General - It deals with Scope of the Paper, Defining
Managing Concept, Explaining the Necessity of Bureaucracy, Various
Theories governing Bureaucracy and Moore's Laws of Bureaucracy.
Cost of Bureaucracy - This deals with Questioning the
Cost of Bureaucracy, Scope of the Cost of Bureaucracy (Five Areas have
been identified relating to Cost of Bureaucracy alongwith the potential
role of Management Accountants).
Innovation & Bureaucracy
Scope of Paper: Bureaucracy has a wide scope. At
home, there is a bureaucracy. Corporate Bureaucracy serves the Corporate
sector. Multinationals are being operated through bureaucracy. NGOs and
CBOs have their bureaucracies.
ARTICLE FOCUSES OVER GOVERNMENT BUREAUCRACY.
"Managing" Concept: Management in one
exclusive aspect would be an emphasis on rational decision making. Two
aspects of management would include planning - a long term function and
controlling — a short term function. However, based on Henri Fayol's
concept, management has functional dominance and includes planning,
organizing, leading, coordinating and controlling. The concept of
"Managing" in this article has been construed to contain the
Cost of Managing Bureaucracy to reasonable limits to ensure maximum
efficiency through friendly users approach and a less burden on the
public purse to ensure diversion of consequently saved funds to
Bureaucracy - A Necessity: No Government can be run
without bureaucracy. Usually the term "bureaucracy" is
employed to denounce or criticize officialdom in modern society and more
especially, the Government Service or Civil Service in modern
Government. Max Weber designated the group of people as bureaucrats who
perform rationalized functions in large-scale organizations, especially
government ones. Thus an organization is said to be bureaucratized when
its procedures for action and decision have become formalized and
impersonalised through elaborate rules that are "public".
However, there is a need to have a better
understanding of the general characteristics of bureaucracy. A
rationally and well behaved bureaucracy has three elements, namely:
A) DIFFERENTIATION OF FUNCTIONS
B) CENTRALIZATION OF CONTROL AND SUPERVISION
C) QUALIFICATIONS FOR OFFICE
ANOTHER THREE ELEMENTS INCLUDE:
Fortunately, both Swiss and British have shown that
an effective and responsible bureaucracy is quite compatible with sound
constitutionalism, notwithstanding popular antithesis between
bureaucracy and democracy. The decisive problem is to ensure
"responsible bureaucracy". Without a functioning
constitutional system, there can be no responsible bureaucracy.
Therefore, bureaucracy is needed to operate a Government. The big
question is: What is a reasonable cost to manage the bureaucracy.
Melville Dalton, a noted American sociologist, served
in six business firms. He offered a revealing picture of organizational
structure in terms of conflicting cliques. It showed the pervasiveness
of the ensuing struggles and their impact on every aspect of
organizational life. It showed how this intense political activity can
be scrupulously and skilfully camouflaged so that the resulting policies
appear to be in harmony with the official ideology. His famous book
entitled "Men Who Manage" (1959) is worth reading.
Michel Crozier, French Sociologist, studied two
French Government agencies (The Bureaucratic Phenomenon, 1963). He
studied power and conflict. In his analysis, the social structure
consists of highly cohesive occupational groups. Each group presents a
unified and a rather hostile front towards the other. Each group
strategy consists in manipulating the rules in order to enhance its own
prerogatives and secure its independence from every direct and arbitrary
interference by those higher-ups. Consequently "areas of
uncertainty" always emerge that constitute the focal point around
which collective conflicts become acute and instances of direct
dominance and subordination develop.
The characteristics of bureaucracy were first
formulated in a systematic manner by the German Sociologist Max Weber
(1864 - 1920), whose definition and theories set the foundation for all
subsequent work on the subject. Focus is on:
i) the division of labour in the organization.
ii) its authority structure.
iii) the position and role have function effects
(predictability, precision) and dysfunctional effects (rigidity).
However, based on conflict theories, a group of
theorists have rejected the functional approach and contended that
organizations must be seen as configurations of antagonistic groups that
aim, through various strategies.
Although these theorists do view the organization
"as a whole" they see that parts of the whole are not
institutional norms but instead are groups that, according to their
power position, can influence policies.
Moore's Laws of Bureaucracy
Moore's Laws of Bureaucracy have been derived from a
social cybernetic viewpoint and are summarized below:
a) Large bureaucracies cannot possibly achieve their
b) Large bureaucracies will thrash wildly about
causing much cost, pain and
c) Large bureaucracies are evil.
d) Large bureaucracies have no heart.
e) Large bureaucracies are perverse.
f) Large bureaucracies are immortal.
g) Large bureaucracies will grow without bound.
No Government can be run without bureaucracy. Usually
the term "bureaucracy" is employed to denounce or criticize
officialdom in modern society and more especially, the Government
Service or Civil Service in modern Government. Max Weber designated the
group of people who perform rationalized functions in large-scale
organizations, especially government ones. Thus an organization is said
to be bureaucratized when its procedures for action and decision have
become formalized and impersonalised through elaborate rules that are
COST OF BUREAUCRACY
Questioning the Cost of Bureaucracy
First Minister, Rt. Hon. Davif Trimble MP, MLA, on
November 03, 2000, told a gathering of senior local government officials
that too many layers of administration in Northern Ireland was making
the job of delivering services to the public more difficult. While
speaking at the arrival dinner of Local Authority Chief Executives in
Ballymena, he explained reasons for the review of local government.
SCOPE OF THE COST OF BUREAUCRACY
The scope of cost of bureaucracy includes:
Salaries and perquisites
Amounts extracted due to
fraud and related aspects
Opportunity cost of
benefits foregone due to inefficiency, slow and time consuming
process of bureaucracy
effects of higher cost of bureaucracy
The above are briefly reviewed below:
SALARIES & PERQUISITES
As against the concept of transparency, perquisites
include considerable hidden cost which needs to be calculated and
contained within manageable limits. A revolutionary idea recommended is
that the known and the hidden cost should be included in the gross
salary and all perks should be eliminated. This transparent monitized
cost of Bureaucracy will help accomplish the theme of paper namely,
"Managing Cost of Bureaucracy" through the identification of
total cost of bureaucracy.
The corrupt should be brought on books and be awarded
punishment of a deterrent nature so that the cost of bureaucracy can be
substantially cut down. In this respect, as Management Accountants can
considerably benefit from Transparency International, Paris and
Commonwealth Secretariat, London, apart from excellent work contributed
by many International agencies. In this context, Pakistan's experience
of categorization of corruption is as under:
CORRUPTION - TYPES:
The Government of Pakistan, based on current research has categorized
bureaucrats into five types. These types are based on the intensity and
degree of corruption committed by bureaucrats at Federal and Provincial
on Cost of
largely dependent on salaries; fewer
misused any official facility.
Role Models, no
committed crimes (e.g. bribes) but
did not cross the limit.
3. Light Grey
Misused all the
official facilities and even to some extent
damaged the exchequer by their ill deeds.
Moderate to high.
4. Dark Grey
to learn the system and even became
its parts e.g. Kick-backs, bribery, favoritism.
from Crackdown against Corrupt Officials next week likely, Dawn,
Lahore, January 16, 2000.
FRAUDS AND RELATED ASPECTS
Management Accountants can help install and
operationalize strong Administrative and Financial Controls to reduce
the magnitude and size of frauds. Moreover, risk minimization guidelines
can also be prepared by Management Accountants to reduce the incidence
of frauds. In this respect, awareness in the world has started and U.K.
experience is shared below:
PROTECTING THE PUBLIC PURSE:
Cost of bureaucracy has another dimension, namely,
fraud. Frauds need to be uprooted. UK experience in local Government can
be helpful. Based on developing tools to assess risk to help auditors to
make the best use of audit resources and many other initiatives the
number of fraud cases fell by 30% over the last years, value of detected
fraud fell by 4% (£ 101 m) and more high-value, long-running frauds are
being detected in Councils in other regions of England outside London
and in Wales.
OPPORTUNITY COST OF BENEFITS FOREGONE:
The users of Bureaucracy services are badly affected
due to inefficiency, slow and time consuming process of bureaucracy. The
opportunity cost of benefits foregone by the users need to be
qualitatively and quantitatively assessed and quantified. Management
Accountants can play a productive role in this respect. An American
Experience in this regard is shared below:
LESS BUREAUCRACY & LOWER COST:
Based on Daily Policy Digest of February 22, 2002
released by National Center for Policy Analysis of USA, Physicians
designed their program "Simple Care" and results were
impressive and are summed up below:
One minute of patient care resulted in seven minutes
of administrative tasks under insurance and managed care contracts.
Using simplified cash payments seven minutes of
patient care require only one minute of paperwork.
Profit per patient visit rose to $ 10 - from a loss
of $ 7 per visit.
CONSEQUENTIAL FINANCIAL EFFECTS OF HIGHER COST OF
All over the globe awareness is growing for computing
the consequential financial effects of higher cost of Bureaucracy. In
this respect, Chinese experience is shared below:
China: Shake-up of Bureaucracy to push Economic
China's bureaucracy is a legacy of 4,000 years of
feudal history and decades of Stalinist autocrat rule. It is generally
believed that the current government machinery is over-manned,
inefficient and driven by internal rivalries that distort and slow down
Major shake up of bureaucracy in China is being done
due to the following factors:
Contradictions between government institutions
created under a centrally planned economy and market development have
grown bigger and bigger.
More than a half of the state industries are in red
and China's state-owned commercial banks are crippled by bad debts
amounting to at least 20 per cent of their assets.
The goal is the emergence of a smaller but more
powerful government, compatible with the new market economy.
With several years of liberalizing economy, China has
reached the most unwieldy aspect of the reform process — reviving the
antiquated state sector alongwith the technically insolvent sector.
There is a strong call for a deep, massive cut in the
number of government officials, ministries and departments in what is
the most drastic shake-up of China's mammoth bureaucracy since the
Communist Party came to power in 1949.
Under the small-government credo, nine other
ministries will be merged into three "super-ministries"
responsible for informatics, welfare and agriculture. Simultaneously a
couple of new ministries will be added to boost the government's ability
to improve the economy and to fend off the impact of Asian Financial
However, Government Officials try every means at
their disposal to maintain their vested interests when their department
faces the bad luck of being restructured. The following table show
concerted directions for major shake up in bureaucracy:
Shake-up of Bureaucracy
1. Cultural Revolution in
4. Ultimate aim in future
Excerpted from World News, Interpress Service. The theme was
China: Shake-up of Bureaucracy to Push Economic Reforms.
INNOVATION AND BUREAUCRACY
Yingyi Qian, Department of Economics, Stanford
University and Chenggang Xu, Department of Economics, London School of
Economics first released their paper entitled "Innovation and
Bureaucracy under Soft and Hard Budget Constraints" in May 1991 and
released the final version in February, 1997. Abstract of the above
research study is quoted below:
"Because of the inherent uncertainty promotion
of innovation critically depends on the screening mechanisms to select
projects. This paper studies the relationship between
"bureaucracy" and "financial constraints" as two
such mechanisms. The lack of commitment to hard financial constraints
interferes with its ex-post screening capability; ex-ante bureaucratic
screening is optimally chosen as a substitute. However,
"bureaucracy" makes mistakes by rejecting promising projects
and delays innovation, and the efficiency loss due to soft financial
constraints increases as prior knowledge becomes worse and as research
stage investment requirements become lower. In a centralized economy,
bureaucracy may reduce the number of parallel projects, particularly for
projects with higher uncertainties and less research stage requirements.
This theory fits much evidence and in particular it explains why the
computer industry, but not nuclear or aerospace industry, has fared so
poorly in centralized economies."
All Governments are urged to reengineer the process
of Bureaucracy, introduce bureaucracy busters concept, wherever
applicable, operationalize electronic bureaucracy to substantially
reduce the cost of bureaucracy, implement lean organizations with few
tiers in the organizational pyramid. The Management Accountants should
accept these challenges and the Governments in power should associate
them in reducing the cost of bureaucracy to manageable limits for
ushering in an era of wider prosperity, elimination of poverty,
enhancement of standard of living across the board and help accelerate
socio-economic development in the world.