The Coordination Tax: Where Work Slows Down, and How to Fix the System
- RESTRAT Labs
- Jan 5
- 12 min read
When work slows down, it’s often not due to lack of effort but inefficiencies in how tasks are coordinated. Researchers call this the coordination tax - delays and friction caused by unclear handoffs, waiting for approvals, redundant meetings, and rework. These issues affect small businesses and large enterprises alike, leading to missed deadlines, wasted time, and frustrated teams.
Key takeaways:
Small businesses face bottlenecks like stalled projects and owner overload due to informal processes.
Large organizations struggle with execution delays, complex decision-making, and inefficient workflows.
The solution? Shift from informal coordination (meetings, emails, and escalations) to designed systems with clear ownership, structured workflows, and automated processes.
Examples of solutions include:
Netflix reducing meetings by 65% with memos and video updates.
Microsoft Japan increasing productivity by 40% with shorter meetings and a four-day workweek.
A global company improving product development speed by 1.5x through shared governance and data access.
Where Coordination Tax Comes From
What Causes Coordination Breakdowns
Coordination tax stems from friction within systems, often caused by task and resource bottlenecks. These bottlenecks - like delayed approvals or absent personnel - halt progress when one team's output is needed by another [2].
Centralized processes can worsen the issue. When many tasks flow through a single point, such as a review board or legal department, delays multiply as dependencies stack up [2]. Unclear decision-making authority adds to the problem, with decisions being reopened multiple times due to confusion over who has the final say [1]. Information silos further complicate matters, as fragmented or inaccessible data undermines confidence in decision-making [3].
Additionally, cross-functional processes like strategic planning, budgeting, and performance reviews can consume a staggering 40% to 65% of management time in large organizations. This diverts focus away from executing tasks that directly create value [3].
Coordination Failures in Small Businesses
Small businesses experience coordination tax in the form of resource bottlenecks and owner overload. Imagine a commercial painting crew arriving at a job site only to find the primer wasn’t delivered or access to the building requires a key held by an unresponsive property manager. Meanwhile, specialized equipment like lifts or scaffolding might sit idle at one location while urgently needed at another.
Without formal systems for task handoffs, business owners often step in as default coordinators. They spend late nights contacting suppliers, chasing subcontractors, and troubleshooting issues that could have been anticipated. Instead of structured workflows, problems are escalated informally, creating bottlenecks that worsen as the business grows [2]. These small-scale challenges mirror the systemic issues seen in much larger organizations.
Execution Drag in Large Organizations
In larger organizations, these bottlenecks scale into what’s known as execution drag, significantly impacting efficiency. For instance, McKinsey highlights a 30% gap between a strategy’s potential and its actual results due to flaws in operating models [5]. Bain has identified recurring patterns like the "Focused Waddler", where a strong strategy falters due to overly complicated decision-making, and the "Aimless Runner", where solid execution is derailed by misaligned priorities [6].
Nearly two-thirds of executives describe their organizations as overly complex and inefficient [3]. Decision-making often gets bogged down, with multiple departments weighing in but no clear authority to finalize decisions. Internal complexities, such as separate reporting structures for demand planning across regions, further hinder collaboration and delay responses to pressing issues [4].
These inefficiencies aren’t about individual performance but rather misaligned operating models. Without clear ownership of task handoffs, synchronized timelines, and structured decision rights, friction builds faster than it can be resolved. These challenges highlight the importance of deliberate coordination design, a topic explored in the next section.
Architecting for outcomes | Simon Rohrer | The DEVOPS Conference - Copenhagen, 2022
Two Approaches to Coordination
Why Informal Coordination Fails
Most organizations handle coordination through meetings, email threads, and constant check-ins. It feels like the natural way to work since it leans on existing relationships and communication tools. But this approach often results in what McKinsey calls "unnecessary interactions" - those endless meetings and email chains that sap energy and overwhelm people without solving the core issues [1].
The problem lies in how informal coordination addresses friction. It treats it as a people issue, not a design flaw. When tasks stall, the default fix is to schedule more meetings or send more emails. When decisions hit a bottleneck, more stakeholders get pulled in, which often leads to decisions being revisited or escalated unnecessarily. In smaller businesses, this means owners frequently step in to resolve issues, taking their focus away from growth.
This creates a major drag on execution. For example, in large organizations, processes like strategic planning and budgeting can eat up 40% to 65% of management’s time [3]. In smaller companies, the constant coordination demands pull owners away from revenue-driving activities.
"Executives report excessive interactions that drain energy and hinder progress."McKinsey [1]
By contrast, a well-designed system eliminates these redundant exchanges and sets the stage for smoother workflows.
How Designed Operating Models Reduce Friction
Designed coordination takes a structured approach. Instead of relying on impromptu efforts to fill gaps, it builds clarity and structure into the operating model itself. This involves clearly defining responsibilities for handoffs, mapping out information flows, and assigning decision-making authority - without endless back-and-forth.
The DARE framework is a prime example of this structured approach. It assigns four specific roles to streamline decision-making: Deciders (those with the final say), Advisers (those who provide input but don’t vote), Recommenders (the ones who analyze and propose options), and Executors (those present to flag potential implementation issues) [1]. This framework removes ambiguity and keeps decisions from stalling.
Examples from the real world show how impactful a designed approach can be. Take Netflix, which in 2021 introduced a system limiting meetings to 30 minutes and replacing one-way information sharing with memos or video updates. This shift cut meetings by 65%, with 85% of employees preferring the new system [1]. Similarly, Microsoft Japan’s experiment with a four-day workweek and shorter meetings during its "Work Life Choice Challenge" led to a 40% productivity boost [1]. Whether you’re running a global corporation or a small business, a structured approach to coordination tackles the systemic issues that slow progress.
Designed coordination also incorporates formal roles like Business Process Owners or Value-Stream Managers. These roles oversee planning across departments, reducing the need for informal escalation. In smaller businesses, this might mean hiring a project coordinator to manage permits, deliveries, and schedules, freeing the owner to focus on growth.
The benefits are measurable. For instance, a global consumer goods company mapped its product development process and integrated four functions using shared governance and automated dashboards. This led to a 1.5x increase in speed to market, a 20% rise in the net present value of its product pipeline, and a 25% boost in employee engagement [3].
Comparison: Informal vs. Designed Coordination
Feature | Informal Coordination | Designed Coordination |
Primary Mechanism | Frequent meetings and emails [1] | Clear ownership, synchronized handoffs, and automated workflows [3] |
Decision Making | Consensus-seeking; unclear who has the final vote [1] | DARE framework with defined decision rights and accountability [1] |
Information Flow | Live presentations [1] | Memos, dashboards, or vlogs for information, with meetings reserved for Q&A [1] |
Problem Solving | Escalating issues to a central coordinator [1] | Empowered teams with clear escalation paths [1] |
Time Investment | High coordination overhead - up to 40-65% of management time [3] | Streamlined, decision-focused routines [3] |
Outcome | Execution drag, employee exhaustion, and stagnant growth [3] | Faster, more reliable operations with improved margins without added headcount [3] |
The key difference isn’t about working harder or hiring better people - it’s about whether coordination is left to chance or intentionally designed. Organizations that treat coordination as a system design challenge, rather than a people issue, are far better equipped to eliminate friction and improve execution.
How to Reduce the Coordination Tax
Operating Model Design Principles
Reducing coordination tax begins with designing the system, not trying to fix the people. The focus should be on creating clarity and structure in how work flows through the organization, cutting down on the need for constant check-ins and escalations.
Five key principles form the backbone of this approach. First, make handoff ownership crystal clear - every time work moves between roles or teams, there should be a designated owner who ensures progress continues. Second, build information flows directly into the system so that the right data reaches the right people automatically, without requiring manual requests. Third, limit approvals by clearly distinguishing between decisions that require input and those that need formal sign-offs. Fourth, synchronize parallel tasks to keep teams working on related projects aligned, reducing the need for endless coordination meetings. Fifth, establish clear escalation paths so that issues don’t always land on the owner’s or executive team’s plate.
When applied consistently, these principles help eliminate structural inefficiencies that slow down progress. The beauty of these principles is that they work at any scale, whether you’re running a small business or managing a large enterprise.
Reducing Coordination Tax in Enterprises
For large organizations, coordination challenges often multiply with scale. The solution lies in rethinking governance and workflows to cut out unnecessary interactions.
The ESSA framework - focused on eliminating nonessential meetings, synchronizing information flows, streamlining reporting, and automating manual tasks - has proven effective in addressing these issues [3].
Take, for example, a global consumer-packaged-goods company that applied this approach in 2025. By integrating four critical functions - commercial, R&D, production, and procurement - through unified governance and shared KPIs, the company sped up its product development process by 1.5 times. Even better, it boosted the net present value of its product pipeline by 20 percentage points [3].
High-performing organizations also rely on integrative roles to bridge department silos. For instance, Business Process Owners manage shared interfaces across teams, Value-Stream Managers connect functional verticals, and End-to-End Planners act as single points of contact between commercial and supply units [4]. These roles don’t add bureaucracy; instead, they reduce the need for informal escalations by embedding coordination into the operating model.
Another essential piece is aligning performance systems. Misalignment often stems from conflicting KPIs. For example, when sales and supply chain teams share targets for forecast accuracy and delivery, coordination improves naturally because everyone’s incentives are aligned [4].
While these frameworks are designed for large organizations, their principles can also deliver big results for small businesses.
Reducing Coordination Tax in Small Businesses
Small businesses often struggle with stalled workflows, especially between sales and delivery. Owners frequently end up as the default coordinators, fielding questions and handling escalations. The solution isn’t hiring more staff - it’s about designing better workflows and reducing reliance on the owner.
Start by identifying where work gets stuck, assign clear handoff ownership, and set fixed budgets to empower teams. For instance, a contractor could implement a simple scheduling system where a project coordinator is responsible for tracking permits and managing subcontractor schedules. Instead of answering constant questions, the owner could review the schedule just once a week. This kind of system can dramatically reduce the owner’s involvement and free up time for growth-focused activities.
Fixed-envelope funding is another game-changer for small businesses. By setting a budget for each project and allowing teams to make decisions within that limit, owners can avoid approving every single expense. This approach not only speeds up execution but also reduces unnecessary escalations [7].
RESTRAT Studio specializes in helping small businesses implement enterprise-level rigor in scheduling, sequencing, and workflow design. Their goal is to reduce chaos, improve reliability, and create systems that operate smoothly without constant owner oversight. When coordination is built into the operating model, owners can focus their energy on scaling the business instead of putting out fires.
"Structure alone will not create value. Instead, companies should evaluate structure as just one of 12 interlocking design elements."McKinsey [5]
What Changes When Coordination Tax Drops
Speed and Reliability Without Adding Headcount
By focusing on structured coordination, businesses can unlock hidden potential without needing to expand their workforce. The benefits are clear: faster execution and greater reliability in operations.
Take the example of a global consumer-packaged-goods company in 2025. By integrating its commercial, R&D, production, and procurement teams through shared KPIs and unified data access, the company achieved impressive results: a 1.5x faster speed to market, a 20 percentage point boost in the NPV of its product pipeline, and a 25 percentage point increase in employee engagement [3]. These efficiency gains meant they could achieve more without hiring additional staff.
"Managers were burdened by meetings and reporting cycles that left insufficient time for strategic priorities." - McKinsey & Company [3]
Management processes like strategic planning, budgeting, and performance reviews can eat up 40% to 65% of management and overhead time [3]. Streamlining these processes - by cutting redundant reporting and simplifying coordination - can free up over 15% of total organizational workloads within the first year [3]. This newly available capacity can then be directed toward growth, not administrative tasks.
These results highlight why carefully designed coordination is crucial as organizations face increasing complexity in their operations.
Why Designed Coordination Will Matter More
As work grows more interconnected and resources become tighter, organizations relying on informal communication and ad-hoc problem-solving will find themselves falling behind. Companies that embed coordination into their operating models will have a clear edge.
With rising complexity - more vendors, more handoffs, and more interdependencies - systematic coordination becomes the bridge between strategy and execution. Without it, inefficiencies multiply. However, "designed coordination" isn’t about adding layers of bureaucracy. It’s about reducing unnecessary interactions and establishing clear decision-making processes.
For instance, Netflix cut its meetings by 65% by capping them at 30 minutes and replacing one-way updates with memos or video updates [1]. Similarly, Microsoft Japan increased productivity by 40% by reducing meeting times and adopting a four-day workweek [1].
The organizations of the future will approach coordination as a design challenge, not a staffing issue. When workflows are intentionally structured to move seamlessly across roles, teams, and vendors, execution becomes both predictable and scalable. These changes underline the importance of rethinking coordination for better outcomes.
Key Takeaways
Coordination problems are systemic issues, not individual shortcomings. Delays often happen between steps, not within them. The solution? Redesign the handoffs, not the people.
Lowering coordination costs requires rethinking the operating model: define clear handoff ownership, streamline information flows, limit approvals, synchronize parallel efforts, and establish clear escalation paths. Frameworks like DARE demonstrate how synchronized workflows and well-defined handoffs produce measurable improvements. These principles apply across the board, from small businesses to global corporations.
When coordination costs drop, organizations can move faster, operate more reliably, and grow without needing to add more people.
"Updating the org chart while leaving other key factors untouched can be a waste of time and resources. Costs often return as underlying processes and behaviors remain static." - McKinsey & Company [3]
The solution is straightforward: design a system that minimizes friction and lets the work flow smoothly.
FAQs
What is the coordination tax, and why does it slow businesses down?
The coordination tax represents the hidden costs that arise when tasks and responsibilities shift between roles, teams, or external partners. These costs often show up as delays caused by unclear handoffs, waiting for missing details, redoing tasks due to misunderstandings, or navigating excessive approvals and poorly aligned parallel efforts. Each misstep in the process creates friction, slowing things down and eating away at efficiency.
This isn’t about individual performance - it’s a systemic issue. When organizations fail to design processes that minimize these handoffs, the result is slower execution, increased costs, and stalled progress. Picture this: sales-to-delivery transitions grind to a halt, subcontractors are left waiting for permits, or business owners become overburdened as default coordinators. By rethinking the operating model to simplify handoffs, define clear ownership, and align workflows, businesses can cut down on this tax. The payoff? Faster execution, greater reliability, and improved profitability.
What steps can small businesses take to reduce coordination tax and improve efficiency?
Improving workflows is the key to cutting down on coordination tax, not pointing fingers. Coordination tax refers to the hidden costs that creep in due to delays, rework, or inefficiencies when tasks are passed between roles, teams, or vendors. Small businesses can tackle this by mapping out their core processes - like the path from sales to design to delivery - and clearly assigning responsibility for each handoff. This approach helps prevent delays caused by missing or late information and ensures smoother transitions. Something as simple as a handoff checklist can replace scattered emails, reducing confusion.
Simplifying the approval process is another way to make things run more efficiently. Focus on approvals that genuinely add value - one clear approval step often works better than multiple layers. Tools like shared status boards or project-management platforms can also make a big difference. They consolidate information and automatically notify the next person in line, cutting down on waiting times. For example, a subcontractor updating a permit-status board in real time allows others to take action without constant follow-ups.
By treating coordination as a system-wide challenge and building better processes into their operations, small businesses can improve reliability, cut delays, and scale up without needing to hire more staff.
What advantages do designed coordination systems offer organizations?
Designed coordination systems enable organizations to operate more efficiently, with improved reliability and clarity. By cutting down on delays, unnecessary approvals, and repetitive tasks, they simplify workflows, ensuring smoother transitions and better alignment across teams.
These systems tackle coordination issues at their core, enhancing efficiency, flexibility, and execution quality. The result? Higher margins without the need to increase staff or complicate processes. This means teams can concentrate on achieving outcomes instead of dealing with avoidable obstacles.
