Competence: the Crucial Cost That Can’t Be Cut
Here is one of the finest desserts in the entire world, Bavarian Apple Strudel, baked to perfection by master bakers who love their work, and an object of veneration for those of us who believe Germany has all the best desserts.
Feel free to take a slice of this delicious strudel, but think twice before taking a slice out of competence
Here’s a great recipe if you feel up to the challenge of making your own apple strudel:
Competence Costs Money; Incompetence Costs Much More
Once upon a time there was a middle of the road retail store which offered good quality merchandise at reasonable prices to middle class customers. This store was not for the super-rich, nor did it try to compete with K-mart or Wal-Mart. The store employed friendly, helpful adults and paid them reasonable wages, benefits and commissions. These employees were given training and the company invested in them wisely, viewing them as a valuable asset that achieved sales and profits.
Then one day the economy collapsed, store management became afraid of losses and disaster, and responded by getting rid of its trained, competent adult workforce. In their place the store hired junior inexperienced part-time employees and high school students, offered them no training of any kind, and paid them minimum wage with no benefits. The store also reduced the total number of its employees to the bare minimum, believing, as many companies did during the economic collapse, that Cut and Cancel was the order of the day and the best business strategy.
I visited this store recently and asked a teenaged employee about a product and was given the wrong answer. The teenaged employee had no idea whatsoever about the product I was interested in, had received no training in it, was unaware of its characteristics, and was otherwise bored and bothered that I dared to even ask her a question. My experience was representative and not an isolated occurrence.
I asked myself a question at this point: was I in a store or a warehouse where I was on my own? What was different and better about being in this store compared to being in K-mart or Wal-Mart and wanting help with a product? Nothing. Competent service was a critical success factor for this business to sell its products. As an MBA I could see all of these failings, and they were fatal. As a CPA I could count the costs and lost profits, and they were fatal too.
This store had made the fateful decision that the competence of its own people was irrelevant. Management had created a commodity shopping experience and made this store indistinguishable from shopping at discount retailers. Teenaged store employees knew nothing about the products the store sold or store layout. Worse still, no one cared. I would be better off buying the product I wanted online, or going to Wal-Mart, and many others will think the same.
This store has written its own epitaph and dug its own grave. Its days are numbered. The countdown to bankruptcy has already begun. The logic of a competitive market will conclude that there is no longer any good reason for this store to exist.
Competence costs money. But there is one thing that costs far more: Incompetence.
A Perfect World
In a perfect world all jobs would be assigned solely on the basis of competence. Competent people would obtain jobs precisely at the level of competence they have achieved, while being offered training, education and opportunity to improve themselves to the next level of competence. This state of affairs is called Meritocracy.
Meritocracy gives opportunities to people based on their proven abilities and actual commitment to work. It is very, very different from Socialism, Aristocracy, Nepotism, Cronyism, and other corrupt and inefficient methods of allocating opportunity and income.
People of proven ability and skill will succeed in a Meritocracy and will fail and suffer in every other type of system. And in the long run every system other than Meritocracy ultimately goes out of business because it fails to carry its own weight. This is true at every level of reality: individual, company, state, national, and international. The laws of nature cannot be repealed.
But companies can temporarily depart from the ideal of Meritocracy because:
(1) There may not be enough competent people available in a local market;
(2) Companies are not competent enough to judge who is really competent;
(3) Some companies, by action or inaction, allow jobs to be assigned on some other basis than competence;
(4) Economic circumstances may result in insufficient resources to pay for a competent person;
(5) The company may delude itself that it can get by without competent people.
The last possibility is the most extreme and outrageous instance of incompetence. There is no substitute for competence. People who think otherwise will soon be disabused of their delusions. Nature is ruthless in punishing the incompetent. The laws of nature cannot be repealed.
How Timing Differences Facilitate Delusion
One day I become extremely upset at the high price of gas. I’m sick and tired of paying megabucks to fill up my tank. I’m so upset that I decide to switch to water. I reason that water is cheaper than gas so I’ll save money. I fill up my car with cheap water.
Nature will immediately impose consequences on this act of incompetence: my car won’t start and it won’t run. There will be no time delay. Cars need gas to run while water will ruin the engine.
But it’s different when incompetence is used with people instead of directly with nature. It will take longer for the laws of nature and economics to assert themselves. In the meantime, companies and people who engage in incompetent acts may persuade themselves that because no negative consequences occur immediately they have gotten away with being incompetent.
It takes time for incompetence to propagate through supply chains, to impact customer interactions, business goodwill, and other key elements of a business. In this context, incompetence is a slow acting poison that takes time to manifest itself. The best that can be said to those who try to get by without competence is to quote the sincere words of my favorite high school bully (he never lied to me): “Laugh now, cry later.”
There Is No Free Lunch
Companies that think they can save money and get by without competence deserve to put their belief to the test. First, they should fire all competent employees and replace them with cheaper but incompetent people. Then, they should sell off all reliable machinery, equipment and tools that are in good working order and replace them with cheaper but dysfunctional machinery, equipment, and tools. Finally, they should eliminate competent management and advisors and replace them with cheaper incompetent managers and advisors. Once these steps have been implemented the countdown to nonexistence will have begun.
There is no substitute for competence.
Ultimately, the desire to succeed without paying for competence is the desire for a free lunch. Economics and arithmetic teach us that there is and can be no such thing.
Never ascribe to malice what can be adequately explained by incompetence.
Violence is the last refuge of the incompetent.
Certified Public Accountant Master of Business Administration
Tel: (207) 989-2700 E-Mail: GeorgeAdams@IntelligenceForRent.com
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