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By our estimates, an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output per year. When you look at all 32 countries in the OECD, the cost of excess bureaucracy rises to nearly $9 trillion.
Yet while the incentives for dismantling bureaucracy are substantial, so are the hurdles. Bureaucracy is ubiquitous, familiar, and deeply entrenched. For most managers, bureaucracy is not merely the “safe” choice; it’s the only choice. They’re likely to see radically flat organizations like Haier, Valve, and Morning Star as weird exceptions, as opposed to valuable exemplars.
Upending cultural norms isn’t easy. It takes courage, a dose of righteous indignation, and, perhaps most critical, data. People pay attention to things that can be measured. To dismantle bureaucracy, then, the first step is to be honest about how much it’s costing your organization. These costs fall into seven categories:
o Bloat: too many managers, administrators, and management layers
o Friction: too much busywork that slows down decision making
o Insularity: too much time spent on internal issues
o Disempowerment: too many constraints on autonomy
o Risk Aversion: too many barriers to risk taking
o Inertia: too many impediments to proactive change
o Politics: too much energy devoted to gaining power and influence
Not all of these costs can be easily measured, but that shouldn’t deter you from working to calculate your organization’s bureaucratic burden. We call it BMI, or bureaucracy mass index.
How pervasive is bureaucracy in your organization? How much time and energy does it suck up? To what extent does it undermine resilience and innovation? Which processes are more trouble than they’re worth?
To find out, take the assessment [provided in the article]. At the end of it, you’ll see how your results compare to other readers’.
Reducing bureaucracy won’t happen until its costs are visible to all internal and external stakeholders of your company. A decade ago, few companies reported on environmental impact — now many do, thanks to pressure from governments, customers, and environmental advocates. Similarly, shareholders and other interested parties need to press CEOs to detail the costs of obsolete management practices and to develop plans for eliminating those costs.
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Here is a direct link to the assessment and the remainder lf this article.
Gary Hamel is visiting professor at London Business School and cofounder of The Management Innovation Exchange. His latest book is What Matters Now.
Michele Zanini is the Managing Director of the Management Lab and co-founder of the Management Innovation eXchange, a pioneering effort to reinvent management by harnessing the power of open innovation.