The Uncomfortable Truth About Efficiency Savings
It is easy to make vague promises about huge savings from greater efficiency. But perhaps leaders need to look closer to home for real savings.
Has there ever been anyone, anywhere, seeking a position of authority, who has not said that they can instantly make huge savings if appointed just by being more efficient? Whether in senior corporate roles or political office, candidates constantly talk about trimming the fat and transforming organisations simply by being more effective, as if there are huge swathes of staff sitting around twiddling their thumbs who can be axed in an instant.
Now, let me be clear, I am very much in favour of efficiency. I hate tasks which are effectively telling other parts of the organisation about what I am doing for no good reason, stopping me from actually getting on and doing it. I also agree with embracing new technologies where genuinely helpful. AI, for example, is a great tool, but it is not the magic bullet that many in senior positions seem to believe it is.
But this general, vague refrain of instant efficiency savings needs to stop, because it is just a myth. Almost every organisation has now gone through so many efficiency initiatives that any fat is now just a distant memory, and the bones themselves are being cut into more and more, with the obvious dangers that come with undermining the foundations of anything.
There is, however, one area in many organisations where instant significant savings could be made, but it is not something that those in charge want to hear, for reasons that will become obvious.
Every organisation has a core purpose or purposes, which generally involve serving customers of some sort, either by providing products or services. Even public sector organisations have this kind of core function, even if it is carried out for social rather than revenue-generating purposes. Invariably, the people who carry out the tasks directly related to this purpose tend to be in the lower and middle ranks of the organisation. The staff who make the products on the factory floor, or sell them in a shop, or provide banking services face-to-face or by telephone, for example.
Efficiency drives tend, bizarrely, to target these areas, which are most closely connected to the core purpose, which always puts the delivery of that purpose at risk. Why is this the case? I think there are several reasons. Firstly, it is a numbers game. If you have 10,000 staff in frontline services, it seems achievable to trim 1 or 2 per cent of that number. It is also where a lot of the expense arises, but purely because of the number of people, not because they are well paid individually.
But I fear that in many cases it also happens because those at the top making decisions have no clear understanding of what many of their staff actually do and what would go wrong if they were not there. It can be as basic as cutting one person from the staff of 4 who run a small shop. It sounds fine to only run it with 3, until 1 is on holiday, 1 goes sick, and the 1 who is left has a statutory right to breaks! The end result can be the outlet closing for a period, with a loss of revenue, or having to move staff in from other locations at further expense, with a knock-on effect on where they come from.
So often, we see senior leaders parachuted into organisations with no grounding in the core functions. This is a big problem, and often seems to lead to experienced staff, who are human beings with lives, being seen as nothing more than a column on a spreadsheet. This usually ends in disaster eventually. An organisation is nothing without its people, and I am not talking about the people at the top!
But perhaps it is at the top that we should now look for savings. Instead of looking solely at numbers to find efficiencies, would it not be better to ask who could be removed from an organisation without affecting the core functions? In many cases, I suspect that there are senior staff who readily meet this criterion. I have never worked anywhere where losing a couple of people from the frontline did not have an obvious and significant effect, but when senior people go on holiday, or a post is left vacant, the effect is often less felt. Indeed, some suggest that things run a little more smoothly during those periods!
I came to this subject as I approach the end of watching the HBO series “Succession”, set in a large corporation. Of course, it is fiction and made for dramatic effect, but it occurred to me that we never see any of the main characters, who are supposed to be senior leaders, ever do any actual work. They do a lot of talking to each other, but never anything that really impacts what the organisation actually does, apart from firing people who do the work!
If someone spends their whole working life in strategy meetings with others in a similar position, why are they not the obvious target for cuts instead of those performing the core functions? Yes, there are fewer of them, but they are generally paid a great deal more than those at the other end of the spectrum! Yet leaders seem to always be exempt, or even have their numbers increased while cuts are made elsewhere, allegedly to “manage the change”.
Of course, leadership and management are necessary and important. But it feels like in many places this function has grown out of all proportion to the rest of the organisation and continues to expand while other areas contract. The elephant in the room, of course, is that it is these people who make the decisions to cut others, and turkeys do not vote for Christmas. But with everywhere else cut, will we finally start to ask if we need this self-sustaining, bloated, and expensive structure at the top of so many organisations?