What Leads to Administrative Bloat? A Dynamic Model of Administrative Cost and Waste

Abstract: Administrative burden has been growing in organizations despite many counterproductive effects. We develop a system dynamics model to explain why this phenomenon occurs and to explore potential remedies. Prior literature has identified behavioral mechanisms leading to process creation, obsolescence, and removal, but typically examines them individually. Here, we integrate these mechanisms in the context of an organization allocating limited resources to competing priorities. We show that their interaction -- via accumulation and feedback loops -- leads to two possible outcomes: a sustainable equilibrium, where administrative costs stabilizes, and runaway administrative bloat, where administrative costs and waste accumulate in a self-reinforcing cycle. The two outcomes are separated by a critical threshold in management behavioral parameters -- the propensity to create processes in response to problems, and the propensity to prune obsolete processes in response to administrative burden. Rapid environmental change worsens the threshold, making bloat more likely. We evaluate several intervention strategies using simulation and find that lasting reductions in administrative costs and waste require two key commitments: a permanent shift in organizational priorities, and investment in discerning obsolete processes from useful ones. In contrast, temporary shifts and indiscriminate process cuts offer only short-lived relief. Counterintuitively, we find that prioritizing direct production can increase administrative waste. Our findings suggest that while dynamic environments make administrative bloat more likely, administrative bloat is not inevitable -- managers play a critical role in preventing or reversing it.