Intellectual Corporate Waste

The term “corporate waste” is sometimes used in litigation to describe the egregious acts that get business leaders into trouble with their shareholders for wasting precious corporate assets. Executive officers spending company money on lavish parties and trips to exotic places in private jets or giving themselves loans that are never paid back are examples of corporate waste.

But while these expenditures are indeed a waste of shareholder money, they pale in comparison to the hidden waste that exists in almost all organizations. I’m not talking about bloated corporate bureaucracy, ineffective production processes, or unproductive delivery systems. Rather, I’m referring to the less-discussed problem of untapped organizational capabilities—the everyday, inexcusable waste of intellectual equity found in your employees, managers, corporate directors, and yourself.

I am somewhat amused when managers complain about the lack of productivity of their employees. I like to challenge them with a few questions such as: Do you have a process and a reward system to promote innovation? Do you encourage your employees to capitalize on new opportunities, or do they need to submit themselves to a bureaucratic process to be heard? Do you teach your employees how to anticipate the effects of external changes and respond accordingly? Chances are, the answers to these questions are not affirmative. If we accept the premise that the intangible assets of leadership, talent, and speed are uncapped, then not answering “yes” to these questions suggests that the organization’s ability to innovate, capitalize on opportunities, and respond to change is a wasted asset. 

The collective skills, abilities, and knowledge of your employees are things you can’t see or touch, but they truly are your most valuable corporate assets, so treat them that way. In other words, when the pressure to meet next quarter’s earnings expectations makes you consider “downsizing,” resist the temptation to be shortsighted. Instead, take a longer view and invest in staffing, training, and compensation to beef up your organizational capabilities. Research shows that organizations that make extraordinary investments in people enjoy extraordinary performance on a variety of indicators, including shareholder return. (Read “How’s Your Return on People?” in the Harvard Business Review, March 2004.)

Also, make sure your corporate culture and organizational structure encourage communication and teamwork, so that people and resources are interacting well and getting things done. Are there departmental silos with people protecting their turf, or is there a smooth, timely sharing of important information? Is knowledge perceived as power—so no one wants to share it—or is knowledge considered a critical corporate resource that is important to the team in accomplishing corporate goals?

Management Intelligence

Next, take a good look at your management team. Is it an effective team focused on accomplishing the strategic plan and objectives? Are they communicating well with each other, or pointing fingers and blaming someone else for problems? Do they make decisions with accurate and timely financial information? Are they hiding behind bureaucracy to ensure that no one is accountable or responsible for anything?

Competitive advantages that other companies cannot reproduce lie in the collective intellectual capabilities of your management team. They need the ability to translate your strategic direction into daily processes, i.e., turn your vision into action. Assess your management team’s ability to manage the right organizational infrastructure and design necessary human-resource teams to motivate employees to get things done.