The Inefficiency Effect

I once worked for a company that sold a gigantic amount of iron ore (please don’t hold that against me). They made billions. And then the price of iron ore started falling. Heavily. Suddenly hundreds of people were made redundant. Labor hours were more closely tracked. Big vendor contracts were renegotiated. Procurement was managed. A few levels of managers were cut from the hierarchy. Processes were altered and refined to be better.

It didn’t take long but they were able to produce the same amount of iron ore if they wished. In a better way.

That’s the problem when business is doing well. When you’re making the money you’re comfortable living with, it hides all the inefficiencies. 

It’s very hard to peel the curtains past the illusion when everything appears to be working fine. You don’t need to self-correct because there isn’t a variable in the market that forces you to do so. Until there is.

That company also made some terrible decisions caused by sudden panic and instant reaction rather than thoughtful, proactive measures.

And that’s why it’s even more important to assess and implement right now. In the long run, smarter decisions and operating processes will nearly always lead to better results.

Being comfortable or finally coasting along is an opportunity to do better without having the pressures of time and money. If you don’t, that monkey will be on your back again shortly. You just won’t see it coming.

(this also applies to our personal income and finances)

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