Principle of Bureaucratization

by | Aug 6, 2018 | *Financial Awakenings, Business Owners, Money Psychology, Weekly Column

A client recently told me about her first medical checkup after becoming eligible for Medicare. “The doctor said things like, ‘They require us to fill out this form,’ and ‘This test is covered every three years, so we can’t do it this year,’ and ‘Medicare will pay for a baseline EKG even though you have no history of heart disease.’ I’ve gone to this doctor for ten years. I’m the same person I was a year ago. Yet it felt as if I had moved to a category where the appointment was all about the paperwork instead of my health. ”

A situation like this, where the paperwork seems more important than the person, demonstrates something I call the Principle of Bureaucratization: the idea that the more layers of decision-making are added to an organization, the less efficient it becomes in delivering its goods or services.

While this phenomenon affects organizations and governments of all sizes, the negative outcomes seem to increase the larger a company becomes or the further away the seat of government is from its constituents. Municipal services seem to be delivered more efficiently than state services. State services tend to be more efficient that those coming from the federal government. There are some exceptions, but not many.

One reason is that the further removed from you the decision-maker is, the less personal the services will be. Moving from the private health care system to the government-run health care system called Medicare is just one example. The same principle seems to apply in other countries. I have visited the UK numerous times, and it seems that every time I’ve read a newspaper article about some specific failing of the NHS (National Health Service). Just recently, at a workshop in Europe, a participant from the UK told me that the waiting list to see a psychiatrist was one year. “The NHS simply works against you,” she said with exasperation.

I think most Americans can agree that our healthcare system is badly flawed. We may disagree on the causes and cures. I see as one major problem that our federal government has created a regulatory structure which allows a select number of health insurance and pharmaceutical companies control over the health care system. These regulations have sent insurance costs soaring by almost eliminating competition. Third-party payment of medical bills means those receiving the services don’t have any incentive to even ask about costs.

Bureaucratization isn’t limited to governments. It also affects large companies where the policies are made by people many layers away from the customers, and the employees dealing with customers don’t have the authority to make decisions or solve problems. Who hasn’t experienced having a seemingly easy problem to solve with a service provider, calling a customer service representative, and ending up on the phone for 45 minutes being passed from department to department and supervisor to supervisor?

Many employees of large firms and governments are equally frustrated by the bureaucracy created in their organizations. Bureaucratic organizations stagnate innovation and responsiveness. They are especially inefficient when those dealing directly with consumers don’t have any significant consequences riding on the quality of the goods or services provided. This is one reason why many, like Brian Robertson in his book Holacracy, believe the “best practices” governance model for organizations is a self-organizing structure that empowers employees closest to consumers to make decisions.

What’s the bottom line? You’re ultimately responsible for your own well-being. Ask questions, be the squeaky wheel, and, above all, make connections with those working in the bureaucracies you deal with. Help them keep in mind that their purpose is to serve people, not paperwork.

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