Based on ‘Cut the Fat but Keep some Slack’ by S Mullainathan and E Shafir provides examples that remind us of an important, counter-intuitive principle of dynamic systems, such as business organisations: some slack in the system is essential for its efficient operation. Lack of slack may have disastrous consequences. ‘Fat’ on the other hand, is wasteful slack that should be eliminated.
The component parts of core business structures and processes are tightly coupled i.e., dependent upon and interact with each other. If a system is designed to deal with average demand or assumes predictable behaviour, the coupling is tighter. Consequently, unplanned events that exceed the average or the expected will stress the system and have deleterious consequences that may persist for some time. A typical example of this phenomenon is the effects of equipment breakdown.
Prudent slack
Prudent slack imparts resilience and robustness: an ability to absorb internal or external ‘shocks’ to the system, i.e., the ability to deal effectively with variation such as excess demand or equipment breakdown). In The Joy of Slack, Robert Weirs proposes four sources of slack:
Resource slack is equipment, inventory, or personnel in excess of average or current demands.
Temporal slack is a bit of extra time, e.g., allowing an additional 10 minutes when travelling to a meeting at another location.
Procedural or control slack is the under-specification of non-critical processes or authority – it allows for some flexibility.
Conceptual slack is the variety of perspectives on a system’s state, functions, and environment – i.e., some tolerance of different points of view – which provide ‘requisite variety’ that counters groupthink and provides an opportunity to adapt to a wide variety of threats and opportunities.
Excessive slack in all these forms is wasteful, can lead to complacency and can also cover up inefficiencies and an inability to ‘see’ danger.
What does this mean for managers?
Managers are being exhorted to do more and more, faster and faster, with less and less. This tightens coupling and increases the likelihood of unpredictable behaviours and consequences; it is one of the reasons that 95% of projects are late and over budget: over-ambitious planning that assumes the system will behave as predicted.
Prudent slack is a buffer that makes organisations robust. Robustness is not just about avoiding collapse or about ‘sustainability’. Robustness is the ability of an organisation to maintain critical functionality and to perform well in the face of significant stress. And we know that stress occurs more frequently than purely random events: think of late delivery of material, increase costs, machine breakdown, a big order or temporary absence of key personnel.
The management challenge
The challenge for managers is to know if slack is prudent and beneficial or wasteful. One approach is to monitor carefully or model what happens for some months after a larger order comes in, when a crucial supply is delivered late, when equipment breaks down or when key personnel are absent.
Some Key Concepts
See T2: Absorb, Anticipate, Adapt.