ManagementSpeak: Global sourcing is all about promoting efficiency and eliminating waste from the corporation.
Translation: Global sourcing is all about looking for the “Miserable Nation of the Month”, and taking advantage of its low wages.
KJR Club Member Paulo Caetano explains the nature of waste.

Like the rest of the country, Minnesota is in the throes of the “tax revolt.” It’s premise is that we can cut taxes without pain because there’s plenty of waste in government. Somehow, though, when budget-trimming time rolls around, the waste pulls a vanishing act, and we’re told we have to make painful choices.

Sound familiar? It should. It’s the public sector equivalent of “eliminating non-value-adding activities,” a sham exercise American business executives buy from expensive executive-suite consultants for similar reasons: They want it to be valid, because if it is they can increase profits without having to make difficult choices.

Are there wasteful government programs? I’m sure there are, although most of the examples I hear are either rounding-error-size activities, programs whose value or lack thereof depends on the political philosophy of the observer, or employment programs that simply recycle tax dollars into the economy where they turn back into tax dollars. I’m equally sure the real waste in government hides where nobody is looking for it: Not in the list of programs but in their execution.

If anyone really wanted to find government waste they’d be asking line employees, front-line supervisors and middle managers where they spend money and effort stupidly, and why. But doing that would require painstaking effort to assemble a detailed understanding of how things are put together. More, it would require a form of taking responsibility that’s become increasingly unpopular: Those making the rules would have to acknowledge that the rules they’ve established are often the problem.

The same is true in business. While many businesses indulge in pet programs that don’t contribute much to the bottom line, they’re hard to distinguish from pilot projects that could pay huge dividends in the future. So the search for non-value-adding activities usually yields just a single item: The very expensive search for non-value-adding activities. After all, very few employees, or managers, or executives go to work every day saying to themselves, “I think today I’ll find a new way to squander the corporate budget on pointless efforts that distract us from building great products and attracting and retaining customers.”

What does happen is that somewhere in the rules, regulations, policies and procedures — often those created to prevent mistakes — lie opportunities to work more efficiently. As in government it’s the line employees, front-line supervisors and middle managers who know where to find them. The problem is also the same as in government: They have no place to take a good idea, nor does anyone actively seek the good ideas they have.

Here’s an example every manager in the federal government knows, but which hasn’t been fixed despite 25 years of tax reductions: Use-it-or-lose-it budgeting. Intended to reduce costs, it has the exact opposite effect. It requires every manager in government to engage in a year-end spending spree, not because they’re irresponsible but because, just like their private sector counterparts, they need to make sure they have enough funds in next year’s budget to get the job done.

Imagine the impact of a change in the rules. Instead of cutting next year’s budget if this year’s numbers look good, the opposite happens. Managers, supervisors and staff share 20% of the savings; another 20% is carried over to the following year, and the remaining 60% goes to cutting the cost of government. Is there any doubt what would happen?

That’s just one example. (It’s a freebie. If your local government would like to engage the services of my consulting company, we’ll be happy to find others.) It illustrates an important point that applies to your business and IT organization just as much as it applies to government spending: If there’s waste to be found, finding it will require two changes in attitude.

The first is that the waste will be easy to find and eliminate. It won’t. It will lie in the details of day-to-day work. While some opportunities will be easy to spot, most will require significant digging. Eliminating the waste will always be hard, calling for intelligent organizational redesign, strong leadership, and political courage. The most difficult part of all will be finding the benefits in accounting reports, which rarely reveal the connection between cause and effect.

The second change will be an even harder one for many business executives to accept than the first. It’s that the fault, to paraphrase Cassius, lies not in their employees but in the unintended consequences of their own decisions.