Hidden in plain sight, bureaucracy wastes money and time -- but it can be rooted out of your company
Everyone says that you can't fight city hall. What they really mean is: Fighting the harmful side of bureaucracy is futile. And yet often, overly bureaucratic procedures can lead to tremendous waste, inertia, and inefficiency. So why do we allow these practices toflourish in our own organizations? Mostly, out of benign neglect.
The pain of a loss is much more severe than the joy associated with a similarly sized gain.
Bureaucracies form gradually, quietly, and often for reasons that seem sensible at the time. But a close examination of bureaucracies shows that they're often a response to fear of loss resulting in attempts to regain local control, regardlessof overall strategies or needs. These barriers are usually created with the best of intentions, which is what makes them so difficult to spot and combat.
But that's not to say bureaucracies are eternal and indestructible. Every harmful bureaucracy can be dismantled, but you must start by examining how it formed in the first place. What's more, addressing these barriers is critical toorganizational success, because the inefficiencies bureaucracies create right under your roof might be costing you more than you can imagine.
Anatomy of bureaucracy
For the purposes of our analysis, bureaucracies are defined as practices and endowments that create harm for the many while benefitting the few. And the first step is to determine why these bureaucracies form.
The research behind ourexploration of bureaucracies covered diverse organizations in the public and private sectors, including different industries, countries, job types, and functions. What we learned was that these types of practices generally were created based on a local need, but they became harmful through a series of missteps all based in fear. The evolution of these missteps into silos and bureaucracies followed threeconsecutive steps: parochialism, territorialism, and empire building.
As activities become more complex, organizations need to divide up functions. Operating a complex organization requires excellence from many functional areas: human resources, production, sales, marketing, accounting, finance, inventory management, compliance, risk management, and more. Organizations also need peopleto lead and manage those functions. As responsibilities grow for each department, so does the pressure and accountability to meet local goals.
At some point, out of necessity and in response to daily pressures and demands, the leaders of those departments may start to focus much more on their functional goals than on the organization's overall goals. When this happens, making sure that theirpart of the process is done correctly may become all that really matters, even at the expense of mission success. The group may not only lose sight of the connection between its work and organizational outcomes; it may even stop caring about what happens outside its silo. It defines its world by the piece, not the puzzle.
Gallup calls this condition parochialism. Parochialism develops when a groupviews the world strictly through the lens of its functional goals, and it judges the relative importance of other activities by the way they affect the group's objectives. Parochialism limits the group to a narrow reference point -- ultimately, everything is viewed from that filtered local perspective.
As Nobel Prize winner and noted behavioral economist Daniel Kahneman, Ph.D., and his researchpartner, Amos Tversky, Ph.D., found in their landmark work, "Prospect Theory: An Analysis of Decision Under Risk," a person's reference point will determine whether a particular level of performance will create positive or negative value. Different people may have different reference points and therefore different definitions of success for a given outcome. In other words, an outcome may be...