If there is one key takeaway I had from this Managerial Economics Paper

Published: 2021-08-30 20:35:09
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Category: Managerial Economics

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If there is one key takeaway I had from this Managerial Economics course, it’s that nothing is ceteris paribus. And because we can’t hold everything else constant, a lot of the concepts we learned in college don’t really apply in the so called “real world.” There are so many things that we need to consider, many factors that we just can’t control and “hold constant.” I feel that’s the same idea that the article, “The High Price of Efficiency,” is trying to impart. Efficiency has always been the ideal goal, but should it be the ultimate goal? This is what we need to ponder as managers. While being efficient is nice, it should not be overly pursued at the expense of the people the makes up the organization.
I do agree that it is important to always seek out ways on how to become efficient and minimize waste. But I believe we can only seek to minimize, but not necessarily avoid waste. Totally eliminating waste would be difficult, if not impossible. So why obsess over something that we know that we can’t reach?
In the article, “The High Price of Efficiency,” the author argues that the efficiency increases risk by reducing redundancy. Efficiency seems to create fragility in a way that it cuts the slack that would have allowed the system to recover in the inevitable case that it breaks down. In order to explain the risk of a superefficient system, the author pointed out the problem with monocultures. Monoculture is the agricultural practice of producing or growing a single crop in a particular area. In particular, the author cited the cultivation of almonds. Almonds are grown mostly in California’s Central Valley because it was found out that this region is perfect for growing almonds. In this attempt to be efficient, the almond industry has said to have designed away its redundancies or slack, which could have provided insurance should there be instances that would dampen production.
While the article mostly talks about the perils of overemphasizing efficiency on a large scale, I want to relate this to my current job, which entails me to work in teams. A recent initiative of our management is to promote efficiency by introducing leaner teams. In the past, an engagement team would be composed of a manager, a senior associate and two or more associates. Now, we’re trimming down the associates to just one per team. Since there would be less people in the team, we think this would keep the engagement’s time charges to a minimum, which would hopefully increase our recoverability rate. On paper (well, in our case, on the Powerpoint presentation), it looks good and ideal. However, I’ve come to realize, especially after reading these articles, that this plan can be risky and dangerous. Much like how monocultures remove redundancy and slack, the proposed leaner teams would run the risk of losing the flexibility necessary to address the ever-changing requirements of clients, and not to mention, to cope with the vulnerabilities of the human capacity. We just have to step back and look at past experiences to realize how having more than one associate in the team can actually be essential to the success of the engagement. More than once did we have to pull out a staff from a team to be assigned to another project. Also, personally, I had the experience of losing a staff for a few weeks because of dengue, and that happened during the most critical time of the engagement. But these teams were able to manage because there were other associates who were able to assume the role of the person who had to leave. What could have happened in those cases if we were operating with just one staff? Now that we’re gearing towards super-efficiency through leaner teams, I fear that it would do more harm than good in the long run.
The article asks us to pay more attention to another source of competitive advantage – resilience. By being resilient, we become adaptable to the changes in the environment; we endure and recover from difficulties. However, it seems that by being resilient, we become less efficient in a sense that we need to build some sort of extra capacity that can absorb any impact that would result from any changes in the environment. According to the article, fostering resiliency can help in curbing super efficiency and the pitfalls that go along with it. It goes on to list down ways on how organizations nurture resiliency.
But then again, I am not completely sold to the concept of resiliency. When I encountered the word “resiliency” in the article, what first came to my mind was the phrase, “resiliency of the Filipino spirit.” I remember how I used to be so proud of that expression. It used to be so heart-warming seeing how my fellow Filipinos are still able to smile despite their houses being washed away by floods. But when you see it time and again, it eventually became more and more frustrating knowing that not much has changed from the first time it happened. By being resilient, there is the tendency of becoming complacent. Instead of trying to prevent this from happening again by building more efficient systems, we use these calamities to showcase our “resilience.” Because Filipinos are resilient, we tend to be just contented with what we have, even if we know that we deserve better. We seem to tolerate inefficiency because we’re resilient.
But is it really a simple choice between efficiency and resiliency? Is it possible to choose both? Could we not build systems that are so efficient that it also takes into consideration all possible scenarios – whether it’d be the best or the worst? In that case, we could be both resilient and efficient. There really is a need to strike a balance between efficiency and resiliency. I believe that efficiency and resiliency are not direct opposites of the other but focusing too much on one can have a negative on the other.

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