What is a 'Bureaucracy'?

Bureaucracy refers to a specialized system and processes designed to maintain uniformity and controls within an organization. Bureaucratic processes are most common in large organizations or governments. For example, an oil company may establish a bureaucracy to compel its employees to complete safety checks when operating on a rig.

BREAKING DOWN 'Bureaucracy'

Labels such as "bureaucrat," "bureaucratic" and "bureaucracy" are often invectives or at least have negative connotations. This may be because bureaucrats are not democratically elected or because bureaucracy is typically considered inefficient. However, there is a more neutral understanding of bureaucracy and the bureaucratic process.

Bureaucratic Inefficiency and Structure

The bureaucratic process lends itself to criticism. It is often considered to be synonymous with redundancy, arbitrariness and inefficiency. In fact, one common satirical definition of bureaucracy is "the art of making the possible impossible."

Structurally, a bureaucracy stems from the effort to govern organizations through closed systems. To maintain order, such systems are formal and rigid. Procedural correctness is paramount within a bureaucracy. Perhaps the single most identifiable characteristic of a bureaucracy is the use of hierarchical procedures to simplify or replace autonomous decisions.

A bureaucrat makes implicit assumptions about an organization and the world with which it interacts. One of these assumptions is that the organization cannot rely on an open system of operations, which is either too complex or too uncertain to survive. Instead, a closed and rationally reviewed system should be implemented and followed.

As a consequence, bureaucratic structures tend to be backward-looking, identifying procedures that worked well in the past. This creates a conflict with entrepreneurs and innovators, who prefer forward-looking concepts and attempt to identify ways in which processes could be improved. Over time, a rigid bureaucracy reduces operational efficiency, particularly compared to rival organizations without large bureaucracies. Losses in efficiency are most pronounced in circumstances where bureaucracy is also used to insulate established power structures from competition.

Classic bureaucratic rigidity and protectionism are prevalent in the U.S. federal government, for example, where firing poor performers is extremely difficult because of an arduous termination process. Fewer than 0.5% of federal employees lose their jobs each year.

Bureaucracy vs. Governance or Administration

Bureaucracy is not the same as governance or administration. Some administrative structures are not bureaucratic, and many bureaucracies are not part of administrative structures. The differences lie in the objectives of each system. An administration directs organizational resources towards an objective goal, such as generating profits or administering a service. Bureaucracies ensure that procedural correctness is followed, irrespective of the circumstances or goals.

In modern industrial societies, such as the United States, dual bureaucracies often exist between private companies and government regulatory agencies. Whenever a regulatory bureaucracy exists to impose rules on business activity, the private company might create its own bureaucracy to avoid violating such regulations.

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