How to Cut Costs and Become More Efficient
How to cut costs and become more efficient
Here is a good motto to memorise "Complexity and waste thrive on each other"
You want to achieve your goals. In order to do that you must:
- Maximise your productivity
- Minimise your costs
Efficiency is the ratio that relates your productivity to your costs:
- High productivity and low costs = high efficiency
- Low productivity and high costs = low efficiency
If you are inefficient you will lose ground to those who are more efficient.
In order to gain efficiency, consider the following five points
- Complexity and waste thrive on each other
- Simplicity is good
- Separate the method from the goal
- Ask what for? Rather than why?
- Divide things into three classes: Those that help you to progress, those that don't help you to progress and those that hamper your progress
1. Complexity and waste thrive on each other
The human mind has limits. Once you go beyond your mental limits you become confused and make mistakes. Over complexity causes the mind to fail, because it is unable to process the volume of information presented to it. Therefore needless complexity is to be identified and cut out.
Over complexity is bad because:
- It costs money to create and sustain
- It does not add any value
- It is the cause of error
2. Simplicity is good
If "Complexity is bad", then "Simplicity is good".
The mind must operate within its limits. That means that information must not exceed a certain level of complexity.
That means the information presented to the mind must achieve a certain level of simplicity.
Occam's razor
William of Occam was a 14th century English logician and Franciscan friar who created a principle called Ockham's razor.
The principle states that "Entities should not be multiplied beyond necessity." Sometimes it is quoted in one of its original Latin forms to give it an air of authenticity:
If you want to impress your mum, memorise this!
"Entia non sunt multiplicanda praeter necessitatem"
It means "Entities should not be multiplied beyond necessity."
Things should not be multiplied beyond necessity
That means "more complexity is NOT necessarily better"
ie If two solutions can solve the same problem, the simplest one is more preferable over the complex one.
Implication: Look at what you are doing and simplify it.
3. Separate the method from the goal
Define your goal and recognise that anything not related to your goal is a relative waste of time money and effort.
In order to simplify you must know what you are trying to achieve (the goal) and separate the goal from the method of achieving it.
- The goal is "the object of your desires".
- The method is the "means by which you are trying to achieve the goal"
Many people do not distinguish between the goal and the method and they mix them up.
Then they make the mistake of committing themselves to a certain method, in spite of the fact that it is not helping them achieve their goal.
Example: The writer is committed to using his typewriter and won't change to a computer
Commitment to your goal - refusal to give up on your goal- is the character of determination: a positive trait.
Commitment to your current method - refusal to give up on your current ways of doing things- is the character of stubbornness; a negative trait.
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4. Ask what for? Rather than why?
We do things for good reasons, but the reasons eventually become traditions.
And blindly repeating tradition is irrational and wasteful.
Rather than ask "WHY? Which gives us the historic justifications, it is often better to ask "what for?" Meaning: "For what purpose?" "With what intent?"
Asking Why? Tends to justify the method already in use and tends to work against simplification.
Asking WHAT for? Tends to challenge the method already in use and tends to work in favour of simplification.
5. Divide things into three classes
Divide things into three classes
- Those that help you to progress
- Those that don't help you to progress
- Those that hamper your progress
Those that help you to progress:
There are some processes and people who are actively helping you to progress.
You should identify, encourage and reward these people.
Those that don't help you to progress
There are some processes and people who are NOT actively helping you to progress:
They are coasting: taking out of the system without contributing anything valuable in return ie dead-weight
You should identify, challenge and inspire these people to upgrade their performance.
Those that hamper your progress:
There are some processes and people who actively HINDER and thwart your attempts to make progress.
They are insurgents, undercutting and frustrating your progress.
You should identify them and see if you cannot enlist their cooperation.
If you cannot change them, you should act to eject them from your team.
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Definition: Efficiency
Efficiency in business shows how much useful work you get for what you spend. It is the ratio of output to input, written as a figure or percent. When you raise output or lower costs, the number goes up. Managers use it to spot waste and decide where to simplify and save.
Show CG4D Definition
- Compares useful output with all input resources
- Expressed as a ratio or percentage value
- Improves only when output rises or costs drop without loss of quality
- Acts as a decision guide for cutting waste and boosting productivity
Article Summary
Simplify work, link each task to a clear goal, and spend only on actions that move you forward; when you cut waste and complex steps, costs drop and output rises.
Frequently Asked Questions
Here are some questions that frequently get asked about this topic during our training sessions.
What does efficiency mean in simple business terms?
How can I spot needless complexity in my work process?
Why is simplicity linked to lower costs?
How do I separate the method from the goal when planning a task?
When should I ask 'what for?' instead of 'why?' at work?
What are the three classes of tasks and people the article suggests?
How can applying Occam's razor principle help increase efficiency?
Thought of something that's not been answered? Ask Us Today!
Did You Know: Key Statistics
McKinsey & Company’s 2024 Global Business Efficiency Survey reports that firms which streamline their top customer journeys cut operating costs by an average 14 % within 12 months. The UK Office for National Statistics Labour Productivity bulletin (Q4 2023) shows that companies adopting process simplification and digital tools raised output per hour by 8.6 % year-on-year, versus 2.1 % across all businesses.About the Author: Chris Farmer
Chris Farmer is the founder of the Corporate Coach Group and has many years' experience in training leaders and managers, in both the public and private sectors, to achieve their organisational goals, especially during tough economic times. He is also well aware of the disciplines and problems associated with running a business.
Over the years, Chris has designed and delivered thousands of training programmes and has coached and motivated many management teams, groups and individuals. His training programmes are both structured and clear, designed to help delegates organise their thinking and, wherever necessary, to improve their techniques and skills.
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