January 25, 2017

Bureaucracy Measurement Index promotes transparency and business growth

To reduce bureaucracy, GCC companies can use the Bureaucracy Measurement Index (BMI), recently launched by management consultancy Strategy&, formerly Booz & Company. 

 

  • Bureaucracy Measurement Index (BMI) is a first in the GCC and tested with regional companies
  • BMI combines three parameters: performance, risk and impact of business processes
  • The methodology can be applied over time and serve as a framework for detecting and combatting bureaucracy

To reduce bureaucracy, GCC companies can use the Bureaucracy Measurement Index (BMI), recently launched by management consultancy Strategy&, formerly Booz & Company. Developed in the Middle East for the first time, the Index provides a quantitative means to assess the level of bureaucracy within a company, compares it to competitors and highlights problem areas. The result is a fact-based recommendation how bureaucracy should be treated best.

The BMI breaks down all work a company does into a hierarchy of processes and measures three parameters quantitatively: a) the performance score (representing the process speed and capacity required to deliver it), b) the risk associated with the process (representing the probability and severity of a negative event occurring), and c) the impact of the process (defined by the weight of the single process on the company’s overall mandate).

George Chehade, Partner with Strategy& (formerly Booz & Company) emphasized the relevance of the Index to the GCC: “In the region we see more rigid, siloed organizational structures, less cross-department teaming and less successful uptake of process-led organizations.  There is also a tendency for individuals to be more attached to formal policies, rules and procedures - the foundations of bureaucracy. These bureaucratic procedures, and the approval chains they create, eventually become more a mechanism to safeguard decision-makers from the wrong decisions than actually advancing the goals of the organization. We believe that GCC organizations would benefit from occasionally stepping back and asking themselves whether their accumulated policies, rules and procedures are creating and protecting value and fostering growth, or hindering it.”

Each company needs to operate with a certain level of bureaucracy to be effective. The bulk of the especially large Middle East companies, however, show similar behaviours like public sector organizations. It is therefore expected to see more bureaucracy in these companies relative to the private sector and start-up organizations. Particularly relevant for service organizations and public administrations, applying the BMI in the current GCC context (in light of the transformational programs of the various countries) can help create the case for a much needed acceleration of decision making paired with an increase of service levels.
 
Manish Mahajan, Director at Strategy& (formerly Booz & Company), commented on the need to find balance: “Companies should tread lightly in how they treat processes that entail high risk, even if they are highly bureaucratic. Removing bureaucracy may seem to be a good move, but not if it exposes the company to new vulnerabilities. The Index can help to shed light on these areas for improvement and even suggest increasing the amount of oversight needed. This highlights how important the assessment is, and the benefits it can bring to direct the company on the right path for growth.” 

The Bureaucracy Measurement Index has shown that tackling the top 20 bureaucratic processes can improve overall process efficiency and effectiveness by 35%. Executives can then delegate in some areas up to 70% of their decision responsibility to lower levels, and focus on more significant decisions aligned with their defined accountability. 

Olaf Schirmer, Principal with Strategy& (formerly Booz & Company) concluded with the long-term benefits of the BMI: “As the pace of business accelerates, the costs of bureaucracy are going up, especially as it affects employee morale and productivity.  As a problem with deep roots in many organizations, we believe that the BMI can give leadership teams a systematic way to address it. The Index can become an ongoing capability that helps a company continue to assess bureaucracy over time. In this way, the BMI methodology is not a one-time project but a regular health-check to stay attune creating an agile operating climate for success.”