#399 Are efficiency programmes necessary?
Are efficiency programmes necessary?
Management obsession or a helpful idea?
People are familiar with efficiency programmes.
The announcement of such programmes usually causes worry, doubt, anger and frustration, and people regularly question whether they are necessary or just self-justification for consultancies or management positions. The aim is to see how the organisation can operate better, more efficiently and more effectively. Savings potential and optimisation are in everyone's interest, as this is how an organisation can be set up for a sustainable future. At the same time, however, business operations must be maintained at a good or, even better, excellent quality.
Are efficiency programmes necessary?
Aspects
Organisations are familiar with structures that grow over time and develop in due course of growth and change. Historically grown structures are a common term in almost every organisation. Such growth gives rise to many positive aspects and numerous very good ideas but also to temporarily necessary aspects and positions, which are not always reduced accordingly after the period of need has expired. Many aspects of an organisation are tolerated and dragged along by the organisation, even though the need has long since ceased to exist. Some people are familiar with this from the moment you move from one place to another, where you often find items you have been carrying for years but no longer know why you even own them. You need to take a look at the organisation. In most organisations, this happens every three to five years, and in some industries, every ten years or even less.
Dimensions
Various aspects of an efficiency programme need to be examined and communicated proactively.
The first dimension is the factual dimension. Can you provide factual evidence that an efficiency programme is necessary now? Is there a new competitive situation, a new company entering the market, or a change in the law? Communicate this proactively. Then there is the second dimension, the economic aspects. Here, too, the burden of proof is on managers to clearly demonstrate that the programmes planned now are necessary. Economic and financial aspects, in particular, often show employees the necessity of measures. In the third dimension, you talk about political aspects. Products that are continued or discontinued, highly profitable, or sold below production price are all elements of a political nature that must be explained accordingly. Personnel aspects, such as new requirements for job profiles or activities, are addressed in the fourth dimension. The fifth dimension is the employer branding aspect. Sooner or later, every efficiency programme will end up in the public debate. This moment impacts application procedures, talent acquisition and employer attractivity. The management level must proactively communicate all of these aspects. The burden of proof here lies with managers. You can find examples of these aspects in this week's podcast; see the links below.
Realisation
Avoid efficiency programmes for the sake of efficiency programmes. If you believe you must first set the tone as a new manager and act for the sake of actions, your management style has remained firmly in the 1970s to 1990s. Modern leadership dispenses with such self-promoting aspects. Elon Musk's failures and his DOGE pseudo-reform attempt, which failed on an epic scale and caused massive damage, are a negative example of the worst kind in history (as of yet).
Knowledge and experience are essential for efficiency programmes. Both aspects need to be served here. It is not enough to offer just one of the two components. External views are helpful and should always be utilised; external expertise is also invaluable. However, this should and must always be accompanied by internal experience and knowledge. No external person can understand every connection and every aspect of an internal process as quickly as someone who has worked in the organisation for years. The cooperation between both aspects is critical here. Processes and their links must be carefully scrutinised with every change so that no interruptions to business operations are caused. The programme should focus on the areas which offer benefits for (internal and external) customers, benefits for the organisation, and benefits for the people working in the organisation.
Conclusion: Efficiency programmes are necessary and helpful if they are implemented professionally and in a targeted manner.
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More on this topic in this week's podcast: Apple Podcasts / Spotify
For the podcast transcript, read below.
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Contact: Niels Brabandt on LinkedIn
Website: www.NB-Networks.biz
Niels Brabandt is an expert in sustainable leadership with more than 20 years of experience in practice and science.
Niels Brabandt: Professional Training, Speaking, Coaching, Consulting, Mentoring, Project & Interim Management. Event host, MC, moderator.
Podcast Transcript
Niels Brabandt
What do you think when I tell you the word efficiency program? Many of you will think, oh, please. No. Not not this management obsessed nonsense again. And the question is, is it management obsessed nonsense or is it actually necessary? We need to talk about efficiency programs based on the emails I received from our hearership. Thank you very much for reaching out to me.
And I received quite a number of these emails. People ask, is it actually helpful? Is there scientific evidence to it? Or is it just something that people do to teach people, hey, management is still here. Look at us. We are still doing something. So let's face the facts first.
Many people know efficiency programs and the goal always is to look into the organization and see is there anything where we can do better, where we can be more efficient? Sounds very German as you can spot by my charming accent.
I am German by birth. Right? And people look at where can the organization possibly could do better. You're looking for any kind of savings you can do. And let's face it, savings aren't the interest of anyone in the first place because the organization can survive more sustainably and probably can spend money better, maybe even on aspects that you actually prefer where it's going to be spent. So it's also there to make the organization thrive in the future and basically secure a sustainable future future for the whole company organization wherever you work in. Are efficiency programs really necessary?
That's what we're looking for. We're looking for this answer today. So let's look into the aspects first. There are always aspects which we call and you probably know that historic growth. Certain things happen because this is how the organization grew and when the organization became bigger and bigger, you hired people and you created jobs and you created positions. Many of them were great ideas, at least they were great ideas back then. Some of them are still great ideas.
Some of them might be the super success you were actually looking for. However, some of them might not be. Some of them might be a temporarily good idea, then people stayed and you just kept on going with whatever you did so far. But you look at it and think, looking from today's point of view, we we don't really need this anymore. So you just keep them, keep them, keep them, and then suddenly you say, do I really need this? I give you just a very simple comparison. When you move house or you move your flat, flat, you move somewhere else and you look at what do you actually have, there will be quite a number of objects where you say, I basically carried this for years with me, one move after another, but I never used this object.
I never needed it and still I'm carrying it with me for the next move yet again. And when you do a move well, you probably declutter how some people call it and then just throw things away or donate it for charity. It is very important to have a look into what is more efficient and more effective for your organization. Usually this is done every three to five years and some organizations, some industries more every ten years. But we have to look into what dimensions do we have. So let's give it a try here to go through the five dimensions of a good efficiency program. The first one is the factual situation.
Are there factual aspects which you can prove that an efficiency program might be necessary? I'll give you an example. Let's say you're an airline and you have a great customer base, you sell tickets, everything's going well and suddenly another competitor pops up selling tickets at a fraction of your price as it happened with, for example, Ryan and EasyJet being a massive competitor for other airlines such as, for example, Lufthansa or Swiss or Austrian Airlines or Alitalia, Air France or Iberia just to name a few. And suddenly they knew when we're going as we always did then we probably have a a problem here because people will go for the cheaper ticket because flying from a to b especially short haul, when you fly a short distance you don't really care if you get an extra cookie or a bit of food or a sandwich. You basically sit down wait for an hour and then you touch down and you move wherever you wanted to move. And that's exactly what happened in in Germany with Lufthansa. They for example then created the brand Euro wings which is the cheaper version of Lufthansa.
On Iberia they have Iberia Express. And you see that you had to move here but you could prove it factually and that's very important. You as the manager, as the executive, as the leader, you have the burden of proof on your side. You have to deliver the factual evidence. As soon as you do so, people will understand. The second dimension of an efficiency program is the economic one. When you for example say, hey people look at what we're doing here.
We are producing a certain good. Let's call it good x y z. And this good sells pretty well. But back in the day, if we had a three we we had three shift system and then the demand got a bit lower. Now we're on a two shift system. And from next month, we are on a one shift system. So you see demand is not becoming any bigger here.
And then you have to check, is there anything that we can do better to keep the organization alive? Sometimes hard decisions need to be made. But again, when you buy economic numbers can prove what you're doing here, people will understand you more and most likely support what you do. Because it doesn't make any sense when you say we just keep on paying people and keep on having people around but nothing actually gets produced then you will go bust, bankrupt. That was it. And then anyone loses their jobs. So the second dimension is the economic one.
The third one is the political one. Is there anything which you keep alive politically? I give you a very simple example. One of my clients, they produce power plugs which you put in a wall in a certain setting. I can't tell you which one here because you would immediately know which company it is. And they sell these slightly below production cost. And now, of course, you might think this this is plain manners.
How can you do that? They produce it for roughly €9. These supplies are, by the way, arbitrary now to not tell you the the exact numbers here. They they produce for nine years, and and and they sell it roughly €8, 8 euros 50. So with a slight loss. And and you think, why should you do that? And, of course, I asked the same question.
Why do you sell something at a loss? And they said, as soon as we have the plaques in the wall, we can then sell our consultancy, our electricians, our service partners, our everything connected to to the project these people are doing. And we make a lot of money based on that. As soon as we have a foot in the door, everything follows. And that by the way is a business model which is now which is now the standard in many industries. When you for example look at building ship engines, with ship engines the the actual suppliers do not make much money on the ship engine neither do companies that sell copy machines. When you put copy machines in offices you hardly make any money on the machine if at all usually you go with a short loss but then as soon as the good is with the client then you have a service contract, you have service technicians, you need regular maintenance and everything.
That is where you make the money and that is why you keep certain products politically alive. That can be part of a gov of a of an efficiency program to keep things alive. Also, you can say, politically, we decided not to do something. Let's say you sell cables for the military, and they are often under very strict regulation. There are very high demands. You make a decent amount of money, but you don't get rich because it's often a public tender. So you have to go by the most economical offer, often by the cheapest price, unfortunately.
So you make reasonable money, but you don't become rich with it. And now you might say, well, look, we have so many so many customers, so many other companies asking us to produce cables in the non nonmilitary field, and they pay way better. They are way less complicated. Let's just ditch the military part of our business and then just go free enterprise. And you can, of course, do that, especially in today's times and the political landscape in which we are. Many companies decide not to do so because they say it is the right thing to be in the military industry. It is the right thing to secure supply.
It's the right thing to be part of, of actually the defending democracy with the goods they they produce there. So you have political decisions which are not merely based on numbers, but based on what you do here. And, again, the burden of proof here is with you. You have to communicate what is the political aspect of what you're actually doing right now, right here to either sustain a certain production or to surrender a certain production and actually end it. The fourth aspect, the fourth dimension is the staffing one, the personnel one, the the the people one. Is there anything where in the people area you say significant changes happen and that's why we need to change things? Let's say you have a certain machine.
And so far, four people work at that machine. And now you say, well, we entered digitization. We should have done probably a decade ago because our suppliers and our our vendors and our competitors already have. We have four people working here, but with a digitized machine, I need only two people, however, two very specialized ones. So you do not save a single penny on staffing because the highly specialized one are way more expensive. However, you might decide to say I prefer to have two highly specialized one on the digital machine compared to the analog one where four, six or eight people work. So very important is is there a personal, a staffing, a people aspect and again communicate this proactively.
The fifth dimension is the Employer Branding one. Especially when people apply or they plan to apply for a job at your organization, when they hear there's an efficiency program going on, often this makes the round in the industry if you like it or not. And as soon as people hear, oh, efficiency program, not sure if my job is to save there, always be aware efficiency program come with a price tag. So when it makes the round and especially when people start to talk and, of course, especially your competitors will spread rumors about, oh, they were not doing well and they're struggling financially. Even if it's not true, every efficiency program comes with a price tag. So be aware of that, that the price tag is not only a financial but also reputational one and you have to deal and manage with that. So how now to put everything into place?
What about the implementation? First, and that is the most important aspect here, as soon as you want to implement anything there are two things you do not do. Number one is do not change something just for the changes sake and we still have that that certainly does pop up in an organization, they are the new leader, the new manager, the new executive, the new CEO and suddenly they need to change something because they need to be seen. They want this moment of, oh, look at me.
I'm the new executive. I show you what we change right now. Changing something for the changes sake. People have an immediate feeling when this happens. People see that there is a change where some things get changed, but nothing really gets better. Nothing nothing gets more efficient or more effective. It's just changing things, and you wonder why we're actually doing that.
So don't change things while the changes say, even if you are a new executive and new manager, when you are in there and you see everything's working well and nothing's missing, you do not have to change the system. You only have to keep it alive and manage it properly. Believe me, and you can be very sure, the next challenge is just around the corner. It will come anyway. So just wait for that. It's going to be very much sooner than you actually thought. Also, the second aspect is the so called Doge effect.
Doge effect named after Elon Musk and his so called Department of Government Efficiency. Where do I start? So so first, you do not hire inexperienced people, 20 year olds. And age, by the way, is not the issue here. It is the lack of expertise and the lack of experience. You do not hire people who don't know the industry, who have no experience in the industry, and then just cut around as they think. I give you a very important aspect here.
As soon as you think that you come from free enterprise and you can do everything better in government aspects, you have no clue. And I can tell I I'm I'm so I'm a self employed person. I should be the first in line saying, hey, Self employment. We are all better than anyone else. But let's look at the facts. Public service and free enterprise are two completely different entities. You do not have public servants who say we could do anything better in free enterprise because of the different thing.
And it's the same thing vice versa. When you run free enterprise businesses and you go into public service, it is a completely different matter and you have to make a significant amount of learnings where you need to be aware how things work. Do not just tell people, oh, I ran a very profitable business and that's why I should run any government business. That is not how anything works. And the lunatic approach of the ego driven person putting himself on display, Elon Musk and his bunch of teenagers is probably the worst example of cutting around jobs in the history of humankind. And I give you a very simple example here as well. Elon Musk, for example, cut US foreign aid significantly.
And, of course, you can do that if you want to. However and, of course, no one likes to talk about that. Aid is about helping. Great. But aid also has a political dimension, and we just talked about political dimensions. When you help certain countries for a very long time, and at a certain point in time, your country has a product to import to that country you helped, What do you think they're going to pick? Do do you think they just pick the random country that never helped anyone, or do you think they favor the country that helped for decades?
And here we are. No one likes to talk about the political dimension of helping other countries, but there is a political dimension. And cutting all of that, when The US stops helping, well, countries will now look around, and let's see who's next in line to help. Maybe it's Russia, maybe it's China, maybe it's any other country, and most likely, it's not a country favorable to, for example, Europe or The United States. And that is of crucial importance. It is of crucial importance that you see political dimensions. The Doge effect means you take clueless people with big egos in, and they just cut around and celebrate each other for doing so including all the mistakes they do.
And that is just a nightmare. So let's look into how to do it properly. First, knowledge and experience are unambiguously important. So as you need people not only with the knowledge can be a degree, can be a certificate, there are many ways to get the knowledge. They need to have experience. With no experience in the industry you will cut something and you do not understand the error you did because you do not fully see the whole picture and where the process is connected to. That is why external views are very important.
External views on your business can be extremely helpful however always have an internal view accompanying that. When the external view says hey we could cut this and and then the internal view said yeah but you just missed out because you can't even know that this bit is connected to that that that and without that we can't even write invoices. Very important aspect to know isn't it because we want to write invoices. So you need knowledge and you need experience in external view should always be included. However, always a company with an internal view. That's where you get the maximum benefit out of it. Always consider every process has connections.
You didn't put a process in place for the process sake. Be sure that you always look at the connections and that you deal with them well. The focus you need to always have in mind is basically focus on three different aspects. Focus on three aspects. Number one, the benefit for the client, internal clients within your organization and external clients, the clients you most likely sell to or the clients you deal with.
Number two, benefit for the organization. What is really factually provable? What can be proven to go better, more efficient, and more effective by your change? Burden of proof is with you. And the third aspect is the benefit for the people. What is in for them? When people see there is no benefit in for me, and sometimes you have to make tough decision and there is no benefit in for them, then people will not help you to change it.
And very important here, then you need to rely for example on other people's help of people from the organization who see a benefit in what you just decided. So three benefits, clients internally and externally, organization and the people. Wrapping all this together, efficiency programs are necessary and helpful when they are conducted professionally with a target oriented goal in mind. Then you will have great successes with efficiency program and I wish you all the best implementing exactly that in your organization. And when you now say, that's that's quite a bit of work, isn't it? Yes. Absolutely. When you like to discuss something feel free to contact me.
In the show notes of this podcast you find my email address, which is nb@nb-networks.com. You also find my LinkedIn there, so feel free to connect with me on there. And you also find my website n b hyphen networks dot b I z. On the website, you also find the transcript of this podcast that I'm looking forward that you're reading there or connecting with you on LinkedIn or just hearing from you via email. If you have something very specific to discuss, probably you want something like like a training, a seminar, a coaching, I should speak at your conference, feel feel free to contact me then. But if you just like to discuss something with nothing else in mind, just an exchange, happy to do that as well. Looking forward to hearing from you.
Many topics we have on this podcast came from emails and exchanges that I have with people just contacting me out of the blue. So I'm looking forward to hearing from you there. The second aspect is we have live session and they are very much appreciated and valued. Go to expert.nb-networks.com. And as soon as you put your email address in there on that website, you receive only one email every Wednesday morning. It's a % content, ad free guarantee. And, also, you get free access to all articles, no podcast, more than 400 articles on leadership and other aspects of leadership.
You get free access to all podcast, also no paywall, no charge for our readers here. And the most important thing, you always, via this email that you signed up for, you receive the date for our next live session. The date, the time, and the direct link with no additional registration, just click on it you are in. However, we only communicate the live sessions via the means of the leadership letter. So I'm looking forward to seeing you signing up there. I'll also put the link to the leadership letter in the show notes of this podcast. The third aspect, however, is the most important one.
Apply, apply, apply what you heard in this podcast because only when you apply what you heard, you will see the positive changes that you obviously want to see in your organizations. I wish you all the best doing so. Feel free to contact me anytime. I'm available 247, and I'll answer any message I receive within twenty four hours or less.
I'm looking forward to hearing from you. And at the end of this podcast, there's only one thing left for me to say. Thank you very much for your time.