5 Ways Bureaucracy Will Kill Your Business - Salt 106.5

5 Ways Bureaucracy Will Kill Your Business

Having worked with a wide range of companies, I have identified five reasons bureaucracy has the unique ability to destroy an organisation.

By Salt 106.5 Network Tuesday 6 Feb 2018Finance and BusinessReading Time: 5 minutes

By: Michael McQueen

When German political economist Max Weber first devised the bureaucratic theory of management in the late 19th century, his intention was to combat the nepotism and unproductiveness rife in the family-run businesses of the day.

Weber believed that efficient organisations needed to ‘have a strict hierarchy or authority, clear rules and regulations, standardized procedures and meticulous record keeping.’ Ironically, the very organisational approach that set out to drive efficiency has, over time, resulted in the opposite outcome.

The larger an organisation becomes and the longer it exists, the more bureaucratic and inefficient it often becomes. Recalling how this occurred at General Motors, former company board member Ross Perot once joked, “At General Motors, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get together a committee on snakes, and you discuss it for a couple of years. And the most likely course of action is: nothing.” Reflecting on such an inefficient state of affairs, Perot concluded in 1988 that “the GM system has to be nuked.”

While Perot’s criticism of GM’s culture is applicable to many other companies, at an even broader level, there are entire nations whose systems and processes have become so bureaucratic they need to be nuked – or at least ruthlessly pruned.

In his 2012 State of the Union Address, President Obama observed that one of the U.S.’s greatest challenges is its bloated bureaucracy.

“We must clear away red tape because there is no question that some of our regulations are outdated, unnecessary or too costly. I’ve ordered every federal agency to eliminate rules that don’t make sense. We got rid of one rule from 40 years ago that could have forced some dairy farmers to spend $10,000 a year proving that they could contain an oil spill – because somewhere along the line milk had been classified as an oil.”

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Having worked with a wide range of clients in both the private and public sector, I have identified five reasons bureaucracy has the unique ability to destroy an organisation:

1: Bureaucracy leads to responsibility being shared or shirked

One of the characteristics of a bureaucratic system is that it shifts the emphasis from the individual to the collective. While this makes organisations less vulnerable to ‘key person’ risks, it also leads people to hide behind systems and processes rather than take responsibility for action, or inaction. Blame gets spread across the whole organisation. When something goes wrong, it is the system’s fault.

Anyone who has contacted a customer service call centre only to be passed from one department to another because the person on the line lacks the know-how, will or authority to solve your problem, knows how infuriating this aspect of bureaucracy can be.

2: Bureaucracy creates cracks that get fallen through

The second danger of bureaucracy is that because systems and processes are rigid by nature, anything or anyone that doesn’t fit in the boxes on a form or the categories in a database tends to be rejected or fall through the cracks. Large organisations like government agencies are particularly vulnerable to this as countless child protection oversights can attest.

Just as people can fall through the cracks, so can ideas and opportunities. This was largely the case when Xerox’s Palo Alto Research Center (PARC) failed to capitalize commercially on many of its innovations due to gaps in communication between its research and marketing divisions.

3: Bureaucracy causes things get overlooked

Bureaucracy tends to mask underlying weaknesses and can cause the basics to be overlooked. Take the infamous exploding Ford Pinto – a car that became irreverently known as ‘the barbecue that seats four’.

An engineer’s early assessment and subsequent strong recommendation to buffer the Pinto’s fuel tanks disappeared entirely as Pinto reports filtered up Ford’s bureaucratic chain.

By the time the management committee approved the final specs for the car, no one was aware of the fuel tank recommendation and almost 30 Pinto drivers died as a result of this needless oversight.

This is the problem with bureaucracy: everyone assumes that someone else has ‘covered all bases,’ ‘asked the question,’ or ‘done the research’ when it is entirely possible that no one has, or someone has, and no one had paid any attention!

If the devil is in the detail, bureaucracy gives the the devil ample opportunity to wreak havoc without anybody paying attention or realizing it – until it’s too late.

4: Bureaucracy leads to risk being avoided and innovation being blocked

Highly bureaucratic and process-driven institutions tend to attract certain personality types and temperaments – namely those who like to know where the boundaries are, and who are seldom tempted to ‘colour outside the lines’. Over time, this tendency can result in a culture of conformity, close-mindedness and risk aversion.

A phenomenon which is common to most if not all bureaucratic organisations is that of the ‘clay layer.’ This term describes how those in the lower echelons of an organisation often have the best ideas for improving performance, productivity or profitability, yet their ideas and insights typically fail to come to the attention of those who could act on them.

Why so? Because a ‘clay layer’ of middle management gatekeepers stifle such innovation in order to preserve and protect the status quo.

This aspect of bureaucracy played a role in Nokia’s demise as leader in the mobile phone business. Seven years before the iPhone’s release, Nokia’s research team developed mobile phones with color touch screens, mapping software and e-commerce functionality.

A few years later, Nokia designed a wireless-enabled tablet computer long before the iPad was even imagined. And yet, according to former Nokia chief designer Frank Nuovo, many cutting edge innovations like these never made it to market due to a dysfunctional corporate culture. Nuovo describes how, in addition to being fragmented by internal rivalries, Nokia’s research efforts were disconnected from the company’s operations departments who were responsible for bringing devices to market – resulting in missed opportunities that cost the company dearly.

5: Bureaucracy leads to inertia and non-responsiveness

Highly bureaucratic organisations are incredibly resistant to outside influences and lack the ability to respond quickly when shift happens. Like the ill-fated Titanic, bureaucracies often alter their course far too slowly when threats and changes emerge.

While bureaucratic process is a natural result of organisations becoming larger and more complex, leaders must remain ever-mindful of the fact that bureaucracy is a great servant but a terrible master.

Article supplied with thanks to Michael McQueen.

About the Author: Michael McQueen is an award-winning speaker, social researcher and best-selling author.