Bureaucracy

AAA

DEFINITION of 'Bureaucracy'

An administrative or social system that relies on a set of rules and procedures, separation of functions and a hierarchical structure in implementing controls over an organization, government or social system. Large administrative staffs are most common in large organizations that need standardized rules and procedures or consistency across a wide range of business activities.

INVESTOPEDIA EXPLAINS 'Bureaucracy'

Although some form of bureaucracy is necessary for large, efficiently run organizations, there is much debate over whether the theory is ever manifested in practice. The term is often used in a pejorative way, since many bureaucracies become too large to be efficient, and become dysfunctional as a result. Some form of bureaucracy is necessary, however, in firms that are subject to heavy regulatory scrutiny, since a loss of policy or oversight control could have dire consequences.

It is a widely held belief that small companies can be more efficient because they do not need large bureaucracies and therefore can adapt and innovate very quickly. Large bureaucracies are also associated with more mature companies in mature industries nearing the end of their life cycles.

RELATED TERMS
  1. Corporate Governance

    The system of rules, practices and processes by which a company ...
  2. Internal Controls

    Methods put in place by a company to ensure the integrity of ...
  3. Industry Lifecycle

    A concept relating to the different stages an industry will go ...
  4. Corporate Governance Quotient - ...

    A metric developed by Institutional Shareholder Services (ISS) ...
  5. Best Practices

    A set of guidelines, ethics or ideas that represent the most ...
  6. BCG Growth Share Matrix

    A planning tool that uses graphical representations of a company’s ...
Related Articles
  1. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  2. Governance Pays
    Options & Futures

    Governance Pays

  3. Doing More With Less: The Sales-Per-Employee ...
    Investing

    Doing More With Less: The Sales-Per-Employee ...

  4. Introduction To Fundamental Analysis
    Markets

    Introduction To Fundamental Analysis

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center