If you spent $15 million at work and had nothing to show for it, would your company be OK with it?
Probably not. No company would put up with that kind of cash outflow and not expect something in return, whether it was a new product, idea or service.
Yet, that’s what is happening as managers struggle to solve a complex problem, and end up spending millions of dollars that bring no solution. They spend the money on surveys, consultants and technology – or fire and hire workers as they look for a way out of a messy situation.
In a new book, “Stop Spending, Start Managing: Strategies to Transform Wasteful Habits,” authors Tanya Menon and Leigh Thompson say this “action without traction” is a problem that not only wastes money, but hurts creativity, innovation and productivity.
The authors asked 83 senior executives from a variety of industries to think about their most critical people problem at work, and then estimate the average cost. The results showed an average cost of $15.5 million, along with 5,514 hours dedicated to the problem. In addition, an average of 357 people in the organization were used – employees who could have been doing something else other than dealing with the issue.
The problem-solving approach that was used most often was discussing it in meetings (68%), followed by conducting analyses (43%) and hiring a consultant (36%). Twenty percent admitted to doing nothing.
At the same time, the executives estimated that there was only a 46% chance that these approaches would solve the problem.
“It’s people problems, not technical problems, that exact the greatest toll on productivity,” the authors say.
Menon, an associate professor at Fisher College of Business at Ohio State University, says that as companies are under increasing pressure to innovate to keep up with the competition, there is more disagreement among workers on how best to do it. That can lead to endless head-butting among different factions of workers and frustrated managers who are trying to be proactive in solving the problem.
“You may talk to these people over and over and it’s just an endless cycle of the same arguments,” Menon says. “It’s that lack of results that exhaust you. You’re making no progress, and as a manager, that just kills you.”
Managers aren’t spending money to solve the problems because they are wasteful, but because the problems are complex and they can’t find a way to overcome them, the authors say. While these managers are smart, action-oriented bosses who are quick to try new things, their actions become “misdirected,” and they end up “capturing noise” instead of “meaningful signals” that will help them solve the problem, they say.
Menon and Thompson say if managers want to quit wasting time and money on solutions that don’t work, they need to understand the five spending traps and how to overcome them:
Menon says the key for spotting these traps and overcoming them is for managers to realize that they need to “focus on the weakness implicit in their own strength.”
“The traps are especially insidious because, ironically, they often result from the skills and strengths that have served successful people so well in the past,” she says.