24 January 2016

Law of Increasing Bureaucracy

Hat-tip: Thomas

"Capitalism isn’t supposed to create meaningless positions. The last thing a profit-seeking firm is going to do is shell out money to workers they don’t really need to employ. Still, somehow, it happens."
From my limited experience, I've formulated a banal Law of Increasing Bureaucracy: bureaucrats exert control over a firm in proportion to its size. In a small firm, the usefulness or otherwise of any administrators is obvious. As the firm grows and its administrative requirements become less well-defined, a bureaucracy develops from the firm's administrative function like a neoplasm. With growth, economies of scale outweigh the increasing fraction of the firm's costs that go to support its unproductive employees, so larger firms may be more competitive than their smaller, less bureaucratic rivals. A firm could gain an advantage by shedding some of its bureaucratic deadweight, but it would have to make an extraordinary effort to do so because of the tenacity of the neoplastic bureaucracy, whose interests don't coincide with the owners of the firm -- an instance of the principal–agent problem.
When they've become ensconced in an organisation, bureaucrats are difficult to dislodge, not least because they're the group that controls any move to "rationalise" the workforce. Their productivity is difficult to measure -- and they're the ones measuring it in any case. There's safety in numbers, and senior bureaucrats make their lack of productivity inconspicuous by surrounding themselves with lesser drones. Like other non-productive professionals (eg, lawyers and accountants), bureaucrats create arcane rules and procedures to exclude outsiders from their territory. One branch of the bureaucracy, HR management, makes it difficult for anti-bureaucratic managers to become established in the firm by skewing the hiring and firing of staff in favour of bureauphiles.
The main weapon in the bureaucratic armoury is time. A functionary's schedule is rarely as demanding as that of a productive worker. If, for example, you're reorganising designated spaces in the firm's car park, you'll probably have more time on your hands than if you're trying to meet a contractual deadline for delivery of goods to a customer; you can use this time to liaise with other functionaries and bolster your power within the firm. Bureaucrats enjoy their greatest time advantage when they come into conflict with others in the course of their work. This applies when the bureaucrat's adversary is an employee within the same organisation, but it is most apparent when the conflict is with an outsider (eg, a small customer of a large firm). The outsider must use his or her time (or buy someone else's) to pursue the conflict, whereas the bureaucrats' time is paid for by their employer. Within a business, the bureaucrats that make the firm's adversaries jump through hoops and defeat them by attrition are likely to be the ones that are doing most to earn their keep.
When we first come up against a bureaucracy, we may think, like the protagonist of Kafka's The Castle, that, if we're persistent, we'll eventually penetrate the protective outer shell of functionaries and find our way to the core of reasonable and ethical people that really run the organisation. After working our way through several layers without finding them, we finally get the picture: it's bureaucrats all the way through.


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