How US corporations reliably screw themselves into torpor

Image credit: Views From The 6th

Many years ago I read a book on startups that was written by one of the first tech entrepreneurs. In the book he said the primary reason people were motivated to start tech companies was the fact they wanted to build organizations that weren’t as brain-dead stupid as large corporations.

Today, that observation is no longer true. The primary motivation of twenty-somethings is the belief they deserve to be multi-billionaires by the age of twenty-five. But large corporations are still far too often brain-dead stupid.

And by stupid I don’t mean their expensive and clever McKinsey & Co strategies for world domination, nor their product/market mix. I mean the internal processes that reliably chew up valuable time and demoralize employees.

The Finance group’s job is to account for spending and one way the dollars and cents flow out of a corporation is when employees travel and entertain for business purposes. Naturally it seems reasonable for the folk in Accounting to require employees to submit expense claims in order to be reimbursed. There are, however, two ways to look at this issue.

The first way is to assume that for the most part employees will behave with some measure of responsibility. In this case, the process of securing expense reimbursement should be as streamlined as possible so that employees can focus on doing their jobs rather than on doing administrative tasks.

The second way of looking at expense reimbursements is to assume that for the most part employees will try to game the system. In this case, the process of securing expense reimbursement should be as fine-grained as possible in order that Accounting can catch cheats and save the corporation precious dollars and cents. Of course, the hidden catch with this approach is that the expense reimbursement process will require an inordinate amount of employee time and send a very clear negative message to employees: we don’t trust you.

Not surprisingly, large corporations trend toward the latter approach. This is because it’s impossible to account for productivity on a balance sheet but it’s easy to count pennies spent on travel and entertainment.

I consulted to a large famous US corporation some years ago that will remain nameless (but they were famous for making photocopiers…). I had to travel in order to perform my job. When it came time for me to apply for reimbursement of the expenses I’d incurred I discovered the beautiful corporate expense claims policy that had been lovingly crafted by Accounting over the course of decades.

Here’s how it worked: let’s say the employee has to take two people out for a working lunch. Normally they’d submit the bill for the total amount, end of story. But at this particular company that was woefully insufficient. Instead (and I wish I was inventing this) the employee had to do the following:

Name each of the participants (First Name, Last Name, Title, Department, Company) and then itemize every single thing consumed, by person. So an expense claim for a quick working lunch would look like this:

It’s easy to imagine the time required for a meal including several people. Furthermore, it means the employee has to keep notes on who’s having what during the meal in order to secure their reimbursement, which will definitely detract from the time spent discussing work matters.

Better yet, Accounting would regularly reject expense claims with one or more queries attached such as “Was the sparkling water essential for the purpose described?”

Woe betide any employee who had to engage in complex travel such as taking an air trip somewhere, taking a taxi from the airport (“Describe the route taken, in detail, naming landmarks along the way”), having meals with one or more other people, etc. A week-long trip could result in many hours of effort attempting to reclaim the money spent by the employee up-front. One employee of this well-known US corporation told me that he traveled as little as possible because it could ultimately take him nearly as many hours to reclaim his expenses as it did to attend the conference or client meeting in the first place.

Sure, Famous US Corporation probably did save a few dollars here and there. But the cost was phenomenal: massive negative hit to employee morale and willingness to travel on company business, plus huge loss of productive time across the corporation. All to save a handful of dollars that would be a rounding error at the end of the day.

I had to travel to Russia on behalf of this corporation and it took me two solid days to complete the expense reimbursement process. Two days for which they were paying me $100 per hour. So that was $1,600 of lost productivity in order to ensure I didn’t incorrectly claim the cost of a bottle of sparkling water that I’d ordered with dinner.

Of course, this isn’t the only kind of policy guaranteed to deliver sub-optimal outcomes. Years earlier I worked for a well-known database company (no, not that one). They hired, at great expense, a senior executive from a larger well-known software company and on Day Two they sent him to Zurich to negotiate what was going to be their biggest-ever deal with a major financial institution. Naturally the Finance-created expense policy made him fly from San Francisco to Zurich on the cheapest possible coach-class fare.

So this senior executive, who was being paid several thousand dollars per day, arrived in Zurich after an exhausting overnight flight in coach during which he’d been unable to sleep because of the two small children behind him crying for most of the journey. He staggered, jet-lagged and travel-worn, into the meeting and was little more than a zombie. The deal fell apart as the financial institution executives felt they weren’t being taken seriously.

The upside: the database company saved nearly $2,000 on the cost of travel. The insignificant downside: they lost a $20 million dollar deal. But Accounting was happy because costs were being controlled. And the CFO was able to continue chewing on his tie through every meeting because, hey, that’s what smart and powerful CFOs do.

Moving along from the topic of expenses, I consulted to another huge multi-national company that hired me for my expertise and then had me report to a manager who over-ruled everything I attempted to do. When I raised the issue with the senior Vice President who’d hired me I was told that nothing could be done because the manager was a female minority over 50 years of age who couldn’t be fired lest she initiate a lawsuit. The company’s approach to mitigation was to move her every year or two so that her deadening influence could be spread across as wide a range of employees as possible.

Inside the company she was referred to as Agent Orange because she killed everything she touched.

In nearly every large corporation I’ve consulted to, people are promoted on the basis of appearance rather than effectiveness. This is because being effective in a large corporation means cutting through a lot of the nonsense in order to get the job done. Which alienates those who prefer to coast along for an easy life. Over time this approach to promotion ensures that most managers are don’t-rock-the-boat folk, while go-getters leave to find positions in other companies more suited to their drive and abilities.

I don’t think much has changed today. The current buzz-word is “agile” and nearly every large corporation has announced its intention to be agile. The essence of agile is bottoms-up activities planned by those closest to the action and thus in possession of the most accurate and germane information. Sounds good, right?

Except…. For large corporations, “agile” means using traditional top-down management methods and simply sticking the label “agile” on top of old processes and rules. In an agile software development scenario it’s the development team that sets priorities and estimates timelines. In a corporate “agile” environment priorities and timelines are set by senior management. Changes have to be approved not by the team but by senior management.

But damn, those senior managers feel great because they’re now working in an agile environment! Damn strange how the usual set of screw-ups, over-runs, and bug-ridden code delivery still keeps happening…

All this is very unfortunate because for the most part, the employees I’ve been fortunate enough to have encountered over the course of a long career have tended to be smart well-intentioned people who genuinely want to do a good job. But far too often, the corporation prevents that from happening.

In one large software company I consulted to for a while, a senior engineer told me, “We don’t have a good release process here. We don’t really release products. They just sort of escape from time to time.”

A large aerospace company was once described as “two thousand extremely clever engineers constantly battling the organization’s attempts to defeat everything they do.”

There may be no cure for large corporation stupidity. Decades ago Lawrence J. Peter noted that managers are promoted to their level of incompetence so that over time a mature corporation will be entirely managed by people who are out of their depth. Nothing much has changed since then, because human nature hasn’t changed. And few organizations seem capable of understanding that human nature must be consciously mitigated if its most baleful (and highly predictable) effects are to be minimized. Unfortunately, as Finance and Human Resources tend to have powerful input into corporate policies and processes, there’s no one awake at the top to effect purposive change.

Which is why I shall continue, as much as possible, to consult instead of taking a full-time role in a large corporation. And perhaps will also, one day, embark on startup number six.

Anyone who enjoys my articles here on Medium may be interested in my books Why Democracy Failed and The Praying Ape, both available from Amazon.

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