Striving for efficiency

Efficiency is considered to be one of the greatest management virtues. Efficient businesses survive while inefficient ones inevitably fail. There are different ways of defining efficiency and in the prevailing economic climate most of our ideas about efficiency are based on the concept of process efficiency, the idea that by making each individual process efficient, we will then end up with an efficient organization overall. There is, however, an alternative view which can be referred to as “whole system efficiency.” This approach was developed by an engineer Emerson, the first person to use the term efficiency in a purely management context. {{more}} While he does not neglect the efficiency of individual processes, he links these explicitly to the idea of total organization efficiency. That is, in becoming efficient, the organization becomes more than just the sum of its parts. What mattered for Emerson was not the output of individual processes, but total output. Other disciples of Emerson have compared the business organization to the human body. The body can tolerate occasional inefficiencies by some organs because the whole body functions as a self-correcting, self-regulating organism.

Companies today when issuing profit warnings often seek to allay stock market fears by assuring investors that they are becoming more efficient, the implication being, that they will thereby become more profitable. Efficiency, in terms of reducing waste, reducing costs and increasing output, is a goal for which all enlightened managers strive. But there is always a question as to what efficiency really is. Typically, approaches to efficiency focus on such areas as cost reduction (reducing inputs), quality control (reducing waste), technology investment and time management (increasing productivity). The ultimate aim is to increase output, to reduce inputs or (more usually) both, thereby improving profitability. The traditional approach to organizational efficiency is to break down the organization into its component elements, studying each process and each part of the process and looking for areas where improvements can be made. This was the approach pioneered by leading figures of the scientific management school notably Winslow Taylor. He first developed the concept of time study, measuring the speed with which workers performed a task and then redesigning the task so that it could be performed more quickly. One of Taylor’s colleagues developed the motion study which involved studying how workers performed their tasks and breaking each task down into generic motions. Redundant or inefficient motions could be identified and eliminated or changed. The two concepts together became known as time and motion study, one of the most important management tools of the 20th century and still in use by many managers and consultants in the 21st century.

According to Emerson however, efficiency has two prerequisites: the right standard and the right organization. He agrees with Taylor that standards are essential not only in tasks, processes and tools, but also working conditions and environments. His concept of standards however is more flexible. Standards are not cast in stone but should be adapted to suit circumstances. Before such standards are set, it is first necessary to get the organization right. For the modern manager the Emerson system of efficiency offers three ideas that can be of value when discussing efficiency today. The Holistic Approach, while not neglecting process efficiency Emerson subordinates it to the efficiency of the whole organization. Ensuring that the organization as a whole is efficient is more important than ensuring the efficiency of a particular task or process. In such a scenario, it could be possible to allow an individual process to be deliberately inefficient in productivity terms so long as it will have an outcome that is positive for the whole organization. Getting the organization right; by creating an atmosphere where efficiency happens naturally and is seen as the norm rather than something that is imposed from the top the organization can achieve the requisite fitness for its purpose. Flexibility: standards are what the firm requires to be efficient. Predetermined ideas can be unhealthy as can over reliance on the benchmarks set by other companies. Standards, like quality should also be subjected to continuous improvement as new knowledge becomes available and as new possibilities for increased efficiency are realized.

The efficiency movement does not have the answer to every business problem at every time, but Emerson’s holistic approach to efficiency represents a valuable and important alternative to the control driven approach to efficiency that is common today where Companies are under increasing pressure to cut costs and increase productivity in order to deal with low cost competitors. We are today indebted to Harrington Emerson who conceived of an organic organization where efficiency is a natural occurrence, not an imposed set of targets and procedures – a concept that has a lot in common with total quality management and a management philosophy that remains valid and important. Arising out of this discourse, the logical question that one may pose is how does my business stack up to these concepts of efficiency and, am I on the right track?