Best Use: Improving efficiency of processes
If you are stumbling down a dark alley and see a guy about to kill another guy, and that perpetrator sees you observing him, do you think he will abort his planned murder and run away? Chances are he will. Or maybe he’ll murder two people instead of just one. That is an example of the observer effect. Or as I like to say, seeing is changing.
The observer effect is one of those mysterious, quantum-based, difficult to grasp principles of quantum physics and human behavior that states, observing a situation or occurrence changes it. It can be used by management to improve efficiencies of their step-by-step processes.
It starts with the idea that matter can exist as either a particle or a wave. A particle is generally described as fixed in time and place. A wave is not fixed; it’s fluid and has many possibilities. Think of a particle like a marble. And think of a wave like a piece of rope that you are flinging. It is moving up and down and at any moment parts of the rope can be up and parts can be down all at the same time. It is fluid. But a marble, at any point in time, is only in one place. The moment you observe a point on the rope, it becomes a marble.
Without going into the physics experiment that has proved the observer effect, one that has been repeated many times and in many ways, I’m going to jump ahead to explain how you can use this principle. It works for service as well as manufacturing businesses.
The first step in using the observer effect is to figure out what you want to observe.
Start with collecting information
Information collection can be the single most powerful tool to change anything. Want to get your financial life into shape? Measure everything you spend your money on. Want to lose ten pounds? Measure everything you eat and how much exercise you get. And here’s the really powerful thing: simply observing, collecting data and measuring things can change their outcome.
If you log everything you eat, you will probably eat less. When you track your calories, you can see in the moment that you are eating too much, or your serving size is too big. A serving size of typical potato chips is fifteen chips. If you observe the number of chips that you pour into a bowl, you will easily see that you should only take fifteen chips, not half the bag.
For business operations, start by collecting the following information:
1. Tasks that take the most time. If any individual process takes a majority of work hours, then there is probably room for improvement.
2. Zero in on those data points that have the biggest negative effect on the bottom line.
3. Track your variable expenses monthly. If every month, shipping costs are roughly the same percentage of net sales, and all of a sudden they increase by twenty percent, then you’ve got a problem in shipping.
4. You can also use industry benchmarks to get an idea of outlier expenses on your financial statements.
In an article by Tim Reimink, Managing Director of accounting and consulting firm Crowe, there is an excellent example of a large UK-based bank that mapped about 50 end-to-end processes (e.g., account closure and change of addresses). Fifty processes! They then analyzed those processes and it became clear that fifteen accounted for roughly 80 percent of the overall cost base (a great example of Pareto’s 80/20 principle).
To cut costs, they focused on those fifteen. Since everyone was being observed and measured, they improved their performance. This is a great example of a service-based company implementing the observer effect.
Many years ago, I was a new C.F.O. for an apparel manufacturing company. Based on an industry benchmark of net profit, the C.E.O. knew that some of his costs were too high. He was a wise old owl. He wanted me to roam the company every morning and watch people. As you can imagine, I wasn’t very popular.
Based on my experience, it seemed that the fabric cutters were moving slowly. And because they were slow cutting, naturally, the sewers were sitting there waiting for pieces to sew. Almost all of these types of bottleneck problems have a ripple effect.
Cutting involved stacking layers of fabric on long tables, putting pattern pieces on top and using electric scissors hung from the ceiling to cut out the pattern pieces. There were several cutters down each side of the tables. So using the timer on my phone, I started timing them at a distance.
The time it took them to finish all the steps on a particular stack of fabric was somewhere in the neighborhood of forty minutes. That was my base measurement. I took notes, went back to my desk and crunched the numbers. Using the cost per man hour of work, I could tell that this time was in line with what the financial statements were reflecting. It needed to be faster.
I went back the next morning and told them what I was doing. They knew I was timing them so they cut faster. I watched them for a whole cycle. I asked the lead if there were any tips he could give his line. He called everyone together and gave them specific suggestions to help.
Back to work, they went even faster. Of course their table lead helped with his suggestions. But the surprising thing is that once their speed was called into question, they concentrated on that, on the fluidity of their movements. They did less talking, too. By the end of the day, they had improved their process time by almost 10%. Any manufacturing company would be happy to increase their efficiency by that much on one of their critical processes.
Being observed, along with some additional training changed their performance. The observer effect.
Tips to help
1. Make sure that your employees have proper training to do their job.
2. You may need to hire additional employees. If it increases efficiency, they may pay for themselves.
3. Give bonuses. Have contests. Employees can have fun with this. Gamify it.
Don’t assume that your employees are always going to do things in the most efficient and quickest way. It’s not necessarily that they are deliberately doing a slow or bad job. Don’t be afraid to observe them. That’s the only way you can help them be the best they can be. And in the end, most people want that.
