In our previous post we argued that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output, but defeating bureaucracy won’t be easy. Bureaucracy is familiar, entrenched and well-defended. The challenge for would-be bureaucracy fighters isn’t unlike that faced by campaigners who, in years past, set out to change deeply rooted social institutions such autocracy, racism and patriarchy.
Long-standing realities change only when the beliefs that underlie them change. As Thomas Paine put in Common Sense, a tract that proved pivotal to the American and French revolutions, “A long habit of not thinking a thing wrong gives it a superficial appearance of being right… .” Thus the first battle to be won is against indifference. In this regard, no argument has proved more irresistible than the one which asserts that every human being should be free to exercise and profit from their natural gifts, and that human-crafted impediments to that pursuit are unjust.
What’s the least efficient activity in your organization? What sort of work delivers the least value per dollar? We think it’s management and administration. The fault isn’t with any particular leader, but with the top-heavy, bureaucracy-infused management structures that predominate in most organizations. We believe that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output, or about 17% of GDP. Here’s the data.
According to the U.S. Bureau of Labor Statistics, in 2014 there were 23.8 million managers, supervisors and administrators in the American workforce. (This figure does not include individuals in IT-related functions). That works out to one bureaucrat for every 4.7 employees. Overall, bureaucrats comprised 17.6% of the U.S. workforce and received nearly 30% of total compensation. (See Figure 1.)
Figure 1. Employment and compensation share of U.S. managers, supervisors and administrators.
The question is, how many of these 23.8 million overseers do we actually need? We can get an answer by looking at the management practices of a small but growing number of post-bureaucratic organizations. Their experience suggests it’s possible to run large, complex businesses with less than half the bureaucratic load found in...
Writing for Harvard Business Review in 1988, the renowned Peter Drucker predicted that in twenty years the average organization would have slashed the number of management layers by half and shrunk its managerial ranks by two-thirds. Yet despite the recent emergence of the “gig economy” and the “sharing economy,” there’s no evidence that bureaucracy is on the ropes—quite the opposite, in fact.
In 1993, 47% of U.S. private sector employees worked in organizations with more than 500 individuals on the payroll. Twenty years later, that number had grown to 51.6%. Large organizations, those with more than 5,000 employees, increased their employment share the most—from 29.4% to 33.4%.
Meanwhile, the percentage of Americans who are self-employed dropped to an all-time low. Today, of the roughly 120 million Americans working in the private sector, 62 million work in organizations that are big enough to have the trappings of bureaucracy. To this number we must add the 22 million souls who work in public sector organizations, where bureaucracy seems as inescapable and unremarkable as coffee-stained carpeting.
Within these organizations, the “bureaucratic class” has been growing, not shrinking. Between 1983 and 2014, the number of managers, supervisors and support staff employed...
As an open innovation and collaborative platform, the MIX is able to thrive thanks to the contributions of the most progressive leaders, provocative management thinkers, and in-the-trenches management innovators—indeed, anyone with ideas for making our organizations fit for the 21st century. As we begin a new year, we’d like to recognize the five most popular Hacks, Stories, Videos, and Blog Posts of 2012, based on traffic.
We recently ran an on-line brainstorming session we call “Quick MIX” focused on a topic related to the current Innovating Innovation M-Prize challenge . The question for the Quick MIX was: what is the one thing you’d change to make organizations more innovation-friendly? Last week we ran the first installment with eight provocative recommendations distilled from Quick MIX contributions. Read the second installment here for eight additional ideas.