What is a 'Bureaucracy'

Bureaucracy refers to a specialized system and process of maintaining uniformity or authority within an organization. Bureaucratic processes are most common in large organizations or governments and administer formal rules of internal behavior. 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 tinted with negative connotation. This may be because bureaucrats do not come into office via democratic election or because bureaucracy is generally considered inefficient. However, there is a more neutral understanding of bureaucracy and of 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 described according to formal and rigid rules. Procedural correctness is held in very high regard within a bureaucracy. Perhaps the single most identifiable characteristic of a bureaucracy is the use of hierarchical procedures to simplify or replace autonomous decisions.

This means a bureaucrat makes implicit assumptions about an organization and the world with which it interacts. One of these assumptions is the organization cannot rely on 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 to identify procedures that worked well in the past. This creates a conflict with entrepreneurs and innovation, concepts that are forward-looking and attempt to identify ways in which processes could work even better. Over time, this a rigid bureaucracy reduces operational efficiency, especially compared with 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 is 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 thing as governance or administration. Some administrative structures are not bureaucratic, and many bureaucracies do not specifically exist as part of administrative structures. The differences lie in the objectives for each system. An administration exists to direct organizational resources towards an objective goal, such as generating profits or administering a service. Bureaucracies exist to ensure that procedural correctness is followed, irrespective of outside 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.