How much waste and rework is going on in your organisation and how much effort is being invested to reduce or eliminate the root causes of the underlying problems?
Error-nomics: a plural noun describing the science that deals with the identification, removal, and prevention of wasted time, effort, and money.
In February this year, I spotted a lead story in the Metro newspaper reporting that illegal drugs have cost the U.K. £110 billion over the past 10 years. Although not reported in detail, as much as £100 billion of the total was from crime related expense resulting from class-A drugs.
During that period, only £3 billion was spent on tackling the problem. A lot less money! Given that prevention is better and cheaper than cure, surely we should be investing our energies and money to reduce the scale of this problem, where the cost to society goes way beyond the financials.
This article isn’t looking to debate the hugely complex issues around drugs and addiction, or, indeed, get underneath the numbers in detail. Although the numbers reported didn’t seem to make sense to me, the article served to remind me of the ‘one-ten-one hundred’ rule, and the terrible waste that goes on in organisations and businesses, throughout the U.K. generally.
The 1-10-100 rule states that as a product or service moves through the production system, the cost of correcting an error multiplies by 10. As an example, if a customer order is processed correctly, it costs £1.
Picking up an error at the billing stage, and putting it right, increases the processing cost to £10. But if the error reaches the customer, and then needs correction, the cost increases to £100. In reality, it may cost even more, given that dissatisfied customers share their experience with others.
Various estimates have been made about the extent of the cost to both Public and Private Sector Organisations, but for many it seems to be in the range of 25-40% of their annual budget.
So, could any of this be relevant to you? How much waste and rework is going on in your organisation? And how much effort is being invested to reduce or eliminate the root causes of the underlying problems? Depending on your answers, you might feel the need for some Error-nomics. Error-nomics may be a new word, but I feel it’s a word that can be clearly understood at first sight.
It doesn’t appear in the Oxford English Dictionary, at least at present, but if it did, the entry would look like this:
Error-nomics: a plural noun describing the science that deals with the identification, removal, and prevention of wasted time, effort, and money.
Catalyst’s one day introduction to the topic presents a systematic and pragmatic way to make Error-nomics work. Click here to find out more.