operations

The Goal by Eliyahu Goldratt and Jeff Cox

The Big Idea: identify the bottleneck.  Relieve the bottleneck.  Repeat.

  • The Goal is one of Jeff Bezos’ three required books for his senior team. (Also, Effective Executive and Innovator’s Dilemma)
  • Cost accounting conventions lead businesses to focus on the wrong things.
  • The goal of a business is to make money. Therefore, every operational metric should link back to profit.
  • There are only three operational metrics that matter: 1) throughput, 2) inventory, 3) operational expense.
  • Throughput is money generated when products go out the door.
  • Inventory is money locked up in work in process until products go out the door.
  • Operational expense is money required to generate throughput.
  • Of these, throughput is by far the most important.
  • The most important objective is to increase throughput.
  • How do you increase throughput?  Identify the bottleneck (ignore everything else), relieve the bottleneck, repeat.

High Output Management by Andy Grove

The Big Idea: Understand the principles of factory production and apply them to business management.

Chapter 1: The Basics of Production

  • Focus efforts on identifying and fixing the bottleneck (limiting step) in the workflow

Chapter 2: Managing The Breakfast Factory

  • Define good KPI’s.
  • Understand JIT inventory management.
  • Automate things to improve work leverage.

Chapter 3: Managerial Leverage

  • Judge a manager by the results of his team.
  • Results are what matter; not effort.
  • Most of a manager’s time is spent acquiring information, which is critical to making good decisions.
  • The most important resource for a manager is his time.
  • Being prepared for meetings saves a lot of other people’s time.
  • Investing time preventing someone important from quitting saves lots of time finding a replacement.
  • New employee orientations are important to do well since new employees are most impressionable.
  • Meddling too much can hurt performance in the long-run.
  • Delegation is another way to improve leverage.
  • When you delegate, you must still monitor and follow up.
  • When reviewing reports, ask to see the rough draft to add feedback as early as possible.
  • Batch similar tasks together to save time.
  • Use your calendar to manage your work and minimize interruptions.
  • Have some free-time projects to tackle during downtime.
  • Six to eight subordinates is about right.
  • Minimize interruptions and documenting FAQs, delegating, batching, and having fast access to information (KPI).

Chapter 4: Meetings

  • Meetings have a bad name, but they add lots of value if done well.
  • Regular meetings allow managers to batch decisions and batch information sharing.
  • One-on-ones are great for teaching, sharing information, and building relationship.
  • One-on-ones can start out weekly and move to monthly.
  • One-on-ones should be about an hour.
  • Staff meetings are to discuss issues and offer solutions.
  • Staff meetings should have an agenda and an open discussion session.
  • Mission oriented meetings are ad-hoc and designed to produce a key decision.

Chapter 5: Decisions

  • Be wary of groupthink in group decisions.
  • Be wary of peer-plus-one in group decisions, where everyone automatically agrees with the senior manager’s opinion.

Chapter 6: Planning

  • Understand basic factory production principles.
  • Apply Management By Objectives (Key Objective, Key Results) and review every quarter or every month.

Chapter 7: The Breakfast Factory Goes National (Scaling)

  • The central tradeoffs when scaling is centralization/decentralization.  (Buddhism/Catholicism in Scaling Up Excellence.)

Chapter 8: Hybrid Organizations

  • Mission-oriented companies are completely decentralized.  Units work towards the mission but operate independently.
  • Functional companies are completely centralized.
  • Most companies are a hybrid of mission-oriented and functional.

Chapter 9: Dual Reporting

  • Matrix management means employees can have two supervisors (their business unit supervisor and their functional unit supervisor.)
  • For example: a controller can report to the CFO and also to the business unit general manager.

Chapter 10: Modes of Control

  • Sometimes you will motivate by money, sometimes by contract, and sometimes by shared cultural values.

Chapter 11: The Sports Analogy

  • Management is a team activity.
  • Employee performance is a function of training and motivation.
  • Understand where on Maslow’s Hierarchy the employee is at.
  • Most people are competitive and motivation is a given in competitive sports, so try and turn work into a game by providing instant feedback and metrics.

Chapter 12: Task-Relevant Maturity

  • Provide detailed instructions to an inexperienced employee.
  • Establish monitoring and then give experienced employees freedom and autonomy.

Chapter 13: Performance Appraisals

  • Performance reviews are absolutely necessary.
  • Level, listen, and leave yourself out.
  • Document everything.
  • Give the review in writing, first, and then meet later in person to review.

Chapter 14: Two Difficult Tasks

  • Interviewing is just about impossible.
  • Do everything you can to save a valued employee who wants to quit.

Chapter 15: Compensation as Task-Relevant Feedback

  • Some employees view salary as a means to pay for living expenses.  Some employees view salary as a measuring stick to compare to others.
  • Performance bonuses should be partly individual, partly team, and partly organization.
  • Performance bonuses should be linked to objective metrics.

Chapter 16: Why Training Is the Boss’s Job

  • Don’t hire external trainers to train employees if you can do it yourself.
  • Managers should learn how to teach a formal course to employees.

 

Scaling Up Excellence by Robert Sutton and Huggy Rao

THE BIG IDEA

Scaling is a ground war, not just an air war. Scaling requires grinding it out; building the organization brick by brick, day after day. One more metaphor…it’s a marathon, not a sprint.

META LESSONS

1. All scaling issues are basically the same across all organizations and industries.
2. Scaling entails more than the Problem of More. You must grow AND get better.
3. People who are adept at scaling excellence are comfortable with the uncertainty and mess that accompanies scaling.
4. Scaling starts and ends with individuals.

SCALING MANTRAS

1. Spread a mindset, not just a footprint.
Running up the numbers and putting your logo on as many people and places as possible isn’t enough.
Examples: Facebook Bootcamp

2. Engage all the senses.
Bolster the mindset you want to spread with supportive sights, sounds, smells, and other subtle cues that people may barely notice, if at all.
Examples: Disney theme parks

3. Link short-term realities to long-term dreams.
Hound yourself and others with questions about what it takes to link the never-ending now to the sweet dreams you hope to realize later.
Examples: Stanford Directors College

4. Accelerate accountability
Build in the feeling that “I own the place and the place owns me.”
Examples: NovoEd

5. Fear the clusterfug.
The terrible trio of illusion, impatience, and incompetence are ever-present risks. Healthy doses of worry and self-doubt are antidotes to these three hallmarks of scaling clusterfugs.
Examples: Oracle Financials at Stanford

6. Scaling requires both addition and subtraction.
The problem of more is also a problem of less. What got us here won’t get us there. There is time to take down the scaffolding.
Examples: IDEO, Cost Plus Market

7. Slow down to scale faster – and better – down the road.
Learn when and how to shift gears from automatic, mindless, and fast modes of thinking (system 1) to slow, taxing, logical, deliberative, and conscious modes (system 2); sometimes the best advice is, “Don’t just do something, stand there.”

——————————————————————–
PART I. SETTING THE STAGE
Chapter 1. It’s a Ground War, Not Just an Air War
Chapter 2. Buddhism Versus Catholicism

PART II. SCALING PRINCIPLES
Chapter 3. Hot Causes, Cool Solutions
Chapter 4. Cut Cognitive Load: But Deal with Necessary Complexity
Chapter 5. The People Who Propel Scaling: Build Organizations Where “I Own the Place and the Place Owns Me”
Chapter 6. Connect People and Cascade Excellence: Using Social Bonds to Spread the Right Mindset
Chapter 7. Bad Is Stronger Than Good: Clearing the Way for Excellence

PART III. PARTING POINTS
Chapter 8. Did This, Not That: Imagine You’ve Already Succeeded

——————————————————————–

PART I. SETTING THE STAGE

Chapter 1. It’s a Ground War, Not Just an Air War; Going Slower to Scale Faster (and Better) Later
-scaling requires grinding it out
-make one small change after another, day after day
-never leave well enough alone
it’s a marathon, not a sprint
-7 scaling mantras (see above)

Chapter 2. Buddhism Versus Catholicism
-Buddhism: mindset guides behavior, but actions and practices vary wildly, KFC/Taco Bell/Pizza Hut in China, Joie de Vivre hotels,
-Catholicism: actions and practices are replicated identically, In-N-Out, See’s Candies
-constant tension between replicating tried-and-true practices and modifying them (or inventing new ones) to fit local conditions
success requires balance between Buddhism and Catholicism
-examples: IKEA in China, Atul Gawande and surgical standardization, Girl Scouts of Northern California, Starbucks, McDonald’s
-start with a great template and customize it
customization of a template instills a sense of ownership in people
-references: Mindset by Carol Dweck, Switch by Chip and Dan Heath
-scaling tradeoff “alone versus together”: shunning partners can slow growth but retain quality and consistency
-scaling tradeoff “more versus better”: grow faster might cost quality, sometimes quality can rebound
understand these tradeoffs and make a clear decision

——————————————————————–

PART II. SCALING PRINCIPLES

Chapter 3. Hot Causes, Cool Solutions
-a hot cause (crisis) triggers attention, emotional energy, and commitment
-when changing a culture, focus on both beliefs and actions
-when getting people to rally behind a hot cause, the key is creating experiences that generate “communities of feeling”
-it is harder to break a commitment when you have proclaimed it publicly
don’t foster a heroic mindset, where problems are continuously resolved with quick fixes by heroes instead of finding permanent solutions
-focus on creating good systems and a continuous improvement mindset
-strategy: name the problem to galvanize efforts, ex: “date rape”, “100,000 Lives Campaign”
-strategy: name the enemy to create some team spirit, ex: Apple vs Microsoft
-strategy: make efforts highly visible, Cialdini’s public commitments and accountability, ex: Gandhi’s Salt March
-strategy: breach assumptions, ex: IDEO CEO desk
-strategy: create gateway experiences and on-ramps, ex: teddy bear, security blanket, Chrysler factory cleanups,
-strategy: new/better rituals, Omnicell coatracks to check ego at the door
-strategy: lean on people who can’t leave well enough alone, identify and promote change promoters, ex: Charlotte Beers at Ogilvy Mathers
-tradeoff between poetry and plumbing, poetry can inspire people, plumbing makes things work
-example: Stanford bike helmets and smashed watermelons

Chapter 4: Cut Cognitive Load
-new rules, processes, and technologies can create cognitive overload
-cognitive overload can obscure focus, lower motivation, increase errors, decrease effectiveness
as teams get bigger, individual performance suffers
-J. Richard Hackman rule of thumb: no more than 10 people in one work team
-Dunbar number is 150 people
-at some point, bloated bureaucracies overwhelm the advantages of greater scale
-most startups are too small to suffer from Big Dumb Company disease but lessons still apply
people say they dislike hierarchies, but studies show they are happier, calmer, and more productive when power and status differences are present and well understood
-strategy: subtraction is a way of life, routinely refactor to remove bureaucracy
-ex: scaffolding in construction is needed at the beginning but always removed
-A.G. Lafley: keep things Sesame Street Simple
-strategy: make people squirm, killing bureaucracy is always a little scary, ex: Pixar’s Incredibles
-strategy: bring on the load buster (subtraction by addition), tools that focus attention to what matters, ex: Sberbank’s traffic light system, ex: checklists
-strategy: divide and conquer, divide large teams into smaller teams, ex: hospital pods, carefully think through coordination between small teams, bonus for team/organization performance not individual performance, ex: Ben Horowitz Freaky Friday
-strategy: bolster collective brainpower
-stick with savvy insiders and stable teams over new hires and new blood
-put together people who’ve worked together on new teams
-a team of smart people doesn’t automatically mean success
-fatigue and burnout hurts performance and decision making, so make sure everyone gets plenty of physical and mental rest
-it’s a marathon, not a sprint
-more hiring, more processes, and more rules are inevitable but wait until they are absolutely necessary
-Ben Horowitz says “give ground grudgingly”

Chapter 5: The People Who Propel Scaling
effective scaling requires people who care about the company and the customers
-Netflix pays top dollar to have stars at every position, then expects that they “act in Netflix’s best interest”
-alternatively, Japanese food service Tamago-Ya hires high school dropouts, give them lots of training and support, and receives loyalty and effort in return
-organizations that scale well avoid the trap of hiring “high-priced stars” to fix issues, instead they do the deep thinking and demanding work required to install, spread, and sustain excellence
-talent x accountability = scaling excellence
-strategy: squelch free-riding
-at about 20 people, if startups aren’t careful, new hires will feel like employees not owners
-at P&G, managers who fail to share ideas simply don’t get promoted
-GE evaluates managers based on leadership (including supporting GE’s culture) and performance
-moving out bad apples (free riders) is almost as important as hiring the right people
-strategy: inject pride and righteous anger
-Netflix treats the company like a competitive sports team, not a family, to focus employees on winning
-strategy: bring in guilt-prone leaders
-leaders who worry about their performance tend to be action-oriented and put the needs of others ahead of their own
-strategy: use subtle cues to prime accountability, ex: pair of eyes on the wall
-strategy: create the right gene pool, hire carefully early on
-a company becomes the people it hires, because founders and first employees create the culture
-founders tend to believe they are destined for greatness, and this belief gives them resiliency, persistency, and persuasiveness
-people shape the culture, and the culture then shapes the people, ex: Tata CEO Factory
-strategy: use other organizations are your HR, ex: hire from Teach for America, military, Stanford
-strategy: hire people prewired to fit your mindset, ex: Specialisterne hiring autistic workers

Chapter 6: Connect People and Cascade Excellence
-scaling hinges on discovering pockets of excellence and connecting them to others, then the excellence spreads on its own like dominoes
amateurs discuss strategy, professionals discuss logistics –US Army
-having a diverse change group propels scaling because diverse people interact with diverse groups of people
-look for master multipliers, high energy people who can spread the excellence broadly, ex: Hayden Fry, ex: Dr. William Halsted
bring on energizers, people with lots of positive energy to infect others with, ex: Facebook Chris Cox
-implement savvy gamification, ex: Rite-Solutions Mutual Fun for idea generation
-seven tools for activating domino chains of excellence: top down, broadcast your message out to one and all, have the many teach the few, one on one, from the few to the many, brokers, create crossroads and meeting places
-create a common heart beat through stand up meetings, 2-4 week sprints
-scaling is propelled by leaders who think and act like connectors

Chapter 7: Bad is Stronger than Good
-a little bit of negativity can undermine a lot of good work
when one deadbeat or asshole joins a small team, performance can drop 30%-40%
-8 strategies for getting rid of bad: nip it in the bud, get rid of bad apples, plumbing before poetry, adequacy before excellence, use the cool kids, kill the thrill, time shifting, focus on the best/worst/end

——————————————————————–

PART III. PARTING POINTS

Chapter 8. Did This, Not That: Imagine You’ve Already Succeeded
-Daniel Kahnamann’s premortem: imagine failure and try to explain what happened, imagine success and try to explain what happened
most high-growth startups fail because they grew too big too fast
-ask your team, are we happy living in the world we built?

The Effective Executive by Peter Drucker

This one’s a classic business book by the dean of business thinking.

  1. Effective executives know where their time goes
  2. Effective executives focus on results
  3. Effective executives build on strengths
  4. Effective executives focus on the 80/20
  5. Effective executives make effective decision

1. Effective executives know where their time goes

  • people can be very time consuming
  • be slow to hire and hire only good people
  • track your time and prune time wasters
  • beware the recurrent crisis b/c these should be foreseeable/preventable
  • a well-managed plant is usually quiet and boring
  • time-wasters often result from overstaffing
  • too many meetings indicate poor organizational structure or employees with the wrong skill set
  • consider working from home one day a week or in the morning

2. Effective executives focus on results

  • efforts don’t matter, only results matter
  • three types of results are: 1) direct production, 2) culture building, 3) employee development
  • four requirements of effective workplace: communications, teamwork, self-development, development of others
  • effective meetings have a clear purpose that relates directly to the corporate mission

3. Effective executives build on strengths

  • promote based on the candidates strengths
  • strong people often have strong weaknesses
  • identify the right person to fit the role. Rarely change the job to fit the person.
  • do not hunt for a genius to do the impossible, redesign the job
  • make each job demanding and big

4. Effective executives focus on the 80/20

  • this is the secret to success
  • do first things first and do one thing at a time
  • success is not a sprint, it’s a marathon
  • stay lean by discarding anything that’s not working
  • always prioritize work based on opportunity not problem

5. Effective executives make effective decisions

  • don’t worry about unimportant decisions, worry only about important ones
  • if a problem is general, solve it generally and establish a rule
  • identify the criteria to determine if the problem is solved
  • afterwards, test to see if the problem was solved
  • one does not argue with a hypothesis, one tests it
  • encourage disagreement because disagreement often leads to alternate solutions
  • sometimes decisions are like surgery, the best option is to do nothing