There are several principal differences between public sector and private sector organisations, and these differences include organisational aims and objectives, organisational stakeholders and stakeholder expectations, the levels of public scrutiny, the levels of impact by political factors and others.
Organisational Aims and Objectives
Private sector organisations pursue the main objective of profit maximisation. Top level executive and marketing management in private sector organisations may attempt to create an image of pursuing other objectives as well such as protecting the environment, making the lives of people more convenient, and creating value for people in many other ways. However, these objectives for private sector organisations are secondary, and they have been developed only to aid the primary objective of profit maximisation.
Public sector organisations, on the other hand, usually pursue aims and objectives other than profit maximisation. Moreover, objectives of public sector organisations in the UK may relate to a wide range of areas such as policing, providing education, providing healthcare etc.
Organisational Stakeholders and Stakeholder Expectations
Customers and shareholders are the most important organisational stakeholders for private sector organisations and their expectations are straightforward. Specifically, customers expect to get the best possible deal from the business, whereas the expectations of shareholders are closely associated with increasing profitability in short-term and long-term perspectives.
In case of public sector organisations, on the other hand, stakeholder expectations are closely associated with the delivery of products and services in an adequate manner. It can be stated that population is the most important stakeholder group for public sector organisations.
The Levels of Public Scrutiny
Public sector organisations are generally subjected to scrutiny to a greater extent compared to private sector organisations in the media and from the government. Moreover, the main reason behind this difference relates to the sources of funding of these organisations.
Private sector organisations are generally funded by own resources of founders and/or directors, whereas taxpayers’ money is the source of funding for public sector organisations. Hence, as the literature review has identified media and various government and non-government organisations usually have greater concern about the use of public funds.
At the same time, it is important to note that with the intensifying forces of globalisation and implications of this tendency, as well as due to the impact of a range of other factors the levels of public scrutiny are increasing in relation to private sector organisations as well. Scandals, public anger and contradictions associated with bankers’ bonuses aftermath the global economic and financial crisis of 2008-2011 can be mentioned to justify this argument.
The Levels of Impact of External Environment
Changes in external environment have great implications on the performance of both, public and private sector organisations. However, the nature of changes that impact organisations is one of the main distinctions between public and private sector organisations.
Specifically, public sector organisations are greatly impacted by political situation within the country in general, and policies of ruling government in particular.
Private sector organisations are impacted by alternative set of external factors that include changes in competition, technological breakthroughs in the industry, moves of competitors, and overall economic climate in the country. Private sector organisations are also impacted by the level of political stability and government policies, however these factors have been found to have less impact on private sector organisations compared to public sector organisations.
Personality Differences between Public Sector and Private Sector Managers
There are stark differences between public sector and private sector organisational managers in personality levels. Public sector managers generally have greater levels of concern and willingness for helping others, while private sector managers have been found to be results-orientated, more outgoing and optimistic.
Moreover, the sources of motivation is a point of difference between public and private sector organisations. Specifically, public sector managers are mainly motivated by serving and forwarding a public cause, whereas financial rewards play significant role in motivating private sector managers.
At the same time, a tendency of increasing levels of concerns towards environmental issues such as global warming and local community issues can be observed amongst increasing numbers of organisational leaders in private sector. This tendency might be fuelled by Corporate Social Responsibility (CSR) considerations of a business entity, nevertheless, they mark a massive shift on traditional differences between public and private sector organisations.