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Deconstructing the Concept of Efficiency

The concept of efficiency is not always easy to grasp.  People go to work.  They do their job.  They follow the pace.  What exactly is efficiency in the scheme of things?  I think it is important to be able to distinguish between how hard different workers are working.  It is not really possible to discuss efficiency if this kind of comparison is not performed.  Improving efficiency is about getting more from a person or process.  Therefore in order to determine whether or not efficiencies are being gained, it is necessary to know if production is increasing.  If an organization cannot say whether one worker is more productive than another, in fact it has little sense of efficiency.  Moreover, it might be paying one worker far too much and another much too little.  If an organization cannot speak in relation to its use of labour, then efficiency is sometimes addressed as an issue of, say, using cheaper toner cartridge, buying a different brand of paper clips, and turning off the lights when the washroom is not in use.  Cost of materials should not be confused with matters of efficiency.  I will explain my position further in this blog.

If I buy a stack of paper for $10 and then find a substitute supply for $5, this does not mean that the organization is more efficient.  Its paper has become less expensive.  The actual operations might remain relatively inefficient.  I suggest that efficiency almost always has a dimension of time.  It is true that if a person works twice as fast, they might produce twice as much product; and it could be said that labour is half the cost.  “Cost” is certainly an important context.  However, the focal point of efficiency would be the doubling of production in the same period of time.  Another dimension of efficiency is the achievement of a desirable outcome.  If one person digs a hole while another fills it, nothing is achieved regardless of how quickly they operate.  Efficiency is usually about time in relation to outcome.  Outcome tends to be described as production, but doesn’t need to be.  Arguably, a paramedic who can save three people in an hour is more efficient than another who can only save two.

Many people seem to use the term efficiency as if it means “the best deal.”  In this context, moving production away from a high-cost region to a low-cost region seems to result in a better deal.  It is a cheaper deal.  If one enters the facility located at the low-cost region, it might be running quite inefficiently albeit less expensively.  I work in a call centre environment.  I discuss efficiency fairly routinely.  But this is never a conversation concerning the issue of salaries or wages.  I examine employee data in relation to performance.  Whether or not an employee should get paid a particular salary in relation to their performance is quite a separate issue.  Of course, an employee might reasonably complain that their performance is quite good given how much they are paid.  This is not an unreasonable assertion; but it is outside my scope and more specifically at some point beyond the immediate conversation.  To know whether or not performance is good for any given level of pay, it is first necessary to ascertain how good that performance is.  The salary discussions can proceed afterwards.

The problem is that people don’t necessarily conceptualize the dynamics well in reverse.  A reverse conversation would be precarious.  Once the salary level is established, some workers seem predisposed to minimize performance thereby maximizing their pay in relation to their performance; this relatively poor level of performance then becomes normalized as if the pay is inadequate if more performance is expected.  Further, if these workers are asked to become more efficient, they would probably say that this is impossible; and any cuts to the budget for salaries must lead to reductions in production or service.  Consequently, there is sometimes a push for governments to turn to the private sector.  On the surface, it might seem like this move is primarily meant to reduce compensation - an issue of cost.  However, I would suggest that private sector employees feel compelled to produce more with fewer employees - an issue of efficiency.

The reason why the private sector is sometimes characterized as being more efficient than the public sector is the immersive use of performance metrics in the former.  There isn’t necessarily a reason for the public sector to be less efficient; it is simply easier to characterize it as such since due to the lack of insightful metrics to establish performance levels.  Why might this be the case?  Well, perhaps I am not alone in my understanding that some charities are structured to operate inefficiently: e.g. a $10 donation might lead to a $5 benefit to the end-recipients indicating high administrative overhead.  Might the money be gobbled up by high costs such as lighting and paperclips?  It is possible to have meetings about setting up meetings to in order to have meetings.  This is not a conversation about salaries per se but rather what people are accomplishing with their time.  To say that they are overpaid or underpaid distracts outside observers - drawing them to questions of reasonable compensation for hours of work, market salaries, and cost of living.  Actually, the real issue is that the hours being worked are pointless and unproductive.

From the standpoint of analytics, efficiency premised on time and outcome is certainly more data-intensive than interpreting efficiency as aspect of cost.  I don’t know about other people dealing with performance data, but for the most part the determination of efficiency is the easiest part of the analysis.  The challenge is getting the person, process, or system to become more efficient.  In effect, I am constantly questioning the normalcy surrounding performance adequacy.  This is not to say that I am insensitive to the issue of pay-for-performance, which I already stated is outside my scope.  I am merely suggesting that regardless of how much people are paid it is frequently possible to find gains in efficiency.  This is a fascinating field in that it doesn’t necessarily involve making people work more or at an unreasonable level.  I know precisely how busy people are.  The real challenge is to create a production environment that makes better use of time.

The activities of people in a production environment aren’t physically constrained in the sense of a train’s movements being determined by its tracks.  People are behaviourally complicated and subject to varying levels of personal autonomy.  Although it is possible to evaluate efficiency entirely from the perspective of outcome, arguably it would also be worthwhile to create a metrics regime to also influence their inputs.  There is a dialog in the analytics between what they do and what they accomplish from what they do.  This is an important conceptual separation if the ultimate goal is improvement rather than simply eliminating those that seem to under-perform.  In the context of improvement, it is necessary to recognize that efficiency impositions do not actually lead to them; but rather, improvements can potentially bring about higher levels of efficiency.  This assertion is made possible only if efficiency is not about cutting costs per se but achieving desirable outcomes.  One hopes to maximize desirable outcomes in the time available.  It is of extreme interest to me what behaviours seem to contribute to the best outcomes.

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