Reducing bureaucracy: less control increases sales and retains trained workers

Reducing bureaucracy not only saves money, but also helps retain trained workers. This is shown by a study conducted by a team led by Matthias Heinz, spokesperson for the Cluster of Excellence ECONtribute at the University of Cologne, together with researchers from the Universities of Frankfurt, Constance, Munich, and Santa Barbara.

“Excessive control of employees harms the company,” says Matthias Heinz. At a large German bakery chain, the research team analyzed what happens when documentation requirements are eliminated. Following a cost-benefit analysis, the company eliminated two checklists in half of its approximately 150 branches, which many employees found particularly time-consuming and unhelpful. The result: higher sales, more satisfied employees, and less attrition.

The approximately 1,350 permanent employees previously spent an average of more than five hours a week on the lists. They had to specify exactly when they took the bread out of the oven and confirm that they had smiled at customers. During the ten-month experiment from April 2021 to January 2022, the researchers repeatedly surveyed management, regional managers (superiors of branch managers), and employees. The managers were asked to assess in advance which branches would benefit from the reduction in bureaucracy.

Trust is good, control is (usually) worse

In the stores without the two checklists, sales increased by an average of 2.7 percent – in those where regional managers had predicted success, by more than five percent. Where they were skeptical, no effect was seen.

Product quality remained high: anonymous test shoppers rated the shopping experience similarly well. Attrition among trained workers (often managers) was on average 35 percent lower than in stores with checklists. Among unskilled workers, however, attrition increased—an indication that they tend to benefit from clear structures.

According to the team surveys, the decisive factor for the positive effects was not the time saved, but the noticeable appreciation. Employees felt taken seriously, were more motivated, and were more committed to the company. After completing the experiment, the bakery chain decided on a compromise: it kept one of the two lists and permanently eliminated the other.

Bureaucratic costs often exceed the benefits

“Companies should not only weigh up the benefits of bureaucracy, but also the costs,” says Heinz. Instead of introducing new measures, it can be more cost-efficient and profitable to abolish old structures. However, documentation requirements are not bad per se. Management should trust the expertise of local managers, as they usually know their teams best.