Friday, March 7, 2008

Relatively Wasteful

When is waste waste? The linked article below poses an interesting view of waste. What do you think?

YOU DECIDE: Is waste relative?

7 comments:

E. R. Dunhill said...

Chris,
This is a great follow-up to last week’s Some questions to the reader.
To address your question in the broad sense, this is how I think of waste: Every economic and biological activity has an input-process-output cycle. Obviously, many activities have multiple instances of this within a single activity, and some are quite subtle. (And yes, one can make a case for exceptions.) Focusing on the output, this includes the thing you want: your car gets you to work, your cells make ATP, &c. It generally includes something that you don’t particularly care about or don’t want at all: various carbon compounds and volatile organic compounds from you car’s tailpipe, and- well, you get the picture. It’s the “other” that we usually think of as waste. I believe there are better ways to think about waste, but I’ll leave that for later.
While I fear Dr. Walden’s prediction in the article you provided is true (that conservation is going to become less popular when various dollar-costs fall), I have a few of concerns about what he writes. For brevity, I’ll stick to one of them.
The article doesn’t mention external costs. For those readers unfamiliar with this concept, external costs (or externalities) are costs that someone else incurs for something that you’re doing. So, Dr. Walden is absolutely right: as long as other people are required to bear the external costs of wastefulness, conservation is often cost-prohibitive. However, if we account for all of the costs, waste, specifically what I’ll term “useless waste”, is always costly.

Sue said...
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Sue said...

Chris -- I'm going to take one of the excellent examples from the article to make a simple point: "in a booming economy, most business managers will find reaching new clients and establishing new accounts to be a more profitable use of their time than monitoring the staff's use of supplies and equipment." While is true that the manager might bring in more profit by spending his/her time establishing new accounts than spending his/her time monitoring staff, if staff use (or appropriation for home use) of more supplies and equipment that is necessary to achieving company goals, then that is money that COULD have gone into profit or into chasing more accounts or other positive activities. Therefore, even if it is not cost effective to police their behavior it is still "waste" because it is not enhancing the bottom line of the business.

An analogy -- Suppose I am on vacation and have my purse stolen and decide that it is not worth the time and hassel of filling out a police report, because all I had was $10 in cash and some American Express travelers checks (which I can get reimbursed without a police report). Does my decision that it is not worth my time to report the crime make it not a crime? Certainly not.

I suspect that any business owner or manager would certainly prefer those employees not engage in those activities if there was some way to stop them (with out having to divert managerial time from other high value activities) because those activities take resources that could go into more productive and profitable activities, and are therefore "wasteful" regardless of whether they have the time and resources to stop them.

Chris McClure aka Panhandle Poet said...

The following quote from the article is something that I strongly disagree with.

"Or in a booming economy, most business managers will find reaching new clients and establishing new accounts to be a more profitable use of their time than monitoring the staff's use of supplies and equipment."

I have found through many years of managing successful businesses that the maxim "you can't save your way to prosperity" is very true. It is always more profitable to be out selling or building relationships with customers than it is to worry about every wasted paper clip, etc. Hire good, honest employees and let them do their job without micro-managing them. A certain amount of "waste" is a cost of doing business. It should be discouraged, but if the success of the business depends on such things, it is destined for failure.

A similar saying is "step over a dollar to pick up a dime." What it means is that people often focus on the wrong things. In mentoring/teaching young managers, I often find that this is the most difficult area. Some have an inate sense of what is important and what is not. Others have to be taught. Of those who must be taught, some catch on but many do not. Those that don't have no business being in management.

Chris McClure aka Panhandle Poet said...

Sue: Your analogy about the stolen purse is humorous to me (although it wasn't so at the time of the event) because I once had my credit card number stolen while on a business trip to Denver. Fortunately the thief only spent a couple of hundred dollars before the card company called me. I immediately canceled the card and began the process of filing the necessary report. After 30 frustrating minutes on the telephone and no progress (as well as an extremely low chance of the perpetrator being caught -- as per the detective to whom I was speaking), I made the determination that it was very unprofitable to pursue the issue. I wasted more company money in 30 minutes than the thief had spent in 24 hours.

I think the choice often becomes one of what do we waste? Do we allow the waste of a few dollars worth of supplies or do we waste many, many dollars of potential profit by not managing the more important things such as growing sales.

Sue said...

Chris -- my example about the theft was based on my own experience while on a business rather than vacation trip. I think that both of your responses support the point I was trying to get at which is -- even when individuals, families, businesses or governments decide that efforts to stem "waste" provide less benefit in relationship to cost than other uses of time and resources, does not mean that there is no "waste." Because in almost all cases the individuals involved continue to recognize that some loss is involved. And should there suddenly appear some new technology or technique that would allow the waste to be eliminated at little or no cost efforts to do so will immediately occur. E.g., colleges lose huge amounts of money on extravagant printing by students using not only paper, but those very expensive print cartridges (students will print out a 200 page book from the Internet in the computer lab). Until fairly recently the only way to control this was by having a staff person available at all times to monitor printer use. You start talking multiple computer labs, and the need for constant staffing, round the clock and the cost of preventing the practice becomes prohibitive. This is nonetheless much recognized as waste (and much discussed at faculty meetings -- which might also be considered a waste of time - ha, ha). Now for the price of about $1000 colleges software is available that can control printing of up to a 5,000 students from any computer any where in the entire college network. Students can be allotted a certain set limit, and have to pay for additional printing beyond that limit. This new inexpensive technology is being gobbled up around the country by colleges. The point being that the waste was acknowledged as waste all along, but not acted upon because the costs of controlling student printing were too great.

So my answer to the more general question is waste isn't as relative as the article suggests, it's still there even when we don't feel that it is cost effective to go after it.

E. R. Dunhill said...

Chris, Sue,
I absolutely agree with the idea that some fixes don’t make good business sense. (Consider the work of the recently-departed Joseph Juran.) But, I don’t think waste in this context is relative. A business’ view of waste is market-dependent. The value of waste and the market-dependency of waste are two different ideas.
What the article demonstrates is a limitation of a money-only economy. The negative effects of wastes appear to come and go, because there are blank spots on our balance sheet. Those blank spots represent actual costs that often go uncaptured, but are nonetheless incurred.
This summer’s drought in the SE, and controversy over water rights are a good example. (It was also an interesting study in propaganda.) The City of Atlanta found itself the victim of its own inadequate planning. The city and its environs chose not to base zoning and building codes on the available water capacity, and were water-starved. At first glance, one might think that the city had every right to incur the costs of buying more water at a premium price. However, in that case, the city’s choice to use water in excess- to waste it- bore costs for other people. Fishing communities downstream depended upon the water that the city wanted to appropriate.
It didn’t make sense for Atlanta to be conservative in its planning (and to incur internal costs) because it had the luxury of passing on those costs to someone else. Until more environmental costs are internalized, interest in conservation will come and go.