What is the definition of efficiency? It’s a word that gets thrown around a lot in the startup world but what does it mean?
efficiency means producing the same result with fewer resources — less time, money, or energy
There’s no doubt that startups who have raised capital have investors who demand they be capital efficient. But making stuff faster is not the metric you want to measure. That measure is productivity. Productivity focuses on getting a new, better and more impactful with the same resources. This is what investors want! Stretch the dollar. Being efficient is necessary, but not sufficient. Note the sub-title of the article by Aytekin Tank on Entrepreneur.com:Why Founders Should Focus on Productivity Instead of Efficiency, sub-titled Productivity is a way to accomplish more of what matters in your business.That sub-title is a good definition of productivity for startups.
Interestingly effectiveness does not appear in the article. As I posted previously, Efficiency is doing things right; effectiveness is doing the right things. Managers tend to focus on efficiency, C-suiters focus on effectiveness. Needless to say everyone should be both efficient and effective! But where does productivity fit in? I’ll list the major todo’s from the article to create a productive venture, with, as usual my own annotations based on my experience.
Prioritize teamwork over solo efforts
At Jotform, the author’s company, each cross-functional team works on one project at a time and operates like a small company. This is my preferred org design, as opposed to Apple’s, which is tightly organized as one company from the top down. Jotform has 150 employees, so some type of org design is mandatory, your startup only needs a plan for org design as you are all on one team! Ownership is a powerful motivator – workers take pride in ownership, not in piece-work.
Make the most of your MVPs.
Aytekin has a great example of this, Apple vs. Microsoft. Both have about 16% MVPs. But the 600 Apple engineers were able to develop, debug, and release iOS 10 in less than two years, while it took 10,000 Microsoft engineers more than five years to develop, refine, and then eventually decommission Windows Vista. Why? Because every business-critical role at Apple was filled by an MVP.
Slash the red tape.
By definition entrepreneurs hate red tape. If you don’t I would like to know why! Founders must have a bias for action. Process needs to serve results and be as simple and streamlined as possible. According to Bain research, the average company loses more than 20 percent of its productive capacity to “organizational drag,” otherwise known as red tape or unnecessary complexity. I saw this in action when our small startup, Course Technology was acquired by what was the Thomson, a $7 billion behemoth. While they mostly just left us alone, there were still the company wide meetings and initiatives that sucked up our resources. I had an earn-out so I stayed my required three years, but not a minute longer. I couldn’t wait to get back to the startup world.
Forget the “more is better” mentality.
Aytekin notes that entrepreneurs often have a rebellious streak. I’d go beyond that to say entrepreneurs must have a rebellious streak. This quote from George Bernard Shaw encapsulates my take on founders:
The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.
The More is better fallacy doesn’t just apply to the number of employees, it applies to the number of hours worked. Too many startup workers humble brag how many hours they work. But hours worked is just an input to a function; the output is a difference that makes a difference – a measurable result.
Giving employees the power to set their own schedules really pays off. At Mainspring our guidelines was unless you were working from home, you should be in the office during core hours: 10 to 2. Note I said guidelines. If you want to move fast and not be bogged down, run your company on guidelines, not rules.
There you have it: organize for productivity, doing more stuff that matters, efficiently and effectively. To quote Aytekin one last time:
Experiment with what works best for your business, and be sure to engage your staff in these discussions. Happier employees perform better. They’re more creative, more productive, and will deliver the kind of innovations that can set your company apart. In the end, I think that’s far more valuable than squeezing expenses or pushing for irrelevant but good-on-paper efficiency gains.