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Volume 11, Issue 1;   January 5, 2011: Some Hidden Costs of Business Fads

Some Hidden Costs of Business Fads

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Adopting business fads is an expensive organizational pattern, with costs that extend beyond what can be measured by the chart of accounts most organizations use. Here are some examples of the hidden costs of business fads.
Two barnacles affixed to the shell of a green mussel

Two barnacles affixed to the shell of a green mussel. Barnacles adhere permanently to substrates by means of a cement they secrete. In some substrates, such as stainless steel, they etch the surface before cementing themselves to it. Fads might do something similar. If adopting organizations must alter themselves as part of the adoption process, the fad gains permanence, because the cost of replacing the fad with something new now includes re-alteration of the organization. Photo by Buck Albert courtesy U.S. Geological Survey.

Most business fads do have at least some inherent value — that's why so many organizations adopt them. But as we saw last time, their inherent value can degrade as the fad itself gathers adopters. In this part of our exploration, we turn our attention to the hidden costs associated with adopting ideas or methods that have acquired — or that eventually do acquire — fad status.

Costs can be internal
When estimating the costs of adopting an idea or method, we tend to focus on cash outlays, but many costs of adoption can be internal. Costs can appear as lost production, lost sales, compromised quality, confusion, political strife, degraded morale, employee cynicism, and much more, most of it difficult to measure. Examples of the sources of these losses include time spent training and learning, employees recognizing the fad potential of the new method, and disruption of interpersonal relationships.
Since adopting a new idea or method can be expensive in both measurable and non-measurable costs, be very certain that it isn't a fad. Fads usually just aren't worth adopting.
Costs can lag adoption
Many of the costs of adopting fads, espSome fads are stickyecially the non-measurable costs, appear not in advance of or during the adoption effort, but much later. For instance, companies that downsized aggressively in the 1990s lost access to many of their experienced employees and much of their organizational memory, from both the downsizing and the voluntary turnover it inevitably stimulates.
Adopting a fad can leave a lasting legacy of recurring cost that can hobble the organization for years.
Investments in fads can be volatile
The investments we make when adopting fads are different in character from investments we make when buying equipment, or creating new products, or outfitting new space. Some investments in fads are volatile because we have little ability to protect them.
Fads that involve personal training are more likely than most to carry with them volatile costs. For instance, when we purchase a computer, we have the ability to keep it in our possession. But when we train an employee to use the Myers-Briggs model, and spend real money to determine that employee's Myers-Briggs type, that investment evaporates when the employee leaves the company.
Some fads are sticky
One of the defining features of fads is that they eventually pass on. After adopting a fad, we adopt something else, undoing the work we did when we adopted it. But some fads, once adopted, are very difficult to leave behind. They stick.
Methods and ideas that require changes to policies and procedures are often stickiest, because changing policies and procedures is difficult by design. Especially sticky are fads involving human resources procedures. When adopting them we rarely consider the costs of letting go.

Next time we'll explore why business fads form.  Next in this seriesFirst in this series  Go to top Top  Next issue: Why Do Business Fads Form?  Next Issue

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