The Dangers of Bureaucratization
Compliance departments – the parts of organizations that specialize in the rules – thrive on the scandals that erupt when companies are found to have broken rules or laws. When a scandal becomes public knowledge, the same politicians who tolerated creative interpretations of the law for many years suddenly go on talk shows to demand that organizations must follow the law to the letter.
Organizations that lobby for more transparency publicly denounce the weaknesses of existing compliance systems and call for more rigorous monitoring not only of gifts and expenses claims but also of compliance with environmental protection laws, human rights, and standards for working conditions. And the organization shaken by the scandal happily gives in to these demands, because doing so allows them to rebuild their legitimacy at a low cost.
But there is a problem with this. As experts in rule-following, the staff of compliance departments have little understanding of the usefulness of everyday deviations from the rules. Compliance departments are in charge of the presentational side of organizations, and therefore other departments only ever show them their presentational sides. When compliance colleagues attend workshops to discuss actual working processes, one witnesses the kind of self-censorship that normally only occurs when senior managers are in attendance. As a rule, compliance staff are therefore the ones who know the least about what is actually going on inside the organization.
In the wake of a scandal, organizations introduce more formal rules, often under pressure from the compliance department, but they do not fundamentally revise existing bodies of rules. And experience has demonstrated that, even where the formal structural rules are revised, they are almost never thinned out but more often ‘refined’. In the name of ‘clarity’, the rules are specified further, conditions for triggering them elaborated, and exceptions formulated. The overall effect is that the formal structure begins to expand and infiltrate more and more aspects and elements of the organization.
Investigations in organization studies have shown that the detailed elaboration of formal rules, the clear assignment of responsibilities, and the associated obligation to keep records lead to a significant intensification of the familiar pathologies of bureaucratized organizations. In the case of the police, the introduction of extra documentation requirements and more monitoring by superiors means more red tape for officers. Attempts by universities to prevent professorial posts or chancellorships from being decided through backroom deals lead to more detailed rules and a high level of transparency – but also to excessive amounts of documentation, which is also available to the public.
The effects of attempts to refine formal rules can be observed in particular in the case of scandal-hit organizations. At the outset, the organization may suffer because of the fines it has been ordered to pay, the absence of the managers forced out of the company, or the hit to its public reputation. These problems ease, however, as the law suits cease, new managers are integrated into the organization, and the media spotlight shifts to other scandals and organizations. But it is at this point that the consequences of the refined system of formal rules and the intensified monitoring of compliance become visible: decision-making is cumbersome and the organization is inflexible. According to Sebastian Barnutz and Sven Kette, the delegitimization of any form of deviation from or violation of the rules leads to a ‘useless legality’, which even threatens to bring about a ‘failure to rule’.
The challenge is to manage the useful illegalities in such a way that, should they become known, they will not sink the organization. This challenge can only be met if there is an acceptance of the fact that no organization can do without everyday deviations from the rules and that not every violation of a rule must immediately lead to the punishment of those responsible and the eradication of the deviant behaviour. But few organizations know how to find out about informal processes through individual conversations and observation interviews, how to process this information in such a way that it is not immediately rejected by the ‘immune system’ of the senior management, or how to make informal processes a possible topic for discussion at workshops – and thus something subject to possible change. If the management is to be able to signal which ‘innovative ways’, ‘generous interpretations of the rules’, and ‘exceptions from the rule’ are acceptable and expected, and which go too far, this is what is required. Ultimately, organizations do not fail because of their everyday deviations from the rules but because of an unprofessional management of useful illegalities.
