The efficiency paradox: why efficiency programs almost never work

“We have to become more efficient!’ This is a common refrain in organizations, even when everyone is already working hard and giving their best. The root cause often lies in a misunderstanding of efficiency: in many companies, efficiency is seen only as resource efficiency—essentially, how much work a resource (such as employees, machines, etc.) can accomplish within a certain time. From the customer’s perspective, however, flow efficiency is what really matters. Flow efficiency shortens lead times and determines how quickly products and services reach the customer. By designing smarter processes and emphasizing collaboration, organizations can achieve substantial improvements through flow efficiency.

The crucial difference between resource efficiency and flow efficiency

An example from the medical sector (source: ‘This is Lean: Resolving the efficiency paradox’) highlights the impact of this efficiency paradox. The central differences between resource efficiency and flow efficiency become especially clear when comparing two approaches to moving from a first suspected case to a final cancer diagnosis.

• In the first case, a patient visits her GP with suspected breast cancer. She is referred to a radiology department for a mammogram, but a few days pass before she can get an appointment. After the examination, she is sent to a laboratory for further tests, where additional waiting times occur as the samples are analyzed. Finally, she is referred to a specialist who reviews the overall results. In total, it takes 42 days for the patient to receive a diagnosis. Each professional—radiologist, lab technician, and specialist—works efficiently within their own area, but the process involves separate steps and relies only on the resources available in each department. This illustrates resource efficiency: each system, person, and machine operates optimally within its own silo. For the patient, however, this results in long waits and multiple individual steps.
  
  

• In the second case, a patient with the same concern goes directly to a specialized breast cancer center. Here, all necessary specialists, equipment, and labs are available in one location. In a single morning, she undergoes all required tests—from mammography to blood tests—and receives her diagnosis shortly afterward. The process is organized to prioritize the patient's needs and maximize cooperation among the specialists. This demonstrates flow efficiency: each step is designed to keep the process moving smoothly without unnecessary delays. This approach mirrors how many modern companies structure workflows to reduce delays and enhance process efficiency.
  
  

This medical example illustrates how differently resource and flow efficiency operate. While resource efficiency focuses on maximizing each department's utilization, flow efficiency emphasizes the entire process and the customer experience. In the corporate world, too, significant efficiency gains can be achieved through smart, scalable solutions and closer team collaboration. By linking processes and reducing wait times, organizations can create consistently optimized workflows, ultimately boosting both productivity and customer satisfaction.

A vicious circle: The misconception that more people create more work 

In many companies, the natural reaction to getting more work done and avoiding workflow bottlenecks is for department heads to request additional staff. However, simply adding employees doesn’t usually speed up project completion without also adjusting workflows. In fact, in the worst case, it can lead to a decrease in overall performance. Why is that? Often, new tasks are started alongside the hiring of additional staff, increasing the work in progress (WIP) in direct proportion to the new hires. In the end, much remains unfinished—a true vicious circle!

A high volume of simultaneous tasks (work in progress, WIP) and a lack of focus on value-adding activities are frequent causes of inefficiency. When new tasks enter the workflow, there is often no clear estimate of how long they will take to complete, which complicates planning and leads to task pile-ups. Two key metrics in this context are lead time—the time it takes for a task to move from start to completion—and throughput, which indicates how many tasks are completed per unit of time.

This is where “Little’s Law” comes into play, a fundamental principle from queueing theory that describes the relationship between the number of parallel tasks, lead time, and throughput. According to Little’s Law, the more tasks being processed simultaneously, the longer each one takes to complete. By understanding and applying this principle, companies can significantly improve efficiency by limiting the number of simultaneous tasks and focusing on completing work in progress.

Another issue arises when new tasks are started while awaiting feedback or information, such as an important reply from a colleague. While this might seem productive, it increases WIP even further. Moreover, the more tasks underway, the greater the likelihood of encountering blockers that hinder progress. These blockers consume additional time and resources without contributing any direct value to the project. Instead, they result in more time spent addressing issues rather than performing value-adding activities. In some cases, dealing with these blockers diverts so much attention that core work stalls entirely. By identifying potential blockers early and reducing WIP, companies can break the vicious cycle and greatly improve their efficiency.

How companies optimize their throughput times and cross-functional collaboration 

To break the vicious cycle, teams need to reduce their WIP and focus on value-adding activities. Applying “Little’s Law” clearly shows the importance of minimizing the number of tasks processed in parallel to reduce lead times and work more efficiently. To boost overall company performance, the focus should be on consistently finishing tasks that have been started, rather than constantly initiating new ones—aligning with the principle, “Stop starting. Start finishing.”

Collaboration, particularly through pair working, is also essential. Pair working fosters knowledge sharing and reduces bottlenecks caused by reliance on individual experts. Although this may seem less resource-efficient initially, it greatly enhances flow efficiency. Many successful organizations are already leveraging the benefits of pair working and self-organization to remove obstacles and improve system-wide efficiency. 

A further critical element is team self-organization. Departments where employees work self-organized are more engaged in decision-making and focus on how to collaboratively complete tasks, creating a more dynamic and productive work environment. Decisions should also be decentralized, eliminating lengthy approvals with managers, allowing for quicker decision-making, and ultimately increasing efficiency.

Achieving efficiency through strategic optimization 

The primary objective should be to eliminate unnecessary work and refocus on value-adding activities. Successfully implementing this approach not only boosts efficiency but also enhances customer satisfaction. Advanced technologies and optimized processes—such as those developed by diconium—can help strengthen a company’s competitiveness sustainably. By focusing on the entire process rather than isolated departments, substantial efficiency gains can be achieved, and resources used more effectively. Emphasizing flow efficiency and reducing parallel tasks significantly optimizes workflow and reduces throughput time, resulting in higher productivity and satisfied customers.

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