The pursuit of efficiency is making your organization slow, fragile, and less profitable than it otherwise could be.

11 March 2025

Investors talk about capital-efficient businesses. That kind of efficiency is good. But, when managers use the word efficiency, they’re referring to components of the larger business. And that’s bad.

If you optimize the efficiency of each component of your business, you strip protective capacity out of your organization, causing it to become both slow and chaotic and, consequently, torpedoing your profitability.

In your organization, there’s one critical resource (or set of resources) that should be fully activated. (If you’re an airline, that’s your set of aircraft.)

All other resources exist to support that one critical resource. For this reason, all other resources should have plenty of protective capacity.

Efficiency improvement is the practice of shedding this protective capacity in the name of business improvement. In practice, efficiency is a fancy word for relentless cost-cutting: a cancer that destroys organizations from the inside out.

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