risk by process design and quality monitoring. Don't wait until you have a complete product. Check in during the middle of the line. Cut little windows in the process – how's that going? If it's going badly, I need to know now, while the value is relatively low.
  • Keep tabs on inventory levels
  • Product line level – the decision to leave memory and go 100% into CPUs was one of the most important decisions Intel would ever make.
• Gather information so you can make decisions early, before they become too expensive. Gather as much info as possible while it's cheap and plentiful, so you can plug it in the right place and use it in the right ways.
  • Pool sampling to identify if there's an issue at any stage, if it extrapolates to the whole population. Important for both people and process management – take a little dip stick sample to think about what's going on as a whole. Figure out when talent is disgruntled.
  • Measuring vs. plan. He elevated the idea of setting a goal and measuring how we're doing against the goal to an art form.
  • Keeping close tabs on what's happening, then pass on tidbits to your people.

The black box

By peering through the windows in the black box, we can get an idea of what the future output is likely to be. 

It's not a transparent box. There are windows, presumably against the most important subprocesses of the box – the general manager is empowered to identify the right windows to measure; somebody is then empowered to keep track of the measurement and act when things change.

What are we actually building? Who's going to do what? How's it going along the way?

What's missing from the black box? How the components interact with each other, it's possible to falsify information (accidentally or otherwise). You could be very happy with the output, with what you measure, but there could be dysfunctions deep inside.

But we can add shock absorbers on the box that could dampen the risk of someone lying, or any other inefficiences.

• It could all come out eventually – if you watch for enough time, you'll be able to see the pile of inefficiently allocated resources.
• Grove would also just walk around the black box, collect more observations, to hasten discovery of these issues.

It doesn't have to be a black box; it could be a garden or a pasture of dairy cows. You're still banking on output, still measuring, still working on opportunities for improvement.

Your job as a general manager is to create the conditions where they can produce the most of what they need to produce. The answer is output.

Leverage

High leverage tasks have the best results: better posture, better outcomes.

Only the general manager has the ability and the perspective to look at the black box and figure out leverage: holistically, adjust step 9 to scale the team and scale output.

Andy Grove's schedule

The mechanism was:
63% in meetings and telephone calls
20% group speaking engagements, talking to clusters of people
17% on mail

But the core purpose was:
60% influencing work of others
12% gathering information
20% transmitting info to others

Mostly gathering information, giving suggestions. Delegating out the actual decision-making. Nudging to influence the actions of others.

It can seem like torture (but is often most effective) to go home at the end of the day and not have your name on any single piece of output.

McCallum felt he knew what had to be done; Grove often wanted to empower others to figure out what needed to happen next.

• Tools available for Grove: management by walking around, deeply technical talent pool that can be trusted to do the right thing. Grove was managing creatives and knowledge workers.
• Tools available for McCallum for windows into the black box: telegraph, that's it. McCallum was managing a very different type of worker.

Andy Grove was an amazing individual contributor, but look at what he writes about: basically none of the IC work. Terrific example of how to release your love of IC work, how to have other people do the work without having your ego hurt or having to put your hands on it.

General management is an amazing career path, but you have to choose it for yourself – don't let your bosses or your board decide you don't have it in you. Often in a high growth company, you start seeing strangers come in and take the good roles – someone decided that the person who's being replaced or layered didn't have what it takes. Don't let someone else make that decision for you.

🃏 Build Your Deck: Black Box

🃏 Build Your Deck: Grove's Leverage Points

How would you convince your company to switch from memory to microprocessors? Play the Industrial Revolution card. Tell a story about the last 1000 years on Earth.

Reading: How The Paranoid Survive
If we all got hit by a bus, and the board puts in an A+++ team to take our place, what would they do?

If the A+++ team would exit memory and do semiconductors, why don't we just walk outside and act like they would do? Liberates you from the baggage of the past.

What about managing creative processes that need to be repeated over and over again?

Christina Hedberg: This is more of the individual perspective but I highly recommend the book “The Creative Habit” By Twyla Tharp. She has this conquered.

Summary

These two people came from radically different places, times, geographies, but had similar sparks of insight.

1. Management's "visible hand" amplifies entrepreneurial genius (Chandler)
2. Management maximizes group output (Grove)
3. Five sacred duties of managers (McCallum):
   1. Establishing common goals
   2. Dividing work and authority
   3. Delivering results
   4. Evaluating performance
   5. Improving humanely