Caution - Low-Fat Organization!

To better "manage", we cut costs and pursue efficiency. We slash away at budgets and resources. We reduce staff, reduce maintenance, and reduce everything, as we try to run our organizations with less. Always with less.

And, as we pride ourselves on running a tight ship, we keep our organizations so close to the edge that they become vulnerable, fragile, with no padding to handle even the smallest bumps and bruises.

1. A small sales center finally got staffing levels to an "optimum" (read "minimum") level, with everybody trained and functioning pretty well as a team. Then, diapers and disability reared their ugly heads. One person left on maternity leave, one on paternity leave, and one on long-term disability, taking three skilled staffers out of the pool of twelve for about a year. Already scrawny, the team was now in crisis. "I don't know what we were thinking; how could we not have planned for this," lamented the owner.
2. Organizations cut infrastructure maintenance, putting it off to next year. Always to next year. The University of Saskatchewan now has a maintenance deficit of $617 million. "There's no way we can continue in this fragile environment," says Colin Tennent, the U of S architect and facilities management division associate vice-president. Not unique to any one institution, this seems to be a global consequence of modern "cost-cutting" management, with a global maintenance deficit estimated at Two Trillion Dollars  (!) per year.
3. A manufacturer went on a crusade to reduce WIP (work in process), and slashed the "allowed" inventory between steps in the production line, to cut costs. They quickly found out that their machines were not very reliable, their job instructions were not very accurate, and the variation in production times at each step was huge. The plant suffered painfully for a year, never meeting shipping schedules, before they rolled back the arbitrary cost-cutting target and started focusing on improving the work instead.
4. A services company had a demand level that fluctuated between 3 and 15 hours per day per person. Due to the nature of the work, only one person could work on each task. So, on some days, the demand called for 3 hours each, and the next day, the demand required 15 hours each, out of a regular day's work. Everyone was going crazy, nobody could consistently complete their scheduled work, and morale was terrible.

People do get sick. Couples do have babies. Key people will leave. Anything we create will need to be maintained. Every step in our process will occasionally fail. And you can't really squeeze 15 hours out of an eight hour day. We need a bit of fat in our organizations to be healthy and resilient. We need some buffers to handle the inevitable variations, the bumps and bruises.

So, don't reduce your organization to the point of inadequacy (Karl Menger's 'Law Against Miserliness’). Don't run a scrawny company. Excess capacity can be a very good thing.