Bureaucracy

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.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Gross Debt Service Ratio - GDS

    A debt service measure that financial lenders use as a rule of thumb to give a preliminary assessment about whether a potential borrower is already in too much debt. Receiving a ratio of less than 30% means that the potential borrower has an acceptable level of debt.
  2. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  3. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  4. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  5. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  6. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
Trading Center