How is private sector management different from public sector management?

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Answered by: Thomas, An Expert in the Management - General Category
The difference between public/non-profit sector management and private sector management is supported by two argument which represent real differences in how public programs and private businesses strive to meet their objectives. First, public organizations do not always operate with objectives which can be clearly measured like in the private sector, which operates in a model of economic efficiency.

For example, a toy manufacturer is able to clearly set a goal of how much product to manufacture and sell, as well as establish a clear bottom line. This is not always possible in the public sector, where the goals aren’t so straightforward and there is no clear bottom line. So if a presidential directive calls for reducing poverty and the mission objectives include reducing “powerlessness” and “apathy", any measure of the success of this endeavor and the programs implemented along with it are going to be general and not easily identifiable. Traditional business or private sector methods of measuring success cannot be used in this instance. The end-result cannot be easily measured based on the establishment of one particular program or managerial factor.

One of the most influential people to have approached this question is Herbert Simon. In Simon’s highly regarded discussion on fact and value, Simon claims that public and private sector management, while sharing similarities in management methods, aren’t entirely similar. By accepting that the means of administration (the facts) are different than the ends (the values), one can assert that the values of the public sector differ from that of the private sector. The public sector values the public interest and political compromise, while the private sector values profit.

The second argument is that accountability differs largely between public and private organizations. Managers in public organizations are accountable to a much greater number of people and in turn are subjected to greater influence by those they are accountable to. This is will play a significant role in their decision making process as public administration is constantly under public scrutiny. The public manager will attempt to appease as many people as possible while achieving results. This adds to the complexity of their position as manager. Moreover, research supports the notion that organizational commitment is weaker in the public sector, so this will also influence public manager’s accountability.

The private sector operates without the checks and balances of the public sector. They are accountable to shareholders and their focus remains on maximizing the bottom-line. Yes, there is a blurring of the public and private sector, and the business man is certainly more subjected to public scrutiny than in the past, but on the whole, the private managers maintain accountability too far less people than the public managers do. Private organizations are also far less transparent than public organizations as there is less demand for “sunset clauses” and other mechanisms to ensure public organizations do not become too powerful and overshadow the abilities of the private sector to function as needed.

With varying objectives and degrees of accountability, managing a public organization will differ greatly from private sector management.

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