Cost of Inefficiency











	Cost of Inefficiency Calculator

	We first published an online version of our Cost of Inefficiency Calculator in 2009, complementing the original 2006 paper version. Since then, countless business owners and individuals have used it to uncover the true cost to their business of 'doing business badly' - their Cost of Inefficiency. Back then, we'd explain it like this:
	"When someone buys your goods or services they pay for the goods or services themselves, including the production costs, licensing costs or fees, labour costs, inspection costs, etc. They expect to pay for these things, just as they expect you to make a profit. What they don't expect to pay for is your inefficiency: the cost of rework, poor purchasing practices, bad scheduling, high team turnover, inventory management issues, unnecessary manual tasks that should be automated, down-time due to equipment failure, insufficient training, and so on. In short, the cost of not having good systems. Your Cost of Inefficiency is based on all the above and it is paid straight out of your profit or is charged to your customers. It is not, and should never be interpreted as, part of your 'cost of doing business.'

	Understanding your Cost of Inefficiency is the first step to minimising it. You're taking that first step today. Good move.
	Copyright© 2007 - 2021 Brain in a Box Pty Ltd All rights reserved

Systems Questionnaire

See how your business stands up in terms of systems.
Provide a score for each statement listed below.

Choose a score from 1 to 10
Zero (0) is not a score

We have clearly defined systems for all core functions of our business

Our systems culture helps builds our team, not 'blame' our team

Everyone in the team is able to access our systems

I believe our systems cater well for all learning styles

Our systems are followed consistently by all levels of authority in our business

We rely on the expertise captured in our systems, not just a few key people's brains

We welcome feedback on our systems and encourage our team to search for improvements

The effectiveness of our systems is seen as a critical contributing factor to our success

Typically, problems are attributed to faults in our systems rather than our people

There’s no significant gap between what our systems say we do and what actually happens



Cost of Inefficiency Calculator

Assess your inefficiency across the three how much time or money is lost through inefficiency by you, your department or your business. There are 10 options in each category. 1. Select an item from one of the dropdowns - something that you know costs money, either directly or in hours wasted through inefficiency. 2. Now decide whether to assess the inefficiency by time (hours per week) or direct cost. 3. For hours, enter your assessment of the hours spent on this item in an average week. 4. For direct cost, enter your assessment of the weekly cost for this item. Suggestion: Go with your gut feel, don't try to evaluate or calculate the 'correct' assessment. Choose your top three inefficiences in each category

TIME	Hours per Week	Direct Cost







COST







QUALITY







The True Value of One Hour
The true cost to your business of every hour is not the sum of the wages or salaries payable for that hour. Rather it is the value that should be generated in that hour plus the direct costs of the hour. So, if the subject of this report should generate $500 dollars per hour, and their direct costs are $250 per hour, then their value is $750 per hour. Note: If you're calculating the Cost of Inefficiency for a team or department, sum the true value you calculated for each team member. Consider having each team member complete their own individual Cost of Inefficiency and then comparing their reports with the whole team report. The comparison can bring some interesting viewpoints to the surface.

Select the True Value of one hour by using the slider below.



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Copyright© 2007 - 2021 Brain in a Box Pty Ltd All rights reserved

Cost of Inefficiency Report

This report is indicative of the inefficiency in your business based on your input.

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Key

Danger Zone
Serious action required
& consider seeking help

At Risk
Some positives but real
effort needed

Fair to Good
Identify the positives &
share them further

Good to Excellent
Reinforce the good
work

The importance of clearly defined systems

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A systems culture of support, not blame

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Providing access to systems

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Catering to all learning styles

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Importance of systems to all levels of authority

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Expertise captured in systems, not key people

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Encourage feedback to enrich systems

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Systems contribution to success

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Focus on systems to analyse problems

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Compliance with systems - saying then doing

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The Role of Systems in Your Business

This calculator does not provide a comprehensive analysis of your business and the role of systems in your success. Rather we seek to provide basic feedback based on your own assessment of a number of factors which we believe describe good systems. Our intention is solely to alert you to areas where you could potentially improve your business.

Looking at your responses to the Questionnaire, we suggest that the following cultural changes should benefit your business.

Essentially, you should aim to achieve:

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Your Cost of Inefficiency

Your Cost of Inefficiency has been calculated using your estimates. If you believe the Cost of Inefficiency to be too high, check your figures. Avoid changing your entries just to make your report look good. Our experience shows that 'gut feel' responses are likely to be more accurate than responses which have been massaged to fit a desired outcome.

The items you selected in each category are listed in the table below, together with the annual cost for each item.

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The Numbers Behind Your Business Inefficiency

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Time

Cost

Quality

Cost

Time

Quality

Cost

Time

Quality

Status

Same

Biggest

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