Watch out for sub-optimising when seeking efficiency improvements

The biggest mistake many organisation make when seeking efficiency savings is to implement process and governance improvements that deliver efficiencies in one area which creating greater inefficiencies across the whole. This is called sub-optimising. For example, you could streamline the processes for one area by removing certain quality checks. This then leads to additional costs further down the food chain when another department has to deal with the knock-on effect of low quality.

Sub-optimising may sound like something that is easy to avoid given the example I have provided. However, sub-optimising can also occur when teams implement additional processes and checks they believe will provide better results down-stream, and hence reduce costs. This is harder to spot, and is common in many organisations that are organised around functional silos that lack a deep understanding of one another or the end-to-end processes that cut across the silos.

For example, at one of our clients a new Proposition Team was introduced to improve the qualification of new demand for business changes and projects. The idea was that they could reduce costs by stopping certain unadvisable changes early, and better shape projects before they hit the project delivery function, thereby reducing FTE spent doing this on projects. The result over a couple of years was a sizeable increase in their delivery costs. To engage with the Proposition Team, other teams had to recruit new people. For example, the Operations Team, who looked after the live support of new business services, had to appoint two new relationship managers to engage with the Proposition Team. Furthermore, the Proposition Team started to drive the capture of more demand for projects, leading to greater scoping work being needed. The Proposition Team also introduced new governance controls and forums, requiring people to spend more time engaging in these, and as a result, increasing the need for FTE across multiple teams. All this would be fine if the overall benefits outweighed the new costs, but there was a wide spread consensus that this was not the case. In a quest to optimise the demand intake process, the client had actually sub optimised the end-to-end process.

To prevent sub optimising, all efficiency improvement initiatives should focus on the end-to-end processes that cut across multiple teams and functional silos. This is what the likes of Lean and Systems Thinking have taught us, but which so many organisations miss despite the clear implications for the bottom line.