Ways out of the efficiency trap - how "transformation" fails or not ...

Travel cost reduction and layoffs will save us? Certainly NOT. But then what are the alternatives to the unimaginative reflexes of the past?

The good old days…

Yes, the last 3-4 years have been wonderful - the economy was booming, Asia brought us one sales record after another and it was the time of radical innovations, moonshots and innovation labs. The New Work Hype really took off - Latte Macciato culture, self-organisation and feel-good culture at the heart of many companies' thinking. New areas with illustrious names were created specifically for this purpose and there was hardly an HR event that was not about "democratic leadership, employee orientation or innovation and creative formats. With a little time delay, the wave of agilization then began in many companies - it seemed as if the holy grail had been found for the solution of all problems. Brave new VUCA world (the term was originally coined by the US Army War College) …

... are over! Layoffs and cost-cutting as a universal solution!

But since the beginning of the year the horizon of innovation and agility is darkening - growth and sales crisis in Asia, trade disputes, political instability, burgeoning nationalism, climate catastrophe and COVID19. The political and economic climate is tilting - not least in the well-tried form, intensified by media and reporting.

Now, one would think that due to the last few years and the apparently great cultural efforts and focus on "disruptive innovations", we are well equipped organizationally and culturally and can actually reap the rewards - with a highly productive, adaptable and innovative organization and culture, we can withstand the current changes. But this is apparently far from the case. The much-vaunted ambidexia and balance of radical innovation and simultaneous focus on maximum efficiency in the existing business is apparently reserved only for the digital champions and well-positioned companies in the SME sector.

Particularly in the case of large companies and corporations, the pendulum is once again swinging unilaterally in one direction: maximum focus on efficiency and the associated reduction in personnel.

The press in recent months is full of redundancy figures in the thousands. The capital market is grateful ... at least in the short term, the announcement of job cuts leads to positive share price developments. The innovation labs and digital culture areas that were opened a few years ago with a lot of "hoopla" are either disappearing from the scene again or being reduced to an insignificant level.

Blind in one eye: black and white thinking and opportunists …

This development is not only reinforced by media that massively reinforce every trend, but also by the often gladly quoted evangelists of the respective promise of salvation who are invited to keynotes. When the hype is over, people change sides completely without shame. Impressive, for example, with the topic of "New Work", where the advocates of democratic structures, maximum human centricity and a lack of hierarchy first chose New Work as a "Silver Bullet" to solve every problem and now announce: New Work is dead. Long live efficiency and hierarchy. Or you can jump directly onto the "Fridays for Future" sustainability train…

And the consultants smell the next big deal and also preach the end of the culture of fun and innovation. Instead, efficiency and FCF (free cash flow) optimization name often is the game …

And the pendulum swings back to the extremes in almost all areas:

Whereas until recently the topics of "technology" and "digitization" were primarily about new business models, platform economy and disruption, the focus now is primarily on using technology to automate processes, reduce personnel - in other words, classic bottom-line optimization. And due to the lack of real top-line success cases, the use of AI / AI is reduced to dull RPA (Robot Process Automation) cases, where manual activities are scripted to replace human by machine.

Whereas innovation, cross-silo collaboration and partnerships were previously on the agenda, the focus is now often on short-term issues and cost reduction. The culture of innovation and risk is being switched almost seamlessly to efficiency management and "sweating out employees".

It is also very interesting to observe the various implementations of agile organizational structures. Since short-term and P&L-effective effects often failed to materialize, hierarchical structures and short-term efficiency and number orientation are hidden behind agile terminology. Except for the adoption of nice terms from e.g. successful organizations like Spotify or Zappos, the rest remains as usual. Or, behind the agile structures, classic control instances and steering committees are built to "get the chaos of agile teams on track". The list of "pendulum movements" could be continued at will. It is enough to look at the relevant trade journals to see: Innovation was yesterday. Efficiency is today.

Not an either/or, but an both/and: Productivity and values at the heart

It is very surprising that the sometimes intense discussion on the topic of "ambidexterity", i.e. the ability to make existing business more efficient and to produce disruptive innovations at the same time, which in case of doubt represent the business of tomorrow and in doing so may even question the existing business (see also my basic article dealing with CompanyReBuilding). Ultimately, this is exactly what provides the answer to the question of what an organizational setup should look like that can be used to react dynamically to market changes. Unfortunately, the much-vaunted "ambidexterity" was structurally misunderstood: isolated innovation labs were built which de facto did not get any horsepower on the road and were regarded as foreign bodies by the rest of the organization. Every buzzword was taken up without reflection and then half-heartedly driven through the organization: New Work became nice colorful rooms and desk sharing. Design Thinking for a collective handicraft lesson. Agile meetings to wild Post-It glue orgies without any depth. And when introducing agile structures, forget that it's not about fun culture and hippie camp, but about maximum value orientation and applying strict rules. All this often only as a facade, so as not to endanger the existing power structures and to leave the professional politicians to continue to be sufficient. The principle of "ambidexterity" provides the answer to the question: what needs to be taken into account for structures that are sustainable and successful in the long term. Or: how do we get from the "either or" to an "both and" way of thinking.

Below are some food for thought from the context of Company ReBuilding and EmployeeExperience:

Productivity instead of efficiency vs. Innovation

I can still remember very well my time when I was primarily concerned with questions of financial management of companies. The focus was on variables such as RoE (return on equity), ROCE (return on capital employed) and FCF, which in my view are still decisive control parameters today. It has always been clear that a one-sided view of the cost base (bottom line) is not very helpful or value-destroying. Not only is the bottom line finite (provision of products at zero costs is simply not possible), but top line effects have a much greater leverage and only top line effects contribute to the sustainability of the company. At the same time it makes sense to ensure the most efficient use of resources. Top and bottom line effects are not mutually exclusive. Rather, it is more important to adopt a value-oriented view, which ultimately means maximizing long-term productivity rather than isolated efficiency considerations.

Double helix instead of client or employee first or shareholder value discussions

As already described in my basic article on CompanyReBuilding, we are happy to find a more theoretical discussion about employee or customer orientation. "Employees first, clients second" was the focus of the past few years, when the new work sow was driven through the village and often incorrectly translated one-sidedly as "cuddling and wellness culture". In the meantime, the pendulum is once again swinging unilaterally in the direction of the customer and stakeholders at the center, followed at some point by the employees - as evidenced not only by the unimaginative staff reductions and efficiency programs mentioned above.

In the age of co-creation with the customer, "employees as product ambassadors" and purposedriven organization, however, this distinction is rather theoretical. It is much more decisive to consistently focus all activities in the company on creating customer and employee value and to do everything possible to ensure that productivity is optimized in the long term. All activities that cannot answer this question, on the other hand, must be consistently eliminated (... sorry for the martial language - but absolutely appropriate at this point). In addition, this optimization towards maximum value should not be carried out once, but should be included in standard processes. Approaches such as the "Cleaning the garage / Springcleaning" approach described by Henley / St. Gallen are simple and effective instruments in which non-value-adding activities are identified and eliminated in a regular process that takes place at least once a year.

Technology as enabler for ambidexterity instead of dumb automation

When it comes to the use of technology, it is also important to take a holistic view and not to turn back the efforts of recent years towards a company with "digital DNA". As already mentioned, technology is increasingly being used again primarily for the pure automation and optimization of processes. De facto, this makes absolute sense - will ultimately release (human) capacities that can take care of value-adding work. However, in this context, value-creating does not mean "releasing employees", but using the freed capacities consistently to improve the long-term topline situation, i.e. to exploit sales potential.

And here too, technology plays a decisive role - namely in terms of digital business models and solutions. After all, there is no industry that can avoid the often quoted "software is eating the world". Building up technological and digital competence within the company and investing in products and ecosystem development remains central to the survival of companies. The use of technology to increase efficiency merely provides the basis for this.

What remains …

The comparison could be continued at will. But I think that with the three examples given, the point is made and hopefully provides an impulse for reflection and pause. Ultimately - as in many other areas of life - the question is how companies can be successfully positioned in a balanced and sustainable manner in the digital age. How to draw the right conclusions from the hype of recent years about innovation labs, disruption, new work and agility and how to adapt experiences of successful implementation. And in particular, how to develop your own opinion about which organizational model, which corporate purpose / purpose is the optimal one for the respective individual context and is based in particular on the experience and history of your own company.

Think about this when you slip into the next efficiency program and wonder about the cultural corridor damage: didn't we have the same experience 5 years ago? After all, much of what we are confronted with every day is "old wine in new bottles" and the solution for the respective problem is much closer than in promises of salvation from self-proclaimed "buzzword evangelists", fanciful technology trends or thanks to social media generated hypes: in the experience and know-how of our own employees.

I look forward to your feedback and comments.

#Efficiency Trap #Ambidexterity #Transformation #NewWork #CompanyReBuilding #EmployeeExperience #HR #FutureOrganisation #Culture #Agility #PeoplePerformance