An organization can simply be defined as social unit of individuals or an entity that is structured, linked and managed to meet specific needs or has a collective goal that is usually linked to an external environment. In this case we view and compare public and private organizations. All organizations usually entail management structure that clearly outline the activities and relationships of members in the organizations, their roles, responsibilities and authority with regards to different tasks involved in running the organization. Organizations are basically open ended systems that impact their external environment and are affected by the too.
Public organizations can be defined as government controlled or state-run institutions that is usually funded or paid for taxes, either general taxes or alternative tax depending on the government structures Public organizations handle matters that the public informs the government for example voting or protests, or even debates. Examples of public organizations are the police and fire departments. Privacy legislation refers to organizations in the public sector a public body or a public authority
Private organizations on the other hand are non-state or non-federal entities. They are partnerships, agencies, associations, or corporations that are not in a public body or in public bodies and are operated for profit. It may be a self-sustaining entity operating on state property and run by individuals acting outside any official positions of governments, for example, privately owned shops or stores, some of which are found in public organizations but run by individuals outside the public organization.. The private organization sector is usually composed of organizations that are completely privately owned and not a part of the government. These usually includes corporations both for profit and non-profit, partnerships, and charities.
Finding differences and similarities in private and public organizations and examining the public-ness of organizations represents a very major and growing body of factual evidence that show how relevant it is with relation to political economy and organizational theories which include matters such as privatization of public organizations.
Public versus Private Organizations
There are several distinct differences and similarities that are involved in the two sectors as illustrated clearly below.
Enactments of public policies are the basis of running public organizations, with addition to being formed by acts of parliament and are mainly dedicated to service provision to the general public
Private organizations usually have policies perusing profit growth, stability and growth of revenues and they can make their own policies that will govern them with government policies instructing them not to act out of laws as indicated by acts of parliament.
Organization of the management of the public organization is usually very complex since the firms are very large. Even the selection of leaders is very complicated as most of the leaders of public organizations are political appointees.( Rainey, H. G. ,2009,pg 35) There is a very large chain of command and control of these organizations making it very hard to differentiate the different parts of the organization and what makes it worse that legal frameworks do not help in this issue. This makes it easy for management to create ghost workers and other means of draining money from the organization. For example, health directories interact closely with ministries and other subordinate institutions and individuals and this leads to a very long chain of command from the first in charge and which part he or she is in charge in to the individual person providing the service. In addition to this, for the individual to make a decision, he must refer to the one above and he or she refers to the one above leading to almost impossible communication.( Graber, D. A. ,2003, pg 17).
In the case of private organizations the firms are of different sizes with the largest being conglomerates and multinational companies and even in these companies, there is proper hierarchy and accountability such that everyone has a task that hthey are accountable for, and as such, there is more order and these structures make running of these organizations very efficient and these leads to good performances and profits.
Goal Ambiguity and Goal Complexity
Most people view public sector organizations with the notion that they are not goal oriented especially due to the lack of profit incentives as compared to the private organizations that are usually profit oriented. In fact most people view public organizations as employment opportunities offered by the government with little regard to the end services they provide overall, that is except for public organizations managers who usually have a scope of the overall purpose of that organizations and how useful it actually is.
Most scholars and observers have the assertion that there is goal ambiguity and complexity in public organizations especially because of multiple conflicting goals that are usually very hard to measure as the lack sales and profit indicators and incentives and are very complex due to political involvement and interference by many authorities
In private organizations however, each individual usually has individual goals and there is more cohesion as the organizations are usually smaller and as such, each employee knows the organization’s goal or goals and these goals can be well measured with regards to sales and profits or even the number of individuals using the service that the organization is offering. And it is for this reason and also since the members input to the organization is clear, they are usually more successful. In addition to that, there is less government interference and thus work goes on smoothly in the organizations ranks and service provision.( Holzer, M. ,1976 pg 18).
Recipients of the services offered by the organizations
The beneficiaries of services offered by the public sector are usually the general public. Meaning, they are meant to serve everyone in the state regardless of their situation or background, usually for free or at very low costs, for example in public hospitals, the costs are usually much lower than in private hospitals, and other public organizations offer their services entirely free like police and fire departments.
Private organizations on the other hand offer their goods and services to the consuming public at a cost so that they profit in their particular endeavors, for example cable companies that are usually privately owned and charge for them to fix their cable installations with addition to monthly charges for the particular channels that a user has subscribed to, and as such clearly shoes that they are profit oriented in their day to day activities.( Kooiman, J., & Eliassen, K. A. , 1987 pg 4).
In this way nit can be seen that public organizations do not compete with each other for number of individuals whom they serve or for profit as compared to the private sector who aim to beat their competitors and maximize their profits
In private organizations have very high levels of pressures and scrutiny brought about by strict shareholders who expect high results without results, corporation’s governance and financial stringency which leaves very little room for risk or trying with new methods of doing things within the organization. There is the issue of successful managers being rewarded with material benefits such as benefits or other forms of appraisal or even promotion while managers who did not reach their goals or failed in their tasks handed to them getting fired or demoted.
Although there are efforts in the public sectors to emulate some of the aspects of private organizations practice there are some very bold differences. In public organizations, managers are usually under very high levels of political scrutiny since most public organization managements are viewed as political positions or spring boards to political positions. In this case, successful mangers and their juniors are likely to be rewarded with less material benefits as compared to their counterparts in the private sector. (Yates, D. ,1985, pg 89).
In public organizations the employees are usually in unions, that is unionized by economists, social scientists in the central administration and health and social profession such as nurses teachers and such professions each with their own unions for job allocations and to fight for rights of the employees and those unions are usually under one umbrella whose leader has a political post. Professional associations usually organize professional workers. Although most concerns are usually about salaries and status or corruption related cases, many employees enter the public service sector with realistic motives.( Abbas, F. A. ,1985 pg 33).
Private sectors on the other hand have a workforce that varies from organization to organization and the relation between employees and their managements usually ranges from fractious to calm and harmonious since the private sector has very strict policies with employees inciting or causing chaos in work places and it is also found that employees in private organizations usually do not have unions to fight for them or offer their ideas to their managements without being victimized. While there are efforts to instill company loyalty and a customer-centric approach, there are very few methods of doing that without offering motivations to employees through economic benefits such as large benefits for employees that work harder.
The time horizon made most politically initiated and as such need to pay off within the electoral period as there is a very high chance of there being a management overhaul after there is a change of guard in government as such most decisions are usually short term decisions and policies. This hampers growth of the organizations as a whole especially due to the constant change in leadership. The advantage is that the government bails out the public sector organizations from time to time by allocating them with budget to cover losses and higher experts from time to time and also financially when it seems as though the organization is about to collapse or struggling.
The private sector usually makes short term decisions too especially since most private organizations are small and lack the funding to execute large plans as can big private organizations do. Although this is the case, the private sector usually has utilities and infrastructural services that may have very long horizons. This is usually the case especially where there organization is stable and its organizational structural is very strong. The private sector usually makes decisions which involve less risk though since they do not in most cases have contingency plans especially financially as is the case with public organizations.
This refers to the sources of new ideas or new methods with regards to technology, management or just day to day activities.
Public organizations usually have resources but in most cases they are usually constrained to using knowledge from the private sector unless it is from suppliers and due this reason most public organizations are usually stagnant in terms of improvement and keeping up to date with current methods and technologies, especially because there are technologies that would lead to unemployment. However, there are some sectors of public organizations that are very good sources of knowledge within themselves and also for other sectors across the board, that is in both public and private organizations. The best examples of such organizations are learning institutions such as public universities since their orientation is on knowledge improvement and new innovations.( Graber, D. A. ,2003, pg 18)
Large private organizations, especially those with greater flexibility usually have research departments and they can also hire consultants who provide them with relevant information. Private organizations also get information from trade associations and the public sector too. Though it is smaller to not while smaller firms may have limited resources to do this, it is not as expensive for them to implement new systems as it does not involve changing across large areas and usually involves considerable costs too with regards to their sizes.
Relations with End Users
Private sector industries have their markets as direct consumers or other firms or business and although levels of intimacy vary from organization to organization, links with their market are viewed as being very important and look for ways to get feedback from consumers with regards to the various parts of the organization, for example how service delivery is, or how the a particular product or products produced by that firm are or if improvements can be made. AS such the private organizations take end user feedback very seriously as compared with the public sector.
On the other hand, public organizations view their end users as citizens and although recently there have been efforts to introduce market type principles and change the views of their employees to stop seeing the end users as consumers and instead see them as customers, there is still a long way to go before they treat their end users as well as those in private sector.
The public sector is usually very dependent on private organizations in this area. For example if they need equipment they offer forums for the private sectors to bid for tenders that will give one individual organizations to provide particular equipments. And although the decisions on allocation of tenders is usually political based and there is corruption involved in most cases, it is very vivid that public organizations usually have private organizations as their supply chains.
In the case of private organizations are parts of one of more supply chains with larger organizations dictating or organizing how these chains are either by agreements or just by their means of operation, for example by having a minimum amount of good to be sold to an individual so as to keep middle companies afloat, the best example is petroleum where some organizations only sell more than ten thousand liters as the minimum amount or petroleum that can be sold to an individual company or firm.
Public organizations are usually in a sphere where politics affect almost every individual decision made throughout the organizations running. Not only that but also during implementation every step of implementation is contested both by members in the government and those outside it. This makes working and growing of public organizations very hard and hectic. Indeed, organization efficiency largely may be often irrelevant if the decision and political sphere is uncooperative (Kooiman, J., & Eliassen, K. A. ,1987,pg 9).
Private organizations usually decision and implementation very serious such that they may involve experts and consultants and even in some cases shareholders and all parties involved supports the implementation which leads to rapid growth of some of the organizations regardless of their external environments.
Orientation to action
Public organizations usually have a reactive and prophylactic means of carrying out their activities due to the conditions that they are in, for example, managers are not the ones who are running the organizations but instead those who are in politics that helped them gain those positions and this leads to poor running of the organization and poor results and the end users that are members of the general public never really gain. One also finds that there is no cohesion among those running the organization and this causes friction when running the organization.
In private organization, actions tend to be proactive and innovative and they keep looking for fresh ideas to improve the organization. And those running the company are given room, means and space to run the organizations and with such conditions, they run the firms well and with ease. One also finds that the top brass of the organization is usually under one roof with their goals similar and they support each other and their subordinates. Such conditions are almost impossible to find in the public sector. (Van, W. M. ,(2008 pg 8)
These factors highlight the differences in public and private organizations with regards to operations and the conditions under which they operate and it is very clear that the private organizations have better environments and conditions to thrive and grow, both in profits and revenue while providing better goods and services to the general public, while public organizations provide cheaper services and are more widespread in their coverage though there is a lot of room for improvement on how they are run and managed.
Rainey, H. G. (2009). Understanding and managing public organizations. San Francisco, CA: Jossey-Bass.
Holzer, M. (1976). Productivity in public organizations. Port Washington, N.Y: Kennikat Press.
Kooiman, J., & Eliassen, K. A. (1987). Managing public organizations: Lessons from contemporary European experience. London: Sage Publications.
Yates, D. (1985). The politics of management: Exploring the inner workings of public and private organizations. San Francisco: Jossey-Bass.
Abbas, F. A. (1985). The effectiveness of public and private organizations: The case of Malaysia’s stock exchange companies. Ann Arbor, Mich: University Microfilms International.
United States. (2001). Strategies to manage improper payments: Learning from public and private sector organizations. Washington, D.C.: U.S. General Accounting Office.
United States. (2001). Strategies to manage improper payments: Learning from public and private sector organizations : executive guide. Washington, D.C: The Office.
Graber, D. A. (2003). The power of communication: Managing information in public organizations. Washington, D.C: Congressional Quarterly.
Van, W. M. (2008). Leadership in public organizations: An introduction. Armonk, N.Y: M.E Sharpe.