Complexity: Businesses, Bureaucracies, and People

If you listen to the pundits and want-to-be pundits (especially conservative ones), the word “bureaucracy” means “government bureaucracy” and nothing else.

But having worked in both the public and private sectors, I have experienced what most of us know:  Bureaucracies are in any and EVERY organization larger than 12 people (and in some smaller).

It does not matter if it is government, private-publicly held, private-closely held, or private non-profit, each of these types of organizations MUST create bureaucracies in order to monitor/influence the actions of its employees or agents.

In fact, the most ridiculous red-tape I ever had to deal with was with a major, private-closely-held major construction company.

A number of years ago, when I was starting out in IT, I worked for this company at a nuclear power plant they were constructing.  Among my other duties, I also was in charge of office supplies for my group.  If I wanted to order a box of #2 yellow pencils, I had to get the signatures of my group boss, his boss, and HIS boss!  The whole process could take a week just for the signatures, and the final signature was one rung below the Project Manager for the entire site!

One of the reasons my boss liked me was that I figured out a way to short cut that process.

< No, I am not going to tell how I did it.  Certain people trusted me, and even if the statute of limitations has run out, I may need to use that method again!  >

When I was working on my MBA, one of the things that surprised me was that the major focus of a company’s accounting department was not taxes or mundane things, such as profit and loss, but rather on how to measure what people were really doing, comparing it to what you wanted them to do, and figuring out how best to encourage them to work on what the CEO really wanted done.

Having grown up with the traditional American disrespect for “red-tape”, my business career has taught me that it is neither inherently good or bad.  What is good or bad is either an excess or a shortage of it!

The example I cited above is one of too much, but I can also cite examples where there was too little.  A medium-sized company I consulted with was bankrupted because the person who was responsible for balancing the company’s accounts could also write checks….

I think a good analogy for organizations and bureaucracy is that of the oil system of a car.  It keeps things cool, lubricated, and running.  Using too much oil is the sign of a problem.  Having too little oil causes problems.

This gets me to a link I came across today, courtesy of The Big Picture and Barry Ritholtz:  The Collapse of Complex Business Models by Clay Shirky.   When combined with a Rolling Stone article also referenced by today by TBP, it makes for very disturbing but needful pondering.

When does complexity cross over from helping to hindering?  How can you tell?  How can you stop it?  Can it be reversed short of collapse?

In my MBA program we had to read a lot of books on how to build a business.  Maybe we now need a slew of books on how to simplify a business.

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