I once worked for a fast-paced, high-tech company with an entrepreneurial culture. We were publicly traded with about 400 employees and $300 million in sales. Then we merged with a much bigger company. Yes, I know that was dumb, but it seemed like a good idea at the time.
The bigger company was a political place filled with big egos, power struggles, finger pointing, sugarcoating, and everyone covering their you-know-whats. It was more than a little overwhelming. I began to realize the cultures were completely mismatched as we went through the integration process but by then it was too late.
Besides, the big company did have one saving grace, something that had me fooled, at least in the beginning: a relatively new, first-time CEO. He was larger than life with an ego to match. He was charismatic and convincing. And when he spoke, he sounded like a real entrepreneur, a man of the people.
He would often mock his predecessor. How bureaucratic he was. How he built a top-heavy organization with 17 divisions and layer upon layer of executives. How he cordoned himself off in an enormous, glass-walled executive suite with his three high-paid lieutenants occupying the vaunted office of the president.
To this day, I don’t know if that was bravado – a facade – or if the company’s bureaucratic culture eventually infected the CEO. But a few years later the company built a brand new corporate headquarters with the top dog, this man of the people, on the very top floor. I hear it was like getting through the Secret Service to see him.
I doubt if you’ll be surprised to learn that the merger ended in disaster that cost both companies dearly. And, after running the company more or less into the ground, the CEO eventually stepped down. That paved the way for the firm to be gobbled up by a much larger and far more successful company that, at one time, was its peer.
Maybe bureaucracy didn’t exactly kill the company, but I’m pretty sure its chronically bureaucratic and political culture was like an infection that permeated it from top to bottom, kept it from growing beyond a certain point, made it a perennial industry laggard, impacted its decision-making, and ultimately led to its demise.
It’s a cautionary tale and one that every executive and business leader should abide because bureaucracy is so insidious, so prolific, it can happen almost anywhere. It initially masquerades as process and methodology, a safe buffer from the chaos of constant change and competition. But before you know it, it takes hold of your culture. And once that happens, it’s very difficult to eradicate.
When we hear the word bureaucracy, we tend to think of government organizations, the poster children for the genre. You only need visit your local planning department for a building permit to see that. The employees shuffle around like mental patients on Lithium or Prozac. They resemble real-life zombies under the sickly hued fluorescent lights.
I watched my dad spend 40 years at the U.S. Postal Service in New York. He never complained much, but he occasionally joked about all the small-minded bureaucrats guarding their little fiefdoms, protecting their own butts, and stabbing each other in the back to get ahead. Funny how, decades later and on the opposite coast, my current mailman tells the same sort of stories.
The causes and effects of bureaucracy are remarkably consistent. The origin of the word bureaucrat is the French word bureau, meaning desk or office. Bureaucrats are people who sit behind a desk and do only what they’re programmed to do. They follow rigid process because that’s how things are done. They’re the keepers of the status quo.
What causes bureaucratic behavior in companies is the same thing that causes it in government organizations and political bodies: lack of accountability.
Government agencies are monopolies. They’re service organizations, but since they have no competitors, their customers are completely and totally dependent on them. And that means they have nearly unlimited power. To make matters worse, their employees and leaders are typically unionized and nearly impossible to fire.
As service monopolies, government organizations are not accountable for operating metrics, shareholder value, employee engagement, or customer satisfaction. They don’t even have to balance their budgets. In fact, the modus operandi for bureaucratic leaders is to find ever more clever ways to increase their budget, grow their organization, and expand their power base.
That’s why bureaucracies inevitably become more and more bloated and less and less efficient over time. It’s why they’re the bastions of dysfunctional organizational behavior that resists change, improvement, initiative, transparency, and anything remotely resembling accountability.
And it’s exactly why private companies must keep bureaucracy out of their culture. Private companies are not monopolies. They have competitors. They have to keep their customers happy, their employees engaged, and their executives motivated. They have to grow revenues, generate profits, and create shareholder value.
If they don’t, customers will jump ship, talent will go elsewhere, and shareholders will seek better investments. If they don’t, they’ll fail. Just like the company in the story.
To avoid that fate, executives and business leaders of every company have to do three things:
1. Clearly articulate the company’s goals, strategies and success metrics. Ensure managers and employees understand their role in the big picture, are aligned with each other, and are personally vested in the organization’s overall success.
2. Strike a balance between entrepreneurial spirit and process that rewards initiative, flexibility, and transparency while providing the tools and infrastructure the organization needs to scale and grow.
3. Above all, hold themselves accountable to those they serve, the company’s three key stakeholders: customers, investors, and employees.
More on the subject: How to Survive Office Politics.
Steve Tobak is a Silicon Valley-based strategy consultant and former senior executive of the technology industry.