Today I’m going to tell you about one of the highest cost ways to run your business.
When I explain this phenomenon, you’ll recognise it immediately. Yet most organisations refuse to recognise it, much less factor it in to their business planning and operations.
Which is a shame – because if you don’t pick up the Road Runner Effect early enough, the damage to your bottom line is going to be considerable.
And, often, impossible to recover from.
You’ll recognise the Road Runner Effect in most of our public services – anything where politicians meddle is at a particular risk of experiencing the Road Runner Effect (ironically meaning that everything is more expensive to run than it needs to be, and produces fewer positive outcomes).
You’ll recognise it in the working practices of a range of major corporations.
You’ll certainly recognise it amongst the tech industry, but nowhere is immune.
What is the Road Runner Effect?
So, what is the Road Runner Effect?
Well, it’s based on a regular scene in the old Road Runner cartoons. Remember them – the little Road Runner bird and Wile E. Coyote…?
Wile E. Coyote was always trying to bring about the untimely demise of the little bird, with the aid of a range of not terribly well-designed products from the Acme Corporation.
As part of their rushing around chasing one another routine, there was often a scene where Wile E. Coyote ran over the edge of a cliff, above a precipitous drop.
For a moment, his feet would keep running and he would be suspended in mid-air, defying the laws of gravity – all-too-briefly, from Wile E. Coyote’s perspective.
Then he would realise there was nothing beneath his feet and a look of inevitability came over the coyote’s face, before he plunged earthwards at a fair rate of knots.
A couple of seconds later, a puff of smoke rose from deep down inside the canyon where Wile E. Coyote made contact with terra firma once more – usually face first – with an impact that would have finished off mere mortals. Thankfully it had very little lasting effect on the cartoon coyote, who would pop up in mint condition a few seconds later, hatching another dastardly plot to finish off the Road Runner.
The Road Runner Effect is the name I give for the period between Wile E. Coyote’s feet losing contact with the earth, but before he realises the laws of gravity are about to take over and plunge him earthwards with considerable force.
His legs are still pumping away at top speed. His feet are cycling through at pace, imaginary step after imaginary step, as he pursues that pesky Road Runner. He has not yet realised that forward motion has ceased and rapid downward motion is now inevitable.
What this means for your business
When the Road Runner Effect kicks in, your business runs at its lowest efficiency and highest cost. So it’s important for your bottom line to pick this up early, and ideally not to let it happen at all.
Ironically, this is also likely to be the point where you think your business is running at peak efficiency.
It’s that element which makes the Road Runner Effect tricky for the uninitiated to spot.
You see, everyone will convince themselves they’re being super-efficient, and taking the best possible care of the bottom line, when the exact opposite is taking place.
That’s why, as a business leader, you need to be ahead of the game on this and provide the challenge to your team, who will mostly have convinced themselves that they are doing everything they possibly could to protect and enhance the bottom line.
Here’s an example from when I worked in the printing industry for two of the best bosses in succession I’ve ever worked for.
Printing is a tough business, with high capital costs and low margins. So being cost effective was really important.
We operated huge pieces of machinery, which each required a minimum of 3-4 people just to make it work – one on the back-end loading the paper, one in the middle topping up the ink and ensuring the machinery was running correctly, one on the front end to control the lithographic process so that the work produced was absolutely on-spec for our clients.
It was genuinely physically impossible to run one of these machines with fewer than three people, given that they stretched the entire length of our factory. Even Usain Bolt couldn’t have sprinted from one end to the other fast enough to do all three jobs competently.
Given the need to manage our costs, in the past there had been a ruling that we had to tot up the minimum people resources required for each of our machines, and that became our staffing budget.
So far, so good, you might think. Seems entirely sensible. Sounds like someone is taking a very strong decision to protect the bottom line.
Except…
What did we do when someone called in sick, or went on holiday for a couple of weeks?
Being a printer is a highly skilled job. It’s not like finding a temp to sit on your reception desk and greet visitors with a cup of coffee. Skilled printers are not sat around at home on the off-chance that someone might need them to cover a holiday in a printing factory. They’re all in full-time jobs.
So we had two choices – mothball the machine for a fortnight, at an enormous opportunity cost.
Or, get the other printers for that machine on our normal three-shift operation to switch to two 12-hour shifts instead so the machine could keep running through someone’s holidays. The only catch being that we had to pay the printers doing the 12-hour shifts at overtime rates for the 4 hours they did on top of their normal shifts.
Despite the edict from Head Office, my boss told me to hire another couple of printers who were designated as the “cover printers”. They would help out in the factory when nobody was away, to make sure we ran at maximum efficiency. But every time someone was off sick or on holiday, they switched into providing cover for the missing printer.
The kicker is, though, they provided cover at standard rates, because they were already employed to work those times in the business, not at overtime rates.
Overall, it cost us a lot less to employ two extra people than continually pay out at overtime rates when cover was required.
A mindset shift
Seeing the Road Runner Effect requires a mindset shift.
And it nearly always requires a more strategic view of the problem.
For as long as people thought that not employing any more printers than the minimum required to run our machines was a good decision for the bottom line, that’s what we did, even though overtime costs were considerable.
When my boss took a different view, and looked at the real bottom line implications of that head office decision, he took a very different decision which dramatically lowered our costs.
All the effort that went into (supposedly) keeping costs low (but requiring lots of overtime), instead of just keeping cost low by not paying out as much money as we did before, is an example of the Road Runner Effect.
Head Office had run off the edge of a cliff and hadn’t realised it. Their little legs were still pumping away…their little feet were cycling round and round…for a while they didn’t realise they were no longer making progress. Everyone was too busy congratulating one another on their wise decision to reduce staff numbers and enhance the bottom line.
It was only when the inevitable forces of gravity took hold that people started to notice the bottom line was getting worse, not better. And nobody could figure out why, given all the effort they had put into reducing staff numbers.
Nobody except my boss, that is.
You’ll see the Road Runner Effect everywhere now.
It’s a way to think about organisations which persist with a mental model of how things are supposed to work which has lost touch with the reality of how things actually work in practice.
The point at which their legs are still pumping away, and their feet are still cycling through, but all forward motion has stopped – that’s when the Road Runner effect has kicked in.
The impact is often compounded
The Road Runner Effect, as I’ve described it above, is bad enough.
But what happens in most organisations is that a compounding effect kicks in which reinforces the pointlessness of the original decision and makes the organisation even more expensive to operate.
So, although this didn’t happen in the printing business I worked for, I did in another business which decided that the solution to the bottom line not shifting in the way their original decision had predicted, was to hire a team of data analysts and beef up the management infrastructure to make sure everyone was working hard.
The only reason why the bottom line could still be underperforming, those geniuses thought, was that their people were lazy.
This had a number of interesting side effects – which is why, when the Road Runner Effect kicks in, this is generally by far the most expensive way to run your business.
For this second business there were two pretty rapid consequences from their decisions to hire more analysts and beef up the management infrastructure.
Firstly, staff motivation, which hadn’t been great up till that point, collapsed through the floor.
It turns out that calling all your people lazy wasn’t the great motivator the people at head office had imagined it was. Who’d have thought, right?
Output per person declined because they reverted to doing the contractual minimum they were required to do, rather than going above and beyond as they had been previously. (The problem in this business was not a lack of hard work, but chaotic business systems and processes which hadn’t been invested in for decades, and were no longer a good fit for how customers wanted to interact with this business.)
In addition, the salary bill went up to cover the costs of the analysts and the managers.
The one-two punch to the bottom line as a result of simultaneously reducing output and increasing costs was not the genius move those head office folk imagined it was. This business required a significant emergency refinancing and the senior leadership team were all fired.
But this is the Road Runner Effect in action – just running harder once the edge of the cliff is behind you won’t make the slightest difference.
You need to think differently about the problem – and, generally, more strategically – if you want the best result for your bottom line.
You need to be prepared to challenge the fundamental assumptions which, at some level, usually make some sort of logical sense, so lots of people get suckered into thinking they made the right decision.
You need to look for counter-intuitive solutions, like hiring more printers to reduce the cost of employing printers. By any standards that’s a non-obvious solution, and one everyone else had missed.
Decisions like that are the sign of a bottom-line genius – someone who gets their head out of the lazy, seemingly-logical decisions everyone else has unconsciously absorbed into their thinking as if they were the words from a sacred text.
That’s how to avoid the Road Runner Effect.
Avoid that, you’ll open up more bottom line growth than you ever thought possible.
Beep-beep…!