What Leads to Administrative Bloat? A Dynamic Model of Administrative Cost and Waste

Summary

Administrative bloat occurs when organizations accumulate outdated processes, leading to increased administrative costs and waste. A dynamic model simulates the interaction between process creation, decay, and pruning, revealing two possible outcomes: sustainable equilibrium or runaway administrative bloat.

Highlights

• Organizations accumulate outdated processes, leading to administrative bloat.
• A dynamic model simulates process creation, decay, and pruning.
• Two possible outcomes: sustainable equilibrium or runaway administrative bloat.
• Environmental change and management heuristics influence the outcome.
• Increased production desires can lead to greater administrative waste.
• Drastic actions, such as discarding existing processes, may be necessary to escape the bloat cycle.
• The model can be extended to other types of capabilities, such as physical infrastructure.

Key Insights

• Administrative bloat is a contingent phenomenon: It is not an inevitable outcome, but rather a result of the interaction between environmental change, management heuristics, and resource limitations. Organizations can take steps to prevent or mitigate administrative bloat by adjusting their management heuristics and resource allocation.
• The effects of process creation and removal are asymmetrical: Creating new processes can lead to unintended long-term consequences, such as the accumulation of outdated processes, while removing processes can be more difficult and costly. This highlights the importance of careful decision-making when creating new processes.
• Environmental change can trigger a cycle of administrative bloat: Sudden shifts in the environment can lead to an increase in process obsolescence, which can trigger a cycle of administrative bloat. Organizations must be able to adapt quickly to changing conditions to prevent this from happening.
• Increased production desires can lead to greater administrative waste: When organizations prioritize production over process management, they may inadvertently create more administrative waste. This highlights the importance of balancing production goals with process management.
• Drastic actions may be necessary to escape the bloat cycle: In some cases, organizations may need to take drastic actions, such as discarding existing processes, to escape the cycle of administrative bloat. This requires a willingness to challenge existing norms and procedures.
• The model can be extended to other types of capabilities: The dynamic model can be applied to other types of capabilities, such as physical infrastructure, to better understand how they contribute to organizational performance and administrative bloat.
• Organizations must balance codified and ad-hoc solutions: Organizations must strike a balance between codified processes, which provide structure and efficiency, and ad-hoc solutions, which allow for flexibility and adaptability. This balance is critical to preventing administrative bloat and maintaining organizational performance.

Mindmap

Citation

Yang, V. C., & Grenier, L. (2024). What Leads to Administrative Bloat? A Dynamic Model of Administrative Cost and Waste (Version 1). arXiv. https://doi.org/10.48550/ARXIV.2412.15378