Efficiency means not doing unnecessary things, not employing unnecessary people. They may have been doing something useful, or just something that someone thought was important.
The important point is the question of what exactly you are being efficient at doing. As you drive towards a particular Pareto optimization, economic forces have changed what you need to optimize for, perhaps driven by your own optimization. The limiting factors have changed.
If the moat of required competencies and capital allocation is large enough, you can hide a lot of inefficiencies (aka your boss's friends) for quite a long time.
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Edit: people can comment about crony capitalism etc if they like, my comment is not meant to be comprehensive, merely observational.