The Cost of Path Dependence


You’ve probably been on countless calls over the last year working through all the logistical details for the reopening of your business. The countless questions you have had to consider likely include some version of: “how should the office be configured?”, “who should come back and who should stay at home?”, “how often should we be sanitizing the elevator buttons?”, “do we have sufficient PPE?”, “should we have split schedules to minimize staff in the office at any one time?”  

These are all practical questions. However, one question that I have not heard is, “what should we not bring back”?

I am specifically talking about the rules, procedures and practices that linger from past initiatives, despite the project having long been abandoned. While these archaic rules, procedures, and practices might frustrate us, we are nevertheless stuck with them because we tell ourselves that we are too busy to do anything about them. 

The bureaucratic debt we tend to accumulate in organizations acts like real debt in that it robs us of our future productivity and profitability. This is known as path dependence – the tendency for groups to stick with a system currently in use rather than try other alternate ways. 

For us humans, our past often constrains what we do in the future.  The well-worn grooves that our habits etch into our daily routines keep us headed in a predictable (yet sometimes unwanted) direction.  A single experience from our past can cause us to make a conclusion about ourselves, others, or how the world works. This experience then distorts and hijacks our ability to read new situations; to a hammer, everything looks like a nail. In short, our future is very much determined by the path we have been travelling along.

In normal conditions, we help clients intervene in their path dependence in order to take large leaps in team effectiveness.  We have found that the degree to which a group of people can depart from their past ways of operating and thinking is the degree to which they can create lasting leaps in future performance.

Despite the havoc it has produced, the COVID-19 pandemic has provided us with an opportunity; we now have had a meaningful separation from the way we used to do things.  With less dependence on our past ways of operating, we have a unique and profound opportunity to critically ask what is truly essential.

As many businesses re-enter the market, we will face a persistent period of much lower demand.  To maintain profitability and competitiveness, we must unburden ourselves from the cost of processes, rules, procedures, mandated authorization, useless meetings, and any other relic from the past that we tolerated. 

We often challenge clients to remove two old processes for every one new process they create.  And so, I challenge you and your team to do the same – as you reopen your businesses, critically examine everything in your value chain and remove anything that is not absolutely essential.  If you are not sure what can be discarded, just ask your front line staff. After all, they are the ones who have been too busy servicing the bureaucratic debt to do anything about increasing efficiencies to deliver value to your customers.