In a Fortune 100 company, the Board hired a well-known, large, and respected strategy consulting company to do an efficiency study, in the hope of finding cost savings.

Unfortunately, efficiency was not that consultancy's forte. They brought in a simple spreadsheet to measure "span of control" (I prefer "span of supervision" in an empowered organization). They assumed that a manager with fewer than seven staff was wasteful.

That assumption is, of course, absurd. They didn't seem to understand working managers.

Note that 1 manager who's spending full-time supervising 7 staff

= 2 working managers, each spending half-time supervising 3 people (plus half of themselves) and the other half-time doing the work of the group.

In both cases, there's 1 FTE (full-time equivalent) of supervision over 7 FTEs of work.

But beyond being inane, their recommendations were harmful. They recommended combining two groups with very different specialties (lines of business) under one manager who's not qualified to manage both. At least half the combined group would be reporting to a manager who doesn't understand their profession, can't mentor them, and is ill-equiped to plan the future of that line of business.

Sources of Inefficiencies

What an efficiency study should do is track down all the sources of inefficiencies, and recommend solutions at the root-cause level.

There are many sources of inefficiencies, including these:

• Unclear strategic focus, at the enterprise and departmental levels

• Unclear or shifting priorities, and department priorities not aligned with enterprise priorities

• Unclear accountabilities for end-results at the individual level

• Disempowerment: a lack of authorities to match accountabilities, including budget, decision authorities, information

• Lack of specialization in the structure (e.g., groups substructured by the wrong dimension, decentralization)

• Poor teamwork, perhaps caused by:
  • Silos, lack of the appropriate contributors on each team, perhaps caused by:
    • Structure (e.g., silos by design, unclear accountabilities for satisfying internal customers)

    • Fixed teams regardless of the needs of each unique project

    • Difficulty getting help from other groups, e.g., for lack of a dynamic team formation process or priorities set at the group rather than enterprise level

  • Lack of clear individual accountabilities for specific results among team member (the "all for one, one for all, everybody's accountable so nobody's accountable)

  • Lack of a clear chain of command within each team (prime contractor, subcontractors, subs to subs)

• Inefficient processes (or ambiguous processes), doing steps out of order, perhaps caused by:
  • Badly designed processes

  • Unclear or no defined processes

  • Lack of phase gating (clear requirements before engineering work begins; analysis of solution alternatives before implementation work begins)

• Reinvention, perhaps caused by:
  • Lack of documentation and sharing of lessons learned

  • Lack of design for reusability, or a repository of reusable components

  • Poor structure with overlapping domains

  • Decentralization

• Bureaucracy (work that is required but has little added value)

• Excessive supervisory layers; inappropriately narrow span of supervision

  (Note: This analysis must account for working managers, who both supervise part-time and do some of the work of the group.)

• Lack of motivation, perhaps caused by:
  • Lack of clarity about the Why of the enterprise

  • Less than inspirational leadership

  • Lack of sense of purpose in work, e.g., jobs defined by roles in processes or responsibilities for tasks rather than satisfying internal customers with results they value

  • Unsupportive culture

  • Below-market compensation

  • Inappropriate metrics and incentives

• Incompetence, perhaps caused by:
  • Poor hiring practices

  • Lack of training

  • Lack of up-to-date tools and methods

  • The Peter Principle, promoting people to their level of incompetence

  • Promotions before people are ready for the purpose of retention (to satisfy people's ambitions)

• More people than work, people have time to waste (rare)

  (Note: Work on "unbillable" sustenance activities, such as training, process improvement, planning, innovation, relationship building, etc., is not a waste of time unless it's excessive.)

Selecting a Consulting Company

In the vendor selection process, consultancies proposing to do efficiency analyses should be asked to put forward their list of the sources of inefficiencies that they propose to look for. And they should be able to explain how they're going to find these problems and identify root causes, including the principles they use to evaluate your structure, resource-governance processes, culture, and metrics.

Then, their frameworks can be judged against your list (such as the above) to see if they're really qualified to feret out the most salient sources of inefficiencies, and know what to do about them at a systemic level.

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