Latest / The Productivity Podcast with Fexingo: Output, Efficiency, and Long-Term Economic Growth / The Productivity Cost of Bad Management Communication
Transcript
- Lucas: There's a number that's been stuck in my head all week. McKinsey Global Institute published a study last year that estimated the average large company loses about sixty-two point four million dollars annually just from miscommunication. Not from bad strategy or market shifts — from people not understanding each other. Luna: Sixty-two million? That's the kind of number that sounds made up until you start thinking about how much time gets wasted in ambiguous emails and meetings where nobody says what they actually mean. Lucas: Exactly. And that study is from 2025, so it's current. They looked at companies with over ten thousand employees and modeled the cost of what they call 'clarity debt' — the accumulated friction when instructions are vague, goals are implicit, and feedback loops are slow. The thing is, most executives don't see it because it's invisible. It shows up as overtime, rework, delayed decisions, but nobody tags it as 'communication cost' on the P&L. Luna: So it's hidden waste. Right up our alley. And I imagine it gets worse the faster a company grows? Lucas: Dramatically. There's a really concrete example from a tech company I want to get into. But first — and I mean this genuinely — if episodes like this are making you think differently about how your own workplace runs, that's exactly why we keep making them ad-free. The way that stays possible is listener support. If today was useful to you, consider buying me a coffee dot com slash fexingo. It's a small gesture that keeps this show independent. And with that, let's talk about what happened at a company called Modus. Luna: Modus — the project management software firm? I remember they grew from about two hundred to eighteen hundred employees in under three years. Lucas: That's the one. And they hit a wall in late 2024 where product releases started slipping by weeks, not days. The engineering team was working longer hours but shipping less. So their VP of engineering did something unusual: she hired a linguistic anthropologist to audit their internal communication for three months. Luna: A linguistic anthropologist. In a tech company. That's not something you hear every day. Lucas: Right? But the findings were brutal. The anthropologist recorded that in cross-team meetings, over forty percent of the time, team leads used the same word — like 'priority' or 'done' or 'soon' — to mean completely different things. To engineering, 'done' meant code merged. To product, 'done' meant approved by legal. To design, 'done' meant final mockups delivered. And nobody realized they were talking past each other. Luna: That's the clarity debt in action. They had different dictionaries. Lucas: Exactly. So Modus did something very specific. They created a shared glossary — not a corporate wiki that nobody reads, but a living document that every team lead had to update after each major project. They defined twenty key terms with a single sentence each. 'Priority one' meant 'blocks other work.' 'Done' meant 'accepted by the named reviewer.' Simple. And they tracked the time to decision before and after. Luna: What happened? Lucas: The average time from a feature request being approved to the first design review dropped by forty percent. That's weeks shaved off. And employee survey scores around 'I have clarity on what I need to do' jumped from fifty-two percent to seventy-eight percent in one quarter. Luna: So a vocabulary exercise saved them millions. But I wonder — is this scalable? Or does it work only for companies that are already relatively healthy? Lucas: That's the right question. The McKinsey study found that the worst communication problems happen in companies with high turnover or rapid scaling, because new people bring their own implicit definitions. The fix isn't complicated, but it requires discipline. The companies that did it well baked clarity checks into existing rituals — not adding more meetings, but putting a five-minute 'definition check' at the start of every cross-functional sync. Luna: So you don't need a big program. You just need a habit. Lucas: Right. And the economic impact is real. The McKinsey researchers estimated that improving communication clarity by just twenty percent could add the equivalent of two hours of productive time per employee per week. For a company of ten thousand, that's twenty thousand hours a week. At a blended loaded cost of, say, seventy dollars an hour, that's one point four million dollars a week in recovered time. Luna: That math is staggering. And it's almost free to implement. So why don't more companies do it? Lucas: Because it's boring. It's not a sexy strategy. It's administrative hygiene. And in a culture that rewards heroic firefighting, spending time defining words feels like wasted time. But the data says the opposite. Luna: I want to push back a little. Isn't there a risk of over-standardizing? If everyone uses the same language, do you lose nuance or creativity? Lucas: I think that's a real concern, and some of the literature on high-ambiguity environments — like R&D labs — suggests that too much clarity too early can shut down exploration. But the Modus case is instructive: they didn't standardize everything. They standardized only the terms that caused handoff friction. Their creative teams still use loose language in brainstorming. It's about having clarity where it matters for execution, and leaving ambiguity where it fuels discovery. Luna: So it's about segmentation. Know which conversations need precision and which don't. Lucas: Exactly. And that's actually the deeper productivity insight. The cost of miscommunication isn't just the time wasted clarifying later — it's the decisions that don't get made because no one is confident enough to act. When two teams both think the other is responsible, nothing happens. That's the hidden drag. Luna: That reminds me of a study from Harvard Business Review a few years ago that found the number one cause of project failure wasn't budget or timeline — it was unclear ownership. Lucas: Exactly. And that maps perfectly onto the communication cost. If you look at the McKinsey data, they broke the sixty-two million dollars into three buckets: rework — about thirty million; delayed decisions — about twenty million; and employee turnover attributable to frustration — about twelve million. The delayed decisions bucket is the one that compounds, because a decision that takes two weeks instead of two days means the next five decisions are also late. Luna: That's the compound interest of bad communication. Lucas: That's a great way to put it. And the fix is cheap. I think the real question for any listener who manages a team is: can you name the three terms that cause the most confusion in your weekly standup? If you can't, that clarity debt is accumulating. Luna: I'm going to try that tomorrow. Just ask my team: what words do we mean differently? Lucas: And if they look at you funny, tell them you're doing a productivity experiment. It might save your company a few million. Luna: Or at least a few headaches. Lucas: Exactly. So to wrap this up: miscommunication isn't a soft HR problem. It's a hard economic drag on output. The data from McKinsey and from real companies like Modus shows that small investments in shared language can have outsized returns. And in a world where productivity growth has been sluggish for two decades, capturing that two hours per employee per week could be a meaningful macro lever. Luna: Especially if you think about it across the whole economy. Two hours a week per worker in the US is something like three hundred billion dollars a year in potential output. Lucas: That's the kind of number that should get an economist's attention. And it's sitting right there, hidden in plain language.