Every enterprise reaches a plateau where its bureaucracy expands beyond control. It seems to grow to the point of stifling initiative, preventing response to clients in a timely and appropriate fashion and eventually overwhelming the average worker. At the very least, the excess bureaucracy causes irritation, especially troubling to us when we all know ‘it shouldn’t be that way’. Fortunately, it doesn’t have to be that way. What, then, are the practical means for controlling a company’s growing bureaucracy?
Inevitability of Bureaucracy
Our company teachings illustrate that the common factor of aging organizations is continued expansion of administration and bureaucracy in the face of declining sales – part of the predictable corporate evolution. No one needs a lecture to tell them that bureaucracy seems to grow and expand; we can all feel it. As a company evolves further over its life, the bureaucracy becomes more entrenched, much like the unwanted fat we develop as we humans age. It seems to come with the territory. As the firm progresses in time, it ceases to be its former svelte self, with the fat likely to accumulate, even until the firm is nearly at the end of its useful life.
When things are not working in a company, people apply more rules and with them, more bureaucracy. In such situations, rules and procedures will often be applied without any means to limit them. To a logical mind, more rules and controls can seem to be the right medicine – until the firm starts choking on its own processes. The solution of well-meaning administrators is to apply more controls and more ‘don’ts’ – it’s the action the administrators are most comfortable with. “If we make some rules around here, and people just follow them, we can fix these things.”
Surprisingly, it is these very controls themselves, when properly applied, that tell us when too much bureaucracy is threatening the enterprise. (See Steps to Controlling A, in the middle of this paper.)
The Second Hardest Job
The second hardest job for an emerging company to accomplish is getting some standardized methods and administration (which henceforth we will call A) into its systems. The company needs to do that so predictable processes determine actions, rather than people’s ad hoc choices setting directions. Ad hoc choices often result in inconsistent, non-repeatable actions that affect the people in the company negatively, including affecting their morale. Just as important, ad hoc choices adversely affect the clients outside of the company. Finally, seat-of-the-pants actions hit the bottom line so they ultimately affect the shareholders’ value. The major and difficult step of introducing A will occur during the transition from a gaggle-of-geese type of enterprise to a streamlined, highly-performing company.
Conclusion: We must put A into the company. Order has to replace chaos if the company is to advance to excellence.
The Hardest Job
The hardest job by far is keeping A from growing like a weed once A has been introduced at the appropriate stage of a company’s life. Left unchecked, A will grow to a position where it strangles the company, its innovation and its ability to dance lightly on its feet to any change in the beat of the outside music.
A introduced at the stage of a company learning to ‘do it better’ instead of just ‘doing more’, continues through the company’s evolution until it attains performance excellence. That is good, but we have all noticed how the controls of A continue to prosper and grow, even during a company’s setbacks. And A continues to expand, even as the company slides down the slope to ignominy, to its own demise. In fact, more A is introduced to stop that slide. When the final bell sounds on the company, it is often replete with systems, controls, rules and bureaucracy, at a time when performance excellence is a long-forgotten memory.
Maintaining the Balance
The answer is that the company must have sufficient control (A) to manage its affairs, yet retain the flexibility to adapt to change, to innovate and to question “why?” and “why not?” on an unending basis. That is, the company must maintain an appropriate balance between flexibility and control.
Keeping “A” under Control
Who controls the controllers? Who guards the guards? The Executive Committee, led by the CEO, is usually the best group to ensure that the controllers themselves are under control. People with a controlling role usually see no limit to control. For them it is a panacea to chaos – their dreaded enemy. They see beauty and elegance in control. Because most controllers, out of necessity, have a short-term view, they rarely see or appreciate the long-term dangers of over-control. You cannot leave the limiting of controls to the controllers alone. The controllers were needed to rein in the flamboyance of the early days and the great promises of the company’s dreamers and designers. (The dreamers, left to their own devices, following the excesses of fulfilling their visions, would have bankrupted the company with their optimistic plans.) However, now that the dreamers have been reined in by the introduction of A, the very same dreamers need to rein in the A’s. In neither case can the fox be left in charge of the hen house. Balance is the key. However, before we can control A, we need to ensure its controllers (the dreamers) are themselves preserved.
As pointed out previously, the visionaries, dreamers and innovators have to be in place to create balance. Left on their own, A’s practicality will chase V’s and their fantasies out the door. Specifically, innovation and vision need to be institutionalized and in that way conserved, preserved and protected or they will slowly submerge and drown. After that, it is only a matter of time before the whole organization itself succumbs – without the dreamers and visionaries (which we will now call V) to lead change, for they are the needed agents of change.
In preserving V, the following should be considered:
- Establishing Checks and Balances (Ensuring the CEO does not lose sight of V)
- Preserving V between Departments
- Conserving V by Structure
- Setting up Departments
1) Checks and Balances
How often have you heard about a CEO losing control of an enterprise and being unaware of the key indicators of performance? It happened in 2002 with the collapse of Enron and the demise of Arthur Anderson. Both collapses were a simple matter of having a structure that killed V, while holding the CEO prisoner from acting to correct the situation.
Why? Because the CEO didn’t know what was going on. The CEO in these situations (and, unfortunately, in most situations) had a structure with one key person who directed all of the financial information, for example. The information came from one source that could control two sets of conflicting data. That is, one person could control both the good news and the bad news. Guess which part goes through to the CEO?
Checks and balances demand that information from source 1 be compared to source 2. If it doesn’t compare favorably, an investigation is warranted. However, if one person controls both sources 1 and 2, you can be sure the information will be suitably purged of any bad news.
Let’s use an example. The Senior VP of Sales and Marketing controls information regarding sales and data regarding marketing. Sales usually has a large component of A activity – keeping track of clients’ positions on the sales cycle, preparing quotations, invoicing, etc. Marketing is primarily a V activity – looking out to see trends. The short-term necessity of A will take precedent over the less urgent need of V; thus, Sales dominates Marketing. Practically speaking, when Sales and Marketing are combined, the day-to-day urgency of getting the planned sales in the door dominates the Marketing activity, especially if Sales runs into any problems. Marketing is then reduced to supporting Sales instead of performing its real function of objectively looking out into the markets to see what is coming up next. Marketing exists only in name, not in function.
Sales information might say that sales prospects are on the rise, even though there is a drop in sales this month. Marketing, on the other hand, might be saying that the buyers out there no longer esteem our product like they used to and we need to improve them or find alternatives within six months. However, the information the CEO gets is: “While sales are down this month, an increased sales effort next month will get us back on track. We are also looking at numerous future sales prospects.” What does that tell the CEO?
To be fair to the dominant departments, the CEO could also be presented with the reverse – positive data from Sales and negative data from Marketing. However, the essential point is that the CEO needs to have a chance to look at both perspectives, one long-term and one short-term and make a decision, accordingly, that is optimal for the enterprise.
(Hiring third parties outside the company to conduct client-satisfaction surveys is an example of a practical check and balance for the CEO.)
2) Killing V
The business pairings that, if allowed to form, will assure the killing of V, and which are all too common parings, are:
Sales and Marketing
Production and R&D
Maintenance and Engineering
Accounting and Finance
Personnel and Training
Other departments that might cause similar conflicts of interests:
Information Technology (IT)
Quality Assurance (QA)
Or, putting on a more positive spin, avoiding these pairings will help institutionalize, protect and nourish V.
3) Conserving “V” by Structure
- Do not allow A departments to include V departments within their responsibility, or else the V departments will become secondary.
- If you need to put departments together, combine them not by function, but by A and V style commonalities.
4) Setting Up Departments
It is not practical to have so many departments reporting to the CEO that the CEO’s span of control is ineffective. So some VPs have to head groups of departments. The simplest analysis is to imagine three VPs, one in charge of short term (A styles), one in charge of long term (V styles) and a third in charge of support functions.
VP short term: Sales, Production, Maintenance, QA
VP long term: Marketing, Engineering, Finance, R&D, Training
VP support: Administration, Accounting, IT,
Personnel (a mix of short term and long term)
The choice of department types differs for each company since it depends on what the firm does, how it defines its departments and how it goes about doing its work. But the overriding concept is universal: a broad grouping of three areas needs to be understood – short term departments, long-term departments and support departments.
Steps to Controlling “A”
Now that the prerequisites are in place to preserve V, we can set about, through the following considerations, to keep A under control. We:
- Assign a group to monitor the growth of A.
- Are proactive about innovation.
- Ensure an appropriate balance of different styles within the company structure
- Focus on outcomes.
- Obey the 80% rule.
- Listen to the complaints regarding too much A.
Let’s look at each of these.
1.Assign a Monitor for A
The Executive Committee, through the CEO (or the problem-solving council, if you should have one), must be assigned the job of monitoring the growth of A in the company and making sure it remains in balance. How? By a combination of any of the following steps:
2. Be Proactive with Innovation
(i) Separate innovation departments from control departments (Marketing from Sales, Training and Human Resources from Personnel, Finance from Accounting, R&D from Engineering etc.), as described in the previous section.
(ii) Continue innovative activities, like blue-sky meetings, problem-solving groups, planning initiatives, suggestion box, etc.
(iii) Move visioning and innovation from the CEO position down through the organization to other managers and their staffs. Decentralize innovation away from the leader. The leader could give up the Marketing department and pass it on to another person, for example.
3.Ensure a Balance of Styles
Understand that style makeup for each department’s thinking and approach is different. Also, styles of thinking are different for each stage of a company’s evolution. Be ever mindful of the need to shore up a weakness in your department’s style with whatever is lacking. For example, if you are strong in pushing for results and getting things done, but weak in people handling skills, add some human relations talents to create a level of balance. (Note to those using The CCCC Approach: keep PAVF in mind, as appropriate for each department.)
4.Focus on Outcomes
If you focus on the outcome, you do not need to focus on the means (rules and procedures i.e., A). “If you standardize the outcome, you do not have to standardize the means.” That is, the details of how things are done (A) are left to the individual person and thus a myriad of formalized procedures are avoided. This not only reduces A, it has been clearly shown – with statistics of over one million workers – that it results in a better job and greater efficiency, since the means is tailored to the skills of the individual. The person becomes much happier and more productive.
5. Obey the 80 % Rule
If you keep working things to perfection to the point of ‘ad nausea’, you surely will be adding unnecessary A. Lou Gerstner Jr., who turned IBM around (see Who Says Elephants Can’t Dance?), found one of his greatest continuing frustrations was an IBM staff that detailed ideas and things to death so that many good concepts never made it past the drawing board; hence, great opportunities were lost. For, the market window remains open only for so long. Accept that leading items or new initiatives are sufficiently complete at 80%. They need enough details (A) to reach 80%. Be happy that the new initiative:
- has been installed and the process is in place (and working)
- will allow you to keep on chipping away at the concept, bit-by-bit, without the program becoming an obsession
- has 80% of details in place
- can and will be improved with time
(Note: while you may be content with the initiative being at 80%, data accuracy itself must be at 100 %.)
6.Listen Seriously to Complaints
If the Executive Committee (now in charge of monitoring A) hears protesting about too much A, too many policies or too many procedures, it must listen carefully to such complaints. Where there is smoke there is fire. If it quacks, it’s probably a duck. Where there are complaints there are causes. A has been introduced to help the company. People in the company must see and enjoy the benefits of A. Complaints about A suggest that disadvantages of A to the complainer outweigh the advantages. The assigned monitoring committee or group has to look at the complaint and reconcile the need for the ‘procedure’ with the objection to it. Either the ‘procedure’ has to be modified or the complainer has to be made aware of the advantages of the ‘procedure’. Perhaps the complainer needs to understand that the rule, while inconvenient personally, is needed for others in the company or for fulfilling the bigger picture. But there has to be a convincing argument, so that reconciliation is reached. A complaint from employees is just as important as if it had originated with clients. The same corrective assessments need to be made in either case. The monitor group needs to see if the concepts of d or e, or any of the above, are in place.
Summary: Controlling Bureaucracy (A)
To prevent the unwarranted spread of A, make sure:
- The CEO’s checks and balances are in place
- The Executive Committee is keeping watch of creeping A
- The structure protects V
- A and V and other styles are in appropriate balance throughout the structure
- The focus is on outcome
- 80% of perfection is enough for today
- Complaints of too much A are listened to and acted on.
The irony is that the very thing you introduce (A) to avoid chaotic breakdown itself will lead to bureaucratic breakdown. So, you have to reintroduce the first problem (V) to take care of the cure (A). That’s all there is to it.