diminishing returns

(noun)

A condition in which additional inputs into an organization, project, or process produce progressively fewer or lower-quality outputs and may decrease the total quantity or quality of outputs.

Related Terms

Examples of diminishing returns in the following topics:

  • Setting the Right Goals

    • This is also supported by the idea of diminishing returns, which posits that for each unit of investment (be it a minute of time or a dollar) into a given process, less output will be produced.
    • Therefore, combining a series of small objectives (processes) will be more motivating, causing less output to be lost to diminishing returns over time.
    • TMT (which draws from these two theories of time perspective and diminishing returns) and SMART goal setting together therefore tell us that to maximize motivation and therefore output, managers should divide projects into several more immediate, specific, and realistic sub-goals.

  • Monetary Employee Compensation

    • While the amount of that exact point is frequently debated, experts generally agree that somewhere beyond the ballpark of a six-figure salary range reflects diminishing returns (i.e., no additional benefit to the organization for paying the individual more).

  • The Financial Value of Social Responsibility

    • CSR provides a financial return in the form of lower costs, higher revenue, and returns to investors.
    • Proponents of these funds point to competitive returns for socially responsible indices, such as the Domini 400 (now the MSCI KLD 400).
    • Similarly, academic studies have shown that excluding stocks from companies with poor CSR records does not adversely effect financial returns of a fund.

  • Choosing Team Size and Team Members

    • Fewer than five members resulted in decreased perspectives and diminished creativity.

  • Personal Biases

    • Often times called selective search for evidence, confirmation bias occurs when decision makers seek out evidence that confirms their previously held beliefs, while discounting or diminishing the impact of evidence in support of differing conclusions.

  • Learning to Speak

    • As a result, the communicator's ability to persuade or otherwise influence the recipient is diminished.

  • Leadership

    • Effective leaders can mean the difference between increasing a team's ability to perform or diminishing its performance, between keeping efforts on track or encountering disaster, and even between success or failure.

  • Benefits of Innovation

    • This requires open-minded and motivational leaders in managerial positions who are capable of steering employee efforts without diminishing employee creativity.

  • Honesty in Leadership: Kouzes and Posner

    • In its absence, leaders lack credibility, and their ability to influence others is diminished.

  • Goal-Setting Theory

    • However, when management merely dictates goals, employee motivation to meet these goals is diminished.