The Doorman Fallacy: When Efficiency Makes Companies Worse
There is a concept from Rory Sutherland of Ogilvy that I love called the doorman fallacy.
The idea is simple. A hotel has a doorman. Someone looks at the role and says, “This person opens the door.” Then they look at the cost of the salary, compare it to the cost of an automatic door, and conclude that the doorman should be replaced.
On paper, this looks perfectly rational.
Same door. Lower cost. Improved efficiency. Another small victory for the spreadsheet.
Except, of course, the doorman was never just opening the door.
He was greeting guests. Calling taxis. Recognizing regulars. Keeping an eye on the entrance. Creating a sense of arrival. Making the hotel feel a little more fancy.
The automatic door may open perfectly. But something has been lost.
That is the doorman fallacy: mistaking the visible task for the full value of the role.
I have seen this mistake many times, but these days I see it most clearly in my work as an investor, advisor, and reviewer of private equity deals.
A model gets built. Costs get categorized. Roles get examined. Headcount gets benchmarked. Synergies get identified, which is often a polite way of saying that someone, somewhere, is about to have a very bad Thursday.
And sometimes the cuts make sense. I am not sentimental about bloated organizations, lazy management, or jobs that exist only because nobody has had the courage to ask what the person actually does all day.
But there is a difference between cutting fat and cutting muscle.
There is also a difference between operational discipline and spreadsheet blindness.
The Private Equity Version
In private equity, this usually shows up under respectable language.
Nobody says, “Let’s make the company worse.”
They say, “We have identified operational efficiencies.”
They say, “There are opportunities to streamline the organization.”
They say, “The business has excess overhead relative to benchmark.”
All of which may be true.
But sometimes what they really mean is:
“We found a few people whose value is obvious to the company but not obvious to the spreadsheet.”
That is where I get nervous.
Because in a smaller company, especially a founder-led one, people often wear many hats. The official job title may say “operations manager,” “customer support,” “finance admin,” or “sales coordinator,” but the actual role is usually much messier and more valuable.
That person may be the one who knows which customer needs a phone call before they churn. They know who needs a payment reminder before the invoice goes to 60 days overdue. They may know which vendor always overpromises. They may know which salesperson is great on paper but quietly toxic to everyone around them. They may know which reports are technically useless but politically necessary because one key client insists on receiving them every Friday.
None of that shows up cleanly in the model.
To be fair, I understand the temptation. I like clean models too. There is something deeply satisfying about finding waste, removing complexity, and watching the EBITDA margin improve. But the problem is that some of the most important value in a business is inconveniently human. It lives in judgment, trust, memory, relationships, and context.
That makes it hard to quantify.
And when something is hard to quantify, mediocre operators often pretend it does not exist.
I Almost Fell for It Too
I would love to pretend I was always immune to this kind of thinking.
Sadly, no.
When my own company started growing, I had my own brief flirtation with the doorman fallacy. As the team got larger, the business became more complex. More people meant more salaries, more meetings, more internal coordination, more opinions, and more chances for someone to create a spreadsheet that made me question my life choices.
At some point, every founder starts asking the same questions.
Do we really need this role?
Can this process be automated?
Is this meeting useful?
Why are three people involved in something that looks like it should take one person and half a sandwich?
Those are good questions. A founder should ask them.
But there is a dangerous version of this thinking where you start seeing people primarily as costs instead of contributors. You start reducing roles to visible tasks. You start believing that if something cannot be measured precisely, it probably does not matter.
That is where founders get themselves into trouble.
Fortunately, I caught myself before going too far down that road.
The company I wanted to build was not a soft, sleepy, everyone-gets-a-trophy operation. We were ambitious. We were numbers-driven. We tracked performance closely. We wanted to win.
But I also wanted people to enjoy working there. Not in some fake corporate culture way, where everyone gets a branded hoodie and a mission statement nobody believes. I wanted people to wake up and think, “I get to work there,” not, “I have to work there.”
That distinction mattered to me.
Because the best people do not stay just because the paycheck clears. They stay because the work has energy, the team has standards, and the environment does not slowly drain the life out of them.
In other words, we still cared about performance. We just did not replace the doorman with an automatic door.
High Standards Are Not the Enemy of Humanity
One of the great false choices in business is the idea that you must pick between performance and humanity.
That is nonsense.
In my experience, the best companies are both demanding and human. They have high standards, but they are not stupid about it. They push hard, but they do not confuse exhaustion with excellence.
I have never understood leaders who brag about creating miserable workplaces, as if making everyone anxious is proof of strategic brilliance.
Congratulations. You turned your company into an emotional airport security line.
That is not leadership. That is just poor management.
A strong culture does not mean low expectations. It does not mean everyone gets to do whatever they want. It does not mean avoiding hard conversations because “we are like a family,” which is usually the sentence people say right before behaving like the worst family imaginable.
A strong culture means people know what matters.
They know what good looks like.
They know where the company is going.
They know they will be held accountable.
And they also know they are not disposable machine parts in someone else’s margin expansion fantasy.
That last part matters more than many investors want to admit.
When people feel respected, they give more than the minimum. They solve problems before they become visible. They protect customers. They help each other. They tell the truth earlier.
You cannot always model that neatly. But you can absolutely feel it when it disappears.
The Question Before the Cut
Before cutting a role, automating a function, or streamlining a team, the question should not simply be, “What will this save?”
The better question is:
Are we removing waste, or are we removing value we do not know how to measure?
That distinction matters because the financial model will always favor what it can count. It can count salary, software cost, utilization, response time, and margin improvement. It cannot easily count judgment, institutional memory, customer trust, team stability, or the quiet competence of someone who prevents problems before they become visible.
This is where a lot of optimization work becomes dangerous. The role looks expensive because only part of the role is visible. The employee looks replaceable because the model only captures the formal job description. The process looks inefficient because nobody has bothered to understand why it exists.
In smaller and founder-led companies, this is especially common. A few key people often hold together far more than their titles suggest. They know the customers, the exceptions, the history, the personalities, the weak spots, and the little landmines that never appear in a board deck.
Remove those people too casually and the company may look cleaner for a while. Costs go down. EBITDA improves. Everyone congratulates themselves on discipline.
Then, slowly, the hidden costs show up.
Customers become less loyal. Employees become less candid. Managers spend more time fixing problems that used to be prevented. The best people notice the change before the board does.
That is the doorman fallacy in its most expensive form.
You saved money on the door.
You damaged the entrance.
Efficiency Is Not the (only) Goal
The lesson is not that companies should avoid optimization. That would be sentimental nonsense.
Bad processes should be eliminated. Pointless meetings should die. Manual work that can be automated should be automated. Roles that no longer make sense should be redesigned or removed. I have no affection for corporate clutter, and I have even less affection for jobs that exist only because nobody wants to have an uncomfortable conversation.
But efficiency is not the goal.
A better company is the goal.
Sometimes a better company is leaner. Sometimes it is simpler. Sometimes it is more automated. Sometimes it is more disciplined. But sometimes a better company has a little more human slack in the system because that slack is where judgment, service, trust, and creativity live.
That is the part many operators miss.
They are not wrong to look for savings. They are wrong when they assume that every saving is an improvement. There is a difference between reducing waste and hollowing out the business.
Good operators know the difference. Mediocre operators call both “efficiency.”
Final Thought
I have become more skeptical of optimization as I have gotten older.
Not because I dislike discipline. I built my company around discipline. We tracked numbers closely, held people accountable, and cared deeply about performance. We were not running a corporate daycare center with better snacks.
But I have learned that a business is a human system before it is a financial system.
The spreadsheet matters. Of course it does. Cash flow, margins, growth, and accountability all matter. Anyone who says otherwise has probably never had to make payroll.
But the people create the value before the spreadsheet reports it.
That is why the doorman fallacy is such a useful warning. It reminds us that the visible task is rarely the whole job. It reminds us that some value is relational, contextual, and cumulative. It reminds us that the most expensive mistakes often begin as perfectly reasonable cost savings.
So yes, optimize.
Cut waste. Improve margins. Simplify operations. Automate the boring work.
Just make sure you understand what you are removing before you remove it.
Because sometimes the doorman is not really there to open the door.
He is there to make the place worth entering.
