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Institutionalization vs. Bureaucracy

By Pat Lencioni - June 2016

Organizational Health

Whenever I speak to a group of executives about organizational health, I explain that leaders must "institutionalize a company's culture without bureaucratizing it." People universally respond to this, most likely because they understand the painful impact of creeping bureaucracy. But what is it about bureaucracy that provokes such a reaction in people?

Before getting into that, let's be clear that every organization needs a certain amount of structure in order to preserve what is good about it. This is what I mean by institutionalizing a company's culture. Rules, processes and protocol are requirements of any organization that wants to build consistency around its unique strategy and culture. The problem with bureaucratic organizations is not only that they implement too many rules and regulations, but that those rules and regulations seem to serve no clear strategic or cultural purpose.

An example might be helpful: there is a big difference between the bureaucracy of United Airlines (or one of the other big ones, I suppose) and the institutionalization of Southwest Airlines.

If I were to relay all of the maddening and incomprehensibly bureaucratic treatment I've witnessed and experienced while flying United, this POV would be long enough to be a book. In fact, if someone else were to write that book, I'd certainly read it because, after all, misery loves company. What makes flying United (or going to the DMV, for that matter) so frustrating is the loss of hope and dignity you feel when you ask an employee a question like "what's the point of that rule?" or "why does it have to be that way?" Usually, the flight attendant or gate agent just shrugs, either with indifference, or on a good day, with a sense of empathic hopelessness. There is no sense that they understand why they're doing what they're doing, or that they're empowered to make a decision on their own. And if you take the time to talk to them about their experience working at the company, something I often do, you realize they are victims of bureaucracy as much as their customers are.

Contrast that with Southwest, a company that is not perfect, I know. However, one of the biggest differences between flying the two airlines is not simply that Southwest has fewer rules, but rather that it designs its rules to fit its culture and strategy. This is evident when you ask an employee a question, and get a coherent, logical and understandable response.

Years ago, I was flying Southwest and expressed my desire to a gate agent, who was no more than 23 years old, that the company put seats in the boarding area that corresponded to a customer's boarding number. This would allow me to put my luggage down and rest or go to the restroom without losing my place in line (this was before they had numerical boarding passes). In a kind and confident way, the employee explained that it would cost money to do that and they'd probably have to raise fares, which violates one of the primary tenets of their business. The policy made sense. I felt acknowledged. No problem.

What's the lesson in all of this? A healthy organization first has to know what it stands for, culturally and strategically. Then it has to put in place just enough processes and procedures to institutionalize its culture and strategy, and no more. Finally, it must communicate – and make sure that employees can articulate – the reasons for those processes and procedures in a way that preserves dignity and sanity of the human beings that the organization serves.

This approach to avoiding bureaucracy applies whether you're a CEO leading an airline, a superintendent overseeing a school district, or a president heading a nation. When leaders and the people who work for them fail to understand the cultural and strategic underpinnings of their organization, and how those underpinnings impact real people, they almost inevitably create an environment where bureaucracy explodes. Rules are put in place for the sake of having rules, and not to serve the needs of the people they're supposed to serve. When that happens, everyone suffers, with the possible exception of the bureaucrats who always seem to be protected from the costs of rules and regulations.