CEOWORLD magazine - Latest - CEO Advisory - The Hidden Dangers of Focusing Excessively on Operational Efficiency

CEO Advisory

The Hidden Dangers of Focusing Excessively on Operational Efficiency

Most businesses, when faced with the need to reduce costs, will logically focus on efficiency. Afterall, standardizing, automating, outsourcing, and so on are proven methods to reduce costs. They do work. Except there’s a limit to how well these “efficiency-alone” solutions can work before they start to hurt overall business process effectiveness.

The negative consequences of focusing on efficiency alone can be seen, for example, in customer support. Call center services across industries have evolved over time to reduce costs, from onshore to offshore to automated. In the process, some have become virtually inaccessible or have lost their human touch. They’ve proved to be difficult to interact with or simply ineffective at answering queries and solving problems. As a result, whatever cost efficiencies gained are traded off against worse customer experience and satisfaction.

Pushing cost efficiencies at the expense of customer experience, or separately from the overall business value, is a mistake. Fortunately, there are clear actions that can help avoid that mistake.

Follow these business design principles to deliver both operations efficiency and customer experience satisfaction: 

  1. Always seek an improved customer experience
    Keep customer-experience key performance indicators (KPIs) in mind even when driving efficiency-related changes to processes. In today’s world, seeking efficiency with unclear customer KPIs is a mistake — not just because the customer is important, but also because today’s digital capabilities can deliver both together.
    Here are action items that facilitate this:
    – Ensure that process KPIs are measured end-to-end (E2E), and that customer KPIs increase.
    – Use specialized tools such as customer journey maps to deliberately design the customer experience. You don’t want customer experience to be an unplanned consequence of the process change. You want it to be thought of up-front as part of the whole business value.
    – Ensure that your process organization design allows for E2E process excellence as well as E2E customer support. Siloed organizational designs are a killer.
    – Leverage newer technology platforms that are designed for E2E process management rather than siloed. Many such platforms can also resolve problems across multiple systems.
  2. Design processes to capture both efficiency and effectiveness in business value, in keeping with the open market
    Avoid assuming that if processes are made efficient then increased business value will follow. Simply stringing together a bunch of siloed efficiency gains may not end up increasing business value. In fact, it may detract from overall business value if the new process design itself is suboptimized or in conflict with open market conditions.
    Here are action steps for designing and capturing business value:
    – Use a process design approach that maximizes business value. Tools like process mapping, value stream analysis, and loss analysis do a better job than others of linking process designs to business outcomes.
    – Assign E2E process owner roles to ensure that business value is delivered even after the transformation project ends.
    – Report performance results regularly and completely based on what the business deems relevant. Begin to distinguish between clients and users. Clients are senior stakeholders who ultimately “pay” for the service and who are empowered to make choices about service levels. Users are the employees who use the service and have input as to what’s an acceptable level of service.
    – Get more granular on the costs and benefits of processes. When transforming operational processes, become more precise in understanding the costs of the whole business process, the unit cost of each service item consumed, and the quantified benefits to each stakeholder organization.

The above principles of always seeking improved customer experience and being deliberate about capturing the business value of both efficiency and effectiveness go a long way toward codifying business process maturity. More importantly, they avoid the pitfalls of following efficiency-seeking ideas off the cliff.

This watchout on overemphasizing efficiency improvements to the exclusion of effectiveness is one of the 12 hidden secrets for organizations that want to gain lasting competitive advantage. In today’s world of the fourth industrial revolution, organizations must achieve staying power by transforming not just their products, but also revolutionizing their business operations.

Written by Tony Saldanha.

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CEOWORLD magazine - Latest - CEO Advisory - The Hidden Dangers of Focusing Excessively on Operational Efficiency
Tony Saldanha
Tony Saldanha is CEO/Co-founder of Inixia, the global standards and certification body for the Shared Services industry. He formerly ran Procter & Gamble’s famed multi-billion-dollar Global Business Services (GBS) and IT operations in every region worldwide. Filippo Passerini’s leadership as President of P&G’s Global Business Services and CIO has been recognized as best-in-class in the industry. His strategies appear in numerous books, articles, and business reviews. He is currently a consultant to several companies and C-suite executives. Their new book is Revolutionizing Business Operations: How to Build Dynamic Processes for Enduring Competitive Advantage (Berrett-Koehler Publishers, Sept. 12, 2023).

Tony Saldanha is an opinion columnist for the CEOWORLD magazine. For more information, visit Tony Saldanha’s LinkedIn page and website.