As organisations age the internal bureaucracy gradually increases without anyone noticing it. Young organisations do not carry much baggage and administrative manuals are brief. No energy is wasted on internal approvals. As companies get older power shifts from line functions to staff functions and Chairman's Office, Legal, Strategic Planning, PR and HR become stronger at the expense of Manufacturing, Logistics, Sales, Marketing and Finance.
The Annual Budgeting exercise takes 4 months to complete and more time is spent in "budget vs actuals" analysis paralysis than in running the business. Board meeting are long and political alignments decide which investment proposal gets approved. Detailed financial reports get generated but few read them.
The size of the Head Office increases and they are more people reviewing than doing. The number of Senior Vice Presidents increases exponentially . The dress code becomes formal and the Chairman spends a lot of time on the art collection which adorns the walls in head office. Decision making slows down and line operating staff are faced with a formidable checklist of clearances required to do anything.
The organisation becomes risk averse and starts living in its past glory with good cash reserves as new project investment slows down. No one has the courage to bring the bad news that competition is nibbling at market share to HQ - the political price is too high . The dynamic creative type see the writing on the wall and start leaving. The powerful bureaucrats strengthen their grip on their empires.
Initially the decline does not show up in the financial results due to deft book keeping but by the time the decline does show up it is too late and death of the organisation is not far away.