“Efficiency is generally considered to be one of the great management virtues. From scientific management to business process re-engineering, there has been a sustained concentration on efficiency as a core business value, with a strongly assumed link between efficiency on the one hand and productivity and profitability on the other. The theory is a simple one: efficient businesses survive while inefficient ones go to the wall.
Without challenging this assumption, there are different ways of defining efficiency and in the prevailing economic climate we would do well to look again at what constitutes efficiency and how it is best achieved. Most of our current ideas about efficiency are based on the concept of “process efficiency”, the idea that by making each individual process efficient we will then end up with an efficient organisation overall.
There is, however, an alternative view that takes a much more holistic view of the organisation and which we might call “whole system efficiency”. This approach, which was developed in the early 20th century by engineer, writer and consultant Harrington Emerson – the first to use the term “efficiency” in a specifically management context – does not neglect the efficiency of individual processes but links these explicitly to the idea of total organisational efficiency. That is, in becoming efficient the organisation becomes more than just the sum of its parts.
Whereas conventional scientific management saw efficiency in terms of reducing wastage of labour and materials and increasing output by making individual processes more efficient, Emerson conceived of efficiency as embracing the entire organisation. What mattered was not the output of individual processes but total output. Herbert Casson, a follower of Emerson, later compared the business organisation to the human body. The body can tolerate occasional inefficiencies by some organs because the whole body functions as a self-correcting, self-regulating organism.”