3 Myths about Efficiency

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Efficiency has always been an operations metric businesses watch closely for a healthy bottom-line. Getting work done efficiently is considered good. High employee performance is implied. Managers are delighted when there is no backlog. Efficiency is often interpreted as good speed, high productivity and output.

There are three myths about efficiency.

Good speed implies completion on time

Speed is how much time it takes to complete a task. As most processes are tied to a timeframe, speed is used to gauge whether all tasks for a process are completed on time.

When speed is a top priority, employees would do their best to meet target. For instance, a warehouse picker would inform the customer support agent when she notices an out-of-stock situation for a product. To get the order shipped on time, she continues to prepare the rest of the order for shipment before cut off.

Receiving a partial order might be fine for some customers. But others might prefer a complete order. Shipping a partial order for a computer system would not go well with the customer.

For the warehouse, the ‘shipped on time’ metric is met but not all orders are complete orders.

High productivity implies high employee performance

Productivity is another dimension of efficiency. It reflects how much output is produced from each unit of input. A common way to measure productivity is based on direct labour hours.

A call centre manager looks at the number of calls handled per hour to evaluate agent performance. A junior agent could show high productivity when many calls are directed to Tier 2 support. From her perspective, turning over a customer inquiry she can’t address to a more experienced person is better for the customer. However, the high number of calls she handles sends a misleading message to her manager.

In this case, the productivity of the junior agent is supported by unnecessary traffic diverted to Tier 2 support agents.

High output implies organized workflows

Many businesses use output to gauge efficiency. Output can be quantity of products produced, number of customers served, or revenue generated by account managers.

While high output is the end goal, it is good to focus on it but as a result, many workflow challenges could be overlooked.

Let’s go back to the warehouse example above. The wholesaler relies on legacy systems to process orders. Paper-based processes are onerous. Process documents are not up-to-date.

With high staff churns, on-the-spot workflow changes are made constantly to get orders shipped on time. Problems are handled by the warehouse manager. He is the ‘expert’ who everyone goes to when there are issues.

The business is growing and amazingly, the hands-on warehouse manager has been able to support the order volumes. However, an ambitious growth plan shines a light on the disorganized workflows. The business has to modernize the processes.

As efficiency is important for a business, you need to assess efficiency in proper context taking into consideration the big picture. Optimizing results in silos could be detrimental when interdependent areas are not engaged in fully assessing the effects.

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