Thursday, February 24, 2011

Bureucracy - Part I

Powershift, Alvin Toffler

Everyone hates a bureaucrat.

For a long time businessmen maintained the myth that bureaucracy was a disease of government. Civil servants were called lazy, parasitic, and surly, while business executives were pictured as dynamic, productive, and eager to please the customer. Yet bureaucracy is just as rampant in business as in the public sector. Indeed, many of the world's largest corporations are as arthritic and arrogant as any Soviet ministry. [..] Hardly a day passes without some new article, book, or speech decrying the old top-down forms of pyramidal power.

Of course, no one expects bureaucratic organization to disappear. It remains appropriate for some purposes. But it is now accepted that companies will wither under competitive fire if they cling to the old centralized bureaucratic structures that flourished during the smokestack age.

The revolt against bureaucracy is, in fact, an attack on the dominant form of smokestack power. It coincides with the transition to the super-symbolic economy of the 21st century, and it explains why those who create "post-bureaucratic" organizations are truly revolutionary, whether they are in business, government, or the civil society.

Any bureaucracy has two key features, which can be called "cubbyholes" and "channels." Because of this, everyday power—routine control—is in the hands of two types of executive: specialists and managers.

Specialized executives gain their power from control of information in the cubbyholes. Managers gain theirs through their control of information flowing through the channels. It is this power system, the backbone of bureaucracy, which is now coming under fire in large companies everywhere.

We think of bureaucracy as a way of grouping people. But it is also a way of grouping "facts." A firm neatly cut into departments according to function, market, region, or product is after all a collection of cubbyholes in which specialized information and personal experience are stored. Engineering data go to the engineers; sales data to the sales department.

Until the arrival of computers, this "cubbyholism" was the main way in which knowledge was organized for wealth production. And the wondrous beauty of the system was that, at first, it appeared to be endlessly expandable. In theory, one could have an infinity of cubbyholes.

In practice, however, companies and governments are now discovering that there are strict limits to this kind of specialization. The limits first became apparent in the public sector as government agencies grew to monstrous proportions, reaching a point of no return. Listen, for example, to the lament of John F. Lehman, Jr., a recent U.S. Navy Secretary.

In the Pentagon, Lehman confessed to his colleagues, so many specialized cubbyhole-units had sprung up that it is "impossible for me or anyone at this table to accurately describe. . . the system with which, and within which, we must operate." As private companies grew to gargantuan size they, too, began to smack up against the limits of organizational specialization. Today, in company after company, the cubbyhole system is crashing under its own weight. Nor is it just bigness that makes it unworkable.

As we leave the industrial era behind, we are becoming a more diverse society. The old smokestack economy serviced a mass society. The super-symbolic economy services a de-massified society. Everything from life styles and products to technologies and the media is growing more heterogeneous. This new diversity brings with it more complexity, which, in turn, means that businesses need more and more data, information, and know-how to function. Thus, huge volumes of the stuff are being crammed into more and more cubbyholes—multiplying them beyond comprehension uinl stretching them to the bursting point.

Today's changes also come at a faster pace than bureaucracies can handle. An uptick of the yen in Tokyo causes instantaneous purchases and sales in Zurich or London. A televised press conference in Tehran triggers an immediate reply in Washington. A politician's off-the-cuff remark about taxes sends investors and accountants instantly scurrying to reevaluate a takeover deal.

This speedup of change makes our knowledge—about technology, markets, suppliers, distributors, currencies, interest rates, consumer preferences, and all the other business variables-perishable.

A firm's entire inventory of data, skills, and knowledge is thus in a constant state of decay and regeneration, turning over faster and faster. In turn, this means that some of the old bins or cubbyholes into which knowledge has been stuffed begin to break into parts. Others are crammed to overload. Still others become useless as the information in them becomes obsolete or irrelevant. The relationships of all these departments, branches, or units to one another constantly change too.

In short, the cubbyhole scheme designed for Year One becomes inappropriate for Year Two. It is easy to reclassify or sort information stored in a computer. Just copy a file into a new directory. But try to change organizational cubbyholes! Since people and budgets reflect the scheme, any attempt to redesign the structure triggers explosive power struggles. The faster things change in the outside world, therefore, the greater the stress placed on bureaucracy's underlying framework and the more friction and infighting.

The real trouble starts, however, when turbulence in the marketplace, the economy, or society stirs up completely new kinds of problems or opportunities for the firm- Suddenly decision-makers confront situations for which no cubbyholed information exists. The more accelerated the rate of change in business—and it is speeding up daily—the more such one-of-a-kind situations crop up. [..]

When a real fluke arises—something that doesn't fit naturally into anyone's informational bailiwick—the company's first instinct is to ignore it. This ostrich response is what happened the first time foreign cars began appearing in the United States. The earliest little Opels and Citroen Deux Chevaux that turned up on American streets in the late 1950s drew a shrug from Detroit's bureaucrats. Even w hen floods of Volkswagens began to arrive, the giant bureaucratic auto makers preferred not to think about the unthinkable. There were no units inside their companies whose task was to fight foreign competition, no cubbyholes loaded with the necessary information.

When bureaucracies are forced to deal with a problem that fits into no one's existing cubbyhole, they behave in certain stereotyped ways. After some initial fencing, someone inevitably suggests setting up a new unit (with himself or herself at its head). This is instantly recognized for what it could easily become: a budget-eating rival of the older units. Nobody wants that, so a compromise is arrived at. This compromise is that familiar bureaucratic "camelephant," the interdepartmental committee or task force. Washington is filled with them. So are big companies.

Combining the slow, lumbering gait of the elephant with the IQ of the camel, this new unit is, in effect, yet another cubbyhole, only this one is typically staffed by junior people, sent by their permanent departments not so much to solve the problem as to make sure that the new unit doesn't chip away at existing jurisdictions or budget allocations.

Sometimes the new problem is such a hot potato that nobody wants to deal with it. It is either dumped on someone young, inexperienced, and luckless, or it becomes an orphan: another problem on its way to becoming a crisis.

Faced by all this infighting, an exasperated CEO decides to "cut through the red tape." He does this by appointing a "czar" who theoretically will get the cooperation of all the relevant agencies, branches, and departments. But, lacking the information needed to cope with the problem, the czar, too, winds up depending on the pre-existing cubbyhole system.

Next the CEO decides frontal assault on the bureaucrats below will do no good. So he or she tries another standard ploy, quietly assigning the problem to a "troubleshooter" on his or her personal staff, rather than waiting for the slow, resistant bureaucratic machine to act. This attempt to end-run the existing departments only further outrages them, at which point the offended units begin working diligently to assure staff failure.

Similar power games are played within each department, as its subunits also jockey for control of money, people, and knowledge.[..] One might think that infighting stops at moments of dire crisis. [..] For the image of the "rational" bureaucracy is false. It is power, not reason, that drives the classical pyramids that still litter the business landscape.

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