This article is just the first of a series with business lessons for entrepreneurs from legendary CEOs and founders. For the next articles, remember to subscribe (for free!) to my list here.Listen to “9 Business Lessons for Entrepreneurs from a Legendary CEO” on Spreaker.
If you are reading this on a computer, there is a good chance that the CPU is powered by Intel.
Andrew Grove is the name and surname of one of the main reasons for this American technology company’s overwhelming success.
He was the third employee of a company that now employs over 100,000 people, and he became CEO in 1987. He retired in 2005 and is regarded as a pioneer and builder of what is now known as Silicon Valley in California.
He died in 2016, leaving a legacy of management improvement techniques and serving as an entrepreneur role model.
There are still a lot of people who read his business and management books, and one of them was used as a source of ideas for the next sections.
But before jumping into the essential lessons from Andy Grove, it is important to understand one of the main concepts behind his methods.
The OKRs from Andy Grove
OKR (Objectives and Key Results) is a leadership development method developed by Andy Grove while he was president of Intel Corporation in the early 1990s.
It was created for businesses that want to achieve strategic goals and emphasizes the importance of team alignment. Grove’s management playbook at Intel included the concept of OKRs.
During his tenure as CEO, the company used it to achieve industry-leading performance.
To communicate and achieve strategic goals like “Intel will be №1 or №2 in every market we serve” and “Intel will be the world’s leader in microprocessor units,” Grove and his team used OKRs.
OKR is a powerful tool that can help groups work together to achieve their most important goals while also giving them a path to keep learning and improving.
Grove’s three rules for establishing OKRs are:
- Make them visible and clear. Everyone in your company should understand them.
- Make them measurable and linked to desired results.
- Measure and monitor to ensure that your OKRs are achievable.
With that in mind, time to start with the first of the 8 lessons we learned from this legendary CEO.
1 — Business Output: Every Hour of Your Day Should Be Focused on Increasing Your Business Output and Productivity.
Mr. Grove’s central idea is that the output of a manager is the output of an organization.
In today’s verticalized businesses, middle and junior managers are in charge of giving out information.
In this case, managers should ask themselves the following questions:
- Do you add real value? If all you do is transmit information and add no value, you are easily replaceable and your professional prospects are bleak.
- Are you experimenting with new ideas, techniques, and technologies? Or are you waiting for others to figure out how to re-engineer your workplace — and get you out of it?
- How are managers looking for ways to improve things in their departments? Every hour of the day should be used to increase your team’s output or the value of its output.
2 -Lack of Work Motivation: How to Figure Out Why Your Team Isn’t Producing Good Results.
When one of your team members performs poorly, ask yourself the following question:
Could the person do the work if his life depended on it?
If the answer is “yes,” you have a motivational issue because the capability exists but there is no incentive to fully mobilize it. If the answer is “no,” you have a capacity issue that must be addressed through training or reassignment.
This judgment sharpens the focus on where a manager’s efforts should be directed. Overall, a leader has two powerful tools for increasing results: motivating and training.
3 — Remove the Rotten Egg before the Client Discovers It.
Andy used the fictitious example of a breakfast manufacturer to illustrate some of his ideas.
One of the concerns of the factory’s production line is to avoid any rotten egg from arriving at the customer table to maintain a good reputation with customers.
In fact, bad eggs should be rejected even before they reach the breakfast assembly lines, while the suppliers are still delivering them. A rancid egg should never be served to a customer because the damage would be multiple times the cost of resolving it earlier.
This is summed up by the rule that we should always try to follow: detect and fix any problem in a manufacturing process at the lowest-value stage possible. This is almost always the earliest stage.
4 — Business Indicator Monitoring and the Need for Counter Indicators.
Indicators direct your attention to the object being measured.
Andy Grove uses a good analogy on one of his business lessons for entrepreneurs: it’s like riding a bike; you’ll probably steer it in the direction you’re looking.
If you spend too much time measuring and analyzing variable costs, you may overlook variable costs or, worse, forget about maximizing revenue.
Because indicators direct the activities of managers and entire departments, having paired indicators to measure the effect and counter-effect of a decision is critical.
For instance, if you decide to reduce inventory, you should track both inventory levels and shortage backups. Lowering inventories will free up capital for future investments, but will increase the risk of a product being unavailable if a supply shortage occurs.
Measuring both at the same time allows you to find a middle term with less risk.
5 — A Shared Culture Helps to Reduce Bureaucracy.
A rapidly expanding business can quickly become embroiled in bureaucracy and complicated, ever-changing rules. This occurs because, with new team members being hired regularly, it is difficult to keep all of them up to date on company procedures, rules, and expected behaviors.
A shared business culture is extremely beneficial in this regard. When the rules are put into action, people begin to follow by example rather than by decree. The newcomers will approach colleagues and customers in the same manner as the rest of the team, and processes can be simplified.
6 — Create Windows into Your Company’s Black Box.
Consider a business to be a box, with inputs on one side, a process inside, and outputs — your product or service — delivered on the other.
Andrew Grove refers to this as the business black box. And it is inside this black box that the processes take place, and it is from there that the majority of the unexpected interruptions or defects that can harm our output come from.
We don’t have control over our customers, but we do have control over our inputs and processes. A manager should do everything in his or her power to reduce minor halts caused by minor issues. He should also be prepared to respond quickly and effectively to emergencies so that the problems they cause are resolved as soon as possible.
By cutting windows into your company’s black box, you can look for potential sources of future problems.
7 -Job Interviews Should Be Used to Learn about People’s Motivations and Attitudes.
Interviews are frequently about technical aspects. While this is understandable in some situations, keep in mind:
- Technical flaws can be remedied through training.
- Attitudes and motivations are much more difficult to address, if at all.
The interview is an important opportunity to learn about the candidate’s attitudes and reactions.
As a result, in one of his business lessons for entrepreneurs, Andrew Grove suggests asking questions such as:
- What do you consider your most significant failures?
- What did you take away from them?
- Why do you think an engineer should be hired in marketing? (Adapt the roles according to your situation and the candidate).
- What was the most important course or project you worked on in college What was the significance of it?
8 — How to Not Lose Your Talents by Misallocating Time
Meetings and emails are frequently prioritized over team concerns by middle and junior managers. That is wrong and relates to the earlier mentioned point that a manager’s priority is the output of his team, not the quality of his reporting.
Consider the following scenario: a subordinate stops you in the corridor and asks if you have a minute. He then informs you that he wishes to depart from the company.
Your reaction is critical in this situation. Some managers would prefer to leave the corridor, claiming that they will discuss it later. You just confirmed to your employee that he is leaving because he believes he is not important enough.
Andrew Grove proposes a different approach to this situation: Put down what you’re doing. Sit him down and inquire as to why he is resigning.
Conclusion: Business Lessons for Entrepreneurs Taught by Andy Grove
- Business output: Every hour of your day should be focused on increasing your business output and productivity.
- Lack of work motivation is why your team isn’t producing good results.
- Remove the rotten egg of your production line before the client discovers it.
- Proper business indicator monitoring demands the usage of counter indicators — here is an idea about it.
- A shared culture helps to reduce bureaucracy. (More details about it here).
- Create windows into your company’s black box.
- Job interviews should be used to learn about people’s motivations and attitudes — something better explained here.
- When a talent talks about resignation, immediately put down what you’re doing. Sit him down and inquire as to why he is resigning.
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Levi Borba is the founder of expatriateconsultancy.com, creator of the channel Small Business Hacks and The Expat, and a best-selling author. Subscribe to my articles (for free) and receive (also for free) the ebook “The Blueprint for First-Time Business Owners”.