High Output Management vs. High Empathy Management

A new management metaphor for a new world

Thanks for the note, johnny won.

Definitely, I’m still working through Andy Grove’s High Output Management myself and there are a ton of insightful frameworks in there that are certainly still applicable today.

However, I wonder if his overarching metaphor and macro framework for productivity isn’t more and more so a vestige of a quickly receding era?

In particular, if you take the “breakfast factory” metaphor (i.e. imagine a restaurant as a machine whose sole purpose is to perfectly meet the demand for breakfast eggs and toast) to its ultimate conclusion, you come away with a framework that says all companies are effectively black box machines with inputs and outputs, a “system of humans” as he refers to it. Accordingly, all humans within these “systems” are effectively cogs and/or levers that either increase or decrease productivity of said black box.

To be sure, his m.o. for writing High Output was to increase the productivity, i.e. what he coins the managerial leverage, of middle managers everywhere.

This is all fine and good as long as you know for a fact that what you are producing is in fact what your customer desires. But what happens when you churn away on the factory line, laser-focused on increasing managerial leverage, when all the while, your customers have realized they don’t want soft boiled eggs anymore and rather prefer frittatas? What then?

As such, I think this metaphor is increasingly outdated particularly due to the speed with which technology and, more importantly, customer preference changes today. Output is important, but without empathy first, the sense of purpose that is derived from “maximizing the machine” is pure fiction, a managerial fantasy.

The fact that Silicon Valley has idolized Mr. Grove’s work since it was published is not particularly surprising given the inefficiencies that were prevalent in that era. Since much of the initial utility of technology was drawn from squashing those very inefficiencies, Mr. Grove’s metaphor rang particularly true for the ruling tech hegemony at that time. What better metaphor for a technology company than a machine, a physical algorithm, whose sole intent is to effectively “manufacture” efficiencies? The allure of this concept has proven irresistible to the majority of our tech leaders since that era.

But we live in a different era now.

Whereas inefficiencies were plentiful twenty years ago, today, the “inflection point” has long been traversed where simply targeting inefficiencies as a business model is no longer a realistic low-hanging fruit. Today, rather than seeing companies as independent and isolated “systems” to be solved for, we must necessarily envision ourselves as parts of a larger construct, as members of the societal fabric that we intend to participate in as founders and entrepreneurs. Thus, it is from empathizing with our customers rather than solving for them that we best derive a true sense of purpose for our organizations.

In this new era, without high empathy, high output is irrelevant.

Unfortunately, the dogma of “the company as machine/system/algorithm” persists today. The likes of Ben Horowitz (of Andreessen Horowitz) and Paul Graham continue to sing the praises of this mode of thought with references to companies as “complex system problems” and VC’s as “manufacturers of economic inequality,” respectively.

But, thankfully, others have begun to seen the light. And we are not just talking about startups.

Perhaps the best and most recent example of the large-scale emergence of this transition is… wait for it… Microsoft. Yes, that Microsoft.

In the past five years, Microsoft has basically undergone a painful wholesale transition from “old world” black box to “new world” agile development. The practical effect of this is a shrinking of development cycles from 1–2 years to 1–2 months. This wasn’t necessarily due to a philosophical insight on the part of Microsoft but by necessity. The idea of agile development also is not new and is therefore relatively unremarkable but what is remarkable is their transition to a more holistic customer-focused approach. Adoption of this new customer-oriented mindset strikes at the very heart of what Microsoft is and what it aspires to be. So what have they done in particular? Well:

• Transitioned to Agile development paradigms and now deploy code into production up to four times a day
• Remade their research operations from the ground up, providing a clearer line of sight from the previously siloed think tanks to their end users
• Re-envisioned their entire culture as one focused on the customers rather than the products
• Embraced leading indicators of customer engagement and enthusiasm like net promoter scores rather than trailing indicators like market share and profit
• Finally, speaking of profit, for all the penny-pinchers out there, they have killed it in terms of both profit and share price in the past five years (despite the popular predilection to poo-poo all things Microsoft five years ago) all while reinventing their core businesses (from shrink-wrapped software to cloud-based services)

So in this new world, the metaphor of the company as a high output machine is less and less relevant. Perhaps a better metaphor is the company as an organism or “macrobiome”, i.e. a living, breathing conglomeration of individually sentient beings which has its own macro sense of purpose to fulfill. This is the core metaphor used in recent management books such as Reinventing Organizations by Frederic Laloux and Leader’s Guide to Radical Management by Steve Denning. Personally, I believe the organic interactions and relationships implied by this metaphor will prove much more useful in navigating an increasingly turbulent economy.

All this said, there is one suggestion that Andy Grove holds to which I think is supremely important. That is the importance of one on one interactions between managers and employees.

These one-on-one relationships are the atomic building block of companies.

For how productive can a company be if the individual relationships within it are torturous and disingenuous affairs? Maintaining communication, transparency and open lines of communications thus becomes paramount in any well-functioning organization in the new economy. Indeed, as it turns out, this focus on communication at the most granular level is a core building block of both output and empathy.

In conclusion, the Silicon Valley of the past and present took Mr. Grove’s headline aphorisms of “paranoia”, “leverage” and “output” and ran with them for the better part of twenty years. They imagined themselves to be champions of efficiency, using the surgical precision of logic and algorithmic rationality to slice at the common enemies of waste and incompetence. This may have worked in large part over the course of that period, but the time for cold logic as both a necessary and sufficient paradigm is now over.

Now, logic is but one piece of a larger, more holistic approach. Along with empathy, the combination of these two disciplines is a necessity for both growth and customer engagement going forward.