Why MBA's "Efficiently F*ck" Businesses | Intentional Operational Slack

Existing & Creating Intentional Operational Slack

Probably one of the most counter-intuitive concepts in business.

The idea of creating intentional operational slack in a business is to allow for higher value “assets” to be more effective, but not more efficient…

Here’s a few examples of these in action.

My favourite example is from the advertising agency life in the Mad Men era.

Great show.

In the show, and I presume the advertising industry at this time as a whole, every high level manager or copywriter had a secretary.

Even people who definitely don’t have enough work/responsibility to warrant one.

In fact what this show and concept explains, is that MOST people did not need one during this period.

They didn’t need one from a purely efficiency standpoint.

It seemed like a waste of money.

AKA, it was inefficient.

The reason why this worked so well was down to how they are intentionally creating slack in one area (secretary time, sitting around doing nothing), to save time in another higher value area (in this case “Ad men” time).

This also meant that when “Important Ad Man” needed something done straight away, they can go to their secretaries and they themselves would not be busy doing something else, as a result, these tasks got completed instantly, vs waiting for a centralised team/secretary to do this.

Whether this is just calling someone, sending letters, printing, copying or some custom creative task.

So from an efficiency standpoint this is definitely poor, but from an EFFECTIVENESS standpoint, actually made everything run quickly and smoothly within the agency.

Why MBA's "Efficiently F*ck" Businesses

In our Mad Men example, imagine we had an MBA/Wall street person come in with no real business experience but only efficiency metrics to improve.

They have a checklist about how to improve the profitability of a business and they work to achieve this.

Month 1 they would remove all the “under performing secretaries”, net profit would skyrocket and they’d be heralded as Gods of “synergy” and “cost-cutting”.

This would probably last for the first 1 or 2 quarters.

But then things would start to fray, tasks would take a lot longer to get done, the higher level Ad men would get frustrated having to do all the “micro tasks” themselves and things would slowly drift.

During the drift, work quality decreases, so MBA person puts in more effective methods, usually technology based, these fix the signal but not the actual problem.

As a result work decreases further, talent starts to leave and now revenue starts to go down.

Other Examples

There’s a lot of other examples around this core issue.

The 2 most common are from engineering and Warren Buffett’s views.

The engineering one I do not remember where I read but actually found a Reddit post that explains this pretty well, it’s quite long so feel free to skip ahead.

I’m a pretty analytical guy in general, but when you see how far this can go, and when improving things in the short term is actually far worse in the longer term.

This gets worse when people come into a business rather than founded it, that’s because they don’t know WHY specific “inefficient” things might have been integrated in the first place.

Warren Buffett’s View

Buffett’s view on the subject is pretty similar.

He believes corporate America and Universities teaching business teach this in completely the wrong way, citing only Stanford as one that does this well.

The short version of his opinion is that when people start with cost cutting and trying to make the next quarter look good, you actually have dramatic issues with product and team long-term.

Those 2 things that make the business better or worse when all sales and marketing are stopped.

Just my thoughts, let me know what you think.

Cheers,

Thomas.