Nobody gets ahead by using information selectively to

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offs that are the essence of management. Nobody gets ahead by using information selectively to win internal battles. Technological change drives the semiconductor industry, and several of our management systems help us make decisions about technology assessment and product development that are quite specific to our business. But most of our management systems (and certainly the most important ones) address the universal challenges of business—motivating people to perform effectively and allocating resources productively. To succeed over the long term, we have to do at least four things better than our competitors: 1. Hire outstanding people and hold on to them. No Excuses Management 2 of 28 6/14/2018, 2:27 AM
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2. Encourage everyone in the organization to set challenging goals and meet them. 3. Allocate key resources (people, capital, operating expenses) so as to maximize productivity. 4. Reward people in ways that encourage superior performance rather than demotivate superior performers. Before I describe several of our most important systems, let me make three points. First, I don’t use the word systems loosely. Each one involves holding specific meetings, maintaining databases, submitting specific reports, and securing approvals. For example, managers grant raises by using a software package that takes them step-by-step through the required performance-evaluation procedure, recommends salary increases that they can modify within limits, and alerts them if their final decisions violate company policy. A few of our systems virtually run themselves. We’ve developed a set of computer applications that automatically shuts down a manufacturing operation if it detects that performance has violated a critical procedure. Dubbed “killer software” by our MIS group, these applications have inspired dramatic performance improvements in our factories, and we are transferring the concept to administrative functions such as order entry and accounts receivable. Second, we don’t confuse systems with bureaucratic planning. In our business (and, I suspect, most businesses), five-year plans, even one-year plans, are obsolete 60 seconds after they are written. So we have plans, but we don’t become enslaved by them at an unrealistic level of precision. Our annual marketing forecasts are probably 95% accurate, with respect to total revenues for each of our product lines. For groups of products within each line, the plans may be 70% accurate. For individual products within groups, it’s not that unusual to be off by 100%. At the same time, we are absolute sticklers about meeting quarterly revenue and profit targets. Precisely because we understand that detailed long-term No Excuses Management 3 of 28 6/14/2018, 2:27 AM
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forecasts are so unreliable, we track product shipments and revenues on a daily basis, evaluate how they measure up against the plan, and identify what adjustments we have to make to meet the plan in the aggregate. We worry less about meeting product-by-product forecasts than about reacting
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