The Ten Commandments for Business Failure - Don Keough [41]
You’re on your way to the bathroom and someone buttonholes you, saying, “I’ve been meaning to talk to you about something.” I always tried to steer them away by saying, “Wait until the operating meeting and then we’ll talk about it.” Most of the time, we were able to resolve differences, or at least control the potential damage.
Bureaucracy is a tough beast to tame.
“A committee is a group of men who individually can do nothing, but as a group decide that nothing can be done.”
—Fred Allen
WARREN BUFFETT reported that in one of the companies Berkshire Hathaway took over, in the first month they eliminated fifty-four committees that were eating up about ten thousand man-hours monthly. As Buffett said, “It’s unbelievable how much bureaucracy can build up in businesses, particularly those in which you can pass almost all of your costs to the consumer.”
Just for the record, in 2007, Berkshire Hathaway owned more than 76 companies with almost 232,000 employees generating revenues of more than $18 billion. Their world headquarters staff consists of 19 people.
Peter Drucker spent more than sixty years teaching, consulting, and writing more than thirty books. One of his consistent themes was that smart enterprises don’t micromanage their employees, ordering around every minute detail of their lives. Smart enterprises value their employees and encourage their contributions and encourage their creative spark. Dumb enterprises, by contrast, let layers of bureaucracy smother their employees’ imaginations.
“What do you do, Bob?”
“Nothing.”
“And what do you do, George?”
“I’m his backup.”
DRUCKER’S ONGOING CRITICISM of bureaucracy culminated in a landmark article entitled “Sell the Mailroom,” which ran in the Wall Street Journal in 1989 and was republished in 2005. At a time when the vast majority of businesses were busy trying to improve the efficiency of support staff, Drucker suggested that they should be eliminated entirely by outsourcing their work to independent contractors. Drucker noted:
In-house service and support activities are de facto monopolies. They have little incentive to improve their productivity. There is, after all, no competition. In fact, they have considerable disincentive to improve their productivity. In the typical organization, business or government, the standard and prestige of an activity is judged by its size and budget—particularly in the case of activities that, like clerical, maintenance, and support work, do not make a direct and measurable contribution to the bottom line. To improve the productivity of such an activity is thus hardly the way to advancement and success.
When in-house support staff are criticized for doing a poor job, their managers are likely to respond by hiring more people. An outside contractor knows that he will be tossed out and replaced by a better-performing competitor unless he improves quality and cuts costs.
Outsourcing to create a flatter, leaner organization is a more efficient and arguably more innovative way to run a business.
If you want to fail, love your bureaucracy—to death!
I have one final observation on the hazards of bureaucracy: At their worst, they cannot only impede success, they can also precipitate disaster.
On January 28, 1986, the space shuttle Challenger exploded shortly after liftoff, killing all seven of its crew members. On board was Christa McAuliffe, the first participant in the NASA Teacher in Space Program.
On February 1, 2003, the space shuttle Columbia burned up on reentry over Texas, killing all seven of its crew members.
Both of these