Title MAX WEBER & IDEAL BUREAUCRACY

Name NGUYEN TRA MY ID# 24458

Course BBA IN FINANCE AND ACCOUNTING 1ST YEAR

Submission Date: 26 January 2012 Submitted Academic Year 2011/2012 Semester: Fall I hereby certify that this paper is the result of my own work and that all sources I used have been reported.

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Kozminski University 2011

Principles of Management - Take Home Exam

NGUYEN TRA MY ID# 24458

Topic 8: Can an ideal bureaucracy occur in practice? Present the key elements of Webers model of bureaucracy. What organizations are closest to the ideal model of bureaucracy and why? Provide and describe real life examples. Quote your source. Can a world entirely free from red tape really exist? Justify your answer.

Every organization nowadays tends to use some degree of formalization. It means bringing some degree of formal regulations and paperwork into the organization that is, legitimizing the organization. Introduction of formalization helps overcome chaos and establish common rules and regulations within the organization. However, if formalization is not handled well, it can lead to over-formalization or underformalization. Over-formalization refers to too much of paperwork and obligatory processes, which results in underperformance of work, inefficiency and lack of spontaneity and flexibility. Whereas, under-formalization results in chaos, disorder and unpredictability, which are caused by lack of formal regulations. Therefore, an organization needs to balance the degree of formalization in order to survive and sustain in good conditions.

The model of an organization that is managed based on formalization is called bureaucracy, that is, the power of the office that acts based on official regulations (Management: From the Basics, Kozminski A.K. & Jemielniak D., 2011, 45). This model has been studied by one of the founders of sociology, Max Weber (19222002). I had a chance to listen to the detailed description of this model by professor A.K.Kozminski during his lecture. With reference to this lecture, there are several characteristics of an ideally bureaucratic organization. Firstly, it functions on a continuous basis - that is, functioning in the long run while strictly subject to official regulations. Examples that clearly illustrate this point are public administration and government. Secondly, an ideal bureaucracy is characterized by impersonality and impartiality. It means that all the division of power, promotions, and procedures are not based on connections and relations, but on skills and official rules; and everyone being in similar positions (hierarchical levels) is treated equally. All the personal beliefs and personal issues must be strictly separated from work. Thirdly, a bureaucratic organization has a clear system of hierarchy and control. It has to be specified who can do what and who can tell whom to do what. Every level of hierarchy must be dependent on the level above it and all the key decisions are made on the top level of hierarchical system. This allows the organization to be strictly controlled and not chaotic, provided that the degree of bureaucracy is not excessive. Fourthly, promotions and awards should be based on real abilities and skills instead of connections and background. We are all familiar with the view of kings successors being given the power from birth, which is one example of power given neither based on abilities nor skills. In bureaucracy, one is worthily promoted if

he deserves to be and one is fairly punished if he does not fulfill his obligations and tasks. And the last but not least characteristic of bureaucracy is specialization and rationality. Each member or a group of members is assigned to a specific task based on their expertise and they are required to fulfill the task according to the internal rules and strictly following the legal regulations. Usually, a task is given taking into account the authority and responsibility of the person. When authority exceeds responsibility, what will happen is abuse of power; on the other hand, if responsibility exceeds authority, it will be impossible to perform the task.

Based on the description of an ideal bureaucracy, I think it can hardly occur in practice or if it does, then only to some extent and usually does not succeed. I would say that this model appears to be too ideal to be real because even the government, which applies a high degree of formalization and always follows legal authority, does not strictly follow this model. The reason is probably that too much of bureaucracy will lead to bureaucratism, which is, according to Max Weber, a negative aspect of bureaucracy (Management: From the Basics, Kozminski A.K. & Jemielniak D., 2011, 55). It tends to reduce the spontaneity and flexibility of the organization in dealing with matters that require immediate response. For example, my fathers company is cooperating with the company CEDC (http://www.cedc.com/), which is one of the worlds largest vodka producers. My fathers company is situated in Vietnam and my father is the companys representative in Poland, however, this is a joint stock company so in order to make important decisions, such as which labels to choose for import or which company to cooperate with, he has to go to Vietnam, bring samples with him and other necessary documents in order to have a meeting with the companys shareholders and make a decision. So at the very beginning of the cooperation, my father corresponded with the representative of CEDC in Asia (situated in Japan) by emails. He presented all the necessary information about the company and himself believing that this representative is in charge of signing the contract of exclusive distribution. This matter was urgent to my father because he was planning to go to Vietnam in a couple of days to present this matter to the domain company. However, it turned out later that the person in charge of signing this contract was in Paris and the representative was going to have a meeting with him in Paris in a week. Then, apart from 1 week of waiting, it would take about 1 more week for all the necessary procedures and, once again, introducing my fathers company to that person who is in charge. So my father had a delay of 2 weeks, comparing to his notice to the domain company in Vietnam. In this example, I could see that the bureaucracy in such large companies sometimes can cause great inconveniences because eventhough, the representative was for the territory of Asia, all the key contracts were still to be signed by a head director who was in France. However, apart from the first and most important contract, all the other documents can be signed by the representative. So the company is not fully applying bureaucracy but just some small degree of it in order to maintain the company in strict control.

Another reason for which ideal bureaucracy does not work in practice is that it is very time-consuming. Great amount of paperwork results in significant delays in the

completion of work. For instance, VISA application processes are extremely complicated, time-consuming and demanding. This is not an example of the ideal bureaucracy but it is very close to one. When applying for a VISA from Poland to the UK, or to any other country, it requires a lot of effort and time to complete all the necessary paperwork, applications (hard copy and online), registration, etc. It takes a lot of time and often results in a negative response from the embassy due to very small mistakes that were made in the applications (which are not allowed to be corrected at that moment according to the official regulations) and forces the applicants to do the whole process all over again. One more reason for which an ideal bureaucracy would not work in practice is its lack of efficiency in profit organizations. In my opinion, bureaucracy can cause lack of efficiency because companies are obliged to go through many formal paperwork and processes before taking action, so the productivity might be negatively affected. Besides, since decisions can only be made by top-level superiors, it is, again, time-consuming in order to get to one decision. Ideal bureaucracy also prevents from creativity and innovation. People can only fully apply their potentials, their creativity if they feel free. In ideal bureaucracy, there is no freedom for employees because at every stage, they are held back by regulations, restrictions and time-consuming processes. An example of good environment for creativity and innovation is Google workplace. In Google workplace, the offices and meeting rooms are designed completely differently than in other companies. Besides, Google employees can enjoy the relaxation center like massage, relaxing aquarium, the huge reading room or the vast choice of food and drink provided all the time. Large boards are available just about everywhere because ideas dont always come when seated in the office says one of Google managers (http://www.hoax-slayer.com/google-office-photographs.shtml). A Googles employee does not even need to go home after work because the workplace provides all the necessities that one would need, even such as baby care center. Being in such free and innovative workplace, the employees have a tendency to come up with more creative ideas and to be more motivated to work than in other companies. In ideally bureaucratic corporations, we would not be able to see such freedom or innovation because every action has to strictly stick to the rules and regulations. This also shows that employees confidence is reduced under bureaucracy. Too much of rules and regulations might cause a feeling of not being trusted for employees. People always perform better if they know that other people, i.e. coworkers or superiors, count on them and trust them. In bureaucracy, everything is based on rigorous standards.

Organizations that are closest to the ideal model of bureaucracy are mainly government agencies & public administration, police system, education, courts and legal agencies. Extremely large and old businesses also tend to apply this model due to the fact that bureaucratic systems usually gradually develop over a long period of time, and hence are more commonly found in large & old businesses (Leadership Styles Autocratic vs. Democratic vs. Bureaucratic, Simon Oates, http://www.leadership-expert.co.uk). The political system in the North Korea is also one evident example of bureaucracy, which is partly to be blamed for the famine in the North Korea. Kim Jong-un, the current supreme leader of North Korea, was not chosen by elections or awards, but following the death of his father. And with reference to a bigger scale, I would also include Communism and Capitalism here.

Communism is an ideology that all factors of production within a country are owned by the state, no private ownership is allowed. Capitalism is a system which, on a contrary to Communism, encourages private ownerships. Communism uses bureaucracy to manage its government and that led to corruption, whereas Capitalism does not rely on bureaucracy and it sustains and works successfully.

The number of reasons for these kinds of organizations to keep using bureaucracy is uncountable because each organization has its own strategy and its own mission so it has to fit the management style for the best of the company. However, there are several common reasons that I could come up with. The most significant of all is Safety. A large amount of paperwork and strict regulations can help prevent cheating, dishonesty and misconduct within a particular organization or between many different organizations. For instance, we are all aware that some of the obligatory paperwork and petitions that have to be filled during divorce procedure are unnecessary and time-consuming but these complicated and exhausting procedures are meant to ensure safety for the government in cases of further complications. The second reason for some organizations to use bureaucracy that I came up with is Control. As noted in the definition and main characteristics of an ideal model of bureaucracy, it has a clearly defined hierarchy that is, every level in the hierarchy is controlled by the level above and is entitled to control the level below. The whole hierarchical system of bureaucracy is interdependent and, thus, is able to ensure a high level of control over the organization. The decision making tends to be centralized so the toplevel of the hierarchy has perfect control over all the decisions that are made within the organization. For example, in the company CEDC that I mentioned earlier, the representative in Asia was not entitled to make a decision on signing the contract with a new business partner (my fathers company). Although being the representative of the company in the whole territory of Asia, he was dependent on the main sales director, who was entitled make the decision and to sign the contract. In that way, the company CEDC can be sure about perfect knowledge of all new business partners and have tight control over all parts of the company, which are located in different parts of the world. Apart from Safety and Control, I think ensuring Stability & Predictability is also one of the common reasons. An organization which applies bureaucracy can be more certain about stability comparing to a private and democratic organizations because in bureaucracy, all decisions and actions have to be subject to the set rules and regulations, there is no room for innovation or risk taking, whereas in private and democratic organizations, all the members are encouraged to take part in decision-making, giving feedback and coming up with innovative ideas. Since bureaucratic organization has to strictly follow the established rules, the organization tends to be well predictable and can avoid unnecessary chaos or entropy.

Organizations such as government and extremely large corporations often apply bureaucracy for the reasons of safety, control and stability. However, excessive use of bureaucracy is often the case, which is called red tape. Red tape is excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making (Wikipedia, Red

Tape). The term red tape was invented in the 16th century and the idea was that all the documents tied by red tape were the more important ones that needed to be discussed by a higher authority and were treated with priority, while the other documents were tied by ordinary tapes and were considered not so important. Many organizations try to abandon this practice of red tape and the European Commission even introduced a competition for the best idea of Red Tape Reduction. However, the red tape practice still exists and according to Barry Bozeman and Mary Feeney in Rules and Red Tape, red tape exists when managers view formalization as burdensome and detrimental to organizational purposes. If I was asked whether the world can entirely free from red tape really exist, I would say no because as negative as red tape would be to some organizations, it is still the tool for survival and bringing order into some other organizations. In my opinion, red tape practice might be reduced, but can hardly be vanished.

On the whole, bureaucracy is a good idea for managing an organization because it brings certainty, control and stability. But this can mainly apply to public and longterm organizations and governmental agencies because bureaucracy requires a particular amount of time in order to be effective in bringing safety, control and stability. However, the most important issue is to be able to handle bureaucracy so well that would not to lead to either over-formalization or under-formalization. In the case of knowledge (or technology) intensive organizations, bureaucracy would only lead to corruption due to the fact that stability barely goes along with innovation or development. Bureaucracy can only ensure a moderate pace of development, which is not what knowledge intensive organizations can rely on. The same applies to profit organizations, such as import-export corporations or fashion stores because in these kinds of organizations, spontaneity, creativity and risky moves are the ones that often bring the highest margins; safety and stability here would only result in heavy losses.

Bibliography:

^ Management: From the Basics, Kozminski A.K. & Jemielniak D., 2011 ^ Lecture from prof. A.K.Kozminski ^ http://www.cedc.com/ ^ http://www.hoax-slayer.com/google-office-photographs.shtml ^ Article: Leadership Styles Autocratic vs. Democratic vs. Bureaucratic, Simon Oates, http://www.leadership-expert.co.uk ^ Wikipedia, Red Tape, http://en.wikipedia.org/wiki/Red_tape ^ Book: Rules and Red Tape, Barry Bozeman, Mary Feeney, April 2011