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Difference in Public and Private Sector Management Essay


Introduction

Public and private sector management strategies are only different in theory but the manner in which such organizations (both public and private) are run and managed is more or less the same. However, the difference in context is so significant that it affects the outcome of the activities which these organizations conduct or are involved in.

It has been seen for many years now that the performance of private firms is much better than that of public organizations yet they follow similar procedures and practices1.

That is why scholars of recent times believe that public organizations should borrow managerial strategies from private firms if they want to achieve the goals and objectives which they have set and also to ensure that there is a smooth and efficient running of the organization.

To improve their performance, public managers should try to adopt and implement management strategies which the private sectors have been using over time. This includes the adoption and incorporation of methods such as management with objectives, total quality management and payment of staff according to performance2.

Although adoption of private management structures by public organizations has been viewed with a lot of scepticism, recent literature has shown that that is the only way forward for public organization to grow and develop. In the U.K for example, some public institutions have adapted and implemented management structures and methods which have been used by private firms and have become successful in the long run.

This therefore should act as an eye opener for other public organizations to try and adapt these practices. The main aim of this paper is to establish the critically analyze the management practices which are being used by the public and private organization and to identify and explain their differences.

Definitions of Public and Private Organizations

Although similar, the main difference between public and private organizations is ownership3. While private firms are owned by shareholders and entrepreneurs, public organizations are owned by the entire public through the government or political communities.

Further more public corporations are funded mainly by taxes levied on the citizens of the state and not the money paid by customers who utilize the goods or services which they offer.

In private firms, market forces control the manner in which they operate while in public organization it is the political systems which control the manner in which they operate. Therefore due to the political interest in public organizations, they rarely attain their goals and objectives.

According to the works of Bozeman, all organizations are privet. The only difference is the extent to which these organizations are private4. Therefore to distinguish between them he came up with a three dimensions of public ness. These include property rights, funding dimensions and organizational control.

Property rights of private firms are vested on the shareholders and owners. They therefore have a direct incentive to monitor and control the behaviors of the managers who control and run their firms.

The managers also have to attain the goals and objectives which have been set since their pay is directly related to the level of output they have achieved. Public sectors on the other hand have got vague and diffuse property rights. As a result therefore the owners do have incentives to check the behavior of the managers.

The salaries of the managers are also not related to the level of output which they achieve hence they do not have a need to work hard.

Funding in private firms is manly done by the owners and the shareholders. As a result therefore the goods or services which they offer are influenced by the choice and preferences of the consumers. This is because they want to satisfy their consumers and gain consumer loyalty.

Public organizations on the other hand are funded by taxes levied on the public. In many circumstances therefore they do not produce goods or services according to the preference of their consumers.

Market forces usually affect the organization control of private firms. Under normal circumstances demand and supply, inflation and competition do affect the manner in which the organization runs its activities. Meanwhile, political control is the factor which affects the organization control of public organizations.

As a result therefore it is difficult for such organizations to have an efficient and effective managerial system since different parties have got different interests in the organization bringing about conflicts. This is the reasons why it is difficult for public organizations to achieve their targets, goals and objectives due to a lot of contrasting interest.

The three dimensions of publicness therefore act as a good indicator of differentiating between public owned organizations and private firms. These three dimensions affect the manner in which these organizations are run affecting their output. In many circumstances, it is the privately owned organizations which seem to be run efficiently and effectively.

Organizational Environments

As states earlier, both public and private organizations employ more or less the same management and organizational structures but the manner in which the implement them are different. Both public and private firms try to employ a good favorable environment for both their customers and employees.

However the manner in which this is done in both firms is quite different. There are various aspects which are external in nature that affect the environments of these organizations.

The first aspect which affects these organizations is the complexity of their stakeholders. Public organizations have got a lot of stakeholders as compared to private firms. Each one of these stakeholders has a different interest and demand from the organization putting a lot of constrains and pressure on the managers.

This makes the government to operate through a series of interdependent organizations rather than independent organization. This therefore makes it difficult for publicly owned organizations to achieve their goals and objectives. Privately owned organizations on the other hand have a few owners and stakeholders who normally have got more or less the same interest in the company.

This thus makes it easier for the managers of such firms to achieve the set goals and objectives that the firm has set. This can be attributed to the lack of conflict of interest due to the small number of stakeholders. That is why privately owned organizations easily achieve their goals and objectives as compared to public organizations.

Another factor which affects the organization environment is permeability. Public organizations are seen to be more permeable as compared to private firms. This is because public organizations act as open systems since they receive a lot of external influence.

Although it is the work of public managers to ensure that this permeability exists so that the influence of the organization can be felt across its borders, they are also supposed to ensure that such influences do not affect the operations of the organization.

This is what private firms do to ensure that their operations are free from external influence which affects the formulation and implementation of their policies. It is thus easier for them to ensure that their consumer needs are achieved as compared to public organizations.

Instability of the organization is also another factor which affects the organization environment. Public firms are unstable due to a lot of political influence which affects the performance of managers.

This is because managers are always under pressure to achieve certain goals and objectives within a short time and in most cases such targets are not helpful to the organization. Privately owned organizations are rarely affected by political influences making them to be stable organizations.

Competitive pressure is also an important factor affecting the organizational environment. Private firms operations are influenced by forces of the market. They are therefore highly affected by competition from other firms in the industry. To survive in the industry in the long run they normally come up with various strategies which aim at gaining and retaining customers5.

This includes reduction of prices, improvement and maintenance of product quality promotions and so on. Publicly owned organizations on the other hand do not face a lot of competition in the market and when they do they normally have a dominant share of the market as compared to other firms in the market which makes them to stand at an advantage for example in the provision of healthcare and educational services in the UK6.

In other instances where competition may arise the government normally advocates for collaboration of public and private organization in the provision of goods and services making it easier for public organization to earn customers.

Organizational Goals

Studies have shown that public organization have goals which are distinctive in nature such as accountability and equity which are most of the times absent in private firms7. This is because public organizations are owned collectively by the public therefore they should come up with means of satisfying the collective interest of their stakeholders.

That is why such organizations use the distinctive approach in the formulation of their goals. Private sectors have got a small number of stakeholders with similar interest thus the formulation of goals formulated in such organizations aim at ensuring that the organization maintains its customers and is profitable in the long run.

Managers of public organization also face the tedious task of achieving the multiple goals which have been set by its stakeholders. Privately owned organizations on the other hand normally have got a single goal which they want to achieve.

This goal is profit maximization which is used to indicate the success or failure of any organization. This goal is normally not achieved by public organizations making them to be seen as unsuccessful organizations in the market.

Goals which are set by public organizations are seen to be vague as compared to those which are set by private firms. This is because these goals are mainly formulated by politicians rather than the managers who have a good understanding of the needs of the organization. For an organization to be successful it must have clear goals which are easily attainable.

Politicians normally want to gather support from different groups in the society. In order to do so they formulate goals this will try to impress all these groups. Such policies are normally vague, unattainable and do not have any benefit to the organization. Private firms formulate their goals with respect to the market forces. Such goals are clear, attainable and aim at ensuring the firm survives in the market in the long run.

Organizational Structures

Different organizations either public or private have got different organization structures depending on the goals and objectives such organizations want to achieve. Generally, public organizations normally exhibit a centralized form of organizational structure while private firms have a decentralized form of organizational structure. These structures are different in the manner in which they operate.

Public organizations are more bureaucratic as compared to their private counterparts. This is because they have stiff decision making techniques, the information flows mainly from the high to low managerial levels and employees rarely receive incentives to motivate them to perform their duties.

Under such leaderships there are no serious punishment on employees who violate the rules and regulations of the organization. Public organizations use the bureaucratic structure because it is the requirement of ensuring and maintaining transparency and accountability in the organization.

Private firms on the other hand are less bureaucratic. The decision making process is more flexible involving members of staff from all levels of the organization. Information within such organizations flows in all directions leading to reduction in distortion of the information.

The rules and regulations which have been set by the organization are normally adhered with defiant employees being punished. As a result employees are motivated to work.

Red tape is a side effect of application of bureaucracy in public organization. This side effect is characterized by the concentration of rules and procedures rather than results and outcomes. This leads to organizations concentrating on factors which are not of importance to the firm leading to its stagnation in terms of development. The red tape effect is rare in private organizations.

Delegation of duties is mainly seen in private organizations than their public counterparts. Delegation of duties ensures that there is continuity of performance of duties even in the event of absence of the individual who was supposed to do the duty. In this respect therefore the manager reduces the bulk of work he has by delegating those which are of less importance to his juniors.

This also leads to the empowerment of junior staff giving them an opportunity to perform new duties. This makes them to become more experienced in their profession. Private Managers are therefore seen to be delegating duties to the juniors more than public managers.

This shows that they have got trust in their employees by giving them a chance to participate in critical affairs of the company. As a result therefore acts as an incentive motivating the employees to work even harder and achieve the goals and objectives which have been set by the organization.

Managerial Values

Public and private organizations have got different managerial values especially when it comes to the conduct of their employees on and off the organization. Employees of public organizations have got a negative attitude and perception towards their job and also towards life.

This is attributed to the fact that public organizations do not have proper mechanisms to motivate their employees such promotions, increase in pay, a conducive working environment and so on. As a result therefore employees do not feel as part and parcel of the organization making them not to have the need to work hard and achieve the goals and objectives which the organization has set.

In private organizations, employees are highly motivated hence they have the urge to work hard and attain the goals and objectives of the organization since they feel as if they are part and parcel of the organization. Such employees have got a positive attitude and perception towards their work and life in general.

Managers of public corporations are not as money minded as the managers of private firms. This is because profit maximization is not among the key objectives of public organization. Since they are not motivated by financial rewards policies like bonuses, performance related pay, overtime payment and so on.

These are some of the mechanisms which are being used by managers of private firms to motivate their employees to work hard and achieve certain targets which have been set by the organization.

Instead of maximizing profits managers of public organization put a lot of their efforts into serving the public. This is because such organizations are owned indirectly by the general public thus their managers need to work hard and satisfy their needs. Private organizations on the other hand work hard to fulfill the needs of their individual customers and not the entire public.

This is because they strive to have products or services which satisfy the needs of each and every individual customer they have and not the whole bunch. This difference is brought about by the fact that private corporations are run according to the market forces which the industry is experiencing at the moment such as competition thus they come up with strategies which aim at maintaining brand loyalty8.

Comparing the level of employee commitment between public and private organizations, it is evident that employees of private organizations are highly committed to their works as compared to their public counterparts.

This is because the institutional frameworks in private organizations enhance flexibility in personnel procedures and also ensure that hard work by employees is rewarded an aspect which is lacking in most public organization.

Motivation is a key factors which determines the level at which employees will be committed to their work and ensure that the goals, targets and objectives which have been set by the organizations which they are working for are achieved.

Conclusion

It has been seen that both private and public organizations have got a more or less the same management behaviors and structure the only difference being the manner in which they are applied. Private organizations are strict in the manner in which their organizations are run unlike public organizations.

This therefore makes private organizations to be seen as better organizations as compared to their public counterparts since the manner in which they are run is effective and efficient and in most cases they tend to achieve their goals and objectives. It has been therefore recommended that public institutions should try and adapt the managerial practices and behaviors of private organizations if they want to be successful.

Bibliography

Boyne, G.A. Public and Private Sector Management: What’s the Difference? Journal of Management Studies, 39, 1, 2002, p. 97-122.

Bozeman, B. All Organizations are Public. Jossey-Bass, London Jones, G and Zeitlin, J. The Oxford Handbook of Business History: Geoffrey Jones and Jonathan Zeitlin, New York

Nutt, P and Wilson, D. Handbook of Decision Making: John Wiley and Sons, New Hampshire, 2009

Rainey, H. Understanding and Managing Public Organizations: John Wiley and Sons, New Hampshire, 2009

Roberts, P. Environmentally sustainable business: A Local and Regional Perspective. Sage, London, 1995

Footnotes

1 George Boyne, Public and Private Sector Management: What’s the Difference? Journal of Management Studies, 39, 1, 2002, p. 97.

2 Peter Roberts, Environmentally sustainable business: A Local and Regional Perspective, Sage, London, 1995, p. 166.

3 Hal, R. Understanding and Managing Public Organizations, John Wiley and Sons, New Hampshire, 2009, p. 224.

4 Bozeman, B, All Organizations are Public, Jossey-Bass, London, p. 22

5 Hal, Rainey, Understanding and Managing Public Organizations, John Wiley and Sons, New Hampshire, 2009, p. 229.

6 Hal, Rainey, Understanding and Managing Public Organizations, John Wiley and Sons, New Hampshire, 2009, p. 231.

7 Paul Nutt and David Wilson, Handbook of Decision Making, John Wiley and Sons, New Hampshire, 2009, p. 349.

8 Geoffrey Jones and Jonathan Zeitlin, The Oxford Handbook of Business History, Geoffrey Jones and Jonathan Zeitlin, New York, p. 544

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Barr, Kristopher. 2019. "Difference in Public and Private Sector Management." IvyPanda (blog), May 2, 2019. https://ivypanda.com/essays/difference-in-public-and-private-sector-management-essay/.

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Barr, K. (2019) 'Difference in Public and Private Sector Management'. IvyPanda, 2 May.

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