Talking Business with Grove of Intel on a New Approach to Hierarchy


Andy Grove on learning

We can learn much about the evolution of culture in business by looking at where they originated and how they evolved over time. A collection curated and edited by Nancy F. Koehn— The Story of American Business: From the Pages of the New York Times shines a light on three major themes: 1./ the corporation, 2./ American business and the changing nature of work, and 3./ the defining moments in technology. 

Koehn says,“Taken together, these aspects provide us a kind of wide-angle lens on some —though by no means all— of the most important individuals and events that shaped American business history and that, in turn, did so much to give form to our own time and our possibilities in it.”

Intel was organized and run by the scientists who “developed the preliminary design that put a computer's brain on a single computer chip,” had earned a reputation for being “one of America's best-run companies —as original in management as in its products.”

In little over a decade between its founding in 1968 by chemist Gordon E. Moore (Moore's Law is named after him) and physicist and co-inventor of the integrated circuit Robert Noyce, the company had gone from a $1.9 million loss on $600,000 in revenues to $77.8 million in earnings on sales of $662.9 million (1979).

Intel's founders where technical geniuses in the business world and two of his mentors. Famous Silicon Valley venture capitalist Arthur Rock provided the financing. Grove, who was hired as employee and not as co-founder, had the ability to learn and work hard on his side. He was curious about expanding his circle of competence.

In Andy Grove: The Life and Times of an American, Harvard Business School professor and historian Richard Tedlow says Grove studied human dynamics and taught himself to become a great manager, developing such formulations as “strategic inflection point,” “knowledge power trumps position power,” “constructive confrontation,” and others.

In Talking Business with Intel, an article published in the New York Times on December 23, 1980 the then 44-year old Intel CEO Andrew S. Grove talks with reporters and editors who want to learn more about his new approach to hierarchy, starting with the open-shirt, casual approach at Intel.

Grove says:

The point is to eliminate a lot of the formality, the protocol, the symbols of management hierarchy, to make sure that we concentrate on the essence rather than the form.

[…]

Our approach to hierarchy is that we expect people to do different jobs. People obviously have different degrees of influence, and we pay people whatever a particular level demands in the marketplace.

Beyond that, though, we really try to make no further value judgement as communicated by appearances, parking spaces, offices, titles, the formality of titles. We try to beat into people that their work is very important for what it is.

When pressed on whether the idea was a typical California tech-style thing or something else, Grove mentioned Alvin Toffler's* thoughts on “ad-hoc-cracy” as the future of organization. Grove says:

The particular thing he says is that hierarchical management, hierarchically distributed power, will be unable to cope with the rapidity of change in environment and business conditions and technology. Therefore a very fluid movement of power will have to move back and forth from a hierarchical distribution to a knowledge-based distribution, and back and forth.

One of the most difficult tasks is to make sure decisions are made by the most appropriate people to make decisions.

Tucked in as part of the answer is a comment about generational differences between those he describes as very young, very timid, very inexperienced people who join the company to work on the next generation of microcomputers and “someone who looks like a manager and exudes all the confidence in the world.”

Somehow, we have to force them to cope with issues like this, and boy, the future of the company depends on some of these choices. You make a mistake on that one and it's 10 years gone. And 10 years in this business is everything.

We made choices in the early days which were equally crucial; but is somebody had said, hey, you better watch out because the choice of silicon gate technology versus metal gate technology is going to mean the survival of this corporation, I would have been incapable of opening my mouth.

Discussions about the merits of one course of action over another is where forgetting some of the old symbols is most helpful, says Grove. It's about who is closest to the work when it comes to making decisions. And his job is to communicate that as his expectation.

Grove, who died at 79 on March 21, 2016, was himself a computer engineer. From third person at the company in 1968 he had become president in 1979. In 1997, when he also became the company's chairman, Time called him the “person most responsible for the amazing growth in the power and innovative potential of microchips.”

He became the company's CEO in 1987, seven years after the NYT interview. At the time Intel's annual sales had fallen four straight years and things were looking bleak. 

Grove, who anticipated the growing demand for instant information, was in a position to change the course of an organization's history. He lived during a fast-changing and volatile period and industry. As such, his personality was well suited for it says Tedlow, “He has an insatiable appetite for life's challenges. The old saying —he lives the life he loves and loves the life he lives— applies to Andy Grove more than to most of us.” 

Grove's motto “only the paranoid survive” originated in the circumstances of his departure from his birthplace in Hungary during the bloody Revolution to the U.S., and helped him keep the cannibalization of the memory market by the then-threatening Japanese front and center. They served as a motivating force to push ahead of the competition at Intel.

But even his extraordinary ability to think about rapid change in technology did not anticipate Intel's newfound direct relationship with the people who used its products. In 1994, Grove failed to acknowledge flaws in Intel's new Pentium processor and denounced critics publicly. Intel had managed to make a product people wanted to buy, now it needed to make it reliable along with affordable.

His belief that “Business success contains the seeds of its own destruction. Success breeds complacency. Complacency breeds failure. Only the paranoid survive,” also drove him to insist on having a system of “constructive confrontation” in the company. One in which the power of knowledge and data trumped position.

The 1980 NYT interview is an early peak into the mind of Grove the manager and future leader. How he saw the importance of focusing on the work at hand, on the quality of decision-making by the people who were building the technology, and the need to remain flexible to respond to environmental challenges.

His decisions transformed what was essentially a parts manufacturer in the early days into a global brand.

 

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* Toffler was an American futurist and writer whose Future Shock, on the effects of rapid industrial and technological changes on individuals, family, and society, first published in 1970 has sold over 6 million copies.

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