How organizations become ineffective and bloated

“Fanaticism consists in redoubling your efforts when you have forgotten your aim” ~ George Santayana

People work to together to establish goals. Collaboration requires organization, a distribution of work over people with several skills to reach efficiency and leverage. Why is organization such an important topic? Because it’s a way how people are solving problems, create products and services. It’s the way to build companies and government entities. It’s the way how society shapes progress, lastingness and wealth.

For example, the Netherlands is for more than 50% located under sea level. Since the Middle Ages the Dutch established specialized organizations, the so called Water Boards to protect themselves against floods and to reclaim land from sea and lakes.Water boards are one the oldest Dutch organizations and these are still important as main governmental institution. The screenshot below is a map that is hanging in my office and shows all the reclaimed land so far. These reclaimed lands are called ‘polders’ and became productive agricultural lands.

Overview of all the reclaimed land in the Netherlands

As you may know Netherlands is an important crops producer and is currently the second exporter of agricultural products after the United States. And Dutch expertise on flood protection and land reclamation is leading worldwide. For instance, Dutch engineers have been consulted to restore and rebuild New Orleans flood protection after hurricane Katrina. 

In the process of reclaiming lands, water management followed agriculture. This has been an effective collaboration for decades. It brought prosperity in the low lands as the economy started to grow and exports increased. Water Boards became effective organizations in securing dry feet and shaping the required conditions for agriculture. This ‘know how’ and its organization became assets for Dutch society and citizens.

Let’s go back to the issue of expanding bureaucracy addressed in my first blog. Some time ago I came along this striking image by Charles Hugh Smith

Lifecycle of organizations by Charles Hugh Smith

The image shows the lifecycle of bureaucracy and illustrates its expanding nature as described in Parkinson’s Law. The figure by Hugh Smith addresses 6 stages of organizational development. The first 3 states: ‘Launch’, ‘Growth’ and ‘Maturity’ are positive stages as an organization grows in size and efficiency in balance with its goal. The second 3: ‘Bloat’, ‘Budget Crisis’ and ‘Failure/implosion’ are illustrative for organizational decay. 

What happens in the Maturity phase that starts the decay process? This is the stage where growth slows down and bureaucratic expansion takes over. An organization still grows in size, but no longer in an effective way in balance with its goals. The process of organizational decay is universal. It doesn’t matter what country, sector, government or commercial business organization we focus on, it happens everywhere. More about this in a next blog.

Nowadays, Water Boards are going through a transition from ‘maturity’ towards the “bloat stage that started in the 80’s. Originally, Water board are practical ‘down to earth’ orientated organizations. They have tremendous practical management knowledge and experience about water systems in their region and connections with farmers and citizens. As the organization grows, more people are employed. Water boards started to receive more taxation revenue from citizens, farmers and other interests. Water Boards became more powerful as more interests became represented in the organization to have a say on goals and policies as the main focus was on agriculture originally. 

Growth is positive but has negative aspects if they’re not dealt with in a responsible way. In every situation of growth people have to deal with temptations as power, money, status and ego. Like the cliche of the successful celebrity who can’t deal with all the fame and ruin their life. More about this in a next blog.

As more interests got a say on water management, the goals of Water Boards became blurred. Politics came more and more into the mix. From the 80’s on, Water Boards had to take into account environmental and nature issues. And since the 90’s climate change was added. Last but not least the EU has established several Policy Directives that needed to be followed up by the Water Boards. In response to deal with this increasing complexity Water Boards became important clients of management consultancy bureaus. The purpose was to fill the need in making Water Boards efficient again in balance with their expanded goals and mandates. This development started to influence both the organization itself as well as its policies. 

The concept ‘New Public Management’ was introduced. This symbolizes everything that was introduced in commercial businesses by management consultants. The commercial management mentality, aka way of thinking, and jargon became standard for running governmental organizations as Water Boards. Concepts as mission statements, core values, business drivers, critical success factors, key performance indicators, competences, personal development plans and image campaigns became the centre of activities. 

The result was that policy reports became thicker, like the old fashioned phone number books. Technical expertise and engineering skills got less attention, as they were pushed to the background while this expertise made Water Boards successful. The number of internal meetings and so called ‘away days’ for management staff and teams increased as well as time spend on these. The structure of the organizations became more complex: more departments were established as the planning department, personnel department, higher management, middle management, and the technical operations department, public relations department, several policy departments and the Information and Computer Technology (ICT) department. Communication and collaboration between departments required an increasing amount of procedures, decision schemes and forms. 

The sad irony of this all is that Water Boards became complex organizations that still had to deal with complex goals. Water boards were turned into ‘bloated organizations. The picture below symbolizes this process very well in my opinion. A complex, bloated organization is like a overloaded pick-up truck, and in becoming so, unable to reach its destination, aka goal. The packages on the truck are symbolizing the organizational departments.

Overloaded pick-up truck

I see management as an important cause of growth of bureaucracy and inefficient, obsolete organizations that have lost their goal out of sight and lost their soul. Such organizations have become liabilities instead of assets, lots of talented people are working there, lot of money goes in, less comes out of it. Management consultants claim that their concepts do work of course. For instance, in the Netherlands about 70 – 80% of organizational reforms are failing, and turned out to be bad investments. 

There is plenty of literature focussing on the question if modern management theory works or not. I’m not gonna focus on that. In the next blog I highlight some very practical perspectives. I already gave a few hints in this blog.

2 thoughts on “How organizations become ineffective and bloated

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