Let’s reduce inefficiency by embracing inefficiency
A post about how “Giganticism” risks creating more inefficiency than it solves
Did you watch W1A, the glorious satire of the BBC?
My favourite moment is when Ian uses the new, corporate Syncapatico system to print out a secret copy of the new senior management org chart that he’s not supposed to have seen. He is told Syncapatico can print to “any printer, anywhere in the building”. So where has his secret printing been sent, he asks the intern helping him? “Any printer, anywhere in the building”, the intern replies.
W1A is a glorious skewer of BBC life but it’s also a skewer of corporate life more generally: and particularly exposes a trend for what I’m going to call ‘giganticism’.
My pitch here is that in the quest for efficiency, we’ve built bigger and bigger corporate entities which create friction greater than the inefficiency they’re trying to solve.
BBC
My first experience of this trend was in childhood.
My mum was Editorial Director of BBC Books. Like many corporate structures back in the 80s, BBC Books was its own fiefdom. My mum led a team of editors and worked alongside designers. Everyone necessary to getting a book published was within a few feet of her office. If BBC Books wanted to publish a book with Michael Palin, she’d have a chat with Michael Palin’s agent - and the BBC Books team on-site could allocate all the resources necessary to do it.
Then, in the 90s, a reforming Director General called John Birt decided that this was inefficient.
Similar resources should be managed centrally, he decided. An internal market should be set up which would ensure resources were managed efficiently. My mum’s first exposure to this was when she was told that Michael Palin was no longer a person; he was now a brand - managed centrally across the BBC. If she wanted to make a book with Michael Palin, she had to work with the Michael Palin Brand Managers to scope up the book first. Only when they were happy would they authorise her to speak to Michael Palin’s agent. With resources now centralised and distributed, a book that previously would have involved a handful of people on my mum’s floor now required approvals from people she’d never met and who knew little about the book in question.
She found that most of her time was no longer spent making books but navigating the BBC’s internal market.
“Bugger this for a lark”, she thought after a couple of years, and created a new business, which she ran for the next 20 years.
(these things seem to run in families…)
National Express
I experienced the same thing myself around 10 years later.
By the time I was in my mid-twenties, I was doing well in National Express coaches, looking after the network strategy and planning teams. I was able to get things done and, with the support of an Exec team based on the same floor of the building, make decisions.
(One decision I made during this period was to launch an experimental premium route from Cheltenham to London.
We launched it with a marketing event in Cheltenham. For reasons I don’t need to go into now, we had a lookalike of Queen Elizabeth II at this event. She was incredibly good: great imitation, all the right mannerisms, wore a crown.
Unfortunately, she also seemed to have a thing for men in their 20s. When we were alone on the coach, her whole approach to me changed. Being aggressively seduced at the back of a National Express coach by a woman 50 years older than you who is dressed as Queen Elizabeth II is one of those memories that sticks with you…)
National Express was, at the time, highly decentralised. Each business unit had its own executive team, and they made their own decisions: subject to very light-touch supervision by a tiny Group head office based above Bond Street station.
The result was ludicrous inefficiency.
National Express coach division’s busiest route was from Birmingham to London, which was contracted to First to operate. This was despite National Express bus division having garages within a mile of the coach stations in both Birmingham and London. Absolute madness!
In 2008, it was decided that the inefficiency had to stop.
All nine train operators, all three bus operators and the coach business were merged into a single UK division. Everything would be managed centrally. There would be no inefficiency.
Unfortunately, giganticism also meant that P&L responsibility, which had previously rested with around a dozen empowered local management teams, moved up to the UK level. Cost and revenue became disconnected. People responsible for cost could just assume that the revenue folks, often based in a different city, would pick up the tab for any cost increases. Costs went up 10%. Profits collapsed.
And it was a miserable place to work.
My team expanded as my scope of responsibility broadened to the whole UK division. But only my former coaches colleagues actually wanted me involved. Rail colleagues didn’t want an interloper from Birmingham doing their planning for them: friction mounted. The structure was efficient: getting things done was not.
“Bugger this for a lark”, I thought, and went off to Chiltern Railways.
Arriva
Chiltern Railways was, for most of the time I was there, part of the Arriva group which was, at the time, run rather like the old National Express.
Actually, in many ways, it was the most intelligent of the lot in the way it was run at the time. (it is - I believe - run differently now).
The operating businesses had their own accountabilities, but Group put effort into encouraging disciplines to weed out inefficiency through voluntary cooperation.
I met with my fellow Commercial Directors on a quarterly basis (always involving a boozy dinner) and we’d develop a workplan of things it made sense to do together.
Why, we asked ourselves, are we all paying for different rail booking systems from Trainline and Atos? At the scale of the Group, we could build our own.
So I took on responsibility for making it happen. The project was for Arriva as a whole but I ran it on behalf of a voluntary collective of the Commercial Directors because it made sense.
The booking system that resulted is still being used.
(The divisional CEO was particulalarly smart in facilitating the boozy dinner and subsequent all-day workshop, giving us the space to come up with our own workplans - but sending his Chief of Staff along to the meetings. There was no formal expectation of the outcome… but we knew that there’s no such thing as a free boozy dinner!)
TfL
I left Chiltern Railways not as a result of saying “bugger this for a lark” but after seven years of getting things done and making things happen. I’ve written more about the culture that made this possible here.
I then had a five year holiday from the corporate world running a startup, before joining Transport for London.
And - as luck would have it - I joined TfL just as it was concluding a restructure.
Back in the day, TfL was a collection of largely autonomous businesses. The DLR had its own management, so did the bus network, so did the tube. This was, of course, inefficient. So, instead, gradually over multiple incremental changes taking 15 years, TfL moved to a new structure which saw a single Customer & Strategy function, a single Operations function (with a budget of £8bn!), a single HR function, etc etc.
The new organisation was more efficient but the organisation gradually gummed up. I wasn’t in TfL in its previous incarnation but colleagues who had been told me that while consistency was harder, accountability was clear. In the new structure reporting lines (even for a single tube line!) only meet at the Commissioner. Inevitably, the Commissioner spends time deciding things that should be decided two levels below, while everyone else spends time waiting for decisions they ought to be able to make.
Given how much I love TfL’s mission and respect TfL’s people, I certainly won’t say I thought “bugger this for a lark”, but I do know that many other directors and senior managers who left around the same time certainly did.
How do you measure friction?
The problem is that inefficiency is very easy to measure but friction is very hard. It was easy to measure the profit margin being paid by National Express to First to run a National Express coach route that could be run by National Express buses. Similarly, I’m sure the BBC stakeholder map of people whose role included working with Michael Palin looked crazy. Much better to centralise it to a single “brand manager”. But how do you measure the impact of the increased time to get anything done?
Fascinatingly, there is a pretty universal consensus that the period the national rail network was at its most efficient was the period of sectorisation between 1986 and 1992, when BR was run as a series of largely self-contained businesses. Costs fell and revenue rose. The operating cost deficit of the railway as a system has never since been as low.
But this restructure was the exact opposite of what is now fashionable. If you went to Paddington in 1990, you’d have found locomotives and coaches from InterCity, Network SouthEast and BR parcels: all planned, resourced and maintained separately. Only a few years’ earlier, they were part of one mega-organisation. Yet, somehow, an alchemy had occurred. By introducing what might look like inefficiency, the railway became more efficient. Decisions were taken closer to customers, managers faced less friction in getting things done.
Amazon
“What gets measured, gets managed” is a quote from the legendary Peter Drucker's 1954 management book. But just because friction can’t be measured doesn’t mean it shouldn’t be managed.
I know many people have concerns about Amazon but one of the lessons any corporate can take is the effort they put into reducing friction: enabling their people to get things done.
Amazon’s able to do this as a single, gigantic corporate entity because they’ve put a huge amount of effort into thinking through how to facilitate small teams as part of a larger unit. Most corporates won’t do that. If a restructure makes your world bigger, it will probably become slower.
If you’re a senior person in a corporate and are thinking that the secret to reducing inefficiency can be found through a restructure, just remember that inefficiency and friction can be inversely correlated. Sometimes friction causes more inefficiency than… well, inefficiency.
Where else?
I’ve written this post from my experience. I’d love to hear yours. Is this post fair? And where are the places - besides Amazon - that have managed to be big without succumbing to the flaws of giganticism?
Take action!
Entrepreneurial organisations are biased to action. Here’s what you can do.
For leaders
Question “Efficiency at All Costs”: Before reorganizing or centralising, consider whether it will increase friction. Efficiency shouldn't come at the expense of agility.
Measure What Really Matters: While efficiency is easy to track, friction often isn’t. Take time to observe where processes slow your people down, and focus on reducing those barriers.
Empower Decision-Making: Decentralise authority where possible. Allow teams closest to the problem to make decisions, reducing the need for constant approvals.
Simplify Processes: Audit your internal processes regularly. Eliminate unnecessary steps, approvals, or meetings that don’t add value. Ask yourself: Does this process exist to solve a problem, or just to comply with one?
Encourage Voluntary Collaboration: Instead of enforcing collaboration through the org chart, create forums where teams can voluntarily share best practices and work on joint projects. Ideally with a boozy dinner!
For Team Members
Focus on Outcomes, Not Processes: While following procedures is often necessary, don’t lose sight of the bigger picture. Keep asking: Does this help us achieve our goal, or is it just “how things are done”? Sometimes, you should just pick up the phone to Michael Palin’s agent. (I mean, you shouldn’t. But you know what I mean…)
Advocate for Streamlined Processes: If a process feels overly complicated, say so. Be prepared to suggest alternatives.
Speak the language of Frictionless Decision-Making: If you’re lucky enough to work somewhere that hasn’t succumbed to Giganticism yet, it will happen to you. It’s fashionable. Pre-empt it by regularly speaking about the efficiency you gain through being able to make decisions locally. Never take it for granted: there are many out there not as lucky as you.
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