The drawbacks of efficiency

Col. Casey P. Haskins

Guest Column by Casey P. Haskins

As Americans, we are immersed in a culture that prizes efficiency. Even young children prize the ability to do things well and quickly, learning early to admire the best and the fastest. Schools teach efficient methods for solving problems. Students who figure out the approved solutions most quickly and apply them most efficiently are rewarded with the best grades. And it carries over into professional life, where more efficient workers can reasonably expect to win more business, promotions and higher salaries. Cutting costs, faster product turnaround times, higher quality, more streamlined processes, using less fuel — all are forms of efficiency that separate the winners from the losers.

At its heart, efficiency can be thought of as having two components. First is elimination of waste. Olympic athletes spend years perfecting motions that have no wasted effort. CEOs increase their stock prices by cutting costs. Electrical engineers search for ways to compress signals ever smaller, trying to eliminate all possible redundancy except the bare minimum necessary to correct errors. Stock markets reward the lean and penalize the coddled and undisciplined. In short, they prize efficiency.

Efficiency’s second component is the reduction of error. Minimizing mistakes, aiming to eliminate them altogether, can distinguish a champion from an also-ran. In manufacturing, a difference in quality (fewer mistakes) of a single percentage point sometimes is the difference between a market leader and a company that ends up folding. Championship baseball teams make fewer errors than their competitors. Generals who win wars get it right much more often than they get it wrong — and they tend to be right more often than their opponents.

Looked at from the opposite direction, a mining company with lots of accidents will spend lots on workman’s compensation and make less profit. A plumber whose repairs soon need to be repaired again is apt to find his customers turning elsewhere. A sprinter who starts slowly out of the blocks rarely catches up. Getting it right matters—the more often, the better.

A popular business methodology, Lean Six Sigma, captures both these components. The “lean” part refers to eliminating waste and redundancy, and so to reducing costs. “Six sigma” is a measure of quality. Strictly defined, it refers to a process in which 99.99966 percent of all outputs are defect-free. Put another way, it only allows 3.4 defects per million. The term “six sigma” often is used more broadly, though, to describe a process that finds and eliminates the sources of error.

Lean Six Sigma improves efficiency by attacking both sources of inefficiency: waste and error. A number of companies have used it to great effect (sometimes spectacular effect — Motorola claimed, as of 2006, to have saved $17 billion from Six Sigma), although others have, predictably, been disappointed with the results.

But efficiency comes at a cost, often unnoticed until it’s too late. There are tradeoffs in both components: between efficiency and resilience, and between efficiency and adaptability. The most efficient organizations also are the least resilient and the least adaptable.

“Waste” and “redundancy” are costly and inefficient. However, in a crisis, they can suddenly transform into the ability to carry on and overcome setbacks. If every hospital becomes so efficient that it routinely fills all its beds, then it has no excess beds. In that case, the society has no means for dealing with a pandemic. Ever-leaner supply chains did, in fact, help companies to cut costs and improve efficiency … until a tsunami suddenly wiped them out.

Having eliminated “wasteful” redundancies, too many companies could only watch helplessly, with nowhere to turn when their components just stopped arriving. By contrast, companies that had operated with less efficient supply chains, some of which had struggled as a result, suddenly found themselves in front. Resilience often is a matter of tapping unused reserves. Without those reserves, an organization may be more efficient, but it’s also less resilient.

It’s a similar story with efficiency’s other component, avoiding errors. Experimentation is the raw ingredient of adaptability. Trial and error frequently results in dead ends, but occasionally in new, unexplored pathways. Those new trails often are more winding or bumpy than the old, comfortable roads. But when circumstances change and the old routes cease to be viable, only those who have discovered alternatives can move forward. Unfortunately, eliminating error also means eliminating the chance of discovering new and profitable directions forward. So the most efficient organizations also are the least adaptable, the least able to land on their feet when the environment changes.

Now, none of us wants to buy a defective car. Nor would we appreciate an aircraft mechanic “doing his own thing” as he services the plane on which we’re about to fly, or a surgeon just “making it up as she goes” while operating on someone we love. Strict controls to reduce mistakes make sense in every one of these contexts. Yet there are many times more settings in which mistakes would be much less costly and might just lead to new discoveries, potentially very useful discoveries. If every teacher teaches the same class the same way, no one will stumble upon a better method. Identifying how much room there is to deviate in a given situation and then adjusting accordingly is the key — though that can be harder than it sounds.

Efficiency is good, up to a point. Leaner is usually more fit … But too lean can tilt into emaciation. And eliminating mistakes may be a worthy goal in certain contexts, but eliminating them altogether freezes things as they are. It locks the organization into amber even while the world continues to change around it: The “jewel” soon becomes a fossil.

The point is not that efficiency is bad but rather that we should stop thinking of efficiency as always and everywhere good. Some is good, but more is not necessarily better, and what fits in one set of circumstances may not fit another. Since we make tradeoffs whether we intend to or not, we should choose in the awareness that we are doing so.

Casey P. Haskins is the director of the Department of Military Instruction at the U.S. Military Academy at West Point.