Corporate Bureaucracy Stifling U.S. Economy, Professor Gary Hamel Says on CNBC
NEW YORK (TheStreet) -- Business management positions in the U.S. doubled in the past decade, far outstripping other more technical or operations-focused careers.
Gary Hamel, premier business thinker and Visiting Professor at the London Business School, believes that corporate bureaucracy is stifling productivity and as a result, the domestic economy.
"More than 40 million people, about a third of the U.S. work-force, is engaged all day, every day in bureaucratic work," Hamel said on CNBC's "Squawk Box." "Our research suggests that about half of that is surplus to requirements [and] that we could cut the number of managers and administrators by half ... if we did that we double productivity growth over the next decade."
Recent U.S. productivity growth has "been abysmal" at around 3% per year, according to Hamel, who counts that as a cost of three bureaucratic roles - managers, supervisors and administrators - and the "paper pushers" who work under those roles. Repealing what Hamel calls the "bureaucratic tax" on the U.S. economy would "double productivity growth," "have a chance of raising incomes," and improve income across the nation.
"The first challenge is that we have to simply admit that you can run large, complex organizations with a fraction of ... the bureaucratic load that you find in most companies," Hamel noted.
He cites Vanguard, MorningStar (MORN) and General Electric (GE) - Get Report as examples of how companies can run "with about half the bureaucratic load of their peers." Hamel thinks a General Electric plant assembling jet engines in Durham, N.C. is the model many companies can follow, where GE is building some of "the most complicated things humans can make" using "300 technical employees and a single manager."
For reform to happen, "we have to be a lot more indignant about what [corporate bureaucracy] is costing our economy," Hamel added.