Efficiency management – a systemic perspective

Eliminating inefficiencies in companies is a complex issue

… and, so far, most corresponding initiatives are still wanting.

We want to give you a new perspective on the efficiency problem that companies are facing and identify according solutions through a four-issue series by the LAP Perspectives on the topic of “increasing efficiency.”

Issue 1: Successful efficiency management – a systemic perspective
Issue 2: Identify and quantify inefficiencies
Issue 3: Immediate interventions to increase efficiency for projects, organizations and individuals
Issue 4: Efficiency as corporate virtue. The long-term approach.

Understand the interdependence between efficiency and inefficiency

Every action causes a reaction. The effectiveness of an organization arises from a dynamic interplay between efficient and inefficient actions. If you look at efficiency and inefficiency simultaneously, you get a more realistic view of your business, i.e. when planning new projects.

Eliminate inefficiencies through appropriate actions and use the untapped potential.

Unless anything suggests otherwise, firstly assume that the causes of inefficiencies lie in the implementation and not in the strategy itself. What people actually do is often not part of the strategy, let alone of the official plan.

Develop an “esprit de corps”* when dealing with inefficiencies.

Consistently dealing with inefficiencies is a question of attitude – individually as well as organizationally. Be intolerant of inefficiencies and request the same from your employees.

As Pope Julius II asked Michelangelo how he managed to sculpt such a beautiful statue of David from a block of marble, Michelangelo is said to have replied:

I just chipped away everything that was not David

In this response lies the quintessence of the efficiency-increasing approach presented here. Efficiency and inefficiency go hand in hand. Recognizing this dependency is fortunately also the solution to the problem: in relation to a specific task you are either efficient or inefficient. Intermediate states do not exist. If you want to be more efficient in general, you must stop producing inefficiencies.

Insanity: doing the same thing over and over again and expecting different results – Albert Einstein

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A study, published this year by Bain & Company, documented that only 12% of change projects achieve their ROI. 38% of change projects do not even provide half of the expected ROI.
These results are significant as they would be much worse than the known to date success rate of 30%. It seems that it is much more difficult to implement plans in our fast-paced time. The results were already already bad and are not getting better.

Behind every strategy, behind every project and every business initiative is an organization through which the desired result is to be realized. The organization, however, does not just act according to plan. It develops its own dynamics. It is a creation of diverse visible and invisible stakeholders, with their own roles and functions, with their own experience, skills, personalities and their own interests and concerns. Therefore, the organization’s actions are very often foreign to its objective for a variety of reasons

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Cognitive distortion: it is about the way we think. The most prominent example of cognitive distortions is overconfidence. Skills and motivation are overestimated. At the same time, risks are underestimated or even hidden. This leads to incorrect overestimation of the planned ROI.

Psychological defense mechanisms: they concern the way people feel and deal with insecurities, uncertainty, fear and frustration. Typical examples of defense mechanisms are the so-called mind split, the “us-versus-them” or the denial, the reluctance to admit something.

These psychological mechanisms breed inefficiencies, which grow into toxic situations that can only be resolved by a radical new beginning. People and organizational units don’t deliver what they have planned to deliver. In addition, they often generate anti-objectives, and missions generate countermissions: an official project with the intention to centralize functions can quickly generate many small unofficial activities that do everything to maintain decentralization as a paradigm.

All are busy, but nothing moves.

Increase the overall efficiency of your organization by eliminating inefficiencies deliberately and systematically.

Replace the question, “What should one do, in order to deliver successfully?” with the “What should one stop doing, in order to deliver successfully?” Focus more on the factual actions right now, in this moment, and do not escape into wishful thinking scenarios. Both questions will ultimately lead to the same goal, but they are answered from two different perspectives. The second question helps you identify inefficiencies quickly. The immediate removal of discovered inefficiencies then releases the resources that you need elsewhere.

In order to use resources, you have to know where else they are being consumed. Observe your organization. Most certainly, your projects will compete with other known and unknown aims of your employees. Assume that unexpected, seemingly irrational behavior occurs and its cause is usually an incomplete overview of all motivators. A systemic approach will help you to identify stakeholders or motivators, which have been invisible so far, and thus to eliminate the sources of inefficiencies directly.

Become your own Michelangelo, chipping away anything that is inefficient.

Work on your most important tasks, on your organization or your central project. The best way is to begin with yourself. Think about your own actions, whether in business or in private life, which are foreign to your goal, and whether you tolerate such actions in others.

Bogdan Canda, Friedemann Derndinger, Dr. Claas de Groot