We’ve all heard many times the idea that “people will do what they’re measured on.” Is it really true? If I told you that the defect rate for this company’s premier product dropped from 12% to 1% in only three weeks and then further declined to 0.5% in just three more weeks, you’d probably think I was making it up. Well, that is exactly the result that occurred—and it occurred solely from beginning to measure quality in parallel with measuring productivity (in this case, speed). Perhaps what is even more revealing is that there was no incentive linked to quality improvement. All the while, workers were being paid a bonus for speed—which, incidentally, did not suffer when quality improved. That they were not being equally rewarded for quality made no difference. The metrics alone changed their behavior.
Welcome to the era of hyper-competition, outsourcing and cost reduction. As if the pressures of day-to-day operations weren’t enough of a burden, the demand for growth continues to be on the mind of executives.
But how can an organization be expected to keep costs under control and grow at the same time? It’s a challenge confronting even the best HR organizations. Nevertheless, growth and cost reduction can be designed into the same organization.
Growth germinates from the distinct value offerings an organization offers customers, especially when the value is greater than that offered by the competitors. And growth is sustainable when differentiation is designed into the organization. Therefore, increasing productivity and lowering costs for activities that don’t create competitive advantage constitutes the smartest type of pruning.
One vicious reality facing organizations today is the need to have a clear strategy. With the unlimited opportunities and choices out there, the challenge is making choices that support, reinforce, and align with your organization’s strategy. Without a strategy, the only chance for success is winning the ‘operational efficiency rat-race,’ which is the zero-sum game of cutting costs and enhancing productivity at a pace faster than competitors. More than one company has found itself drowning in the noise of ‘strategic static’—lowering costs and attempting to survive the rat race.