Short-term efficiency initiatives often fizzle out, and executives find themselves in repeated episodes of cost-cutting. Some companies, however, have managed to break this cycle. Ryan Morrissey, a partner in the Organization practice, discusses the long-term approach to efficiency and the five critical areas successful companies focus on.
Read the transcript below.
RYAN MORRISSEY: Recently at Bain, we took a hard look at this question of how are top performing companies embedding efficiency in their organizations. And really, the reason we decided to stare at this problem is a repeated set of questions we were getting from different leadership teams, around how to avoid this history that they've developed of repeated episodes of cost-cutting initiatives. Repeated episodes of efficiency initiatives where they were out building steering committees, assigning a lot of senior people to the team, drafting all kinds of work plans and getting to a place where they're making some real progress, seeing some real tangible results, but then seeing their organization really lose steam—running out of stamina and moving on to other initiatives.
And that became a real frustration for a lot of the executives that we worked with. So the question was, how do the companies that managed to get out of this episodic approach to efficiency do it? What's different about the companies that have really embedded efficiency in the way they work and the way they operate?
And as we look at the research that we've done, the best companies that we've worked with, we've been able to identify a few things that those companies are doing that really differentiate them from the rest. The first is, they get to a place where you can very clearly see that they've adopted what we call the efficiency mindset. So efficiency is no longer treated as "something that we do" or "something to be endured." It becomes part of "who we are."
And the second is actually an identifiable set of behaviors that these companies are exhibiting.
So as we dug into it further, a few things really stood out. One was, these top companies have found ways to get efficiency directly linked to their strategy. So they don't talk about efficiency as a "what we did" or "what we're doing," they talk about it as "who we are." And they think about it—how it can be an enabler of growth and how it can improve their customer experience.
We also see them thinking hard about accountability and metrics. So what metrics are they going to track? How are they going to balance those metrics to make sure they are not over-indexed on one particular element to the equation? And really, how are they going to only put so much pressure on the metric before they think about other things that may be even more powerful?
And a couple things that we've seen are more powerful—one is just commitment. So is the senior leadership team visibly and consistently committed to running a more efficient organization? Are they themselves running out of steam or can they sustain their passion for efficiency over time? Do they understand the connection back to the strategy and how powerful it can be to get out of this doom loop?
The second part is really around translating that into a set of behaviors. So what are the expectations of people on the front lines? What do we need them to do? What's their role in building an efficient organization? And how are we going to use that combination of metrics and expectations to drive that?
And we see the best companies taking all of those things and putting them together and really getting to a place where efficiency is deeply embedded in the culture of the organization. And that's the behavioral change that these executives are looking for, to get out of this initiative-based approach and really adopt a set of behaviors that are going to hold up over time. To really see those behaviors begin to be part of the culture of the organization in a way that's much more lasting than any individual initiative would be.
The last thing that we see quite a bit of is a concern about, well, what's the impact of all of this going to be on the customer experience? So an assumption that efficiency means you're going to take something away from the customer. What's this mean for my growth prospects? So does efficiency mean you're pulling back investment from things that are important.
And through our research, we found actually quite the opposite of that. That in nearly all cases, the more efficient organizations are the ones that are being more selective about where they place their investment dollars. They're running less complex organizations that are able to be more effective in how they get things done. And as a result, [they] actually demonstrate superior customer experience and better growth over time.
Read the Bain Brief: Building Efficient Organizations