Inefficiency and Negative Impacts on our Business

Inefficiency and Negative Impacts on our Business

By, Shel Hart

We all want the very best and latest technological innovations and want everything yesterday all under the auspices of “efficiency”. While this mindset is meant to bring innovation and speed, it often has the opposite impact within an organization. The concept of “legacy systems” and having multiple “platforms” within an organization to try to find the “best in class solutions” often has the unintended impact on a business adding inefficiency, waste, duplicity, and copious amounts of data without generating any meaningful information. 

In business, there are various functions or systems that include, but not limited to, Enterprise resource planning (ERP), customer relationship management (CRM), sales force automation (SFA), digital marketing platforms, financial/GL systems, data reporting/mining tools, billing software, shipping/receiving, inventory, point of sales, etc. etc. There are best in class solutions for literally anything and everything and chasing the “best” individual solution for any one of these areas can be daunting as technology is constantly shifting.  

Of course, a company should never become complacent and not strive for innovation, however, what are the costs of rapid “innovations” vs. engaging in a more complete and integrated solution, even if you give up 20% of the “best in class” features? Let’s evaluate the negative impact of the inefficiencies in having multiple disparate systems / databases / platforms. This way you will be prepared to forecast and vet the potential new inefficiencies that you may unleash in pursuit of greater more technologically advanced options.

Inefficiency costs money

Inefficiencies cost many organizations as much as 20 to 30 percent of their revenue each year. Imagine what your company could do it if had 20 percent extra funds to funnel into customer acquisition, research and development, training, digital marketing campaigns, etc.

Inefficiency is when you spend more money, resources, and energy than needed in order to arrive at the same outcome. Defective products that need to be discarded, excess inventory, bad data, rework, duplicate input, additional coding / development fees to write interfaces are expenses that can quickly deplete your bottom line and are a very large opportunity cost. 

Inefficiency wastes time

You may be able to squeeze every last cent out of a dollar, but there is no squeezing any additional seconds from a day. Every minute squandered is lost forever, never to return. Time spent waiting, duplicating effort of another, whether for a process to finish or for a manager to tell you what to do next, is also time lost.

When it comes to efficiency, time is not just measured in minutes and hours, but also in potential output. A disenfranchised or disconnected employee is simply not going to create the same performance as a connected and fulfilled one in the same span of time.

Employee sentiment has a great deal to do with making the most of your company’s available hours. Measures to make systems more connected, simple, user friendly, cleaner, safer, or even less boring can go a long way.

Inefficiency reduces quality

As Six Sigma (6S) remind us, every defect or missed quality benchmark is an inefficiency. Unhappy employees and older machinery tend to cause more errors than their more efficient counterparts. Subpar quality control processes don’t catch errors in time, resulting in defective merchandise potentially reaching customers.

Businesses don’t usually want to produce quality results 84% of the time, and they shouldn’t have to settle for such numbers after undertaking efficiency improvements. Correcting inefficiencies across a process can have a major impact on success rates in any business, and get those quality results up.

Inefficiency damages morale

Rote or error-prone tasks are frustrating. If you have to perform them four or even eight hours a day, you will not be particularly apt to go the extra mile or perhaps even to smile.

While it’s true that replacing more than one employee with a piece of machinery or an Excel macro is sometimes the solution, a task that can be replaced with equipment was not particularly fulfilling or engaging. Further, eliminating inefficiencies doesn’t always mean letting employees go — they can often be redirected to more interesting and meaningful work (really!).

Know what else hurts morale? A lack of trust, which is the direct result of an inefficient project management process. When projects are announced only to disappear into the ether, when milestone after milestone is set only to go by unacknowledged, and when upper management touts dedication to goals that are not aligned with their actions, employees become all the more disenchanted.

It’s a tough balance between innovation and integration so let’s all continue to keep a balanced perspective as we seek to both integrate solutions and innovate approaches. We all need to do a better job thinking holistically in terms of how these innovations either upset or integrate with current platforms and processes. If not, all we’ll do is add more inefficiencies, noise, distraction and costs.