The Cost of Bureaucracy
Every company of significant size that we work with has a developed a certain amount of red tape that needs to be waded through to complete a project. The amount varies by organization but often doing the same job for a company with hundreds of employees costs us 4 or 5 times as much as it would to do the same job for a company with 10 employees.
These larger organizations have over time developed rules, regulations, and committees to handle the interaction with outside projects. Often these rules and regulations can cause a serious barrier to entry for service providers considering making a bid for the project. Those providers that do bid will bid at a premium to cover the added costs associated with working through the bureaucracy of the organization.
Here is an interesting article discussing the cost of bureaucracy in terms of software. Check it out and let me know your thoughts on the topic: http://www.paulgraham.com/artistsship.html
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I am a small town family physician who deals with the choking posionous Federal bureaucracy everyday. It always amazes me to hear people say medicine is so expensive because of malpractice insurance, fear of getting sued, or insurance companies. These are all problems but they are vanishingly small compared to the cost of bureaucracy. I have 11 employees; 6 do nothing but paperwork, argue on the phone with medicare, medicaid or insurance companies, or deal with OSHA compliance ect, they do not see patients or have any input to health care. I have a practice management consultent to ensure we do not run afoul of the fda, dea, or cms ect. I have a computer contractor who keeps computers running that I must have to bill payers.
About 75% of my operating costs are direct bureaucracy cost, that means if everybody paid cash at the door I would see people for 20 dollars or less!
One need only look to India wehre hip surgery cost 8000 dollars, knee 7000, open heart 15000 and these prices include a luxary motel and the flight there and back. There outcomes are better and patient satisfaction is higher. But it is cash at the door, no CMS, OSHA, DEA, FDA,IRS,ADA, standing around with their hand out on one side and their handcuffs on the other. The cost of bureaucracy is unimaginable not just in dollars but in wasted human effort.
There is a theoretical limit on the ratio of people pushing paper and wearing badges to those making things and it would appear that we are approaching that limit.