bureaucracy

_____________________________________________________________________

Bureaucracy 1 Management Today (April 2007)

BUREAUCRACY:

HOW IT KILLS YOUR STAKEHOLDERS AND ULTIMATELY YOUR

ORGANISATION

by Marius Meyer

A bureaucracy is the system, processes, procedures, channels and culture organisations create and maintain to justify and sustain inefficiencies to ensure that product and service delivery is delayed or broken down with the ultimate goal of frustrating customers, staff and suppliers and thereby creating a non-responsive entity that will maintain strong power relationships but eventually destroy any value created in the past. Bureaucracies are found at two levels, internally within an organisation, but also enforced at industry or governmental level by means of legislation and regulations. Over-regulation and over-control occurs when there is no or little leeway to be flexible, entrepreneurial and innovative. In essence, bureaucracy prevents you from executing your own business strategy that was initially based on the principles of efficiency, excellence and effectiveness. Jack Welch, the greatest CEO of the previous century, aptly refers to these inefficiencies as the “evils of bureaucracy.”

The cost of bureaucracy is staggering. For instance, South Africa is losing between R5 billion and R10 billion rand a year in mining investment because of onerous government environmental regulations and delays in the issuing of mining rights and water licenses. The Chamber of Mines is concerned about the negative effects of regulatory constraints. There are confusion surrounding the interpretation of new mining law and extra red tape brought about by the mining charter. As a result, the South African mining industry lags behind Australia in terms of profits and capital investment. Last year the Australian mining sector’s pretax profits rocked 95%, while in South Africa profits increased only 12%. Between 2004 and 2006 investment in the mining sector fell 33% (Brown, 2006). Having said that, surely some regulations are required to ensure consistency, transformation, order, discipline and compliance in a society that needs focus to put certain realistic controls in place. And any good quality management system has clear procedures and processes, but these provide solutions and not obstacles.

Even at a regional or international level, some regions are suffering because of too much red tape and bureaucracy. In sub-Saharan Africa an average of nine documents must be completed before a product can be exported, compared to seven in the East Asia-Pacific region. Likewise, in sub-Saharan Africa the documents require an average of 19 signatures before they can be processed compared to just seven in East-Asia-Pacific. The result is that it takes an average of 49 days for a product to be exported from the African region compared to just 26 days from the Eastern region. In China, significant

_____________________________________________________________________


improvements have been affected where it takes just 20 days and seven signatures for a product to be exported (Theunissen, 2006). Now if you are a wealthy investor in Europe or America, where would you locate your business and invest your money?

Similarly, in the age of speed, tight deadlines and responsiveness, would you rather stand in a queue using the services of an unfriendly public postal provider, or be treated in a quick, friendly and human way by an efficient private company without any delays in service delivery? The same principle applies to all providers of services. However, sometimes the public does not have a choice, especially in the case of monopolies and public services. Who will forget the incident of a member of the public who in a very threatening way refused to accept the non-delivery of service by the Department of Home Affairs last year? Why do we have so many different layers of directors in the public service and what impact do they have regarding service delivery – chief directors, directors, assistant directors, deputy directors …? Yet, bureaucracy is not limited to the public sector. Even some private sector companies have created huge and powerful bureaucracies.

World-class companies have created centres of excellence that know no rank or position – it is all about sharing and utilising expertise, and transferring this focus on pockets of excellence to the whole organisation with the speed of lightning. On the other hand, average and under-performing companies have created pockets of incompetence that are ruled by bureaucrats, micro-managers and task masters. Typically, the finance, purchasing and human resource functions seemed to be the main culprits. Finance makes it as difficult as possible for the business to get a cent out of the system. Purchasing is hesitant to acquire the supplies needed by the business, and when they eventually do so, the poor supplier must wait a long time to get paid. HR seeks to take their time to deliver inadequate people services, and often works directly against the needs of the business.

Unfortunately, most of us are powerless to influence bureaucracy at national or governmental levels. Where we can indeed make a difference, is at the level of our own organisations. For example, global powerhouse General Electric (GE) instituted a culture to break bureaucracy down. They believe that success “requires a hatred for bureaucracy and all that goes with it.” Royal Bank of Canada believes that an organisation should centralise paper but decentralise people. Staff should extricate out silly forms and policies that gridlock and strangle learning. Fewer boundaries and fewer bureaucracies allow the lifeblood of knowledge to flow quickly and freely throughout the organisation. If you have a form that must be completed to make a manager feel powerful to approve or reject something, an illusion is created that the manager is “in control”. You know what? The manager is not the boss, bureaucracy is the boss! You don’t even have to think, the system thinks for you. In fact, bureaucrats have not only

_____________________________________________________________________


created their own culture, but also their own language. Some well-known phrases of bureaucrats are as follows:

• “No, I am sorry, we don’t do that here.”

• “OK, but you first have to complete this form.”

• “You first need to get official permission.”

• “That is not part of our products or services.”

• “No, sorry, we can’t help you today, Jenny is on leave and she is the only one working with that.”

• “According to the policy, …”

• “Don’t rock the boat.”

• “The procedure says that we must follow these seven steps.”

• “Sorry, I can’t help you, I don’t have the authorisation to do it.”

• “Let us first get a committee to discuss it.”

• “I first have to ask my manager to approve it.”

• “Sorry, the system can not accommodate such a request.”

• “It must go through the right channels.”

• “Let us first wait till my manager comes back from overseas.”

• “Our culture is not ready for it.”

• “Sorry, we are closing.”

• “We are busy changing, but change takes time, we can not rush through it, we need some order and stability.”

• “That is against the procedure, you first have to write a memo for us to consider it.”

• “No, that is not part of my job.” The reality about bureaucracy is that it was not always there. No company is started as a bureaucracy. Companies are born through the innovative spirits of entrepreneurs, yet, as companies grow and expand through the life cycle of business, bureaucracy becomes part of the fabric and culture of the organisation. The moment it is part of the culture, it stays there. It is like cancer that simply grows bigger and bigger, and the only possible cure is to cut it out, but it may be too late. Companies fail to recognise that any request to satisfy a customer who has a need that can not be accommodated by the current system, presents a huge opportunity for innovation and growth. If the system can’t do it, the system must change. We need more entrepreneurs and leaders, and less managers and bureaucrats. The new world of work can no longer sustain bureaucrats, micromanagers and the ridiculous layers, hierarchies and empires they have created. They operate in a world that no longer exists. These people have been effective in the stable industrial economy of the previous century. There is no place for bureaucrats in the new dynamic business world – a world that is driven by knowledge, speed, action, flexibility and responsiveness. Today’s managers are people who can think out of the box, beyond channels and rules, and are often required to make

_____________________________________________________________________


a decision on the spur of the moment. Your policy and rule book will not help you if your customer has a new need for which you have not yet created a procedure. Moreover, the customer is not going to wait for you to get your house in order, and will simply knock on the door of your competitors, who are likely to be more responsive. Today with the power of computers, the Internet and email, the customer is even more powerful. He can simply send an email to ten or more companies at once, blind copying all the others, and see which one will answer first and display the required willingness and capacity to meet his needs. Then he can sit back and smile, and just delete the answers he does not like, or respond by confirming receipt and acknowledging that he has already been helped by a competitor! To add salt to your wounds, he will even give you the name of the competitor he selected, knowing full well that it is one of your biggest rivals. With the business clock ticking 24 hours a day throughout the world across all time zones, the “sorry we are closed” mentality will simply not work. Let us turn to staff. Jack Welch says that “hierarchies tend to make little generals of perfectly normal people who find themselves in organisations that respond only to rank.” In the knowledge economy, most staff members realise that their knowledge is the real asset of the company. Knowledge is power, not rank. Knowledge workers know that if the company does not want to use their knowledge, other innovative companies will gladly welcome them to come and rather work for them. People want to add value and use their knowledge and skills to innovate, improve and create a better workplace and better products and services for customers. However, today’s knowledge workers, especially the younger generation who will very soon run the economy, get easily frustrated with bureaucracy. They understand the power of knowledge and the speed and flexibility of communication, because they have send emails throughout the world before they could drive a car. Furthermore, they do not want to be told what to do by a micro manager who lives in the past and generates unnecessary non-value added work just to keep staff busy. At the coal-face, staff members themselves know of better, quicker and more effective ways of getting things done. If a company or manager tries to use the bureaucracy to control them, employee frustration levels will simply go up and they will eventually leave. They can no longer tolerate a situation in which it is expected of them to lie to customers or show loyalty to a company when they know very well that inefficiencies cause customer dissatisfaction. The performance improvement consultant Geary Rummler puts it succinctly when he said: “If you put a good person against a bad system, the system wins every time.” That is the reason why talented people who are natural innovators, are either directly or indirectly forced to leave their companies for greener less bureaucratic pastures. The management guru Tony Manning recently added his voice to those who criticise inefficiency in the public service. He says that “delivery is held hostage

_____________________________________________________________________


by ignorance, and most leaders don’t realise this.” He goes on to say that the worst leaders are the least accessible because they insist that the only way to reach them is “through the right channels.” “These leaders are oblivious to the fact that few messages get where they are intended through these channels, and those that make it are sure to be distorted. The result is that neither bosses nor their people know what is going on.” Many suppliers can tell you long stories about how the bureaucracy of their clients affects their business. For example, in the consulting industry, you are expected to submit business proposals, and then have to wait between six and 18 months to get an answer, if you are lucky to receive a response. If you are fortunate enough to be awarded the tender or contract, you enter the organisation, and in dealing with the company you realise that you are now part of a bureaucracy. Very often, because of tedious processes, incompetence and red tape, you will wait months before you are paid, a situation that most small businesses, in particular, can not afford. If bureaucracy is the problem, what is the solution? Here are some practical guidelines to transform your bureaucracy to a modern flexible and dynamic company:

• Request all managers and staff to display their commitment to breaking bureaucracy down in order to promote efficiency in the company.

• Quantify the cost of inefficiencies caused by bureaucracy and inform the company in a tangible and visible way that you can no longer afford to lose business because of bureaucracy.

• Get rid of titles, status symbols and other preferential treatment that does not make sense in the knowledge economy. It is not who you are or what position you occupy that is important, but what you know, and how you add value.

• Your leaders should be the visible champions of all efforts to break bureaucracy down.

• If innovation and creativity are part of your values, explain to staff how these principles can be applied in practice.

• Fire the bureaucrats and micro managers, they are killing your staff, customers and suppliers.

• When recruiting and selecting new staff, ensure that bureaucrats are not appointed.

• Reward efforts to break bureaucracy down.

• Streamline your processes and procedures for optimum efficiency.

• Eliminate barriers between departments, that is the most severe cancer in bureaucracies.

• Get rid of all policies and procedures that do not add value to the business.

• Track the speed of doing things in your company and actively pursue ways of doing it better and faster.

_____________________________________________________________________


• Create virtual networks and learning communities where people can actively drive innovation and change.

• If you are concerned about your processes and systems but do not know where to start, get a good consulting firm to help you. And don’t give them a 50 page tender document, they only need 7 words: “We need innovation. Break our bureaucracy down”.

• Another option is to listen to the “trouble-makers” or innovators in your company, in fact, they can save you millions of rands that you would have paid to consultants (or unnecessary legal costs, fines and penalties).

• Throw away all unnecessary forms and streamline documents if they are really necessary.

• Get rid of manual systems, they are part of history. Computerise all your systems.

• Replace traditional hierarchies with centres of excellence in which quality and excellence are the driving forces for everything happening in the company.

• Do active benchmarking with other companies to identify opportunities for process improvement. If your competitor can do a process in one day, while you take two days, the fault is with you, fix it.

• Do regular assessments to evaluate the extent to which you can eliminate bureaucracy.

• Celebrate any significant improvements in productivity caused by the elimination of bureaucracy.

• Transform traditional meetings that waste time into active process improvement action teams where real decisions are taken and immediately implemented.

• Create effective supply chain management systems (including for the payment of suppliers) so that suppliers do not become victims of inefficiency.

• Employ managers for their knowledge and ability to lead, and not to display “signing power.”

• Rotate the chairpersonship of committees to create a sense of shared responsibility and balanced power in your company.

• Empower employees to make decisions in serving customers better.

• Involve your staff, customers and suppliers in process improvement teams, they know exactly what is wrong and how it could be resolved.

A good local example of how bureaucracy was reduced, is the South African Revenue Service (SARS). With the right leadership focusing on the right things, a huge government bureaucracy was transformed into a service orientated dynamic institution. If you apply for a tax extension online, you get an answer within seconds. Also, the border post between Zimbabwe and South Africa was well known for being one of the slowest in the world, but with dramatic reorganisation, resource allocation, leadership and staff commitment it is now one of the fastest – taking an individual on average only three minutes to pass through. What makes this achievement remarkable, is that the long queues of

_____________________________________________________________________


previous years have been completely eliminated. These two examples clearly show that radical performance improvements can be attained if you develop a new mindset and a commitment to break bureaucracy down. If some public service organisations can perform like this, what about the others? Surely the private sector can then also break bureaucracy down. Dynamic companies like Discovery and Bidvest have created flat structures with minimal bureaucracy. The Bidvest philosophy is that there is no corporate bureaucracy, no elaborate structure or hierarchy. Every area is a performance area. In this way, accountability and responsibility are firmly entrenched in the way of doing business, because you can not pass the buck on.

Bureaucracy kills your customers, staff, suppliers, and ultimately your business. If it takes five seconds to get a message from Johannesburg to London, why does it take more than five days to get a message from the third to fourth floor of the same building? Working towards 2010 and the challenges posed by the World Cup, we need to raise our business performance to world-class standards, not only to ensure an effective tournament, but also to enhance the sustainability of our companies. Bureaucracies sustain only four things: inefficiency, incompetence, bureaucrats and a sick culture. The first sign of hope is when there is an active acknowledgement by management that bureaucracy is bad for business.

Once you know you have a problem, the next challenge is to energise people to start changing the culture of the bureaucracy. Over time, and this may take months or even years in firmly entrenched bureaucracies, the bureaucracy will be incrementally broken down. Alternatively, if you have great leaders with insight and a passion for excellence and the realities of the modern business world, a bureaucracy can be eliminated much quicker. It will take some effort, but eventually the improvements in efficiency and outputs will justify this investment to transform your company to a high performing world-class organisation. The end-result is a win-win situation for all parties – your staff, management, shareholders, suppliers and ultimately the business as a whole.

_____________________________________________________________________


REFERENCES Brown, J. 2006. Red tape costs SA mining sector billions. The Star Business Report, 8 November, p.4 Corporate Reseach Foundation. 2006. Best Companies to work for in South Africa. 7

th ed. Cape Town:

Corporate Research Foundation Theunissen, G. 2006. Costs for Africa: Costs and bureaucracy stifle Africa’s exports. Finweek, 7 December, p. 50 Manning, T. 2006. Strategy must make sense to make a difference: In the Public eye. Sunday Times, 10 December, p. 14 Welch, J. & Byrne, J.A. 2001. Jack: What I’ve learned leading a great company and great people. London: Headline Welch, J. & Welch, S. 2005. Winning. London: Harper Collins

Marius Meyer lectures in people development at the University of Johannesburg.

Comments about this article can be emailed to him on [email protected]. For more

information about Management Today, go to www.management-today.co.za

bureaucracy

Documents