What Does the Cost of Deliverables Tell Us About the Quality of Management?

By Marcelo Barbosa

How can we measure the impact of poor management? Assessing the discrepancy between the mapped cost and the actual cost of generating deliverables is an essential indicator of an organization's management quality. This innovative and quantitative approach contrasts with more common discussions about management and operational efficiency, which often focus on intangible qualities such as leadership and organizational culture.

Management inefficiencies can result in high costs due to resource wastage, frequent rework, and failures in project and process execution, which delay deliverables and compromise quality. Furthermore, failed leadership can demotivate the team, reducing productivity and causing high employee turnover. These issues, combined, can deteriorate the organization's reputation and erode stakeholder trust.

The generation of deliverables in the realm of knowledge work is not just a matter of production; it involves meticulous management of human resources and infrastructure. The costs associated with this generation can be categorized into two main pillars: labour costs and infrastructure costs. Both are crucial for the financial sustainability and operational effectiveness of organizations.

Labour cost is one of the most significant components in calculating the total cost of any service or product in the knowledge sector. This cost is determined by the sum of the hours worked by each professional involved in generating a specific delivery. The qualification of professionals, experience, and complexity of assigned tasks also directly influence this cost, requiring attentive and strategic human resource management.

Infrastructure cost encompasses all services and resources that the organization must provide to enable effective work. This includes, but is not limited to, offices, systems and software, technological infrastructure, electricity, and water, as well as cleaning, security, and maintenance services.

Labour cost is not affected by the work modality. However, infrastructure cost is sensitive to the work modality adopted. For example, remote work allows the reduction of this cost by eliminating or decreasing the need for physical space, and consequently, the expenses related to its maintenance.

ANALYSIS OF THE DISCREPANCY BETWEEN MAPPED COST AND ACTUAL COST: AN INDICATOR OF EFFICIENCY MANAGEMENT

Effective cost control is fundamental for the sustainability of any organization. In this context, the relationship between the mapped (or estimated) cost and the actual cost plays a crucial role in evaluating management efficacy.

The mapped cost is derived from the process mapping and serves as an initial estimate for planning and resource allocation. It is calculated based on the analysis of each detailed step in the mapping, including the cost of labour, materials, equipment, and other inputs necessary for the process execution.

The actual cost represents the investment actually made to complete a project or process delivery. It involves the actual cost of labour and infrastructure allocated in generating a delivery.

The difference between the mapped cost and the actual cost provides deep insights into the quality of management. The smaller the discrepancy, the greater the management's ability to effectively predict and control the factors that impact costs, demonstrating a high level of competence. On the other hand, a large discrepancy suggests the existence of failures, pointing to the need for improvements.

STRATEGIES FOR REDUCING COSTS AND TIME IN DELIVERABLES GENERATION

Two main sources for reducing costs and time are identified in generating deliveries: process optimization and management quality.

Process optimization may include:

  • Task Automation: Implementation of technologies that automate repetitive tasks, reducing human errors and speeding up execution.
  • Process Reengineering: Redesign of processes to eliminate unnecessary steps and simplify operations.
  • Standardization of Procedures: Establishment of clear and consistent standards to ensure that all tasks are performed uniformly and efficiently.

These interventions not only enhance the speed and quality of deliverables generation but also contribute significantly to reducing operational costs.

Regardless of the level of process optimization, the quality of management plays a fundamental role in the effectiveness of operations. An efficient management is able to adapt to changes, anticipate challenges, and mitigate risks that may impact costs and deadlines. Considerations include:

  • Accuracy in Planning: Ability to accurately forecast costs and time, reflecting a deep understanding of the context.
  • Responsiveness to Unforeseen Events: Agility to adjust plans and resources in response to unexpected challenges.
  • Effective Communication: Coordination between different departments and stakeholders to ensure everyone is aligned.

The relationship between the mapped cost and the actual cost provides a clear measure of management quality. A smaller discrepancy suggests efficient management, while a larger one indicates areas where management can be improved. This analysis provides:

  • Operational Feedback: Insights on how management practices are impacting performance.
  • Opportunities for Improvement: Identification of areas requiring attention, enabling focused interventions to enhance efficiency.

PROCESS OPTIMIZATION: DEFINITION AND REPERCUSSIONS

An optimized process is characterized by operating with maximum efficiency, where wastes are minimized or nonexistent. Conversely, an unoptimized process is often marked by redundancies and inefficiencies that, if unaddressed, can lead to high costs and significant delays.

An optimized process achieves its goal with the minimum necessary inputs and time, using each resource effectively to produce the desired outcome. Optimization may involve various strategies, including automation, process reengineering, and technology implementation. The benefits include cost reduction, increased productivity, and improved quality of the product or service offered.

Unoptimized processes can result in several negative consequences for the organization, such as:

  • High Operational Costs: Inefficiencies can lead to excessive use of resources, increasing operational costs.
  • Reduced Quality: Errors and rework are more common in unoptimized processes, which can affect the quality of the final product or service.

In already optimized processes, the analysis tends to focus on maintaining the efficiency achieved and seeking marginal gains. This involves:

  • Continuous Monitoring: Regular monitoring and evaluation of the process to ensure it continues to operate at its optimal level.
  • Incremental Innovation: Implementation of continuous improvements and technological innovations that can provide additional advantages, even if small.

For processes that are not yet optimized, the analysis is directed towards identifying and correcting inefficiencies. Common actions include:

  • Review and Restructuring: Detailed analysis of process steps to identify redundancies and bottlenecks that can be eliminated or simplified.
  • Simplification and Standardization: Reduction of process complexity, which often involves standardizing procedures to facilitate execution and reduce errors.
  • Digitization and Automation: Implementation of technological solutions that can automate manual and repetitive tasks, reducing processing time and associated errors.

IMPACT OF MANAGEMENT AND LEADERSHIP

The productivity in generating deliverables, whether optimized or not, is deeply influenced by the quality of management and leadership. Failures in this area can seriously compromise operational efficiency, increasing costs and delaying deliverables. Common management failures and their consequences include:

  • Delays in Decision-Making: Delays in approvals or decisions can create significant bottlenecks, preventing the rapid advancement of projects and processes.
  • Slow Response Time: Inefficient communication between departments or team members can disrupt the workflow and increase the production cycle time.
  • Unjustified Rework Requests: Frequent reworks without clear added benefit can unnecessarily consume resources and demotivate employees.
  • Indecision and Insecurity: A lack of confidence from managers in their own decisions can lead to constant revisions and indecisions, delaying projects and processes.
  • Lack of Strategic Alignment: Deliverables that are not aligned with the organization's strategic goals can lead to uncoordinated efforts and waste of resources.
  • Resistance to Change: An organizational culture that resists change can slow down or even block the implementation of necessary improvements.

The main impacts of inefficient management and leadership include:

  • Increased Costs: Inefficient management often results in additional costs due to reworks, material wastage, delays, and failures in project execution.
  • Loss of Time and Productivity: Delays in decision-making and operational inefficiencies reduce team productivity and delay deliverables.
  • Demotivation of the Team: Ineffective communication, lack of clarity in guidelines, and constant rework can demotivate employees.
  • Dissatisfaction of Stakeholders: The demanders and recipients of products and services may feel dissatisfied with inefficient management, negatively impacting the reputation of the team and/or organization.

To correct these management and leadership failures, it is essential that organizations adopt an action plan that includes:

  • Training and Development: Continuous training programs for managers and leaders, focused on communication skills, quick decision-making, and change management.
  • Improvement of Communication and Collaboration: Implementation of efficient communication channels, promotion of collaboration between departments, and encouragement of a transparent and open work culture.
  • Continuous Feedback: Implementation of feedback systems that allow for the continuous review of processes and leadership practices, adjusting them as necessary to align with organizational goals.
  • Dynamic and Effective Decision-Making: Evaluation of decisions based on reversibility and impact. For decisions with low reversibility and high impact, time and attention should be dedicated to analysis and deliberation. In other cases, a more flexible and agile approach is possible and desirable.
  • Rethinking Rework: Consideration of necessity and impact of rework, prioritizing improvements with real value.
  • Use of Technology and Data Analysis: Implementation of technological solutions that allow tracking of costs and progress of deliverables.
  • Performance Analysis: Implementation of performance analysis systems that monitor the generation of deliverables and identify areas for improvement, facilitating quick and informed adjustments.
  • Alignment of Objectives: Ensuring that all decisions and actions are aligned with the strategic objectives of the organization.
  • Continuous Monitoring of the Management Gap: Establishment of performance indicators to continuously monitor the difference between the mapped and real costs, identifying opportunities for improvement and implementing corrective actions when necessary.

IDENTIFICATION OF FAILURES AND INEFFICIENCIES IN MANAGEMENT AND LEADERSHIP: USING THE 4W1P METHOD

Efficiency in management and leadership is a critical factor for the success of any organization. An effective method for analyzing the quality of management involves understanding the costs associated with generating deliverables — specifically, the discrepancy between the mapped cost and the actual cost.

The 4W1H method — which details "what", "when", “how many” and "to whom" it will be delivered, and"who" requested it — is an essential tool for clearly defining deliverables. The use of this method enables the creation of detailed deliverables plans for teams, as well as individual work plans that include the allocation of hours for contributing to deliverables for each team member. This clarity not only facilitates the calculation of the actual cost but also promotes effective alignment among team members.

Comparing the mapped cost and the actual cost (calculated through deliverables and work plans) can indicate failures and allows leadership to identify where and how management can be improved, reducing costs and increasing productivity.

In summary, the two essential sources for reducing costs and delivery time are:

  • Process Analysis: is crucial for any optimization strategy. This approach involves a meticulous review of all operations and procedures to identify flaws and inefficiencies that may be raising costs and unnecessarily prolonging deadlines.
  • Quality of Team Management and Leadership: Effective management is another critical lever for reducing costs and optimizing time. The quality of leadership can be assessed by its ability to align actual costs with the mapped costs of projects and processes.

RELATIONSHIP BETWEEN PROCESS OPTIMIZATION AND MANAGEMENT

The interrelation between process optimization (optimized or not) and management efficiency (efficient or inefficient) provides four distinct scenarios:

Unoptimized Process + Inefficient Management

In this scenario, the organization faces the greatest challenges, with high costs and low efficiency. The main causes include a lack of proper process review and structuring, and management that fails to implement significant changes, resolve decision bottlenecks, and align strategies with organizational goals. Intervention strategies include a comprehensive review of processes and an intensive managerial training program.

Unoptimized Process + Efficient Management

Here, despite the unoptimized processes, efficient management can mitigate some of the inefficiencies through agile leadership that quickly identifies critical areas for intervention. Effective managers employ detailed analyses to recognize inefficiencies and initiate structural corrections, resulting in significant incremental improvements. They use a strategic approach to realign processes with the organization's objectives, despite the limitations inherent in existing processes.

Optimized Process + Inefficient Management

In this scenario, despite the processes being optimized, inefficient management can compromise efficiency gains. Failures include delays in decision-making, ineffective communication, and resistance to implementing innovations. Improvement requires focus on managerial training, establishing clear communication and decision protocols, and reinforcing strategic alignment to maximize the potential of already optimized processes.

Optimized Process + Efficient Management

Representing the ideal, this scenario combines optimized processes with efficient management, resulting in maximum operational efficiency and minimized costs. Management in this context leverages well-structured processes to drive continuous innovations and maintain strategic alignment. The focus is on further perfecting processes through constant feedback and proactive management to anticipate and adapt to changes and new demands.

CONCLUSION

Effectiveness in managing costs and time in knowledge work is fundamental for organizations. By analyzing labour and infrastructure costs, along with the relationship between the mapped cost and the actual cost, organizations can gain valuable insights into the quality of their management and identify potential areas for significant improvements.

Process optimization, efficient management, and active leadership are crucial for improving productivity. The implementation of technologies that automate repetitive tasks and the continuous review of processes to eliminate inefficiencies can help achieve these goals. However effective management that can quickly adapt to changes, anticipate challenges, and keep projects and processes on track is essential.

Measuring the difference between the mapped cost and the actual cost indicates the quality of an organization's management, as well as its ability to optimize the allocation of its resources and maximize productivity. This is an innovative approach that paves the way for sustainable success.