What’s the least efficient activity in your organization? What sort of work delivers the least value per dollar? We think it’s management and administration. The fault isn’t with any particular leader, but with the top-heavy, bureaucracy-infused management structures that predominate in most organizations. We believe that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output, or about 17% of GDP. Here’s the data.

According to the U.S. Bureau of Labor Statistics, in 2014 there were 23.8 million managers, supervisors and administrators in the American workforce. (This figure does not include individuals in IT-related functions). That works out to one bureaucrat for every 4.7 employees. Overall, bureaucrats comprised 17.6% of the U.S. workforce and received nearly 30% of total compensation. (See Figure 1.)

Figure 1. Employment and compensation share of U.S. managers, supervisors and administrators.

The question is, how many of these 23.8 million overseers do we actually need? We can get an answer by looking at the management practices of a small but growing number of post-bureaucratic organizations. Their experience suggests it’s possible to run large, complex businesses with less than half the bureaucratic load found in...

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