Can efficiency cost too much?

The verdict is in. And I am annoyed. Because we have heard this same verdict before and nothing has changed.

A faulty electrical transmission line started the deadliest fire in California history. And the reason for the faulty line? According to investigators with the California Public Utilities Commission, the utility responsible, PG&E Corporation, “failed to adequately inspect and maintain its transmission lines for years.”

If this sounds familiar, it should. On August 14, 2003, about 50 million people in parts of the United States and Canada experienced an electric power blackout. The official task force which investigated the blackout reported that overgrown trees caused the outage and blamed FirstEnergy Corporation for not adequately “managing” the growth of the trees near its transmission lines.

 

Cause or Symptom?

But was that the real cause? Or is it merely a symptom of facing the wrong problem? 

I think in both cases the people who work at FirstEnergy and at PG&E forgot something critical. They forgot their reason for being. They forgot why their companies exist in the first place.

Their reason for being is not profit or productivity or efficiency. It is to supply electricity. In doing so, they hope to make a profit. And they plan to make a profit by being productive and efficient.

However, because of the impact of their product on us, consumers, their purpose morphs into “having a positive impact on our quality of life.” Electricity and the suppliers of electricity make modern day life possible.

 

Where you focus matters

Why were the trees not cut back according to regulations or the lines not maintained? Because, I suspect, there was a strong internal focus on productivity at the expense of why the energy utilities exist. Undoubtedly, many managers at energy utilities see their job ultimately as one of producing ‘x’ units of electricity. The more units they produce and deliver, the higher their productivity. And the cheaper they manage to do so, the more efficient they become. Thus, the management problem to be solved becomes one of how to deliver more with less; how to be productive and efficient.

However, when they deliver zero units of electricity, as happened with FirstEnergy and PG&E, it does not show zero productivity. At least not in the eyes of consumers.  Zero electricity reminds us of the real purpose of energy utilities, namely the huge contribution they make to our quality of life.

In 2000 the National Academy of Engineering of America stated that the greatest engineering achievement of the 20th century was the network of electrification. Why pick electrification as the greatest achievement? Because the network of electrification made most other advances possible.

 

When efficiency becomes fatal

Management at the energy utility surely had no intention to disrupt power. Nevertheless, I wonder what the linesmen would have done if management had expected them think in terms of contribution to society, and not productivity and efficiency.

Managers are trained to think and act in terms of productivity and efficiency. Hence they focus on things like the ratio of useful work to total energy used; doing more with less; getting better at what is already being done.

Don’t misunderstand me. The focus on efficiency has produced amazing results to the benefit of many. But we have confused ends with means and assumed that efficiency is a worthy end in itself. Not so. Efficiency is a means. Assuming that efficiency is an end in itself, worthy of focused pursuit, can have fatal consequences. It is unclear how many people died because of the PG&E fires, but figures commonly cited are over 40 killed.

The FAA represents a more horrific example of efficiency triggering fatal consequences. In December 2004, the FAA issued a staffing report for air traffic controllers, laying staffing plans. Citing the need to more efficiently use its staff, the FAA proposed reducing staff during the hours of operation at certain airports. Here are three outcomes:

  • 27 August 2006, Blue Grass, Kentucky: A domestic passenger plane crashed while attempting to take off from a runway that was too short. 49 people killed. The official investigation found that, against regulations, there was only one controller in the tower, performing both tower and radar duties.
  • 12 August 2009, Hudson River, NY: A deadly air crash between a helicopter and a small plane. Nine people killed. Again, the official investigation found that, against regulations, there was only one controller in the tower, performing both tower and radar duties.
  • In March 2011, two planes landed safely at Reagan National Airport after they could not make contact with anyone in the control tower.

 

What is the FAA’s purpose? To save money or to save lives? The lesson was not learned. In 2019 we learned that the FAA “delegated” much of the safety inspection of the Boeing 737 Max back to Boeing. In the name of efficiency, the aviation industry was expected to regulate itself.

As BP showed, the insane quest for efficiency and cost-savings can have far-reaching consequences. In March 2005, there was an explosion at BP’s Texas City Refinery. BP had failed to implement many safety recommendations made before the blast. Five years later came the Gulf oil spill. Guess what? BP had made a series of money-saving shortcuts that increased risk and danger just six days before the explosion.

And then there is the seemingly never-ending car safety recalls. And the food safety recalls? Food safety? Is noting safe? Apparently not. The recent E. coli outbreak in romaine lettuce a few months ago kept on giving. The Centers for Disease Control and Prevention at one stage confirmed 138 cases of E. coli in 25 states.

 

Why organizations struggle and fail

We can no longer rely on government to protect us. Ongoing underfunding of regulatory bodies combined with poor leadership makes this obvious. However, there are two positive forces we can muster. One is the organizations themselves and the other one is the consumer.

Before I explain those forces, let me summarize the issue with efficiency by clarifying that this is not an attack on the profit motive, nor on capitalism. It is an attack on the imbalance that is now visible:

The focus on productivity and efficiency at the expense of effectiveness and purpose. This is why I state with confidence that organizations and teams will struggle and fail when they focus on:

profit at the expense of purpose

productivity at the expense of contribution (to society, in this case)

efficiency at the expense of effectiveness

There are hopeful signs that organizations themselves are taking steps to stop the damage cause by efficiency gone too far. For example, note what many companies are doing on their own to reduce their impact on climate change.

 

Efficiency costs too much when society pays the price

But the stronger force is us. You and me. Consumers and voters. So, here is a question for you: “Can efficiency cost too much?”

Most people think the point of efficiency is to reduce cost, so how can it ‘cost’ too much?  Efficiency costs too much when society pays the price.

For example, efficiency gives us canned mall music instead of soaring symphonies; cramped cubicles instead of quiet offices; bland warehouses instead of grand cathedrals; parking lots instead of parks; neutered MP3 streaming instead of high fidelity albums. You get the picture.

Inefficiency can be a bit wasteful, but it’s a small price to pay for beauty. And for honest jobs. Don’t forget that the mad scramble for efficiency has given us downsizing, rightsizing and outsourcing, all meaning the same thing – you’re fired.

If we allow “relentless efficiency” to continue unchecked, our society will become inane, uninteresting and uninspiring. As consumers, we have the power to prevent that. It’s called choice.