Organizational Insanity Revisited

Organizational insanity is on my mind a lot lately.

This week I received a notification that I owed a penalty of almost $6,000 on my Franchise and Excise Taxes for one of the businesses I have. Since the amount paid was correct and the payment was made on time, I was a little confused. But of course I shouldn't have been!

I called the state and was told that I had not paid estimated taxes. I checked with my accountants and they thought, as did I, that we had paid estimated taxes as we should. My accountants then called the state and of course were told a different story. Shocking!

As it turns out, the state is saying that I signed a form in 2007 agreeing to pay electronically, and that if you sign the form, ALL future taxes have to be paid electronically.

Of course that is not true, since in 2008 I paid by check and there was no notice and no penalty. But this year, even though I paid the correct amount and on time, I received a penalty of almost $6,000 because I mailed in a check.

Maybe I filled out the form but I don't remember--it is not what I wake up every morning thinking about. It does not add value to anyone--ops, maybe it does. It certainly does not add to my bottom line. Even if I filled it out, I probably would not have related it to the April 15 annual filing.

Maybe I am crazy, but a $6,000 penalty for taxes filed in the correct amount and on time by check instead of electronically is insane!

But wait, this is the same organization that gives you the option of filing your Annual Report online and paying online, BUT you are charged a service fee for filing online instead of sending a paper form through the mail. Now maybe I am just misinformed, but it seems like I have heard something about electronic filing costing less, rather than more.

Before I have to go check my blood pressure, let me address how smart people working in an organization can become so dumb. I believe there are several reasons and will address a few of them here.

1. They are not as smart as we thought--just kidding, sort of!
2. They lose sight of the ultimate customer and focus internally. Internal customers have different needs than external customers. In large, bureaucratic organizations, one need is to comply with every rule and regulation. And there are other needs that vary with circumstances. Right now most states need, or feel like they need, every penny they can get their hands on.
3. They tend to migrate toward complexity which results in inefficiency, waste and bad decisions. When organizations start, they are generally pretty simple, logical and are set up to serve the customer. Then something goes wrong, and another action or step is created to be sure it does not happen again. Then another and another. It doesn't take long until what originally took three steps now takes fifty-two. For those familiar with the work of W. Edwards Deming, this is a result of what he called tampering--changing the system when you should just address the immediate problem.
4. On the other hand, they often work in a system that is not capable of processing the complexity in the environment. They are set up to respond "A", "B", or "C". If they get a question that does not fit any of the three options, you are out of luck and they appear to be insane. I have experienced this problem with two other organizations recently. I ask questions and the people responding literally have a cover sheet with responses. They put a check mark next to one of the boxes and send it back to me. It doesn't seem to matter that I would write a full page explanation of my unique situation, the response comes back with one of the boxes checked. They do not have the training or authority to literally think "outside the boxes", and address the complex questions I have.

I am sure there are others, but this is a start. The amazing thing is that what appears to be insane to us--and it really is--makes sense to those inside the organization, at least much of the time.

I must admit a sane explanation for paying a service fee on electronic filing versus paper filing is challenging, but I expect inside the organization it went something like this, "We are saving businesses postage and maybe time, so they should be willing to pay a little more to file electronically. And we may get promotions for figuring out a way to generate more revenue without raising the annual fee or taxes. Wow, what a great idea!"

Of course those of us who are the ultimate customers of that organization probably think that electronic filing probably saves the state somewhere around $25 to $35 per annual report in processing cost. And it might make sense to charge no more or maybe even less to file electronically.

But then that would be sane!

Organizational Insanity

Most of us are all too familiar with the definition of insanity commonly used in organizational settings--continuing to do the same thing and expecting different results. Unfortunately it is too common and too true.

But today I would like to speak to another type of organizational insanity. It may be more prevalent and more destructive. As customers and stakeholders, we deal with it almost every day.

Shall we call it "internal organizational intellectual delusion"? Or "organizational insanity"? Or just"stupid"? My mother wouldn't like stupid so I think we will go with organizational insanity!

It is probably most notable in large bureaucratic organizations, but occurs in organizations of all sizes and in every industry. Just because you are in a small, nimble, organic and maybe virtual organization, it does not mean that you are free from organizational insanity.

How do you know if your organization suffers from this illness? There is a very telling and clear symptom--the people in the organization do totally insane things on a routine basis and sincerely believe that what they are doing makes sense.

It is important to note that this is an organizational malady. If the same people were outside the organization they would immediately recognize that what they were doing is insane.

Each of us could probably point to hundreds of examples. The government is of course ripe with examples.

Shall we start with the recent bailout funds that involved spending billions of taxpayer dollars in a bill thousands of pages long that was passed by congress without reading or knowing what was in the bill. Now whether you supported or didn't support the bailout, that is insane.

I recently heard a congressman sincerely and passionately defend his support for and leadership on a bill involving substantial taxpayer dollars and he admitted that he did not know what was in the bill. That is insane but seemed to make perfect sense to him.

The IRS has a tax code that is thousands of pages long. You may have tried to file your own taxes and gotten to one of those lines that says subtract line 47B from line 32A on Form 1372 and multiply by .0375. If you contact an IRS representative for an assistance, they will walk you through a five minute explanation, plus point to the five additional forms that you were not aware that you need to fill out. That is insane but is perfectly logical to the person on the other end of the line.

OK, enough with the government, what about the health insurance company I currently am dealing with. I am told by the representative of the company that my fax was received one day, was logged the next, would take 5 to 7 days to process and then they would send me a letter letting me know the results. I am very concerned about whether my daughter has coverage, and when I ask if they could call me or send me an email, the response, even though we were on the phone talking--I know they have phones--was NO. That is insane but made sense to the person I was talking to.

What do you hate most about going to the doctor? I guess it could be a lot of things, but most of us hate waiting. So what do doctors and hospitals do--they build Waiting Rooms! They design "waiting" into the system! Talk to almost any healthcare professional--smart people--and they will give you a ten minute explanation of why it has to be that way. That is insane!

Newspapers run editorials on global warming, the green movement, sustainability end environmental friendliness in "paper" editions. And they must believe it makes sense or they wouldn't keep doing it, right? That is insane.

Does your organization have any symptoms of organisational insanity? That may be an "insane" question, because it is virtually impossible for someone in an organization to recognize symptoms--there is always an logical explanation!

In later posts we will talk about those explanations and ways to address the dreaded organizational insanity.