The major benefit of a well-functioning bureaucracy is greater efficiency: A clear division of labor and an established hierarchy help your organization perform as one. Assuming that employees stick to the established rules and procedures, and that the rules and procedures remain relevant, bureaucracy can help your small business. But arcane or senseless bureaucracy can cause major problems for any company.

Poor Functioning

A company can’t function well if its rules and procedures are onerous. For example, a factory’s protocol for reporting workplace hazards might be effective in theory, but if employees hate filling out reams of paperwork, they might ignore hazards just so they don’t have to file the reports. Similarly, if employees can’t act without securing approval from multiple layers of management, they will opt for simpler, hassle-free tasks, inhibiting your organization’s productivity.

Poor Employee Relations

Bureaucracies are often impersonal employers, which can offend workers. Suppose a long-time employee has a family situation that requires her to temporarily spend more time at home. If a manager rejects her request for special consideration, citing some policy that forbids exceptions, the employee will feel slighted. After her many years of loyal service, the company’s lack of consideration seems like a slap in the face. In contrast, if the manager bent the rules slightly to accommodate her important needs, the employee would feel supported and grateful.

Unhappy Customers

A bureaucratic approach to customer service can drive your customers toward your more considerate competitors. For example, when something goes wrong with a product or service, customers want immediate help. They don’t want to bounce from one company representative to another, file complaints here and there, and wait patiently while your employees chase their tails following senseless protocols. Worse, customers might begin to feel the complicated procedures are just your company’s way of dragging its feet to avoid responsibility.


Inflexibility is the sum effect of these disadvantages. Red tape, slow decision-making, and low employee morale make it difficult for a highly bureaucratic business to respond quickly in a fast-paced business environment, which puts a company at a disadvantage to its competitors. For example, a company that can’t react to shifts in consumer demand as quickly as its competitors will never be an industry leader.