The Real Reason Personal-Dependent Companies Erode Profits: The Truth Behind 'Invisible Costs' and Talent Shortages
*This article is Chapter 2 of
[Definitive Edition] Why the Hard-Working Nation of Japan Cannot Become Wealthy: The Structure of Personal-Dependent Companies, Societies, and Nations
within the Structure Hub.
The danger of 'personal-dependent companies' discussed in the previous article is not a matter of spirit or morale.
Personal-dependent companies are structured in a way that erodes profits.
In other words, this is not a matter of frontline operations. It is
a problem of design responsibility at the levels of finance, evaluation systems, and decision-making.
1) The Fundamental Contradiction of Personal-Dependent Companies
What is increasing in personal-dependent companies is not costs. It is
“losses.”
However, personal-dependent companies do not treat these losses as losses. This is because all losses are disguised as 'work'.
Responding to recurrences is recorded as 'work'
Coordination, cleaning up messes, apologizing, and handling urgent requests are recorded as 'labor'
Rework is recorded as 'normal operations'
Supplementing for personal dependency is evaluated as 'excellence'
As a result, the biggest bug that occurs within the company becomes this:
Acts that erode profits are counted as achievements.
Here, profits are eroded in a way that is not visualized.
2) What the System Commands
Responding to recurrences is “work.”
Preventing recurrences is a “cost.”
As long as this evaluation structure exists, the company will continue to burn forever.
A fire breaks out → Extinguish it → “Well done,” “You saved us”
Change the design so no fire breaks out → “Unnecessary man-hours,” “This term is tough,” “Low priority,” “Too much trouble”
In short, being on fire is what gets rewarded.
Designs that don't burn are put on the back burner.
The system functions this way as a result.
You are evaluated when you burn out.
Structures that prevent burnout are put on the back burner.
In other words, as long as short-term results are prioritized,
preventing recurrence will always be secondary.
It is not that companies do not learn.
They are designed so that learning lowers short-term evaluations.
This is the design responsibility of management.
3) Why do personnel-dependent companies fail to grow profits?
It is not flashy waste that eats into the profits of personnel-dependent companies.
It is because profits are eroded in invisible ways.
■ Five 'invisible costs' that eat into profits
1. Uncompensated absorption cost (free-riding on people's spare capacity)
Personnel-dependent companies use people's spare capacity as 'free material' rather than as an 'asset'.
People who understand without being told
People who can anticipate needs
People who smooth things over to avoid conflict
People who take things on themselves and finish them
As long as this 'uncompensated absorption' exists, management will be under a misconception.
The current system is working
That is wrong.
The people running it are burning out.
As long as they are burning, it looks like a profit is being made.
The moment they burn out, everything is exposed.
2. Rework cost (doing the same job over and over)
Personnel-dependent companies operate on the assumption of 'misalignment'.
Ambiguous specifications
Ambiguous lines of responsibility
Judgment criteria vary by person
Decision-making swayed by office atmosphere
As a result, the same work occurs multiple times.
Rework
Re-verification
Re-explanation
Coordination
Re-coordination
When this becomes normalized, this is what happens to a company.
It is moving, but not progressing.
It seems like it is generating revenue, but in reality, it is just 'recovering friction'.
3. Firefighting costs (express handling, overtime, apologies, outsourcing, interruptions)
Personnel-dependent companies make the 'unexpected' a daily occurrence.
Express handling
Exception handling
Interruptions
Complaint handling
Managing the nerves of stakeholders
The important thing here is to
fix this as a standard operation, rather than as an 'exceptional response'.
In other words, companies dependent on individuals
turn exceptional costs into fixed costs.
It is not that profits fail to grow.
Before profits can grow, they are consumed as fuel.
4. Turnover Costs (Not recruitment fees, but opportunity losses)
Companies dependent on individuals erode their best talent first.
As a result, the highest costs are incurred.
'Profits that should have been captured' disappear
Recruitment and training costs are visible.
But this is the real loss.
A future that could have been improved disappears
There is no one left who can fix the structure
The organization collapses before reproducibility can be cultivated
That is why companies dependent on individuals create their own
'talent shortages' while using
'talent shortages' as an excuse to stop improving.
5. Credibility Costs (Invisible sales decline)
In companies dependent on individuals, quality fluctuates depending on the person.
Service quality is unstable
Explanations are different every time
Delivery times are unpredictable
Things fall apart when the person in charge changes
Customers do not get angry.
They just leave silently.
And the company does not notice.
When they finally do, they say, 'The market is tough.'
That is wrong.
It was the internal structure that eroded their credibility.
■ Important Points
These are not phenomena.
They are the cumulative results of management decisions.
Personnel-dependent companies did not fail to improve.
It is the result of consistently placing improvement at the bottom of the priority list.
4) Why management can remain in the safety zone
In personnel-dependent companies, when problems occur, the finger is always pointed in this direction.
Lack of attention on the front lines
Lack of verification on the front lines
Lack of coordination on the front lines
Lack of skill level on the front lines
As long as this structure holds, design responsibility is easily kept ambiguous.
Management can perpetually demand improvements from the front lines without changing the structure.
As a result,
the structure is one where design responsibility is easily kept ambiguous.
And this is the most serious part.
Personnel-dependent companies
are not born because management has malicious intent.
They occur naturally as a result of leaving evaluation systems that do not value design in place.
In other words, this is
the consequence of management failing to take on design responsibility
itself.
5) Final Conclusion
The fact that personnel-dependent companies eat into profits is neither a coincidence nor luck.
It is not culture.
It is not inevitable.
A person-dependent company is
an organizational form that has become fixed as a structure that easily continues to erode profits.
It is.
Losses are disguised as operations.
Firefighting is treated as an achievement.
Preventing recurrence is treated as a cost.
Top talent is worn down.
Credibility is eroded.
Sales quietly decline.
Even so, the finger is pointed at the front lines.
That is why I will say this at the end.
It is not that the front lines of a person-dependent company are 'weak'.
The responsibility for design belongs to the management layer.
However, in many organizations, that design is rarely placed at the top of the priority list.
🔁 The overall structure is here
[Definitive Edition] Why Can't Japan, a Nation of Effort, Become Wealthy? The Structure of Person-Dependent Companies, Societies, and Nations
🪞 This is a place to clarify your judgment rather than to seek correctness.
If, after finishing reading,
you feel that 'something has shifted' rather than 'I understand'.
That is a sign that the 'assumptions' within you have begun to waver.
What we handle at withchat is the 'underlying structure' that dulls decision-making.
We do not offer encouragement or know-how.
This is time for you to stand in a place from which you cannot return.
▶ What is the quiet structural change that happens to you in this place?