How does bureaucracy affect business? It's complicated

Bureaucratic Efficiency

Weber and Merton -- and many other writers on bureaucracy -- emphasize its efficiency, which sounds strange to those of us brought up on stories of bureaucratic waste and ineptitude, and who have likely witnessed it ourselves. In Weber's words, bureaucracy

is, from a purely technical point of view, capable of attaining the highest degree of efficiency and is in this sense formally the most rational known means of exercising authority over human beings. It is superior to any other form in precision, in stability, in the stringency of its discipline, and in its reliability. . . . The choice is only that between bureaucracy and dilettantism in the field of administration.

Mark Schwartz

Weber saw the modern era as one where specialized technical skills were increasingly necessary. Gone was the time when "dilettantes" could manage business functions. Instead, experts would be accountable for areas in which they were experts, and formalized interactions would be used to coordinate their efforts. Efficiency would result and would be amplified by removing emotional concerns like personal relationships, hostility, anxiety, and the like, leaving only rational considerations.

For both Weber and Merton, efficiency was not a single characteristic, but a complex set of attributes. "The chief merit of bureaucracy is its technical efficiency, with a premium placed on precision, speed, expert control, continuity, discretion, and optimal returns on input," says Merton. Or, in Weber's words:

Precision, speed, unambiguousness, knowledge of the files, continuity, discretion, unity, strict subordination, reduction of friction and of material and personal costs—these are raised to the optimum point in the strictly bureaucratic administration.

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So, let me pause and ask, reader, what's your problem with bureaucracy? Why buy a book about how to bust through it? It's hard to see anything objectionable in Weber's definition. Sure, I've got a few reservations: in the IT world we've been finding that generalists ("dilettantes") actually are quite valuable, "discipline" is a heavy-handed word, and I'm not sure efficiency is the right goal (leanness is more like it). But Weber is just talking about organizing logically to get good results.

In recent years our view of bureaucracy has diverged a wee bit from Weber's idealized picture.

The term "bureaucracy" is popularly associated with impersonal hierarchy, rigid rules, predictable procedures, and a pace of decision-making and change that would embarrass a glacier. Emphasizing the disadvantages of bureaucracy in a fast-paced world, theorists have consistently contrasted inflexible mechanistic systems with fluid organic systems, and plodding segmentalist cultures with innovative integrative cultures.

Glaciers are not easily embarrassed.

Over time, Weber's broad understanding of efficiency yielded to a narrower idea of process optimization. Bureaucracies petrified and grew tentacles of red tape that seemed to defy rationality rather than exemplify it.

Business and Government

Modern democratic governments are necessarily bureaucracies. They're based on the rule of law and administered by a civil service chosen by merit, separately from the election of political officials.

But businesses too have been designed as bureaucracies. Mass production demanded strict repeatability and statistical quality control. Global competition demanded cost efficiencies. And the increasing size and scale of business organizations demanded some sort of centralized control over decentralized organizations. In Weber's words, "the very large modern capitalist enterprises are themselves unequalled models of strict bureaucratic organization." "All complex organizations," Wilson says, "display bureaucratic problems of confusion, red tape, and the avoidance of responsibility." It's no wonder that large companies and government agencies looking to digitally transform face similar bureaucratic impediments.

One of the most compelling uses of bureaucracy in today's economy is to support a company's branding. A brand must be consistent; it must deliver a unified, coherent, recognizable experience to customers. And that consistency is a specialty of bureaucracy. McDonald's, for example, has standardized, in minute detail, the operation of its stores and the activities of its employees in an operations manual that is six hundred pages long and weighs four pounds.

Branding guidelines specify how a company's logo should be used, what typefaces are acceptable, the positioning of elements on a page, and the voice and style to be used for communications. Guardrails and reviews ensure that those branding guidelines are followed. Because brands can have tremendous business value -- Coca Cola's is said to be worth $59.2 billion and Disney's $52.2 billion -- it's no exaggeration to say that a company's bureaucracy can be a critical component of its value.

Just as the government must answer to a diverse citizenry, businesses -- at least publicly traded ones -- must answer to a diverse base of shareholders. To ensure that employees are doing what those stakeholders want, companies devise governance structures and controls. The larger and more complex an organization is, the more it will see bureaucracy as the solution for aligning its employees with its stakeholders.

The convergence of government and business bureaucracies is noted by Graeber in The Utopia of Rules. On one hand, he says, "The rise of the modern corporation, in the late nineteenth century, was largely seen at the time as a matter of applying modern, bureaucratic techniques to the private sector." On the other hand, the bureaucratic techniques of government, Graeber says, originally came from the private sector and then seeped into all aspects of life:

Americans often seem embarrassed by the fact that, on the whole, we're really quite good at bureaucracy. It doesn't fit our American self-image. . . . If Americans are able to overlook their awkward preeminence in this field, it is probably because most of our bureaucratic habits and sensibilities -- the clothing, the language, the design of forms and offices -- emerged from the private sector.

In the ultimate twist, private sector bureaucracy actually forces the government to be bureaucratic. Weber draws this connection: "Today, it is primarily the capitalist market economy which demands that the official business of public administration be discharged precisely, unambiguously, continuously, and with as much speed as possible." One reason that businesses demand bureaucracy from the government is the predictability (calculability) it offers. Free markets require transparency and predictability:

The peculiarity of modern culture, and specifically of its technical and economic basis, demands this very "calculating" of results. . . . Bureaucracy develops the more perfectly, the more it is "dehumanized," the more completely it succeeds in eliminating from official business love, hatred, and all purely personal, irrational, and emotional elements which escape calculation. This is appraised its special virtue by capitalism.

While bureaucracy may seem mechanical and "faceless," the same is true of the "invisible hand of the market." Business decisions today are ultimately out of executives' control -- they are made by consumers. The market is relentless, merciless, and foils your best plans. Its decisions cannot be appealed. That is to say, it has many of the characteristics of a bureaucracy.

Customer-Facing Bureaucracy

Bureaucracy goes beyond the organization of work within a business; even businesses with a market incentive to provide good customer service can take on the characteristics of bureaucratic impersonality and rigidity in their public personas. Medical insurance companies in the US continue to innovate ways to frustrate their customers with obscure billing codes, arbitrary-seeming rules, surprise requirements for "pre-authorizations," and endless telephone wait times. Graeber relates his experience with a bank when trying to access his account information from overseas, a process that required "speaking to four different representatives, two referrals to nonexistent numbers, three long explanations of complicated and apparently arbitrary rules, and two failed attempts to change outdated address and phone number information lodged on various computer systems."

This bureaucratization of service may partly be explained by a need for formal rules to ensure equal treatment of customers, pressure to standardize processes to control costs, and -- in Graeber's situation -- the need to ensure security and privacy. But it wouldn't survive without our increasing acceptance, as customers and employees, of this formality and rigidity in customer service. As someone who travels a lot, I'm constantly struck by the scolding, condescending, and mechanical tone airlines use with me.

But a deeper connection between internal and external bureaucracy may be derived as a variation on Conway's Law. Melvin Conway, a computer programmer, observed in 1967 that the structure of an organization's software tends to mirror the organization's communication patterns. In effect, the architecture of its software systems looks a lot like the structure of its organizational chart.

In my bureaucratic variation on Conway's Law, the face that a company presents to its customers is also influenced by its internal structure. When you telephone a company, you're transferred from one customer service agent to another based on their different positions in the organizational chart. You're shifted from phone line to phone line as you cross organizational boundaries. They'll have to look you up in four different IT systems because hierarchical bureaucracies don't put much value on information sharing between silos. Your experience, in other words, mirrors their bureaucracy. Bureaucratic goop seeps through the walls of an enterprise and becomes embarrassingly visible to customers.

Bureaucracy affects even the language enterprises and their officials speak to the public. In Charles Dickens's Little Dorrit, a government agency called the Ministry of Circumlocutions circumlocutes and discourages the public from filling out the many forms it requires -- on the cogent grounds that nothing will happen with their cases anyway. Chrysler Corp. announced layoffs with a message saying that it was going to initiate a "career alternative enhancement program." Governments, eager to obscure their more questionable actions, find ways to bury us under mountains of verbiage.

What seems to underlie this type of speech is a denial of agency. Individuals avoid acknowledging their responsibility with the help of vague and confusing language, just as they do by pointing to bureaucratic rules they are obliged to follow. George Orwell famously translated a well-known biblical passage into this anesthetizing exemplar of bureaucracy-speak that avoids using the word "I":

Objective consideration of contemporary phenomena compels the conclusion that success or failure in competitive activities exhibits no tendency to be commensurate with innate capacity, but that a considerable element of the unpredictable must invariably be taken into account.

The original passage, from Ecclesiastes (9:11), was:

I returned and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

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