HBR IdeaCast When Efficiency Goes Too Far
Sep 29, 2020
Roger Martin, professor emeritus at the Rotman School of Management, delves into the dangers of America's fixation on economic efficiency. He argues that this obsession breeds inequality and vulnerabilities, particularly highlighted by the COVID-19 pandemic. Martin advocates for a shift towards resilience and a holistic approach in business, emphasizing collaboration over rigid efficiency measures. He also discusses strategies for mitigating income inequality, urging leaders to prioritize employee welfare and societal outcomes, promoting a more balanced economic framework.
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Efficiency Paradox
- Obsessive focus on economic efficiency can lead to negative consequences.
- It's similar to how too much of a good thing, like love, can become harmful.
Short-Term Efficiency vs. Long-Term Resilience
- Companies often prioritize short-term efficiency gains, like outsourcing to China for cheaper labor.
- However, these decisions can create long-term instability, exemplified by companies like Toys R Us and iHeartMedia.
Efficiency and Inequality
- The relentless pursuit of efficiency intensifies competition, leading to a Pareto distribution where few winners take all.
- This contributes to the stagnation of middle-class incomes and the consolidation of companies.
