If I run a department in a company that is responsible for say, customer service, there are a million ways I could improve customer service by doing things like increasing efficiency in "back of house" areas and the reallocating those funds to customer facing areas.
Problem is... I can't do that, because if I drive efficiency in the BOH area I don't get to keep the surplus resources I just created, it gets gobbled back up by the organisation at the next budget cycle... So there's literally a NEGATIVE incentive for me to optimise.
Now, I understand why the organisation feels the need to capture that surplus, there might be other areas of the business that leadership thinks needs those resources more. But what they're failing to understand is they're actually hurting both the team making the efficiency AND the team who needs the extra resources because now everything is just going to remain exactly the way it was.
This seems like a ridiculously easy problem to solve though... Just allow teams that drive efficiency dividends to retain say half of the benefit they generate.
The company still gets a chunk of resources back to redistribute the way they see fit, AND the team generating the efficiency are able to implement the rebalancing of resources WITHIN the team that incentives them to make the changes in the first place.
I would bet serious money that the NET divided returned to the central pool would actually be HIGHER even though they only get half of each block of surplus, because you would be providing SO MUCH more incentive to individual teams to find and implement these efficiency gains now.