Focusing Too Narrowly on Efficiency Creates Risk

A narrow focus on efficiency can expose us to risk: for example, we may neglect second-order effects of a change introduced for the sake of efficiency. Rory Sutherland uses the example of a doorman: from an efficiency expert's perspective, a doorman might serve only open doors, a task that is easily automated. But, this neglects the ways in which a doorman might signal the status of a hotel, to say nothing of the additional functions they serve in terms of security, or handling the mail. Automating the doorman seems like an obvious way to cut costs; but, a great deal more is lost that may not even appear on the ledger sheet. Indeed, Sutherland claims that efficiency is over-valued by economists and "bean-counters"; when it comes to a product or experience, consumers may prefer something that is inefficient if the experience is more pleasurable. For example, a consumer may choose a more comfortable train ride over one that is faster.

The COVID-19 crisis is probably a more pertinent example to most of us. For decades, organizations have been looking to extract more and more from less and less in the name of efficiency (at the behest of management consultants and economists, probably). And so, they've prioritized lean processes and just-in-time manufacturing. In the US, manufacturers of medical equipment have prioritized those items that bring in a greater profit to their shareholders, without thinking through the longer-term consequences. The result was that we were woefully unprepared for the results of a pandemic, in spite of continued warnings about the possible impact. We knew that the risk was there, but it was not the efficient place to invest our money. Post COVID, enterprises will pivot toward resiliency over efficiency. But that's little comfort to those who have suffered.