Apparent inconsistencies and irrational decisions can be found in all organizations and they often point to underlying attitudes and assumptions among staff, about the organization and the way it works. Concepts such as 'negotiated order' and 'values in use' have been suggested in recent literature on organization theory to describe the important role of individual, and social, needs and expectations upon the functioning of organizations. This article presents the apparently common assumptions made about government service, as encountered during research into the management of district public health services in Nepal. It argues that, when taken together, these form a wide and coherent system of 'values in use', or an 'implicit theory' which appears to guide many of the bureaucracy's actions. The way in which staff are selected and promoted, common attitudes towards work, the shortcomings of the reporting systems, all appear to be part of an 'implicit' theory which is based on the fundamental belief that it is the main purpose of the district public health service to provide incomes for its staff. Thus, most posts do not have job descriptions and staff are recruited to them on the basis of factors other than the skills or knowledge required. Training and supervision are seen commonly as means of earning extra allowances, and service quality is not seen as a priority. This contrasts with the 'official' theory which is that the organization exists to provide health services to the community and that it is the purpose of the staff to provide those services. Such an implicit 'theory', recognized and accepted by staff but never acknowledged, and based on very different values and expectations to those assumed in a 'rational', task-oriented bureaucracy, obviously has implications for the success of development programmes. It explains why training so rarely results in improved performance and why the bureaucracy is so resistant to change which does not satisfy the implicit theory. While the implicit theory described here is specific to Nepal, the phenomenon may be widespread. The failure to take account of such 'theories in use', guiding the actions of staff and hence organizations, could explain the failure of many attempts to improve government health services.