Definition: Corporate red tape is an excessive burden of formal procedures that slow down a company’s processes. It is a bureaucratic behavior where many steps are required to fulfill certain tasks.
What Does Corporate Red Tape Mean?
The term red tape, applied to organizational behavior, comes from a procedure employed in the past where documents were grouped and stacked with a red tape to point out their higher degree of importance. This practice led to the concept of red taping as a way to describe unnecessary formalities that reduced productivity and response times.
In business environments, red tapes should be avoided because they affect the business negatively by holding down crucial decisions and actions that need to be taken in order to successfully deal with day-to-day operational issues.
Modern management techniques include organizational design as a key task to identify and reduce corporate red tape by cutting redundant procedures or keeping the work load of certain job positions properly balanced. On the other hand, a less centralized management style is also advantageous to keep red tape at a minimum by delegating different responsibilities to a wide range of staff members to increase the speed of decision-making processes.
Galaxy Cinema Co. is a company that has more than 20 movie theaters located across England. They have a Content Department that is in charge of proposing potential films to be displayed at each of Galaxy’s facilities. Last year the company experienced a decline in the number of tickets sold and according to an independent consultant’s research, the reason for this sales decline was that the company was unable to update their film chart faster than the competition.
After investigating the matter, the consultant identified that it took more than 20 days to approve the purchase of a new film, due to an excessive red tape in the procedure. The Content Department had to get 7 different signatures from other departments and this always delayed the process and made it very tedious. After analyzing the problem, the consultant came up with a new procedure that involved only essential approval requirements and this change led to an increase of 30% in the company’s last quarter revenues.