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Something that any big corporate institution or organization will have to deal with is bureaucratic inefficiency. Bureaucratic oversight arguably has a natural tendency to develop in business environments where a bureaucrat is unchecked in his or her administration. This leads to patterns of reckless or inefficient spending in a business.

The Inevitable Issue of Bureaucracy

As Canice Prendergast of the University of Chicago notes: “…bureaucracies are always inefficient: the features that make bureaucrats more efficient also make them unnecessary. To phrase this another way, when bureaucracies work well, consumer choice works even better.

Significantly, Prendergast gives five important areas where bureaucracy objectively drags down productivity:

  • They (bureaucracies) ignore legitimate consumer complaints, especially those aimed at incompetent bureaucrats.
  • They monitor more in situations where it is not needed.
  • They correct fewer errors than in non-bureaucratic situations.
  • They delay decision-making for too long.
  • Oversight is biased against consumers.

With an impartial reporting system in place, it’s possible to prevent reckless employee spending as a function of how employees are hired and how employees are taught to spend money. SuccessFactors aims to prevent reckless spending by helping to bridge the gap between the customer, manager, and a business executive.

Keeping Track of Employees and Lowering Bureaucratic Inefficiency

As a business, one situation you want to avoid relates to having too many people with overlapping skill sets. A common case in which this situation occurs is when there are too many managers in comparison to employees – anyone can see how having two managers looking after one employee might be inefficient. The Harvard Business Review notes boldly that “Management is the least efficient activity in your organization.

At the heart of the problem is the trade off between decisions made at the discretion of managers that don’t pay off and alternative methods that rely more heavily on other indicators like market forces. The same HBR study reveals that direct management accounts for 33% of HR payroll expenses and that: “Second, the typical management hierarchy increases the risk of large, calamitous decisions.

Therefore, to lower the risks associated with management oversights and to help introduce greater economic signaling into bureaucratic decision making, it is necessary to include impartial, data-driven controls that executives based business decisions regarding management on. The cloud-based HR tracking and organizational services offered by SuccessFactors are a perfect fit for this role because of the variety of metrics it reports and its easy integration into a workplace community.

For example, consider the statistical insights offered by the Workforce Planning and Analytics module of SuccessFactors. This module aims to provide data using methods such as supply demand gap analysis, financial modeling and impact, and streamlined headcount planning. Using the features of this module, you’ll be able to quickly locate strategic and operational inefficiencies in human resource management and cover resource gaps.

Implementing Payment Reports From Employees

Encouraging and implementing measures that promote responsibility in the workplace are huge mechanisms towards ensuring that a bureaucracy functions properly. SuccessFactors can add a lot of value to the executive-level resolution of managers. However, it’s important to incorporate something that also motivates employees and managers as individuals to think twice about spending company money.

The most direct way to do this is to have an oversight system in place – but this in itself is no guarantee that your employees will feel compelled to give the most accurate and honest reports. One might think that an oversight system is counterintuitive since bureaucrats may feel less likely to report information when they feel as if they are under investigation or threatened by complaints. For example, it might be argued that a customer representative might cave into the demands of a customer by making a refund in order to avoid a complaint, even when that’s not the economically or socially optimal thing to do.

But Prendergast argues that enforcing more stringent standards of investigation may actually increase bureaucratic inefficiency in her research: “…the judicious use of monitoring propensities, penalties, and timing of decisions can improve the decisions made by the bureaucrat, even when faced with this fear of oversight triggered by a complaint.” So, we can actually reduce inaccuracies in bureaucratic reporting with greater strictness.

A greater standard of strictness can be enforced to curb employee spending by involving a third party to conduct payment audits and financially manage and advise employees and managers where necessary. Lexington Law is a firm dealing especially with credit education and financial management that can provide these professional services. Couple an objective third-party report on spending from Lexington Law with the Core Human Resources and Payroll software of SuccessFactors and you’ll have data which you can use as a starting point for enforceable standards for employee fiscal responsibility in your company.

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