Is efficiency a luxury or a necessity?
Many professionals do not appear to realise how a lack of efficiency is costly to their company. Many professionals do not appear to realise how a lack of efficiency may in fact directly threaten their job.
This may appear very vague and abstract, therefore let’s take a concrete example to pragmatically illustrate this premise: let’s analyse the efficiency of two competing coffee shops.
Coffee shop #1: efficient coffee shop
In our first example, we observe an efficient coffee shop.
It has 4 employees: 1 employee at the cashier, 1 employee interfacing with customers, 1 employee preparing orders and 1 employee keeping the shop clean.
We can observe that there are two lines of customers: 1 line with people placing their orders or waiting to place their orders; and 1 line with people who have placed their orders and who are waiting to pay.
The flow of customers appears steady. This is an efficient operation.
Let’s imagine that this shop earns $240 per hour.
|Number of employees:||4|
|Hourly income of shop:||$ 240|
Coffee shop #2a: struggling coffee shop
In our second example, we observe a struggling coffee shop.
It also has 4 employees. However: 1 employee interfaces with customers, prepares orders and holds the cashier; 3 employees focus on cleaning the shop.
We can see that the flow of customers is bumpy and, in fact, 5 potential customers are leaving (in red) because they are not happy with the speed of the service.
In addition, they can see that there are 4 employees and that the service could be faster if employees were more efficient and if they better managed their priorities.
These leaving customers will probably go to a competing and more efficient coffee shop.
This is a very inefficient operation. As a result, this shop has a lower income – say $90 per hour. Therefore:
Number of employees: 4
Income of shop per hour: $90
What will eventually happen to this inefficient coffee shop?
It will become an empty coffee shop, as it is shown in our next example.
Coffee shop #2b: empty coffee shop
In our last situation, we are in an empty coffee shop.
It used to have 4 employees. However, because it was very inefficient, their customers gradually stopped coming because they were not happy with the speed of the service.
Eventually, the shop did not make enough money to keep all 4 employees. 3 employees were asked to leave and only 1 has stayed.
However, sales kept dropping because the operation was very inefficient with only 1 employee but, also, the shop could not be kept clean for lack of sufficient manpower. Eventually, the shop has to close to stop making financial losses.
Number of employees: 1
Hourly income of shop: $0
In our first two examples, there were 4 employees in each shop.
However, one shop was efficient and the other one was not.
The inefficient coffee shop, through its inefficiency and its poorly managed priorities, suffered what is called a ‘loss of opportunity’: indeed, if it had been more efficient, it could have had the opportunity to make $240 per hour instead of $90 per hour.
Because it was inefficient, it lost the opportunity to make $150 more per hour.
As a result, its sales were lower than the salaries paid to its employees and its overheads and it eventually had to let go of some employees. In the end, it even went bankrupt.
Professionals need to realise that, just as in the above coffee shop examples, a lack of efficiency makes their company lose opportunities.
A poor management of priorities also results in a loss of opportunities. These losses all eventually become financial losses and they weaken the company.
A common misconception is that the company loses money only if it makes a loss after it spends additional money or after it makes unusual expenditures.
For a given size of workforce, the misconception is also that ‘inefficiency does not cost more to the company if the number of employees remains the same. There would be more costs if the company had hired more employees’.
This is where good professionals must keep the example of coffee shop #2 in mind. With the same number of employees as coffee shop #1, coffee shop # 2 made $150 less per hour (or 62.5% less).
The resulting ‘cost’ of an inefficient operation is a ‘loss of opportunity’: the funds that the company invested in this inefficient operation have effectively been lost. The company has invested in something that has given disappointing results.
This money is gone for good, whereas it could have produced more results – if the operation had been more efficient – it or could have been spent on something else that would have made more money for the company.
The salaries paid to a poorly performing team of employees is an example of an investment yielding disappointing results.
With an inefficient operation, eventually the financial performance of the company drops, or management eventually realises that obtained results are disappointing compared to the initial expectations. This may trigger concerns about the performance of the workforce and this may lead to a logic of workforce downsizing.
Keeping efficiency in mind
Inefficiency is costly to a company and it may directly threaten jobs. Inefficiency leads to a ‘loss of opportunity’.
Professionals must continually keep efficiency in mind.
• Planning work properly
• Managing priorities well
• Monitoring performance through KPIs
• Conducting resource planning activities
• Continually developing competencies
• Maintaining a ‘lessons learnt’ register
amongst other activities.