The ‘elephant in the closet’ in the business world refers to the large and looming issue that everyone knows exists, yet they have put it into a closet and shut the door. Apparently in hopes that if no one sees it no one will talk about it. But it is still there. It’s a way of dealing with things much like a child in that up until the age of about 6 years old, if the child cannot see it, it does not exist.
I recently came across a prime example of an elephant in the closet and I call it “planned inefficiency.”
I was working with a service manager for a national corporation yesterday and we were talking about how the company measures success. His answer was that all he ever hears about is the margin.
He said “If the margin is good, they don’t say anything, and they won’t make any changes. But this year, 2009, the margins won’t be so good. Sales had bumped up their pricing during good times almost 50%, now they are back down to normal. But they won’t hear what I know will increase them!”
Which turned out to be efficiency.
Why won’t they look at efficiency?
Three reasons:
First, their margins are acceptable, they think.
Second, the inefficiency is not measured. With all of their sophisticated software, they cannot measure the effects of poor design drawings or inexperienced inspectors in the field. These are the people that feed the information to the service crews that go out, discover something is wrong, have to return to the shop and order and wait for the correct parts, or fab something up onsite.
Third, they are unaware of it. They aren’t actually listening to the people that see the inefficiency.
All of which eats into the profit margin, not to mention the effects it has on the companies reputation. Interestingly, the inspectors and sales people have learned to bump the cost of the job in order to maintain their margins. So the net effect from a behavioral standpoint is that they have trained ineffiency into the system. It has become a part of doing business.
“So? The margins are where they should be.” you say. “Why worry?”
Several reasons:
What would their margins look like during good times when their job pricing is 50% higher?
What would their clients say when they did ‘excellent work’ which actually translates to “I called them, they did it, I didn’t have to worry.”
What would the employees say when they came to work? Would morale improve?
What would Wall Street say when they saw the new margins?
What if there is a ‘planned inefficiency’ in your organization?
Would you know it?
Would you know what to do about it?
What elephants are in your closets?
People are afraid to broach these subjects to their higher ups. But they have to. We can no longer avoid talking about the obvious and not so obvious.
If you need help hunting the elephants in the closet at your organization, we should talk.
Bart Gragg
925.757.7473
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