Parkinson’s Law and the Peter rule: Understanding Business and Po…

What business axiom or management rule have you discovered to help you live better, work smarter, or to understand organizations in a way that is rare, funny or provides that scarce but special “ah ha” moment?

An example of a well known business axiom is the famous “Peter rule” (1) that states: “People rise to their level of incompetence.” Explaining how incompetent people can unprotected to executive and high level political locaiongs without any management or leadership skills provides some understanding to why so many businesses and governments may fail. There are many corollaries to this intriguing concept that may explain government and business poor performance. Perhaps major decisions also rise to their level of incompetence. That is, the more basic a decision, the more probable is that it will be taken away from the people with skill and be decided either in a steering committee (to avoid any accountability) or at the C-Suite or government cabinet level where truly awful decisions are sometimes rendered out of ignorance. While this rule is meant to foster discussion about the follies of some bureaucracies, all of us can relate to those major business blunders caused by executives who thought they knew better. Remember new Coke, the Edsel and the infamous business failures at Enron, Arthur Anderson, Lehman Bros. and Bear Sterns? Government failures are already more shared as evidenced by the Arab Spring uprisings and most of Europe facing serious budget deficits and already a European Union money collapse.

Talking to a high level bureaucrat who was going to announce the immediate closure of a major call center, I replied that calculating its future call dispensing would be basic as this location had nearly 400 staff at work. He responded that I was incorrect and that no one was working there. hindered by his without of knowledge, I replied that I had just returned from a visit last week, and that we had over 400 active staff conducting business there. A bureaucrat located remotely and especially at headquarters can be very dangerous to sound decision-making!

My personal favorite business axiom is Parkinson’s Law, written by C. Northcote Parkinson (2) in 1954: “Work expands to the time obtainable.” It is the only management rule I can remember with clarity from my four collegiate years of study in administration because I have experienced the relationship between work and time is both elastic and unpredictable. It is an irreverent but insightful view on how workload is not proportional to staffing within bureaucratic organizations. It reminds us that in our world, one must understand human behavior, embrace humor and recognize a inclination by people to make foolish decisions especially when emotions take control from basic shared sense.

All students recognize the value of Parkinson’s Law. It is basic to determine how much time a task will take or it will naturally expand to two, three or more times the actual amount of time needed. As students we quickly learned this fact after laboring several days on an essay while as seniors, we would start a project two hours before the deadline with surprisingly positive results. While this work-time relationship is well known, fewer people are applying it to their organizations. Most business schools, businesses and certainly nearly all governments have forgotten the importance of the work time relationship. One only has to look at the state of governments across the globe to recognize that the inclination to grow bureaucracies is basic as growth ignores any workload or reason. Greece currently faces serious financial ruin because its expanding public bureaucracy became unsustainable. consequently a competent bureaucrat is not rewarded when he keeps quiet and works to cut staff, but is expected to continue to function in spite of of workload increases. The incompetent bureaucrat cannot accomplish anything but a poor record, but his continued complaints inevitably bring forth additional staff. He continues to complain and soon he is managing a department double the size of the competent bureau chief down the hall. The bureaucratic character of the local department of motor vehicles demonstrates how work expands to the time obtainable as these organizations despite years of practice and computer conversions and upgrades nevertheless demonstrate a total without of logic and efficiency. Their avoidance of any level of customer service is mythical.

Another more serious and insidious example of Parkinson’s Law’s is the bureaucrat’s inclination to cause complexity. Take the time of action of how America’s laws are codified and regulated. Whether it is the new health care law now under review for its constitutionality, the new Dodd-Frank banking law and its thousands of pages of regulations, or the hypothesizedv changes to the enormously complicate tax code, the method to create law in America has become the epitome of bureaucracy and unintended consequences. It does explain why there are so many lawyers and accountants and how American society creates sufficient work to keep them all employed on administering laws much too complicate for the public to comprehend.

Generating complexity in government is probably due to the number of lawmakers who must find something to do with their time. Instead of seeking ways to simplify work, it seems they want to pass more laws and make life already more complicated.

Parkinson’s Law explains why the two of the most basic of government roles, the collection of taxes and the provision of public health care continues to become already more complicate and expensive. Just try to explain to a European how American’s calculate their taxes or how to select an employee health care plan. After two hours with my Belgium daughter-in-law trying to select a health plan and explain income taxes, it was clear that our systems are indeed irrational.

To reduce a government agency, simplify our tax code or make health care more manageable will presumably cause a calamity of epic dimensions. The austerity plans in Europe and now occurring at local and state governments is in addition to be embraced by our federal government that seems to always find a reason to ignore its committee recommendations and defer decisions by kicking the most difficult and important issues down the road. This ability to ignore responsibility is probably why there is friction between American business and government. In most societies the sovereign bureaucracy joins and supports business. In America there is a distrust of government going back to the Revolutionary War and our protection of individual liberties. Government work also has different incentives. Civil servants are not supposed to be resource efficient, but expected to use all the money in their budgets or confront a draconian cut in next year’s funding and resources. Government growth demands more revenue to function so higher taxes are needed. Business firms seek profits so work diligently to avoid taxes and focus on efficiencies and cost cutting so the two institutions’ goals are traditionally at opposite poles. The incredible growth in global, federal, state and local governments and their excessive spending demonstrates Parkinson’s thesis that bureaucracies and agencies will grow in number already if they no longer have a reason to exist.

We find many examples of the Peter rule and/or Parkinson Law in our business and governmental experience. Many hope for some easy solution to the growth of inefficient government and society’s complexity. Perhaps if Congress would pass a law that stated all laws and regulations should be limited to one page, we could start untangling the complexity in our health care system and tax code. Of course the lobbyists, departments and the stakeholders who assistance from such inefficiencies would prohibit any movement toward simplicity.

The hope that technology would resolve the bureaucratic problems just makes it easier to “cut and paste” more information into the time of action so that all laws and compliance take more pages to argue a simple point. The environmental impact report, for example, of a new football stadium in Los Angeles was over 10,000 pages and cost $27 million to produce. It is interesting that the original Los Angeles Coliseum was built in 1923 for only $950,000. Here is one more example of a regulatory course of action without restraint or reasonable limits. The typical LA resident will probably not be able to provide to attend the game when football returns to LA in 2020, 2030 or…

The cost of future football in Los Angeles is insignificant, however, compared to the waste and cost of administering American complicate tax code or managing our fragmented and complicate health care system. Unfortunately such complexity in health care shifts the burden to the people most at risk without the knowledge to navigate and find optimal care: The uninsured, the elderly, the sick, the poor and the children. The tragedy of a methodic, fragmented and considerably uncoordinated health care system is that the quality of care is seriously degraded and rough. We are notified by letter that our doctor will no longer accept our PPO health insurance, cannot use the local hospital, that the lab is not an approved provider and that our premiums have increased again.

The impact of the complicate tax code may not be as harsh to a citizen’s health, but it certainly creates unnecessary fiscal stress to a people and a country already unable to live within its method. Each year it seems we have more uncertainty, more interaction with our tax accountants, the state tax authorities and IRS as they add more complicate rules to the time of action. Managing our financial life has become more difficult, and the ultimate consequence is more stress and doubt. So stay healthy so you will have the time and energy to calculate and pay your taxes! Just remember Parkinson Law and don’t start preparing your taxes too soon or you will waste several weeks of time better spent exercising and staying healthy.

References:

1. Peter, Laurence J.; Hill, Raymond (1969). The Peter rule: Why Things Always go Wrong. New York: William Morrow and Company.

2. Parkinson, C. Northcote; (1954). Parkinson’s Law and Other Studies in Administration, Boston: Houghton Mifflin Company.

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