Bureaucracy (book) - Private Enterprise Vs. Bureaucratic Agencies

Private Enterprise Vs. Bureaucratic Agencies

Private enterprises are managed on the sole basis of the profit criterion. A company's sole purpose is to increase revenue while minimizing cost, as reflected in the profit and loss accounts and other accounting tools. Companies or company branches that operate on a loss must either reform or shut down. Due to these simple facts it is relatively easy to devolve responsibilities from company headquarters to the various branches, no matter how large the company might be. Headquarters gives the branch manager a free hand to operate his concern as he sees fit so long as he returns a profit. In this way initiative and innovation are not only permitted but even encouraged and rewarded.

It is quite a different matter when it comes to public services and other bureaucratic structures. A structure like the FBI or an embassy in a foreign country has no criterion of efficiency that is anywhere nearly as easily evaluated as the profit criterion. 'Success' here is a more vague concept, and one that is more open to subjective interpretation. Precisely because the product of public services has no price on the market, the traditional tools of management that have proven successful in private enterprise (scientific management, time studies etc.) cannot be applied in the public sphere. To 'increase output' and 'minimize production time' are concepts that cannot be applied to something like a police department. But an even more important consequence of the absence of the profit criterion is the necessity of centralizing administration and restricting the freedom of the branch or department manager: since his performance cannot be easily assessed in monetary terms, the safest way to prevent excesses and the abuse of power is to ensure everyone adheres to the government's directives. Thus the most important quality of the successful bureaucrat is obeying orders.