The Rise and Fall of the Bureaucratic Empire - Part I

What is the bottom line for your organisation? The main objectives as a CEO, Director, or other Executive?

Profit? Short term results? Growth? Long term survivability? Shareholder value?

Or is it no longer only one or many of these - as reported recently from the Business Roundtable, a group of ~200 CEOs from US firms - but now a move towards a more holistic, human and value-delivery approach? I've seen a number of posts on this recently, and I'll delve into it more in future, but I wanted to look at this in terms of the transition from a longstanding tradition - and one I've worked to facilitate for a while.

The Harvard Business Review writes that this report "explicitly counters the view held for decades that the sole focus of a corporation and its CEO is to maximize profits. Corporations are, according to the new statement, accountable to five constituencies, of which shareholders are only one. Customers, employees, suppliers, and communities are the others."

That is an incredible statement - and one which is both very welcome and inline with today's growing expectations. No longer is one group profiting at the expense of the other four; now they are all stakeholders, and that's an important perspective. But this is directly opposed to the original ideals of bureaucracy, which focuses on efficiency and benefit in only one area - and it still needs some work.

In this article I will explore business bureaucracy's rise, its challenges, and how it's failing; in a second article, I'll look at what lies beyond and how we can not only move forward, but benefit hugely doing so.

As ever - this has a lot to it, but is by no means completely comprehensive. It's an ancient and complex subject centuries in the construction.

The Challenges Bureaucracy Faces

There is an onus on leadership now like never before - the market change has accelerated to the point most companies can't keep up, a new generation is becoming the majority of both workforce and customer, markets are super-saturated with companies clamouring for differentiation; sustainable innovation and disruption have taken a notable dive in recent years, people are overwhelmingly dissatisfied with being a component and taken advantage of. Traditional management models are failing both companies and employees. Individualism is being re-realised. People are demanding change and making their demands known across social media and business. A large number of organisations are stuck in the Cycle of Woe, some refusing to even admit there is a problem, and many entire industries are struggling (areas of tech, retail, banking and many more).

In The Decisive Patterns of Business I explore some reasons Leadership is facing so many challenges and what they can do to be mindful of mitigating them - so there are all the mental patterns, time limitations, and increases in complexity in business to factor in as well. I also suggest 3 ways you can immediately enhance leadership and a way you can make more accurate leadership decisions. All of these things (and much more) are intricately interlinked; this isn't an easy puzzle to solve for business, nor is it one you can do from within the frame of reference.

All this is just the start, and I'm sure any Executives/Directors reading this can agree and/or add to many of these issues.

In Cynefin terms, Bureaucracy is often where we attempt to enforce order on unordered systems that can't be ordered, the domains of Obvious and Complicated (and weighted to the former). It is mostly rigid constraints, lack of reactivity, Best Practice, virtually no innovation or risk. Bureaucracy is where complacency-induced catastrophic failure and a lapse into chaos is most likely; it's where social complexity is most likely to be ignored, where context won't be as correctly applied or even realised. It's where you don't even see orthodoxy shifts in the market until far too late.

In comparison, Complexity is where innovation, enablement, investment, self-regulation, adaptation and reactivity reside far more.

So - how do we fix it?

Many of my articles speak about the 4th Industrial Revolution (and we could be in the 6th depending on your definitions), the challenges faced, the implementation of fads, the adherence to older and ineffective models of management (process engineering, systems thinking) past where they are suitable, finding coherency in complex situations, and much more.

You can, for the purposes of this article, boil things down to this: we need to find ways to make organisations deliver better value, get better return and be leaner, act in a more (contextually) Agile fashion where appropriate, divine where they really are as a system in each situation and react appropriately; not just demand or rely on one buzzword framework but use multiple frameworks in context; and rediscover the humanity of the people who are our value and assets both. We need to move to being inspirational leaders, not instructional bosses, because the acceptance and effectiveness of the latter is fading. We need to realise the power of making everyone a stakeholder for the business to achieve its full success potential naturally - to reinvest in culture and success being mutually beneficial.

Traditionally, bureaucracy requires a rigid hierarchy adhered to as below, in descending order of size (or perceived importance) and a downward flow of strategic information/instruction. If a pipe is fouled or blocked, problems occur (and they block easily!):

(Note the outlier/maverick/heretic on the bottom right!)

Ok, give me one easy step that can enable all the above!

Those familiar with my work will know by now there is no "easy recipe" for success - it's ALWAYS contextual. But that said, there is one thing we can do to begin exploring the facilitation of the above:

We can re-evaluate the bureaucratic approach and the strict hierarchies within it, and begin the move to a more entrepreneurial approach via ecology.

I've been told before that this is quite radical, and I guess it is, but that doesn't make it less advantageous. The fear of change, and the focus on "doing things this way because they always have been" are both powerful suppressants to changing for the better.

This is meta-innovation, if you like - the ability to innovate abstract structures, not just to conceive a new product - and this type of innovation is arguably more critical to long-term survivability for a company.

Bureaucracy is categorisation, not emergence. It's inflicted by humans and carries all of the patterns, inbuilt limitations, and issues that action brings.

Why does this solution make some C-suite executives uncomfortable?

Bureaucracy is primarily focused on power, authority, and control.

The ecosystem approach is often perceived as a lessening of power, of decision-making, but of course that isn't the case. Look at a company such as Google, which aims to reduce bureaucracy where it can and invests in investment; Google is considered powerful and fairly effective in terms of business.

I recently had a professional tell me that bureaucracy must exist because that's the only way you access leadership as a consultant - but to me, that bespeaks an avoidance of a necessary paradigm shift, instead working within a closed loop that will continue to shrink. Hierarchies don't need to be a totally rigid structure for people to function - in fact, the opposite has been proven true, and long-term, rigidity is problematic for stakeholders.

It's also worth noting that hierarchy doesn't require bureaucracy. Hierarchies can also self-regulate or define their own structures based on composition. For example, a professional team of people know their places, have individual investment, and deliver as optimally as possible; this doesn't have to be directed to the nth degree. Ecosystems take this further, and automatically regulate themselves around the decision makers - or apex predators - within them. In both these examples, over-constraint affects the whole system negatively.

In Part II, I'll give a great daily, ingrained example of how ecosystem is more effective than bureaucracy, and I'll expand on the aquarium analogy, but for now let's focus on what a bureaucracy really is.

Defining Bureaucracy

Bureaucracy as a concept is ancient, because at its core it is rigidly hierarchical. Wherever humans wished to control other humans via systems, it existed; religiously, politically, profitably, sometimes all three at once. Via policy and tradition, it was (and still is) established.

It isn't just hierarchy; hierarchy is a complex and fluid structure within a system dependent on any number of contextual ideas. Bureaucracy is a further constraint via human management; "any system of administration conducted by trained professionals according to fixed rules" is more or less the current definition.

The German sociologist Max Weber argued that "bureaucracy constitutes the most efficient and rational way in which human activity can be organized and that systematic processes and organized hierarchies are necessary to maintain order, maximize efficiency, and eliminate favoritism."

This was seen as a logical end result of administering a hierarchy, but it leaves out the question of what, or whom, the hierarchy is benefiting.

However, Weber apparently also rightly saw unfettered bureaucracy as "a threat to individual freedom, with the potential of trapping individuals in an impersonal "iron cage" of rule-based, rational control.", something we're now seeing as a widespread mindset of decades.

Humans naturally polarise and go to extremes, especially if comfort can be attained doing so. We form mental patterns and follow traditions once established because it's simply always worked like that. Changing those traditions usually then requires either chance, or a vast upheaval.

The Rise of Bureaucracy in Business

What we now usually mean by the word Bureaucracy is Corporate Culture, in business at least (and in modern times, politics and religion have both taken on many of the trappings of business, especially in a world driven by neoliberal ideals of profit), and it goes back a couple of hundred years to the foundations of Taylorism, which has had enormous impact on modern business mindset. I talk about Taylorism a lot in my work, so this matrix should be familiar:

Knowledge Management Matrix

Frederick Taylor is often called "The Father Of Management Science". He was a mechanical engineer who essentially created the idea of Process Engineering - the reduction of workers to a dehumanised component level. The idea was that by removing the unreliable and perceived lazy human aspect, you made a process more efficient - something we can also achieve today with automation, but which was not available then.

Somi Arian wrote a great article on this recently here, so I don't want to rehash it - I recommend you go and check it out, it's got great information (and she does some amazing work on AI and Millennial Culture, so check that out too while you're there!).

Process Engineering still requires human skill and judgement, so it wasn't totally dehumanised. What is interesting is what happened when Systems Thinking was created in 1956 by MIT Professor Jay Forrester. It was originally designed as a way to improve the understanding of more complex systems by looking at how the agents within interacted as a whole, and was a largely social construct at first, but it quickly became an effective way to explain the aspects of business Process Engineering couldn't define and broaden management science in general. However, Systems Thinking removes all human judgement, and it operates on prediction and outcome based measures, very often (in business at least) heavily relying on a perfect goal and forecasting - neither of which necessarily reflect reality.

The other problem with predicting humans in business structures is that companies invariably then require those humans to follow these predictions. This, as you may be aware, is neither how predictions nor humans actually work!

A Delicate Balance

So now we have what makes up the majority of the Modern Management approach in the corporate culture of bureaucracy - a sliding scale between these two systems. One is rule-based, one is heuristic-based; one removes human variance and demands constant full output, one removes human judgement and metricises for prediction. Henry Mintzberg's 10 schools of Strategy lie between these, 3 in the former and 7 in the latter (read The Red Pill of Management Science for more information on this!).

A problem here is that bureaucracy has mostly slipped into the worst parts of each over time. The dehumanisation, the over-constraint, the metricisation, the pure focus on outcome-based measures, all whilst preserving strict hierarchy and trying to also marry up a somewhat schizophrenic wish to care for employees and give them a voice - it's akin to mixing water and oil when you then add real people, who operate on systemic, social, and individual complexity.

Something has to give somewhere, and the hierarchy inevitably wins. When you add into that the perceived threat of automation, and the conditioning over 200 years of people to believe they should be paid for hours, should take pride in their skills and focus only on those, and should give their all to the company, then combine it with the drastic shift in recent years of generational mindset, market orthodoxy trophic cascades, the downward dive of innovation across industries and the awakening of individuality, we find that the system isn't fit for purpose any more - and it never really was, it just worked well enough at the time.

The world has moved on. The multiply-complex new age of business doesn't work like a steel mill 200 years ago. It's time we acknowledged this, and considered alternatives.

The Problems We've Been Ignoring

So many companies are struggling and mired in red tape and politics it's obvious the system has become more important than the result, despite the desired outcome being profit. Even the Business Roundtable report, encouraging though it is, is going to have to also address the fact that business has been set for decades to work on short-term profit mindset for C-suite to fulfill, and that's been the aim of bureaucratic corporate culture for so long now it's "tradition".

Bureaucracy can have its place, just as ideals born from hierarchy and strict process such as Waterfall are still applicable in certain instances. But it's been globally applied out of context and in general for decades. In the vastly more complex landscape today, it's failing us all, both individually and organisationally.

Think of the recessions, the rise in suicides reported in the last 100 years from work pressure globally; the gaming behaviour, sycophantism, cynicism that we now take for granted; the exponential increase of burnout, the sheer inefficiencies where we expect not to get results because of the hierarchy. Even those thriving off bureaucracy use the word as an epithet for not getting anything done! How many startups fail to cross the chasm or grow past an initial point of entrepreneurship? How many companies emulate a phoenix, growing, purging, growing, purging? How many both feel trapped by and acceptance of forever living in the Cycle of Woe?

No wonder the next natural steps are political maneuvering, empire building, selfish personal ambition, gaming the structure for personal gain, cynicism, sycophantism, and a type of Cobra Effect - where the new language and the appearance of following a certain message are used, but it's only a veneer allowing both continued operation of individual ambition, and micromanagement where a boss spends so much time insuring their authority is maintained very often they are not adequately doing their own role. These go hand-in-hand with harassment, isolation, divide-and- conquer island-creation, all to maintain often tenuous control for just long enough to deliver short-term profit at the expense of long-term reputation and survivability.

The extreme ends up being a company that is locked rigid in over-constraint, zero humanity, checkboxing, and demotivation in an excessively toxic culture. Nothing gets done properly, but at least it doesn't get done properly in triplicate and everyone's arse is covered. I've both worked with and worked for companies like this; they exist.

This is not delivering the maximum value that a company can deliver. It is not efficient, or healthy for individuals. This is what I work to change.

Bureaucracy across Business is a Dead End

Or to be more blunt, it's dying as a fix-all concept, and taking a lot of profit, individuals, and organisations with it in its death throes.

But it doesn't have to. We've known for decades that strict adherence to hierarchies is damaging to people as well as inefficient. And what's interesting to me now is that emerging powerhouses like India and other areas of Asia are transitioning far more rapidly from a very heavily Process Engineering outlook to being extremely aware of this new methodology than the West, where bureaucratic corporate culture largely originated. I'm seeing more interest in my skillset from executives there than I am in the West at the moment, and when it changes, it's going to be a huge and sudden ripple effect, I think. The hidebound West stands a good chance of being left behind in efficiency, ethics, and value delivery overall.

The emphasis is on delivering value, and it always has been; only the meaning has changed here. "Value" for decades meant shareholder profit. Now "value" means stakeholder satisfaction, not just in terms of profit, but also ethics, sustainability, work/life balance, end product quality, as well as other contextual elements.

Bureaucracy falls readily into the trap of general application, and is very hard to balance effectively. This is why it has finally begun to be phased out in many areas of business, to allow more reactive, delivery-focused, long-term, human and sustainable structures to grow and drive business and return to true innovation. Agile, entrepreneurship, ecosystems, human individuality - all have their place in this transition.

The market no longer supports a sprawling bureaucracy. The trouble is, bureaucracies and their keepers are so slow to react they don't yet realise this, if indeed they even recognise the signs of trouble at all. That in itself is reason enough to explore different avenues of management and business, and when you add the desperate need of humans to again be human, and indeed to be able to work at environmental, ethical, social, and other concerns traditionally exploited by corporate culture, the need of change is desperate.

We're past weak signal detection by this point; we've reached change-or-die territory for many bureaucratically-structured companies, and most of them can't even see it because they're in it.

That's why you hire people like me!

What is to come

So this article explored Bureaucracies a little. In the second part, we'll look at why ecosystems are better, some examples and other structures, and how we can begin moving over.

If you're a C-level or director looking to facilitate this change - DM me! We're at a point where we need to have conversations around this.

What are your thoughts on bureaucracy? What have you seen or experienced? Where do you think we need to go?