Photo: Rodney Smith, AJ Seated with Golf Balls, St. Augustine, Florida, 2002
In the 80s of the last century, the “social ecologist” Peter Drucker created a very authoritative theory of management. According to it, in the new information society, the role of bureaucratic procedures in management will be fundamentally different, because “creative destruction” and the need for constant changes will make completely different management models in demand.
Drucker predicted that in a couple of decades, the average organization will have 2 times less hierarchical levels. At the same time, the number of management personnel will be reduced by 2/3. However, modernity has already made significant adjustments to Drucker’s forecasts.
Statistics show that the number of administrative staff and managers has grown steadily since the mid-1980s and has doubled by now. Considering that employment in other spheres of activity during this time increased by only 44%, it can be stated that the bureaucracy in the information age has demonstrated just the same phenomenal growth.
The study showed that if, in the process of an organization’s growth, the number of employees begins to exceed 200–300 people, the rate of increase in the bureaucratic apparatus begins to outstrip the rate of development of the organization itself.
At the same time, the power of the bureaucracy, the costs of it and maintenance of the norms and rules that it constantly generates, and its ability to control everything and everyone, demonstrating its indispensability, increase.
Moreover, crises only increase bureaucratic centralization, and the influence of groups that can resist it is steadily declining. In conditions of political and economic instability and uncertainty, dismantling a redundant bureaucratic system is much more difficult than in quieter and more stable times.
Paradoxically, the proliferation of digital technological innovations provided the “bureaucratic class” with additional control over every step of employees and only strengthened it.
LEVELS OF HIERARCHY
The book Humanocracy, which was recognized by The Financial Times as one of the best books of the last year, perfectly shows the role of bureaucracy in the modern world. Its authors, Gary Hamel and Michele Zanini, share the results of a large-scale survey of the levels of management of an organization. More than 10 thousand employees of companies working in various industries took part in it.
The study showed that the management hierarchy in an average statistical organization consists of 6 levels. But if the number of staff exceeds 5,000 people, then the number of levels rises to 8 or more. The survey revealed that employees of companies spend more than a quarter of their working time on compliance with bureaucratic rules and procedures.
In particular, 27% of the working day is devoted to the preparation of all kinds of reports, correspondence with other employees, and the preparation of internal documents. Most of the respondents noted that these bureaucratic procedures do not represent any value and sense for the staff and the company. Moreover, 79% consider them harmful, since they significantly slow down the process of making of managerial decisions.
SLOW, UNFAIR, INEFFECTIVE
Bureaucratic procedures slow down change and demotivate staff. They create a corporate culture in which innovation is undesirable – 75% of company employees noted that in their work teams, attitudes towards new ideas range from indifferent to openly hostile.
No more than 25% of the personnel are involved in the implementation of changes, the rest remain uninvolved in these processes and, accordingly, are not involved in changes and corporate development. In a situation where innovative thinking is poorly encouraged and staff engagement is low, a career in the corporate hierarchy is largely the result of bureaucratic games and political intrigue.
Their critical importance for career growth was noted by 62% of respondents. Moreover, the larger the organization, the greater the importance of this factor for a career. In large companies, it is “politics”, not results and abilities, that determines career advancement in 75% of cases.
84% of managers note the poor quality of personnel decisions made on the basis of favoritism, and 94% consider the policy of fighting it as ineffective. That is, the bureaucracy is a system that promotes the worthy only in theory.
POWER IS A BUROKRATIC DRUG
Interestingly, the problem of bureaucracy cannot be solved by organizational methods. The reasons for the growth and omnipotence of bureaucratic systems lie in social psychology – in the desire for power. Power gives the illusion of absolute control over one’s life and other processes, which, by definition, are impossible, and hardly worth controlling absolutely.
Harvard Business Review published research according to which the main reason for the reluctance of the leader to reduce the role of bureaucracy is the psychological dependence on the possession of power. In essence, this is an addiction, the mechanisms of which are similar to drug and alcohol addiction or an abnormal addiction to food and sex. Power gives the bureaucrat incomparable pleasure.
And the level of this pleasure does not depend on the level of the hierarchy: the administrator of the lowest rank is able to “get high” with the same intensity as the leader at the very top of a large organization.
The inflated self-esteem of a leader is a “human weakness” that costs companies very dearly, making them clumsy and ineffective. The case of the head of Intel, Paul Otellini, is indicative, when his “authoritative” conceit led to a failed decision worth billions – the refusal to make chips for the iPhone.
HOW TO DEFEAT THE BUROCRATIC MONSTER?
There have been several attempts to dismantle the bureaucracy and lower management costs. The most famous attempt is the concept of socio-technical systems (STS), proposed by the British psychologist Eric Trist, which “dismembers” the corporate monster, focusing on small, self-governing teams. In the 60s and 70s, the idea was extremely popular.
Procter & Gamble, Shell, Volvo, General Foods tried to implement it. However, it was not possible to achieve great success in this direction – STS was sabotaged primarily by top managers, who were afraid of losing power. They are trying to transform the traditional hierarchy into a more flexible network structure using approaches such as agile, lean startup, tools like Microsoft Teams, Slack and Yammer.
However, real successes are the exception rather than the rule. Most modern corporations were founded as command-and-control organizations. Within the framework of this type, they grew up, achieved success and are not going to part with this past.
CULTURE, NOT DIGIT
If the bureaucratic monster can be defeated, it is only through the introduction of an innovative culture, not digital technologies. For example, the steel giant Nucor did it. In his book Plain Talk: Lessons from a Business Maverick, Ken Iverson, the former CEO of Nucor, explained how the rather conservative steel company managed to outperform its competitors in terms of profit and return on capital.
They focused not on digital HR systems, but on a culture where employee contributions are valued more than their rank. Another example of a unique culture: Morning Star, the global market leader in tomato processing, has managed to reduce the number of hierarchical levels to 2. The company has no managers. The first level is the president, the second is everyone else.
Clearly, today’s leadership requires companies to be innovative, adaptive and inspiring, people-centered. Among the main basic principles that allow this to be done are co-ownership, the introduction of market principles within the company, and adherence to meritocracy.