Another Dive Into The Bureaucracy Wreck

►ANOTHER DIVE INTO THE  BUREAUCRACY WRECK◄

This solution expands upon our 03/14/19 solution.
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Our March 14, 2019 Proven Solution article on the subject of bureaucracy has generated many more telephone calls and Emails to us than any prior article published by us.

Included below are 8 of the questions asked of us by senior executives from around the world since that date along with our answers to those questions.  Please note that with all of these questions being very incisive, there is slight overlap among some of the question subjects.

We believe that these comments/questions and our answers will be helpful to many executives beyond just the executives who posed them to us.

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Some executives here seem to not know the symptoms of increasing bureaucracy or the problems it creates for all aspects of our business and company.  Bureaucracy is a dirty little secret here and getting worse all the time.  Please stay on this topic and I am sending a few people here to your site.  (Large food products distributor Supply Chain Director)

We have been focused upon this common business performance roadblock as a contributor to declining enterprise results for years.  It is a frequent enough contributor to enterprise capability blockages that we will always assist companies to become more productive while continually removing internal inefficiencies and results roadblocks.  But please know that people who gain something only in their minds from bureaucracy will defend it until the end of time.  The capability set to end it is always more effective than the desire by some to keep and grow it, however, because ending it always improves the numbers.

 

I am new in this position and bureaucracy is pretty plain to see here.  I wonder how bureaucracy grows in front of otherwise highly capable executives.  We had none of it where I last worked for 16 years.  (Public technology company Controller)

Damaging bureaucracy is analogous to spatial disorientation while flying and while SCUBA diving.  In those situations when there is no pilot view of the earth’s surface and horizon, or when there is no diver view of the sea floor and the water surface, the pilot or diver can each become unknowingly disoriented with very negative consequences  The Aeroflot Flight 821 crash in 2008 and John F. Kennedy, Jr’s air crash in 1999 are examples of pilot spatial disorientation, with no survivors in either case.

Anyone in an aircraft that is making a controlled turn, no matter how steep, will have little or no sensation of being tilted unless the horizon is visible to them. Bureaucracy tilts businesses and blocks executive views of the enterprise horizon.

It also creates a false perception of being effective as individuals and successful as enterprises.  We call this mission disorientation whereby employee and executive views become focused upon the bureaucracy reality instead of upon the horizon reality of competitors, customers, financial results, internal efficiency, and performance-to-plan.  As bureaucracy grows there is an increasingly obstructed view of the business horizon creating unknowing disorientation on the part of many and eventually all of its leaders who have not departed because of it.

Pilots can end this problem by viewing the earth and the horizon or by using their navigation instruments if so qualified.  Divers can view their air bubbles and follow them to the surface in a controlled ascent.

Bureaucracy can commence either purposefully or mistakenly and in business you only need to know what bureaucracy looks and smells like, map it to financial results, and then fly or swim to avoid it just as you would avoid a tornado as a pilot or a school of large sharks as a diver.

 

Is it possible to know whether someone you are meeting with for the first time is a bureaucrat or a non-bureaucrat?  (Large public restaurant company President)

Yes.  We actually utilize 4 varying groups of 3 evaluation steps to evaluate bureaucratic tendencies. Here is one of our bureaucracy preference evaluation methods:

  • Meet with them for coffee and be sure to be present when the coffee is served. If they add anything to their coffee before drinking it and they then stir the coffee for more than about 2 seconds, it indicates that they tend to take excess time to accomplish things which is a direct manifestation of bureaucracy.
  • Ask them at least 2 questions on subjects about them professionally. If they answer those questions without pausing they are prone to acting as opposed to deliberating and reflecting.  Deliberation, indecision, reflection and slow response on factual subjects are direct manifestations of bureaucracy.
  • Ask them, “When you have a flight connection in a large airport, on moving walkways between concourses do you stand to the left, stand to the right, or do you keep walking?”  Standing still while business moves around you is a direct manifestation of bureaucracy.

 

Are any of your listed symptoms of deleterious bureaucracy also symptoms of anything else that may be damaging to business results?  (Large non-US airline Chief Digital and Innovation Officer)

Yours is a very intuitive question.  Our 40 symptoms of damaging bureaucracy tend to result only from bureaucratic preferences or resulting bureaucracy itself.

Generally speaking, bureaucracy arises from executive limitations and undeveloped skills that are usually easily corrected on a peaceful basis.  Our experience in nearly all client cases is that it is the bureaucracy that must end as opposed to the executive’s employment ending.  But please know that absent a bureaucracy intervention it is the bureaucracy itself that gives comfort to the usually small or tiny group of executives who happen to be unknowing, while giving simultaneous discomfort to their most capable and productive team members.  In the most severe cases, however, unbridled bureaucracy is direct evidence of unbridled incompetence.

We have seldom met executives whose purpose has been to create bureaucracy and the expenses/failures that result from it, but we have met many executives whose unknowing limitations created and grew very damaging bureaucracy that was more difficult to eliminate with passing time.  Also please remember that people have a significant tendency to hire in their own image which can include executive limitations and undeveloped skills, potentially increasing the half-life of internal bureaucracy.

As a great example, several of the 22 symptoms included within our March 14, 2019 article are frequent manifestations of executive limitations such as a mistaken desire to be knowledgeable about details that should be fully delegated to others, or the very common error of hiring or promoting individuals who are under-capable.  The more under-cable employees and executives there are within an enterprise the more necessary meetings are and the longer it takes for even basic business decisions to occur, with each of those 2 symptoms being direct evidence of deleterious bureaucracy.

 

From your client experiences what are the expenses that grow the most as bureaucracy grows?  (Large not-for-profit health care company CEO)

CEO’s and Presidents are very seldom the causes or enablers of bureaucracy, but you may as a CEO now have a bead on part of your business where it appears to you that efficiencies are slipping and/or expenses are increasing, causing you to evaluate whether bureaucracy may be the cause. (NOTE:  This individual confirmed that this was the case within 3 key departments reporting to 1 senior executive that reports to this CEO.)

There are both Direct and Indirect bureaucracy expenses and most of them are easy to calculate or note within earnings statements as soon as they begin to exist.

  • Excess headcount is commonly the most damaging direct expense and the primary reason is because as unnecessary headcount is added, bureaucracy tends to be some or much of the job descriptions…whether stated or not…of those excess employees and layers of employees added unnecessarily.  The indirect bureaucracy expenses of headcount are derived overhead consisting of items such as payroll taxes, group benefits expenses, time off with pay, company cars, and workers’ compensation insurance premiums, as examples.
  • Enterprises with excess staffing become inwardly focused instead of maintaining productive focus on competitors, customers, products and services. This results in degradation of earnings, efficiency and/or revenue either slowly or rapidly.
  • As bureaucracy increases, distractions by subjects not connected to improving individual performance and enterprise results become commonplace. Vision and critical thinking become corrupted, and output and workflow slow.  We call this The Gynorcki Syndrome and would be pleased to define that to executives desiring more information on the subject.
  • Because bureaucracy is analogous to a dense cloud formation within any given enterprise, human errors tend to increase in frequency and also tend to not be noticed and/or not be corrected. Accountability tends to not be delineated effectively as bureaucracy increases because many more people than necessary become involved in actions, decisions and delays.  Repetitive errors always have costs either on the top line or on the bottom line and this subject is closely tied to deficient unity of command within bureaucratic structures.  Bureaucracy is actually quite similar to a hall of angled mirrors on the floor, ceiling and walls with confusion, delays and being lost the common human outcomes.
  • Individual and team objectives become amorphous, meaning that fewer individual and team business objectives are accomplished within bureaucratic environments. In business, that translates into degradation of financial results slightly over 85% of the time frequently with the excuses of competition, customers, the economy, regulatory influences, suppliers and/or technology being falsely blamed.

 

Through your client work have you discovered any particular functional team that tends to create bureaucracy the most frequently, because I think I know which one it is here?  (Very large public manufacturing company CEO)

Bureaucracy can have its Genesis anywhere if it is not prevented at its earliest stage of growth.  However, it nearly always begins within teams that have no P&L accountability while being led by executives with little or no P&L capability.

For that reason, bureaucracy does not tend to begin or grow within airline hubs, in distribution centers, in restaurants, or in hospital trauma centers.  However, buildings and teams where customers are seldom if ever present are a significantly different story.

One of the 3 most common bureaucracy originators is the Human Resources function within which P&L illiteracy is quite common.  This frequently worsens with headcount growth within such functions because teams without P&L literacy and P&L missions frequently do not contribute positively to financial outcomes except by accident.  With each additional headcount in such departments, bureaucracy expands.

We have 3 large clients in the USA and 1 large client in Germany whereby the Human Resources functions are now organized, staffed and led so effectively that they have eliminated bureaucracy within the function in addition to where it has been propagated within other functions and operations.  Those 4 teams are now 18% to 32% smaller than they were previously while each enterprise has grown significantly during the last 3 years.  Coincidentally, all 4 of those Human Resources teams are now headed by P&L literate and experienced executives who have hired similarly skilled professionals.

Lack of P&L interest and ability within such staff functions is easy to prevent and reverse, however.  It is quite fascinating to observe the rapid improvement of functional capabilities and contributions to enterprise financial results as those teams become more financially informed and effectively focused upon enterprise mission instead of only upon an insular functional identity.

In summary, the simplest antidote to this challenge is to have no functional teams led by P&L illiterate professionals who have never held P&L accountability.

 

Is there any numerical formula that your firm uses to know where bureaucracy exists or is likely to exist within a company because we are large and operate around the world with many differences among us?  And, I believe bureaucracy and financial slippage are each growing significantly.  (Very large non-US technology company Managing Director of Finance and Shared Services)

Yes, although our formula is only 1 of the 3 analysis tools that we use.  That numerical analysis gives us and our clients what has proven for over 4 years to be an accurate initial indication of whether and where non-contributory bureaucracy likely exists within buildings, business units, departments, divisions, regions, subsidiaries and teams. It is entirely numerical and is an algorithm founded upon client data that recognizes the inherent differences between business models, geographies, enterprise missions, industry complexities and varying cultures.

It is a crucial starting point of our evaluations, but it does not indicate the causes of bureaucracy if it exists; only the locations of it.  We have used it successfully and accurately with clients in Doha, Nairobi, Milan, Dublin, Atlanta, Minneapolis, Denver, Phoenix, Kuala Lumpur and Singapore, and are again utilizing it beginning today with a new client in Houston.

2 of the 6 key aspects of our formula are Operating Revenue and Non-Incentive Payroll Percentage, and our evaluations are usually founded upon 3 of the last 5 years of certain financial data provided to us by our clients.

 

Is there a “poison pill” for increasing bureaucracy?  (Very large E-commerce company Board member)

There are several poison pills that are highly effective for neutralizing bureaucracy and almost all of them do not create organizational convulsions.  The most effective one(s) to use are determined from the specifics of each enterprise case on subjects such as who/what started the bureaucracy, when and where it started, what is the imagined need for it and benefit of it, and who/what is nourishing it currently.  The loaded question by us is always, “Have there been any magnificent results that have resulted directly from this bureaucracy alone?”

A magical question that we also always pose is, “What will the revenue, margin or profit loss be if this internal bureaucracy is eliminated?”

Another important factor is the subject of what is working well currently while improving financial results within the enterprise despite bureaucracy.

A very highly effective bureaucracy poison pill that is usually combined with 1 to 4 other poison pills is the hiring and promotion of only highly capable and productive people at supervisory levels and above everywhere in the enterprise, and there are very easy and effective ways to accomplish this without complexity or delay.  High human capabilities and lack of bureaucratic tendencies are both easily measured because professional capabilities and bureaucratic tendencies are inversely proportional within individuals 100% of the time.

Reading between the lines of those prior 2 sentences makes clear that all of the most highly capable and contributory employees and executives in your business are NOT bureaucrats.  We call this The Tom White Reality and would be pleased to define that to executives desiring more information on the subject.  This reality is much of what inspires key executives to utilize our bureaucracy poison pills and is also why within our executive search practice we spend so much time assessing bureaucratic tendencies within executive candidates being considered for employment by our clients.

 

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