The delineation between the public and private sector is often emphasized in legal regulations and requirements, yet the differences between the two may not be visible to a side observer. Indeed, the similarities that the public and private sector share place them in the same economic context, allowing both publicly and privately owned organizations to compete with roughly equal chances for success (Luoma-aho & Canel, 2020). However, certain characteristics that are unique to each must be detailed. Although both types of business are driven by the need to meet consumer demand, the ownership differences define the politics within the public and private domains.
Private and public sectors overlap in a range of areas, yet the customer focus represents the overwhelming trend that unites both company types. The importance of addressing customer needs has been prevalent both in public and private organizations, which has allowed them to thrive in the target market (Garg et al., 2018). Another important similarity that connects the two organization types is the propensity toward the acceptance of change and innovation (Farazmand, 2019). Both sectors recognize the importance of integrating innovative solutions into their frameworks.
However, apart from the characteristics mentioned above, the private and public sectors mostly represent polar opposites. First, the ownership issue must be recognized as major point of difference in public and private sectors. Specifically, public organizations are owner by the government, which defines their bureaucracy, the rigidity of their standards and decision-making (Yoe, 2019). In turn, private companies are owned either by private entities or individuals, which makes the process of managing them significantly more flexible and unique (Alford & Greve, 2017). Therefore, the issue of ownership represents a massive point of difference that set private organizations apart from public ones.
Another quite notable difference between private and public organizations concerns the source of financial support for each. While public companies are sponsored largely by the government, the financial resources being provided form the state budget, private organizations have to seek financial support elsewhere (Khan et al., 2018). As a result, private companies generate their budget by taking loans from banks or seeking the support of investors (Jilke et al., 2018). Thus, while public organizations have a lesser range of resources, their budgeting remains more consistent and reliable than those of private companies.
The goals that public and private companies pursue are also notable different. Although both claim to center the needs of their target audiences as the essential prerogative in their performance, public organizations are driven primarily by the need to obtain profit (Durant, 2019; Confederation of British Industry, 2021). The specified goal should not be condemned as far too mercenary; instead, it needs to be viewed as one of the foundational characteristics of privately owned businesses. In turn, public organizations have been established with the purpose of serving the needs of citizens (PFI Centre of Excellence, 2021). Therefore, privately and public companies pursue different objectives, which defines their strategies and the choice of the approaches that they undertake in order to improve their performance in the respective industry.
Despite sharing a similar concept of a customer-driven service, public and private organizations are quite different in relation to the ownership type and, therefore, the approach to governance observed in each of the two systems. Specifically, while private organizations tend to have a decentralized approach to governance, most public companies thrive on the idea of a centralized framework, which reinforces their power yet makes them vulnerable to sudden changes in the market.
References
Alford, J., & Greve, C. (2017). Strategy in the public and private sectors: Similarities, differences and changes. Administrative Sciences, 7(4), 35.
Confederation of British Industry. (2021). Public-private partnerships: Lessons from COVID-19. Web.
Durant, R. F. (2019). Building the compensatory state: An intellectual history and theory of American administrative reform. Routledge.
Farazmand, A. (Ed.). (2019). Handbook of comparative and development public administration. CRC press.
Garg, K., Dar, I. A., & Mishra, M. (2018). Job satisfaction and work engagement: A study using private sector bank managers. Advances in Developing Human Resources, 20(1), 58-71.
Jilke, S., Van Dooren, W., & Rys, S. (2018). Discrimination and administrative burden in public service markets: Does a public–private difference exist? Journal of Public Administration Research and Theory, 28(3), 423-439.
Khan, N., Aajiz, N. M., & Ali, A. (2018). Comparison of management practices in public and private universities in Khyber Pakhtunkhwa. Journal of Education and Educational Development, 5(1), 108-122.
Luoma-aho, V., & Canel, M. J. (2020). The handbook of public sector communication. John Wiley & Sons.
PFI Centre of Excellence. (2021). Policy. Web.
Yoe, C. (2019). Principles of risk analysis: Decision making under uncertainty. CRC press.