[MUSIC] In this segment, we're going to focus on the first dimension, of management in the model I introduced in the previous segment. And that is all about coordination. How activities, get coordinated. In firms. Think of this in terms of managing across, how the, how the manager gets the pieces of the puzzle as it were, working effectively together. There's two basic, concepts out there as to how we coordinate. And on the left hand side, in the top left, you will see this principle. Called bureaucracy. Now you all know the word bureaucracy, and I'm just going to make sure that we define it and understand it in a way that actually helps us to really understand it, its strengths and weaknesses. And the term bureaucracy was, was, was invented by a German sociologist called Max Weber. Some of you have heard of this guy. He was operating in the early part of the 20th century. And if I'm going to put it into a single sentence, I would say that coordination, according to Weber. Was coordination through formal rules and procedures. In other words, we use almost like depersonalized systems, to enable coordination. Now the word bureaucracy has become tainted. Right? When we talk about. A company being bureaucratic that almost always, got negative connotations. It's just worth reflecting though, that when Weber came up with this concept originally, it was actually seen as, as the solution of the problem. And, and you just gotta spend a few minutes just thinking about Web, where Weber was coming from. He had this concept that authority. To kind of one of three forms. There was kind of traditional, authority. There was what he called charismatic authority. And then was what he called rational or legal authority. Now back in that era, of course, there were an awful lot of countries as well as companies that were, that were run using very, very traditional means or often being run by, by, by autocrats. By dictators. And so he come up with this three fold categorization, as a way of saying look, across the world, whether in political systems or in corporate systems, those three alternatives, essentially his first one, the traditional one, was almost like a, a traditional monarchy, if you see what I mean, where. Power is handed down. You know, through, through the generations to whoever is next in line to become king, or queen. And in his view that didn't work particularly well. And then you have this notion of charismatic authority. Which was of course the case of, if you like, the, the dictator who comes to power, and grabs authority for him or herself on the basis. Of personal charisma, and again, that didn't work very well, because even though a particular dictator might be successful for a time, they very often became, became, became very, very dangerous people. So he actually had this concept, of the the rational legal form of organizing, which is akin to what we would today. Called a democracy, whereby essentially we deliberately de-personalize things. We create a system, which is bigger than any individual in that system. And as people we can vote out our leaders in a country, and in a corporate, well, it's very unusual that we vote out our leaders in a corporate system. But at the very least what we do is we create a corporate system with checks and balances, so that the individual's running that place are actually beholden to. The needs of the greater whole rather than, being just some greedy dictators or traditional kind of monarchs. So, Weber came up with this concept. It was a beautiful concept in principle, and indeed it works pretty well. It has worked, and it continues to work. And on the slide you see here, what you see are, are three of the kind of the big benefits of, of this system. First of all. We create efficiency through hav having standardized rules and procedures. Everyone knows what they're doing, because everybody is following the rules. Secondly, people are given roles according to their expertise. We're given functional activities, to do that suit our particular skills. And third, we get rid of favoritism. We get rid of this idea that certain people get to the top because either they, you know, they are sons or the daughters of the previous leader, or because they are just the personal favorites to the person at the top. And if you think about it, all of these are pretty sensible principals. It is very good idea, to use these principals. So that is what bureaucracy is, and we must not denigrate it unnecessarily. What we have to say to ourselves is bureaucracy. Has these enormous benefits. And under certain circumstances, it continues to be a highly effective way, of getting work done through coordination of differing parts in an efficient way. However, we all, I think, experience, that bureaucracy also has its down sides. And, it's worth now just playing out what some of those downsides are. First of all, it is slow moving. Almost by definition, the more people who are involved in running a process, the risk is that all, they all feel obliged to have a stake. In what comes out of that decision. You've all been in meetings I suspect, where we've had too many people in the meeting, and the meeting has reached some sort of, almost like, deadlock because we can't agree. So bureaucracy slows things down. Bureaucracy is also internally focused. It's very easy when you're running a, a resource allocation process, or a budgeting process, to be convinced that the process itself matters. And by completely losing track, of what it was that you were doing the process 400 plus first place. So there is always a risk, that we become internally rather than externally focused which is dangerous. Thirdly, it is disempowering. It is actually the case that the people inside a process, almost by definition find themselves doing little pieces of it rather than, thinking of the big picture. Now you just go back a, a century or two. Go back to Marxism. Go back to Karl Marx. If, I don't know if you've ever studied this, but Karl Marx said that one of the reasons why, you know, our democratic systems are capitalist system. Was going to fail was beacuse essentially, employees were becoming alienated from the fruits of their labor. So, in some ways, he was kind of spot-on because, of course, when I, when I talk about in terms of disempowerment, was exactly what Marx was talking about in terms of, of alienation of employees. Now, I'm not a Marxist, nor will I ever be. But on that particular point, I think Marx was right he, he hadn't sort of extrapolated from there and then, then came to a review of the world around class warfare. Which obviously I don't agree with. For me, the managers in the system are part of the solution not part of the problem. Their job is to help to, to re-empower employees. Not to, to disempower them further. But nonetheless, the bureaucratic system. Is highly disempowering, for many, many people. And then finally, the bureaucratic system leaves little room for creativity. It's very difficult as an individual employee, to take any sort of risks, to try anything new because you are a cog in a machine. You are just a little part in a system, and you just don't have the degrees of freedom, to be allowed to step outside those boundaries. So as a system, it works as long as you know exactly what it is you are trying to do, and as long as all you what to do is to continue to replicate that time, after time all just read it out for you, it's a nice defination of bureaucracy the succes understands that taking action on anything is risky. So there should never be any incense, sense of urgency to act. For the bureaucrats, the objective should be to do, what can be done to delay getting things done. And if you think about it, that is a very, very bad thing for a big organization. Now there are certain areas of the world. Particularly in the public sector where this is, kind of the norm. But let's be very clear that that form of bureaucracy, the one that's kind of encapsulated in that quote, is the form of bureaucracy which is actually very damaging, particularly to commercial companies. So, that is my definition of bureaucracy. That are the strengths of the, those are the strengths of bureaucracy and those are its weaknesses
