Why Corporate Bureaucracy Sucks: It Costs PepsiCo $1.26 Billion

PepsiCo litigation
PepsiCo litigation
PepsiCo Inc has its legal document buried for weeks, causing it not showing up to court and losing $1.26 billion default judgment – all thanks to big corporation bureaucracy.

Here is another reason why small businesses rock – They are lean and mean, and eliminating corporate bureaucracy by nature. And yes, corporate bureaucracy sucks.

I just read a news update from Yahoo! Finance that a busy secretary (she is busy preparing for a board meeting – yep) forgot to take care of the legal document and cost her company to lose $1.26 billion for not showing up to the court.


Here’s the root of the problem, quoted from the Yahoo! Finance news:

PepsiCo claims it first received a legal document related to the case from the North Carolina agent on Sept. 15 when a copy of a co-defendant’s letter was forwarded to Deputy General Counsel Tom Tamoney in PepsiCo’s law department. Tamoney’s secretary, Kathy Henry, put the letter aside and didn’t tell anyone about it because she was “so busy preparing for a board meeting,” PepsiCo said in its Oct. 13 motion to vacate.


Why corporate bureaucracy sucks

If you run a big company as big as PepsiCo, a certain level of “managerial overheads” may occur, whether you like it or not. These “overheads” – officially called bureaucracy – are slowing the corporation down. As large corporations involve many employees to take care of their business operations, the company is becoming more prone to human errors and communication problems. The end result: Slow (darn slow) decision making and mistakes such as in the PepsiCo’s case.

Unfortunately, not only big company, some small business owners are allegedly ‘love’ bureaucracy. Not only within the company, the customers and clients, too, have to suffer the consequences of bureaucracy.

For instance: Why on earth some small businesses, in this case, retail stores, slow things down forming a company structure (e.g. Store managers, Supervisors and Staffs)? Why don’t they cut the ‘middleman’ (Supervisors) and let all staffs report to a Store manager?

I once owned business services store (offering stationery, printing, Internet access and other business supports). My mistake is to have two Supervisors reporting to a Store Manager. Eliminating those supervisors could reduce bureaucracy – a lot, and more (including cost cutting.) What’s more, I let the staffs to contact me directly so that I am better informed, instead of losing important messages.

Remember, more steps required to pass an information means more risks of losing part of the information. Even worse, the information could become misleading and lose focus.

How to

The keywords are: culture and policy.

While your small business is still…well, small, I think is better for you to develop policies and procedures that encourage your business to rapidly change as needed.

You don’t want to change things around when your business is booming. First of all, it will slow you down and exhaust your resources. Secondly, what happened with PepsiCo could very well happen to your business. You don’t want to lose money that way, do you?

Good luck, PepsiCo, on facing the litigation.

Ivan Widjaya
Bureaucracy sucks
Image by yoppy.