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Pundits Love To Blame Bureaucracy. Here’s Why You Shouldn’t Listen To Them:

2024 March 31
by Greg Satell

When Bill Anderson joined Bayer last June, he knew that the 160-year old firm had its challenges. In addition to high debt and expensive litigation involving the herbicide Roundup, the firm also faces a slew of patent expirations and a faltering development pipeline for new drugs.

Yet Anderson has his eyes set on even a more menacing bugbear. “Bureaucracy has put Bayer in a stranglehold,” he recently wrote in Fortune. “Our internal rules for employees span 1,362 pages. We have excellent people…but they are trapped in 12 levels of hierarchy, which puts unnecessary distance between our teams, our customers, and our products.”

I’m skeptical. While pointing to a nameless, amorphous bureaucracy as the source of all evil may be convenient, it’s not at all clear to me that it’s evidence of a strategy. In fact, middle management is often crucial to enabling organizations to function, playing critical roles in helping to coordinate and execute complex tasks. We need to be careful what we cut.

What Happened When Google Eliminated Bureaucracy (And When Salesforce Didn’t)

Most companies start out as a tight-knit team, but as they grow, they tend to lose their loose atmosphere in which problems can be solved through personal relationships. This usually happens somewhere between 150-200 employees. I call this the “Dunbar Region” based on Robin Dunbar’s research that suggests a cognitive limit to the size of a group in  which everyone can maintain social relationships to one another.

This is a very challenging time and it is guaranteed to create stress. The “old-timers” tend to want to keep things as they are, while newcomers find it difficult to decode the culture and get things done. Dominant personalities tend to rule the roost, while deft political players are able to pull favors when they need to. Everyone else just struggles through.

Google Co-founder Larry Page ran into a related problem when his company hit about 400 people. He hated the layers of management that had built up, separating him from engineers making products, and longed for the days when Google operated as a smaller firm. So he eliminated middle management.

It was a disaster. Some people had more than 100 direct reports, nobody knew what was going on and coordination became impossible. Page quickly reversed the policy, the layers of management returned and the company was able to scale into a global giant.

As Huggy Rao and Bob Sutton explained in Scaling up Excellence, Salesforce took a very different approach and was much more successful. Instead of eliminating managers, they decided “to use the hierarchy to defeat the hierarchy” by breaking up software development groups into smaller teams and shifting middle managers out of a command-and-control mode and into a more enabling role.

Adopting A Subtraction Mindset

Bayer’s red tape does seem problematic. Anybody with any experience in corporate life knows how dehumanizing senseless rules and procedures can be, and 1,362 pages of rules does seem excessive. Yet as we have seen with Boeing, many seemingly bureaucratic rules have a serious purpose, especially when life and death hang in the balance.

So the question is not whether cutting rules and procedures can be a good thing or not, but how you go about deciding which ones to keep and which ones to cut. Here, the Bayer CEO has little to say other than, “we have begun a massive effort to redesign every job and every process, with a radical focus on customers and products.”

Again, that sounds great, but how do you go about it? In Rao and Sutton’s new book, The Friction Project, they go into great detail about how organizations have successfully embraced a “subtraction mindset.” For example, some organizations do “Good Riddance” reviews in which they ask the rank and file which rules and procedures get in the way. Even the notoriously bureaucratic US Government has designed a strategy to reduce burdens.

More than three decades ago, Don Norman created a revolution in product design when he wrote The Design of Everyday Things. We need something similar for organizational design and we can see it building with not only Rao and Sutton but a group that includes Cass Sunstein and many others.

Simple lip service and platitudes from the top aren’t enough. Organizations are complex machines, To design and maintain them effectively, there has to be a clear, coherent and ongoing strategy that involves a variety of stakeholders.

A Massive Reorganization

Besides slashing rules and procedures, Anderson has been reorganizing the 160-year old industrial giant at a furious pace.  He writes in the Fortune article:

Most importantly we’re putting 95% of decision-making in the hands of the people actually doing the work. This means many fewer managers and layers, and replacing hierarchical annual budgets with 90-day sprints by self-directed teams. We have 300 of these teams with thousands of people already working in this model, which we’ve coined Dynamic Shared Ownership. By the end of the year, it will reach tens of thousands.

Again, I’m skeptical. Given that he joined Bayer just ten months before the article was written, that’s an incredibly fast pace. Typically a new CEO would take three to six months to analyze a new organization, identify problems, hire key staff and build a strategy. If a reorganization is involved, it’s also a good idea to do an organizational network analysis to understand informal linkages in the organization before you start cutting them.

There are some other red flags as well. First, while the challenges Anderson cites at Bayer, such as high debt, legal costs and expiring drug patents are certainly real, it’s not immediately obvious how a reorganization will solve them. Second, judging from the company’s reporting, Bayer isn’t in an immediate financial crisis that would warrant drastic action. Third, given that the effort can’t be more than a few months old, why the PR push?

The problem is that it’s relatively easy for an executive to announce a transformational initiative, very few of them succeed and reorganizations are among the most difficult to pull off. The ones that do succeed tend to move slowly at first and then accelerate as they gain traction. While it is entirely possible that the situation at Bayer is far more urgent than public evidence would indicate, I get suspicious when a program starts too fast or too loud.

Beware Of Transformation Theater

Over the past few decades pundits have become enamored by the change gospel. We’re told that we live in a VUCA world that is more volatile, uncertain, complex and ambiguous and therefore our only option is to disrupt the status quo, which is bureaucratic and bumbling. We need to move fast and break things.

The simple fact is that it’s much easier to talk about genuine transformation than produce it. Ed Hansen and I call this “Transformation Theater.” Consider the fact that transformational initiatives usually take 3-5 years to complete successfully, while the average executive tenure has fallen to 4.8 years, and it’s easy to see the attraction for careerists: Launch exciting new initiatives, make a lot of noise and move on before the sham is exposed.

The blueprint for this type of hoax is Bob Nardelli’s tenure at Home Depot. After getting past over for the top job at GE, he landed at the Atlanta-based retail giant with a plan to transform the culture, implementing Six Sigma to ruthlessly cut costs and create efficiency. In the process, he undermined the firm’s famous service culture and allowed rival Lowe’s to gain the competitive advantage. Nardelli was fired, buit walked away with $210 million.

We need to notice the telltale signs: First, there is a false sense of urgency calling for drastic action when none is needed. Second, is a rushed process, with little or no time taken for analysis or to listen to dissenting voices. Third, is a large public rollout that trumpets the initiative before there is any real evidence of success.

To pull it all off successfully, transformation thespians need a bugbear and bureaucracy is always a convenient target. When someone raises it, we should be skeptical. As Ralph Waldo Emerson once put it, “The louder he talked of his honor, the faster we counted our spoons.”

Greg Satell is Co-Founder of ChangeOS, a transformation & change advisory, an international keynote speaker, and bestselling author of Cascades: How to Create a Movement that Drives Transformational Change. His previous effort, Mapping Innovation, was selected as one of the best business books of 2017. You can learn more about Greg on his website, GregSatell.com and follow him on Twitter @DigitalTonto and on LinkedIn.

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