Bureaucratic companies: inevitable, or unforced error?

By Lindsay McGregor and Neel Doshi .

Feeling stuck in a maze of corporate bureaucracy is all too common. It drains motivation, slows progress, and seems almost inevitable in large organizations. If you've ever felt trapped in a bureaucracy, we'd appreciate hearing your story.

While sadly commonplace, no CEO dreams of their company becoming synonymous with red tape and sluggishness. So, what's happening? 

Let's unpack the root causes and antidotes to bureaucracy.

Bureaucracies aren't about slow decision making

Why are bureaucracies slow? This question seems so obvious that it is rarely asked. Most leaders' knee-jerk answer is that bureaucracies are slow because they take forever to make decisions. But if we pause and think about it, this can't be right.

Which of the following organizations is ultimately going to win?

1. An organization that makes really bad decisions very quickly.
2. An organization that makes great decisions, albeit a bit more slowly.

Probably the second one! Therefore, the issue of bureaucracies cannot only be about slow decision making. So, then what?

Imagine trying to row a boat down a river. If you're not great at it (like me), you might end up zigzagging a lot. On the other hand, a highly skilled expert can keep the boat on a straight path, even on a winding river with wind and currents. So, what's the difference between the expert and me? It's often not strength. Instead, it's adaptability.

When you observe these experts, you'll see that they are making many more tiny adjustments every minute.  On the other hand, I'm making blunt, large course corrections infrequently.

The first principle in this analogy is well known to systems engineers: a machine's - or team's, or company's - velocity is a function of the frequency and quality of its feedback loops. When feedback loops are low quality or slow, the organization will waste time zigzagging. Ironically, it might feel to employees like they are all rowing their boats as hard as possible, yet they are still going slowly, because of all that waste.

This is truly why bureaucracies slow down organizations: a poorly built bureaucracy worsens the frequency and quality of feedback loops. These organizations do not react fast enough to signals from their customers or the markets overall.

Milton Friedman, the Nobel Prize-winning economist, described it well1 by pointing out that bureaucracy "reduces the impact of the consumer on the producer".

The root causes of bureaucracy

If bureaucracies are clearly velocity inhibitors, and very few CEOs want them, then why are so many companies bureaucracies? Whenever you see a problem that is obviously bad but also stubbornly resistant to change, you're likely dealing with a systems problem.

A common principle of systems problems is that they have multiple root causes that interact with each other (we'll share more about systems thinking in another article). For example, imagine that you're trying to figure out why your garden isn't flourishing.  

• A non-systems hypothesis - which could be correct - could be that you're not watering it enough.
• On the other hand, a systems hypothesis could be that interactions between your plants, the soil, the water, and the climate are together resulting in a poor outcome. Adjusting any one of these dimensions alone might never solve the problem, and instead, you have to find combinations that work.

Bureaucracies are similar in that they are often driven by a few root causes that need to be addressed together. In our examination of workplace motivation and performance, we see four common root causes that together form a systemic issue:

1. Skill gaps
2. Motivation gaps
3. Time gaps
4. Knowledge gaps

Skills gaps

Consider a highly skilled professional chef. Observing these chefs, you'll notice that they can perform remarkable feats with just a single chef's knife, from peeling an apple to dicing micro-herbs. In contrast, as an unskilled home cook, I find myself surrounded by dozens of kitchen tools, attempting to compensate for my lack of skill with gadgets and procedures. This not only clutters my kitchen, but also drives up cost.

Organizations operate the same way. When organizations lack skill, they compensate with complexity and clutter, often trying to replace skill with more processes, procedures, and policies. Or, in other words, bureaucracy. Then, with every newly discovered or unforeseen issue, the default response is to introduce even more bureaucracy. To the average employee, this accumulation becomes so burdensome that it fails to achieve its original purpose.

The value of your human capital is determined by two factors, one of which is skill (we'll discuss the other below). To ensure that an organization can scale without bureaucracies, it must measure and manage skill growth. Surprisingly, this is much easier than it might seem.

To address this issue, as a next step, implement Skill Checks using the Factor platform in your organization. Skill Checks help untangle bureaucracies by providing a few capabilities:

1) Colleagues all set goals for skills to grow.

2) Leaders work with them to build plans to learn those skills.

3) Colleagues seek endorsement when they have achieved fluency.

4) The organization can use metrics to spot where skills aren't growing.

Motivation gaps

The second factor that significantly influences the value of an organization's human capital is motivation. This aspect is crucial in understanding the root causes of bureaucracies. When organizations are first established, people are typically motivated by the right reasons - namely play, purpose, and potential. "Play" refers to finding the work enjoyable; "purpose" means understanding and seeing the value of one's contributions; and "potential" involves working towards the future success of both the organization and oneself.

However, as organizations grow, they often forget to manage the motivation of their people. As a result, this intrinsic motivation drops. Sensing a less motivated workforce, companies try to replace this intrinsic motivation with extrinsic motivation, namely emotional pressure, economic pressure, and inertia.

Because extrinsic motivation results in narrow behavior (i.e., you get what you pay for) and selfish (i.e., mercenary) behavior, organizations lose trust in their people. This loss in trust results in more control mechanisms, and thus more bureaucracy. 

Thanks to cutting edge research and artificial intelligence, organizations can finally manage motivation at scale. To do so, implement Health Checks using the Factor platform in your organization. With a Health Check:

1) Every team has a quarterly Health Check conversation.

2) That conversation begins with a team diagnostic that measures motivation.

3) Artificial intelligence then guides the team through a discussion that results in a motivating action plan.

ou can learn more about the science of performance motivation by reading the worldwide bestseller, Primed to Perform, or a summary article. You can also learn more about Health Checks and start implementing them.

Time gaps

Let's return to the analogy from above of a rower in a boat. A rower experiences a direct and immediate feedback loop from their environment: they can sense the river's current, the wind's direction, and the water's resistance against the oar. However, the rower is so close to the water that they may not be able to see obstacles that are just around the bend.

The same is true with teams. Teams often have the best feedback loop regarding what's "on the ground", but they often don't see longer-term issues or opportunities to collaborate with other teams. This is why middle management is so important. 

Unfortunately, many organizations have operating systems that prevent middle managers from thriving. An over-reliance on meetings and memos leaves middle managers with no time to process, think, and strategize.

In our experience working with organizations to cultivate high-performing cultures, we've observed countless meetings with executives and middle managers. When faced with decisions - especially those involving high stakes - the absence of reflective time leads to what we call "stall questions." For example:

• Requests for unnecessary data
• Premature concerns for early ideas (e.g., "does it scale?")
• Requests to include many more people in the problem solving. (The hope is that 20 people who don't have enough time to think can make better decisions than 5 people who don't have time to think.)

To solve this problem, for many organizations, it's time to end meeting cultures.

Knowledge gaps

As organizations grow and evolve, they accumulate hundreds of thousands of hard-earned lessons. Some of these lessons have been learned through painful experiences that they'd prefer not to repeat. Eventually, there are so many lessons that it becomes practically impossible to teach them all. So, instead, organizations implement processes and procedures, which in effect encapsulate past knowledge. They also implement management cadences where senior leaders review work, in case they have context trapped in their minds. Ironically, the systems that were meant to impart past knowledge become systems of bureaucracy.

One technique organizations attempt to use is forced documentation. In this model, employees are forced to write wikis or documents to capture their knowledge. This strategy fails for many reasons:

1. It isn't particularly fun, interesting, or meaningful to document after the fact, so employees do a poor job.
2. Strategic documents often lack the details to be useful in future situations.
3. It's a time-consuming and therefore expensive strategy.

Instead, in the age of AI, organizations should focus less on writing documents and more on capturing the problem solving discussions and inputs that ultimately lead to decisions and actions. The problem solving discussions capture the rationale, counterpoints, lessons, examples, and opinions that are all valuable context for someone to know in the future. The discussions also show the source of that information so that anyone can learn how different people perceived a problem.

The Factor platform helps manage this aspect of performance as well. The platform makes it easy to document all the discussions, data, options, and choices behind great problem solving. Then, rather than spending a lot of time on documentation, colleagues can use AI to create documents based on the underlying discussions, if needed.

As companies grow, they learn a lot of lessons. But sharing that knowledge can be tricky, especially when there's so much of it. Instead of relying on outdated processes or expecting everyone to just "know" things, your organization should use technology to share information more effectively.

Moving forward

Max Weber, a seminal figure in sociology, explored the nature and consequences of bureaucracies in modern societies. 

On one hand, he saw the advantages of bureaucracies. They could be more rational than the emotionally driven decisions of single individuals. And they could be incredibly efficient in tasks that never change. 

On the other hand, Weber was also critical of bureaucracies. He described the result of bureaucracies as an "Iron Cage2" that prevents creativity, adaptability, and motivation.

Over 100 years later, his words have been prescient. Too many organizations are struggling to adapt to a changing world because of their bureaucracies. The time is now to dismantle them.

Next steps

• Get in touch to share your bureaucracy stories and solutions.
• Read the worldwide bestseller, Primed to Perform, to understand the science of motivation and performance.
• Learn more about the dysfunctions of organizations.
• Learn more about the plight of middle managers.

Citations

1. Free to Choose Network, "Milton Friedman: The Problem of Bureaucracy", 0:19.
2. Wikipedia, "Iron Cage".