Organizational Inefficiency
Imagine for a moment that your brakes on your car were rubbing against the wheel drum. As you try and move faster the car feels as though it is sluggish and the engine must work harder to pick up speed. During this time your engine is incurring additional wear and tear, burning lots of fuel, and possibly damaging the car. Organizational efficiency is very similar. When the production machine develops drag it takes a lot more energy to continue working. The more busy the organization becomes the more compounded the problem.
Organizational efficiency requires the constant maintenance and oversight of the inputs to production as well as the production process itself. Quality, cost, labor, equipment, consistency, etc… must always be evaluated in order to ensure there is no drag on production. By periodically re-evaluating the processes the company can ensure they are not wasting precious resources.
These inefficiencies are most common in the labor, supply, processes, and marketing mechanisms of a company. Yet most managers only consider supply and processes to make improvements. The organization as a whole should be considered for its ability to perform the same functions with the least amount of resources.
Areas of Inefficiency:
1.) Labor: Companies should consider the type of people they are recruiting and their inherent skills. The concept of “getting bodies” doesn’t work anymore. The key is to get the right body for the right position. Inventorying skills and using people in their most natural position can help in reducing workforce inefficiencies.
2.) Supplies: Organizations should constantly be looking for high quality supplies at cheaper prices. Shaving a few percentage points off of the cost of supplies can add up to higher profit margins on the books. The company should weigh and balance the needs for cost and quality.
3.) Processes: Some processes are designed to keep people employed. People create additional work for themselves by requiring multiple signatures, a tedious paper flow (or production process) as well as the use of inefficient methods. Consider the closest point between A and B and try and mimic this in your operations. Where oversight is required make sure it doesn’t impede operations.
4.) Sales and Marketing: Sales and Marketing can be some of the biggest problems in an organization. It won’t matter if you make the best product in the world if that information is not being given to the right people. Therefore, it is necessary to ensure that you have top advertising professionals in order to earn to draw the most customers.
Creating efficiencies isn’t easy and can often be ignored due to the demands of day-to-day activities. Yet, if the organization’s management is required to review all the aspects of the process for improvement every year you may find that the time is well spent. Small changes in large companies can create huge benefits and huge profits.
