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What is diminishing returns and how to prevent it

The law of diminishing returns is one of the most important principles in the world of economics. This will help you find the right balance in production within your organization.

Understanding the laws of diminishing returns, regardless of the products or services offered, can have a significant impact on the efficiency of your organization. The concept of diminishing returns applies when:

  • Complete the report, but think it’s not enough and continue to work on bits and parts
  • I’ve spent hours researching to find more and more project resources and support, but the actual work hasn’t started yet.
  • Spend extra time and effort (more than necessary) to make your project better.

Finding the right balance between factors of production requires knowledge and effort. Understanding the laws of diminishing returns will improve your productivity and performance. This article uses a clear example to help you understand the law of diminishing returns.

What is Diminishing Returns?

In the world of economics, the law of diminishing returns states that in every production process, adding additional production units while other production units are constant reduces overall production. increase. It is also known as the law of cost increase, as adding production units reduces revenue and ultimately increases production costs.

In terms of productivity,

The point of diminishing returns is the point after reaching the optimum capacity level. At this point, each time you add a production unit, the increase in production is small.

The biggest problem is knowing when you reached this point. As a leader, you need to ask yourself this question:

How long will you continue to work on the project until you declare it good enough? – And this extra time doesn’t have a big impact on the results.

Examples of diminishing returns

The law of diminishing returns applies to different areas of life. See if these examples resonate with you.

  • You have been working on work projects non-stop to complete it on time and achieve your goals. You may think that working all the time is one step ahead, but the reality is that in the long run you will get diminishing returns on productivity and performance. To make matters worse, your health and even family relationships are affected because you are stressed and exhausted and simply ignore other aspects of your life trying to perfect the project.
  • For workplace meetings, the first hour tends to be the most productive. Usually, adding 2 or 3 hours does not significantly affect the results. Over time, it can be tiring and boring for everyone involved and not at all productive.

How many times do you find yourself coming up with the best solution after collecting data and analyzing the problem for weeks or months instead of actually taking action to solve the problem?

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Why do you do that? Are you trying to find the perfect solution and create the perfect condition for the perfect result?

But will the solution be perfect even after spending a lot of time and effort on research and analysis?

The answer is probably no.

Paralysis by analysis It happens when we try to find the best or perfect way to do something or solve a problem.Most of the time, perfectionists Fear of failure It tends to avoid potentially harmful situations. They don’t want what they are doing or flaws in themselves.

But the truth is Perfection doesn’t exist.. Waiting for the perfect time or trying to perfect something not only wastes effort, but also significantly slows progress. This is when perfectionism leads to diminishing returns.

How diminishing returns affect productivity

Diminishing returns affect productivity in four main ways.

Invest more, but regain less

Spending a lot of time and energy on tasks and projects does not always give you better results. According to a study conducted by Stanford University, more can be achieved with less effort.

In fact, investing a lot of time and energy after reaching the point of diminishing returns does not have a significant impact on the results.

Nothing is done

When you invest endless efforts in something, you delay completing it. Therefore, nothing will be completed.

Postpone decision making

You need to make a decision to achieve the results of all your tasks.

Some people tend to spend a lot of time researching and analyzing data to make the best decisions. This sounds logical to make before making a big decision, but most of them tend to get stuck at this stage and can’t make a decision.

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Waste of time and loss of opportunity

If you spend a lot of energy on your project and you can’t achieve your goals, you’re wasting your time and losing opportunities.I explained in another article about this opportunity cost..

Opportunity cost is usually expressed in terms of how much time and value must be abandoned in order to pursue an opportunity. For example, if you choose to spend time investigating and analyzing results, this cost is worth the time you spend testing your ideas in the field and getting feedback.

What you can do to prevent diminishing returns

There are two effective steps you can take to prevent diminishing returns.

Step 1. Use superstructure method

The Superstructure method is Lifehack’s unique method for quantifying the value of a task, so you can organize your tasks in order of importance.

If you adopt the superstructure method and start prioritizing tasks in your daily life, you will see big rewards.

These include significant improvements in productivity and work output. It also reduces stress and overwhelming, giving you time and energy to increase your expressiveness and creativity.

Just imagine …

New things can improve your mental and physical health and accomplish more while you have more leisure time to do what you love.

This is not an illusion. This is the life I am living in now. And if you put the superstructure method into practice, you too can live your life.

Every task has three components:

1. Intention

Understand why you need to perform these tasks, find out how you can benefit from working on them, and how it drives you towards your goals.

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2. Value

Organize your tasks into the following three categories.

  • Necessities: Important to achieve your goals. Without it, the result is meaningless.
  • Must have: Important but not important. However, omitting this may have less impact on the final result.
  • Good to have: It’s great to have it, but not including it won’t hurt your purpose.

How you place them depends on your goals.

3 hours

After reviewing the task priorities, you need to evaluate the cost of each task in terms of time. The complexity of the task is reflected in the time required to complete the task.

You can easily calculate the time cost by dividing the task into 30 minute intervals. The task should not exceed 3 hours.

This method helps you get the best results because you have limited time to complete or make decisions.

Schedule a task

Knowing the task priorities and the approximate time it takes to complete each task will give you the key to positive and productive action.

And the good news is that it’s really very simple.

You need to schedule tasks in the Weekly Planner — select the days and times when you need to work on each task.

When you start using this superstructure method, you can quickly overcome the overwhelming sensation. That’s because you always have an organized weekly plan that allows you to master your time and reach your goals.

And there’s better news …

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After running the superstructure method for a while, you will find that you start to create solid routines for regular tasks such as holding regular meetings and replying to emails. Routines are also a great way to save time and energy as they help automate tasks and keep them away from distractions. For more information, Super structural method here..

Step 2. Apply the principle of 90/10

Now it’s clear about Must-Haves, Should-Haves, and Good-to-Haves. Also, let’s combine the principles of 90/10.

The 90/10 principle is one of the most important principles for productivity and effective time management by Stephen Covey. It states that 10% of your actions account for 90% of your results. As mentioned earlier, there is no perfection, so trying to achieve 100% results is not very practical. Enough enough, you don’t have to drag to achieve the remaining 10%.

When people try to achieve 100% of the results, they basically spend more than 90% of the effort and resources to achieve the remaining 10% of the results. This is more than necessary and when diminishing returns occur. It’s like spending more than 90% of the effort to achieve only 1-2% of the results, and it’s not worth it.

Understanding the 90/10 principles will help you set the right expectations and actually get things done. In fact, according to a study conducted by ResearchGate, workers are less stressed and more productive at work when they use the 90/10 principle to manage their tasks.

Conclusion

The law of diminishing returns is an economic concept that applies to different areas of our lives. Understanding this concept can help you improve your productivity and performance quickly.

As we have seen, fear of failure and anxiety about taking action are the main reasons for determination and inaction. By coming up with ideas and implementing them on a small scale, you can receive immediate feedback, improve business processes, and improve performance.

By using the superstructure method and the 90/10 principle, you can prevent diminishing returns. Understanding and using these two effective tools will help you set the right expectations and reach your goals.

Featured Photo Credits: Chris Liverani via unsplash.com

What is diminishing returns and how to prevent it

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