Idea in Brief

The Problem

Big companies end up creating big bureaucracies, which sap their organizations of creativity, willingness to take risk, and productivity. Though many executives express the desire to stamp it out, bureaucracy is thriving.

Why It Happens

With its clear lines of authority, specialized units, and standardized tasks, bureaucracy promotes efficiency at scale. It is also familiar, varying little across industries and cultures. Some believe it is the natural outcome of dealing with a complex business environment.

The Solution

A new organizational form is challenging the bureaucratic model. Exemplified by the Chinese appliance maker Haier, it makes employees energetic entrepreneurs directly accountable to customers and organizes them in an open ecosystem of users, inventors, and partners.

Bureaucracy has few fans. Walmart CEO Doug McMillon calls it “a villain.” Berkshire Hathaway vice chair Charlie Munger says its tentacles should be treated like “the cancers they so much resemble.” Jamie Dimon, the CEO of JPMorgan Chase, agrees that bureaucracy is “a disease.” These leaders understand that bureaucracy saps initiative, inhibits risk taking, and crushes creativity. It’s a tax on human achievement.

A version of this article appeared in the November–December 2018 issue (pp.50–59) of Harvard Business Review.