Why do organisations that invest so heavily in strategy seem blind to how inefficiency is baked into their culture? “Optimisation” applies to tech stacks and supply chains, but not to how people show up to work – or fail to. If they’re so committed to data-driven decisions, why aren’t they tracking inefficiency more holistically?
Three forms of inefficiency
Jefferson Yu-Jen Chen, associate professor at GIBS, says companies often rely on traditional metrics like revenue, cost, and productivity. “While essential, these miss the hidden costs of inefficiency,” he explains, adding that there are three broad types of inefficiency.
The first is strategic inefficiency: ignoring key customer trends and treating silos and disconnects with external partners as operational rather than strategic failures. Outdated reward structures, fuzzy collaboration terms, and poor change management also create friction and squander potential. “Without clear, transparent goals and defined partner roles, organisations spend more energy managing internal complexity than creating external value,” says Chen.
The second type is operational inefficiency, manifested when there’s no clear appreciation of what “great” looks like in operations. As a result, operational agreements between teams aren’t well defined, leading to delays, duplicated work, unproductive meetings, and clumsy handovers.
“AI can help by highlighting where time is wasted, automating low-value tasks, and showing how work flows (or doesn’t) across teams,” says Chen. “But that’s not enough. Everyone – not just leaders – must understand what ‘great’ looks like for their role, and embrace human-AI hybridity: integrating judgment and tech to enhance performance and innovation across all levels.”
Chen says the third – and most underestimated – form of inefficiency is cultural. He offers three key, and slightly controversial, insights.
Firstly, “When employees feel unseen or undervalued, disengagement quietly spreads,” he says. “Gallup’s extensive research reveals that what followers seek from leaders is surprisingly human: hope (growth and future orientation), stability (consistency), trust (psychological safety), and compassion (fairness with understanding). Performance improves when leaders genuinely understand their people.” He cautions against “purpose-mumbo-jumbo fatigue” – when employees feel overwhelmed by lofty ideals that don’t connect to their daily experience. Instead, leaders should focus on reciprocal contribution – a concept he unpacks in his book Courageous Invitations. While shared values and vision are important, Chen says performance frequently hinges on one key element – team connection.
“Team members need to understand how they give and receive support to optimise performance – that’s reciprocal contribution,” Chen explains. When this happens, belonging grows. “The magic lies in how leaders build trust, foster cohesion, and align teams. That’s when performance takes off.” Leaders should regularly engage with their teams to co-create success.
“Team leaders should engage in open conversations with their members to discover how they can mutually achieve their best. Such discussions should occur regularly and frequently – transforming them into an enjoyable ritual. Leaders cannot expect their diverse colleagues to affiliate to a set of strategic intents and organisational goals without creating belonging, inclusion, and equity – as mentioned in the white paper I co-authored with Taelo Mojapelo, CEO of bpSA, and Khethiwe Nkuna, when she was serving as the corporate citizenship lead for Africa and Middle East of Accenture.”
Second: traditional performance management is flawed. “It often becomes a nitpicking session or a polite dance around the real issues,” says Chen. “Leaders must understand it has two parts: honest conversations about how to accelerate each other’s performance, and appraisal of the impact those reciprocal contributions generate.”
Love, happiness… and hurt?
Discussions about culture often focus on love and happiness – and rightly so. But the real challenge, Chen argues, lies in hurt. While love is celebrated, it’s unaddressed hurt that most often undermines performance and cohesion.
Our brains are biased towards negativity because it helped us to evolve and to survive. From evolutionary biology, social science, and anthropology standpoints, adults tend to focus more on negative information than on positive information. They pay more attention to, learn from, and use negative experiences more often,” says Chen. “Hurt is a fundamental part of being human, and our reactions to it can be quite complex."
Not all responses to hurt are destructive, however. This insight led Chen to develop the Five Hurt Languages, inspired by Dr Gary Chapman’s Five Love Languages. His research identifies 30 personas that describe how people typically respond to hurt in the workplace.
Leaders usually don’t get to choose their teams freely. They often inherit a group that comes with its own dynamics, including organisational politics, and personal agendas. These factors, along with individual emotions, can create inefficiencies in how the team works together. “Leaders must adapt their approach when faced with hurt – both their own and that of others,” says Chen. “When inefficiencies arise and strain relationships, it’s crucial for leaders to have a variety of strategies at their disposal. These strategies should reflect their personal values and align with the organisation’s values. This flexibility is key to maintaining strong interpersonal connections and fostering a positive environment.”
People-first approach
Paul Jones, CEO of niche consulting firm Kairos, says real transformation begins and ends with people. He’s seen companies turn around dramatically by putting people first – but only when they invest the time and resources to do it properly.
“Professional services firms – legal, audit, advisory, tech – are the most complex,” he says. “They sell time.”
Media focus on mental health in these sectors is overdue, says Jones – but the solution goes beyond giving people the odd day off. “We need to fix the structure and build sustainable businesses. That starts with getting the right people on the bus – and in the right seats,” he says, paraphrasing Good to Great author Jim Collins.
Businesses that prioritise people development reap the rewards, Jones says. “Retaining great staff starts with developing them and creating a healthy environment.”
While this sounds obvious, it’s rarely practised. “Most companies would rather spend on systems or short-term rewards,” says Jones. “But investing in employee well-being pays off – massively – over time.”
Cost of employee disengagement
In 2024, Gallup estimated lost productivity cost the global economy $438 billion. Its research shows that highly engaged teams significantly outperform disengaged ones, with:
- 78% lower absenteeism
- 63% fewer safety incidents
- 51% lower turnover in low-turnover organisations
- 28% less shrinkage (theft)
- 32% fewer quality defects
- 23% higher profitability
- 18% higher productivity
- 10% greater customer loyalty
Employee engagement goes far beyond low morale – it costs companies real money.
Jones says it’s hard to pin down exact costs per business, but disengagement comes with hidden losses:
- Minimum effort leads to errors, complaints, and low morale
- Disengagement is contagious – toxic staff spread it
- Managers waste time motivating disengaged employees instead of driving value
“Only 21% of employees are fully engaged,” he adds. “Imagine the impact of improving that by even 5%.”
Engaged employees produce better business outcomes, while engaged teams have a measurable impact on organisational performance.
Where does change start?
For organisations serious about eliminating inefficiency – including cultural – change starts by benchmarking reality.
Kairos’s “Pulse” tool starts by interviewing a cross-section of staff to gauge the business’s true mood. “Leaders often sense something’s wrong but can’t pinpoint the cause,” Jones says. “Once we understand that, we can ask: what kind of company do we want to work for? That starts with clear values – not just words in an induction pack.”
Values need to be translated into real-world behaviours and embedded into workplace culture. “Only when this is done consistently will we transform our culture,” says Jones. “More importantly, every staff member is on the same page. Values are not taught; they are caught. Employees learn values by observing and imitating behaviours of others, rather than being told what these values are. If you want to shift culture, you must embed values in daily habits. That’s how you get everyone on the same page.”
That’s why leadership is key to fixing cultural inefficiency. “You can’t charge a dead battery with a dead battery,” says Jones. “We can’t change others – but we can change ourselves by changing how we think.” He warns that many managers aren’t engaged, which undermines the rest of the organisation. Gallup found that only 44% of managers globally have received proper management training – and most of that is technical. “Where’s the training in coaching, empathy, conflict resolution, or vision?”
“Failing to develop managers means they’ll fail to deliver,” he says.
In Courageous Invitations, Chen and co-author Anne Duggan urge leaders to move beyond their comfort zones and encourage reciprocal contribution. When people see their efforts serve both the company and their own growth, they engage more fully – and the whole team performs better.
Role of individuals
While addressing organisational inefficiency requires systemic change, every individual can play a part. Jones notes that taking personal responsibility is probably the single most important (and most challenging) decision anyone can make.
Systemic change is vital – but individuals also have power. “Taking personal responsibility is the most important and most difficult step,” says Jones. “Once you own your choices, you can’t blame others – but you gain real agency. We can’t change people; we can only be our best selves. That can be tough, especially in hard environments, but change spreads. Others will notice – and it can be infectious.”
Take action
- Set a good example. Steward organisational resources well, whether it’s avoiding unnecessary costs or ensuring meetings are run efficiently.
- Think in terms of reciprocal contribution. Find ways to create value that are a “win-win” for all parties involved. As Chen and Duggan explain, “One’s purpose does not often lead to any gratifying outcome until you understand the needs of those you wish to contribute to and until you find meaningful ways in which they can contribute to you in turn.”
- Be brave enough to disrupt the status quo. Challenge outdated habits and unproductive behaviours, even if “it’s how we’ve always done it.” Courageous change often starts small: asking a better question, cancelling an unnecessary meeting, or speaking up about a broken process.
- Move beyond traditional measurements. Don’t limit your focus to performance KPIs. Pay attention to human signals, such as disengagement, burnout, or inefficiency disguised as busyness. Advocate for metrics that reflect value creation, not just cost control.
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