“Many systems require slack in order to run smoothly. Old reel-to-reel tape recorders needed an extra bit of tape fed into the mechanism to ensure that it wouldn’t rip. Your coffee grinder won’t grind if you overstuff it. And consider roadways: In principle, if a road is 85 percent full and everybody goes at the same speed, all cars can easily fit with some room between them. But if one driver speeds up just a bit and then needs to brake, everyone behind that car has to brake as well. Thus, at 85 percent there is enough road but not enough slack to absorb small shocks, and traffic grinds to a halt. Still, slack is routinely undervalued. We fail to build in slack because we focus on what must be done now with too little consideration of all the things that may arise in the future, even in the near term. When the intangible future comes face to face with the palpable present, slack feels like a luxury. Now, let’s look at slack through a different lens. During the 1970s and the early 1980s, there was a widespread perception that many corporations were bloated. Some industries were so awash with cash that executives spent carelessly. The leveraged buyout wave in the 1980s was an attempt to solve this problem. The logic was simple: Buy these companies and impose pressure by placing them in debt. Move them from abundance to scarcity. The discipline of debt—in our parlance, the focus that comes from scarcity—would improve performance. Leverage also had an effect because of the psychology of scarcity. Companies became “lean and mean,” in part, for the same reason deadlines produce greater productivity. Being a hypervigilant manager who keeps costs low can require a great deal of cognitive effort. Such managers must negotiate diligently with suppliers and scrutinize every line item to decide whether an expense is truly necessary. This kind of focus is easier to come by under scarcity and harder to come by under abundance. Even private companies, whose managers are spending their own money, start acting “fat” when awash in cash. Slack can represent a source of great (though often hidden) value or it can represent waste. When slashing costs and reorganizing for efficiency, it can be hard to separate useful slack from true waste, and indeed, many of the leveraged companies of three decades ago were left at the brink of bankruptcy. Faced with that reality, they tunneled—they neglected everything besides the emergency at hand. Cut too much fat, remove too much slack, and you are left with managers who will mortgage the future to make ends meet today.” Sendhil Mullaiathan en Eldar Shafir, respect. hoogleraar Economie aan Harvard University en hoogleraar Psychologie aan Princeton University, in Strategy + Business (voorjaar 2014)
Posted on: Mon, 17 Mar 2014 13:41:11 +0000
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