The Bloj

Ramble: Bureaucracy

Posted on April 23rd, 2008 by Chris.
Categories: Business/The Software Industry, Chris, General/Misc..

This is how bureaucracy works. When you first see this, if you’ve had any experience with office bureaucracy, you may think “that’s true!” followed by “that’s crazy” followed by “that’s life,” and then you may run away because you want to watch scrubs or family guy or something.

I don’t have a TV though, so I will now try to figure out how to fix this problem. In the process, I will probably accidentally prove that it’s good not to watch TV. But that’s ok, because I’ll probably watch TV after that, disproving everything I just said.

Bureaucracy

is all about the disconnect between people and their incentives. At big corporations and gov’t organizations, you don’t earn the money you spend; you get a budget. If you want to spend more, you use up all the money you have and then try to talk the right person into giving you more next year.

When one person runs a business, they try to do what’s in their best interests. When two people work together, they will tend to hold each other accountable. When one thousand people work together, the interests of the group become disconnected from the interests of the individual.

The Myth of the Rational Voter describes this very well. It may be true that how well my company does affects my well being, but I make a very small difference to a big company, and this is outweighed by even a small incentive to act in a different way.

Transparency

Once a group gets big enough, we must find a way to realign the incentives of its members with the incentives of the group.

One of the things we mentioned earlier was holding people accountable (in the case of small groups). We also noted that people are disconnected from their incentives in large groups. If we can make the individual’s accomplishments public within the group, we can measure them.

There is a weakness to this approach:

1. The individual is rewarded on appearing to be helpful, not actually being helpful.
2. Even if people are honest, there is no way to say for sure what is helpful–if the organization is driven by thousands of people, it may be impossible to accurately measure individual contributions.

The Free Market Approach

The most well-known of getting people to act in the general interest is market economics, which argues that people who are free to act in their own best interests and have a way of exchanging value with others will maximize the public’s well being as a whole. It’s interesting that though the economy is largely free market, corporations internally are run more like dictatorships; this may imply that there is some reason for the free market organizing principle to break down within a corporate body.

Is it, hypothetically, possible to change an organization into a group where everyone buys and sells from each other? If so, how would we preserve the advantages of a corporate structure?

For example, say I have a software product and I need someone to develop features for the latest version. Insofar as the product is modular, I can pick a module and contract out bids to people within my company. So far, so free. However, systems within a company tend towards natural monopoly–it is unlikely that any company would throw out its working team to replace it with a new, less experienced one.

Need that be absolute? Perhaps part of owning a process is having the ability to transfer knowledge about that process. If you can force the team working for you to make that process transferable, it changes from their asset to yours (and lest this seem unfair, you would likely pay for the privilege). The same goes for software as it does for factories or stores - if you don’t have the information to operate it with a different team, then you don’t own all of it.

Final Comments

But this is just one objection - an example amid many. The U.S. Army, certainly, could not operate along those principles. The power of choice is necessarily limited when it comes to a professional army.

Transparency can get people to operate in a way that appears good, though it wouldn’t actually make them act in the way best for the organization overall. There won’t always be two or more actors to compete for the same work and push the best one to the top.

Individuals can generally be counted on to act in a way that benefits them; the free market is largely based on this principal. Bureaucracy is typically about getting large groups to act in a way that benefits them as a whole; even when this is parallel to the individual example (large numbers of bureaucracies competing with each other) there is a necessary weakness–individuals are still individuals, and try as we might to get their interests to all point the same way, they will inevitably shift in their own direction.*

This may in fact be a good thing. Do we want the Mafia’s cronies to act with single minded purpose towards advancing the Mafia, or would we rather they skimmed and subverted?

That individuals can be counted on to act in their own interest more reliably than a group interest** may act as a bulwark against the power that a group has against an individual. Plenty of groups have turned against each other in history, but it is likely that there are injustices that have never occurred, simply because the unjust lacked the ability to act with sufficient unity.

* If you want to reduce this subversion, forcing people to act in the open is highly useful. Mobilizing the forces of conformity is likely to encourage people to act more subtly in their interests, however.

**(at least, when the group is not pitted directly against another group)

(originally started January 20, 2006 @ 00:22)

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