Waste

In hindsight, a certain percentage of expenditure is always wasted. Waste is usually the result of risks that go bad or lack of experience in a key field.

Examples of waste:

• staff who don't stay
• programs that are abandoned
• materials that don't get used
• contracts that have loopholes
• marketing programs that don't work
• equipment that doesn't do quite what you wanted
• students who don't perform
• staff disappointments
• new ventures that don't earn money
• empty rooms, etc.

Relate waste to the stage of your organization. Identifiable waste is at a minimum in a small, new organization. In hindsight, it will one day seem that waste is quite high because it has put resources into projects that didn't work.

Large, well-resourced organizations appear wasteful and often are. But sometimes they're not. Perhaps they're too big to simply absorb costs that a small organization would. For example, they need to buy all their own proper equipment and hire professionals. Perhaps they simply have the resources to do a good job without pinching pennies. (E.g. hire the best people.) Sometimes they invest in better resources because it is actually more profitable than minimum performance resources. That is, they achieve economies of scale.

How much waste?

• Some organizations survive with 90% wastage, such as high risk ventures in foreign countries.
• You're doing very well if you can look back in 10 years and say that wastage was only 10%.
• You're doing very poorly if you can see current waste at 10%.