Why bureaucracy is a Good Thing

Gus O’Donnell presented a thought-provoking programme on Radio 4 this morning, In Defence of Bureaucracy. He presented two arguments. Firstly, you can’t get much done without basic organisation. Secondly, bureaucracy, with its formal rules, offers protection from the arbitrary whims and prejudices of those in power.

His piece in the FT covers similar ground:

In this country you can renew your car tax if you can prove you own the vehicle, it is roadworthy and it is insured. In other parts of the world all it takes is knowing which palms to grease. Bureaucratic systems are colour-blind, gender-neutral and they don’t care what you sound like. That brings fairness in a way more discretionary systems can never match.

It has long been argued by economists and historians that one of the factors enabling the economies of Europe and the USA to develop so rapidly, compared to those elsewhere in the world, was the rule of law. It is the main theme of the widely acclaimed Why Nations Fail (reviewed in an earlier post).

The argument is that strong government with rules applying to all, including the rulers, makes for economic prosperity. Without it, there is much less incentive to innovate and create new enterprises.

The absence of order meant that anything you created might be stolen by warlords and robber barons. Centralised authority without law meant that your property and ideas might be taken by the ruler or his henchmen. Only where law applied both to the rulers and the ruled were those developing businesses protected. It was because European merchants had this protection that industry developed in Europe.

Bureaucracy is essential to the application of the rule of law at an administrative level. It is what ensures that things get done but also what ensures that they get done in as fair a way as possible.

However, something similar applies to the internal workings of an organisation.

Bureaucracy is the corporate equivalent of the rule of law. It protects people from arbitrary decisions inside the organisation. Rules and procedures give people clarity about their roles, their scope for decision making and their boundaries. Like the rule of law, they protect employees from random and vindictive treatment by their bosses. It has become very fashionable to deride bureaucracy but working in organisations with fewer rules and procedures can be just as unpleasant. Trying to second guess the whims of a maverick autocratic boss can be every bit as energy draining and innovation stifling as working in a bureaucracy.

Bad bosses run riot in the absence of rules. For example, without clear definitions of roles, the boss can set his staff against each other, handing out tasks randomly, the interesting ones to the people he likes, the doomed-to-fail ones to the people he doesn’t. Sometimes he can give the same task to two different people, just to see what happens. Then next week, he can change it all round, depending on who has pleased or displeased him. It’s the same with other procedures. Size of office, cars, relocation allowances and training opportunities can all be abused to create a system of arbitrary patronage that would make a medieval monarch proud. Great for preserving the manager’s power and level of comfort but a complete disaster for everyone else. Bureaucracy mitigates this sort of behaviour. Rules and procedures mean a tyrannical boss can only go so far.

But doesn’t bureaucracy stifle innovation? Perhaps it does, but so does arbitrary management. If you are constantly trying to win favour with an unpredictable management hierarchy, you are hardly likely to stick your neck out. Like the medieval peasant, the dangers associated with upsetting your lord outweigh the benefits of coming up with a good idea. Better to keep your head down.

In any case, although we currently have a startup-worshipping culture, brilliantly satirised in this piece, there is little evidence that smaller, less bureaucratic organisations are any better at innovating than larger established ones. As The Economist notes:

It is shrewd politics to champion the little guy. But the popular fetish for small business is at odds with economic reality.

Size allows specialisation, which fosters innovation. An engineer at Google or Toyota can focus all his energy on a specific problem; he will not be asked to fix the boss’s laptop as well. Manufacturers in Europe with 250 or more workers are 30-40% more productive than “micro” firms with fewer than ten employees. It is telling that micro enterprises are common in Greece, but rare in Germany.

So, although we love those nimble, non-bureacratic, small firms, they are not all that innovative. Without rules and specialisation, the would-be innovators spend too much time  fixing the boss’s laptop. Or worse.

And even when your whacky innovators come up with stuff, you still need the suits to make it happen, as the beautifully titled  People and Process, Suits and Innovators found:

[I]t is the individuals who fill the role of middle managers – the “suits” – rather than the creative innovators that best explain variation in firm performance.

The results also show that middle managers are necessary to facilitate firm performance in creative, innovative, and knowledge-intensive industries.

As Ha Joon Chang says, what makes rich countries rich is the ability to organise on a large scale:

What makes the poor countries poor is not the lack of raw individual entrepreneurial energy, which they in fact have in abundance. The point is that what really makes rich countries rich is the ability to channel the individual entrepreneurial energy into collective entrepreneurship.

Channelling that entrepreneurial energy would be impossible without bureaucracy.

As I’ve said before, the startups and charismatic leaders are fascinating and exciting but it’s the people doing boring stuff, like planning, creating systems, designing processes and managing performance that make things happen. Bureaucracy creates and sustains our modern prosperous world. We’d be stuffed without it.

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13 Responses to Why bureaucracy is a Good Thing

  1. Pingback: Why bureaucracy is a Good Thing - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Needs2Cash says:

    Agreed, an organization’s size can bring benefits. But our grandchildren may be grateful for today’s start-ups.

    Calm and effective bureaucracy helped make the Olympics an enjoyable success. Gus nicely contrasted our government’s Olympic bureaucracy with the G4S’s shameful neglect of their’s. At least the boss of G4S confessed in time for our authorities to fill the void with their bureaucracies.

    Twenty Twelve was also very enjoyable. But as John Major reminded us, bureaucracy cannot fight back.

    Tomorrow morning at 9:30 our rare celebration of bureaucracy will end after another 30 minutes from Gus. A few days respite may follow. Then we the general public and our media will probably continue to misunderstand the benefits of bureaucracy or to bully it because it is fun to do so.

  3. Kamo says:

    Would it not be better to say that efficient and effective bureaucracy is a good thing? The main complaints about bureaucracy stem from when it becomes self-serving or creeps its mission. Where it has clear and limited responsibility and is seen purely as a means to a given end there does not seem to be a problem. The problems, or criticisms if you prefer, are where bureaucrarcy starts to find areas to grow into and becomes self-perpetuating, with the solution to bureaucratic problems being more bureaucracy.

  4. JR says:

    I like to think that I’ve made a real difference to the organisations I’ve worked for, but without the people who make things happen I’d be screwed. We need both: those who see the big picture and have long-term vision and those who understand process and actually know how to make things happen. I hate bureaucracy, but I love working with people who understand it and make it work to our advantage. Process is good, as long as it is a means to implementing creativity and strategy rather than a means of stifling it.

  5. ThinkPurpose says:

    hmmm. I call bollocks.
    And as a bureaucrat, I should know.
    Bureaucracy was a useful invention in its day, when running a global empire was the purpose, and neat handwriting was needed as command and control was facilitated through handwritten letters, the ability to do exactly what you are supposed to within the very specified rules vital. It’s not now. A bureaucracy is the enemy of value, it encroaches, it becomes it’s own purpose. A true bureaucrat knows they cannot get into trouble for saying no, but they can for saying yes.They know that paper is its own purpose. Point to a glowing report, no need for reality.
    Of course, it depends what you mean by bureaucracy. Its not necessarily an emergent property of large organisations, Netflix have famously got rid of their internal policies and processes on entertaining, expenses and annual leave, in favour of a 5 word policy of ““Act in Netflix’s Best Interests””
    Bureaucracy is an emergent property of command and control thinking, if you think that people need to be told (commanded) by paper, and monitored (controlled) through paper, hey presto, you’ve just got yourself a bureaucracy.

  6. SadButMadLad says:

    Sounds like you’re more arguing for the existence of rules rather than bureaucracy which is the imposition of an excessive number of rules. Rules are good. Bureaucracy is bad. Law is a (relatively) simple set of rules, but you don’t need a bureaucracy to impose law. As Gus says in his programme, bureaucracy ensures that births are registered, etc. But when the rules become excessive and overbearing and unable to cope with the huge variety in human life then they turn into bureaucracy and red tape.

  7. Meg Peppin says:

    Bureaucracy = red tape and interests of the managers become directed towards preserving and upholding the system which is what tends to be what is rewarded. Bureaucracy creates defensive cultures which squeezes out energy and adaptability. Discouraging bureaucracy doesn’t preclude the need for some processes which should emerge from understanding business needs and progressing them.

    I am working with two organisations at the moment where I think this is illustrated, one of whom has virtually no rules and occasionally that causes a problem but where decisions are made at meetings in real time; another who has lots of rules where a fairly simple decision made in November has just been through the bureaucratic motions to be validated in early March.

  8. Pingback: Bureaucracies – our saviours or our assassins? » 21stCenturyFix.org.uk

  9. I think it’s too simplistic to discuss the pros and cons of one organisational form in preference to another. With refence to Peter Drucker’s ‘The Effective Executive’ (1968), the first and arguably most important question to ask is what does the business need right now? He might argue that this is the key to guiding how you then ‘systemise’ the business to achieve the aim. Critically then it is about frequently reevaluating the effectiveness of the system as environmental conditions change through time.

  10. rogerh says:

    I agree re the benefits of an honest bureaucracy. However I see a difference between bureaucracy that adapts organically to match its environment – Shell/BP/M&S and other successful corporates and a bureaucracy that moves by lurches and only after great scandals and disasters – UK government bureaucracy. The reasons are obvious – cui bono. No way to run a bureaucracy or a country though.

  11. allcoppedout says:

    Bureaucracy is neither good or bad – we need to examine use. Even technology can be examined as ideology (Habermas classic 1970) Bureaucracies often become self-serving through performance management techniques (classic examples were Soviet – now widespread in kwality schemes and official statistics, targets and the rest).

  12. Pingback: Innovating Around Bureaucracy - Social Innovation Minnesota | Social Innovation Minnesota

  13. Pingback: What we can learn from the SWP | Big Chief Tablets

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