X-efficiency refers to the gap between the output an organisation actually achieves and the maximum output it could achieve with the same resources, given current technology and processes. In practice, it is about uncovering performance losses caused by slack, poor incentives, vague standards, information gaps or weak management attention. Consultants diagnose X-inefficiency by comparing units that should perform similarly, benchmarking against peers, and tracing where time, materials or effort are being wasted. Interventions can include clearer KPIs, performance-linked rewards, process standardisation, better data for frontline teams, or competition between internal units. Improving X-efficiency is powerful because it releases productivity without major capital spending and makes cost advantages more durable. It is especially valuable in public sector, monopolistic or formerly protected industries that are now facing competition.
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X-Efficiency: What it actually means?
