From first to "wurst": the erosion and implosion of German technology during WWII: the German management system, especially in terms of the technological industry, was a complex and convoluted bureaucratic nightmare

Air Force Journal of Logistics,  Summer, 2004  by Charles A. Pryor, III

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Who's in Charge?

At the core of the management of Luftwaffe technology was Hermann Goering. As Hitler's duly appointed head of the Luftwaffe, he was responsible for ensuring the Luftwaffe had the necessary tools to prosecute the war. The Luftwaffe was responsible for determining its own requirements to ensure it could fight. Similarly, the navy and army each had that responsibility. While this is to be expected, what was lacking in Germany overall (and the Luftwaffe, in particular) was centralized control. There was no one agency in charge of military procurement. Indeed, "production was pitifully small. The fault lies clearly with the Technical Office whose lack of initiative cannot be ignored and with the Luftwaffe General Staff ... which failed completely to provide the guidance expected of it." (36) Thus, there was no direction, no vectoring of the effort to ensure the proper item was developed. In other words, there was no one in charge.

Further complicating the effort was the process for placing something on contract. The Luftwaffe would award a production contract for an aircraft based solely on its design. (37) This essentially skips the research-and-development portion of modern-day acquisitions, with the Luftwaffe assuming the risk that the design will not work. In many cases, the prototypes developed did not meet expectations (or requirements). (38) Thus, large quantities of resources were spent and expended for something that did not work. This is an incredibly ineffective way to manage a contract. Further increasing the drag on the resources was the number of programmatic changes enacted. With the swift progress of the war and the swifter progress of implementing minor technological changes, the German factories and modernization centers were hard-pressed to keep up. (39)

Finally, to keep the costs from escalating beyond what was already wasted, the Germans enacted price fixing for the industry. Essentially, a contractor could choose one of three pay categories: one which they were not taxed (but had to be a low contract bid), one where they were taxed, and one where they were taxed and some of their costs recouped. The latter only could be chosen with approval from the government. (40) In essence, from a fiscal point of view, German management of the contract process was a shambles. Valuable resources were wasted by betting the design would work, and the designs were changed constantly, costing more resources and further straining an industry that was undermined by fixing prices to the advantage of the government. This poor fiscal policy was further convoluted by the complicated organizational structure of the German industry.

Early German industrial organizational structure was an attempt to maintain centralized control over industry as it attempted to shift to a wartime footing. In each of the industries of the Third Reich was one person at the head. Directly beneath the head was a main committee, made up of the industry leaders. Ostensibly, the function of this main committee was to evaluate the way each of the companies in the industry did business, select the best from each, and have all factories implement these best practices. Further refining this process, there were special committees under the main committees that dealt with specific parts of the whole. These special committees were also responsible for implementing best practices among their subordinate factories in an effort to increase standardization and efficiency and reduce cost. (41) In theory, this seems to be a sound business practice; however, management by committee (or in this case, by many committees) was not very practical. When combined with poor fiscal guidance and a lack of strategic direction, this system merely complicated the problem.