Mitigating the agency problem

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Prevalent feedback loop is not work creation as much as role preservation: the perfect bureaucratic job is to march around with a clip-board inspecting things, and insisting that someone else does the remedial work.

Any number of modern excuses to over-analyse, over-control, over-report, over-audit and wallpaper with policies and processes that require second-order maintenance and oversight.

You can’t fix this from the bottom up: if your push down your cost challenge is to your seventeen risk control and audit functions, they will start at the bottom and trim fat, rather than reassessing their own architecture and raison d’etre. Turkeys don’t vote for Christmas.

So look for structural ways of doing things that encourage taking responsibility for its own role: For example, setting an escalation threshold that forces a unit to curate its own specialist knowledge (be it compliance, legal, credit, tax or whatever, and only allows a sufficiently senior team member to escalate an issue.

Understand also that, especially where there is rampant juniorisation and segmentation of functions into component parts, the agents carrying out these atomised functions may not realise that they are afflicted by the agency problem. Consider the operational bucket production team:

The polishing team say, “we take the bucket, polish it, and give it to the priming team.”

The priming team say, “we take the polished bucket, prime it, and give it to the painting team.”
The painting team say, “We take the primed bucket, paint it, and give it to the drying team.”
The drying team say, “we take the painted bucket, dry it, and give it to the stripping team.”
The stripping team say, “we take the dry bucket, strip it, and give it to the polishing team.”

It now becomes clear that this multi-phase operation needing quality control and audit, with a front to back workflow optimisation and data visualisation tool to generate management informaiton about the quality of each phase of bucket coating preparation.

Rightly, none of these people can see their role is meaningless. The fish rots from the head: this kind of redundancy can only be removed by attaching that layer of permafrost middle management at the top of the organisation.

See also

• Agency problem
• Escalation threshold