Have Bureaucracies Changed? 

I read an interesting piece recently. I found it so because it violated one of my many half-baked ideas – business methods can apply to government. Seems I am wrong to make that assertion.

The piece is “Why Businessmen Fail at Government

More interesting still is it was written by Ludwig von Mises in 1944.

von Mises makes some useful points.

  1. “Government efficiency and industrial efficiency are entirely different things.” I will admit I had never considered efficiency the way he does. Maybe engineering is a poor basis for understanding efficiency. The ratio of outputs and inputs has a hidden assumption. That the output solves the problem. The outputs of a government often relate to ideas or principles or culture, while they seldom do for a business.
  2. “Its achievements cannot be valued in terms of money.” What is the right sentence for a murderer? Not easy for a profit-loss system.
  3. “Speed alone is not a measure of intellectual work.” Issuing a license to carry out some activity, say a pipeline, is not susceptible to the same reasoning as designing a faster way to produce paint. A doctor is not necessarily better because he works faster. Skate technician, Hal Flaro had a sign in his shop that explains the point, “Speed is not a good substitute for quality.”
  4. Some government activities must not fail. In business, a defective part goes on the scrap heap and costs per unit sold rise slightly. That is more complicated if the activity is one that is not easily reversible or affordable if it can be changed. Governments make more irreversible decisions than do businesses. The resulting processes seem odd to business people.

Have things changed?

I think that while von Mises makes sound points, the 70+ intervening years may have changed the playing field somewhat. It is not inconceivable that the government bureaucracy plays by different rules now. There may be some room to consider efficiency as a reasonable place to focus administrative effort.

  1. Technology is immensely different. The recording of information is very expensive using old ideas. That results in misapplied skills and resources. For example, nurses are highly trained and well paid. How does it make sense to have them spend a third of their time, or more, doing clerical tasks?
  2. The bureaucracies were once the servants of the people. In many ways their inertia made it difficult for the politicians of the moment to change things easily. The bureaucracy was the real “sober second thought” department.
  3. Today, bureaucracies seem not to have the servant of the people mentality. Many are peopled with ideologues and promote an agenda. Some have lost touch with the surrounding world. Others are obsolete. Time has lost meaning.
  4. Bureaucracies seem to exist for the benefit of the people within. The work they do is sometimes less customer-centric than the people would prefer. In Ontario a recent case of a system test registering liens on property left a citizen with a spurious lien on her car. It took nine months and a lawyer to clear it.  90 minutes might have been fair. Totally unreasonable and yet it happened. 

Businesses should notice.

Each has bureaucracies within. Businesses call them staff functions. Engineering, human resources, accounting and legal follow the same pattern as government bureaucracies. You can assess their effectiveness, but you cannot measure it directly. Bureaucracies in business are becoming less customer-centric too. United Airlines being the most visible recent example.

It is difficult to deal with departments that value their work more than the meaning of their work. Just because an employee has followed the rules perfectly, does not mean they have done the right thing. Customer service is the important aspect and is often treated as a nuisance.

Businesses and governments both are failing when they hide behind process and rules. Outcomes matter.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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