Objectives of Public and Private sector organizations – A comparison
Both public sector and private sector organizations have objectives and missions. But depending on the type of organization, there are differences between the public and private sectors of a country. Some of them are discussed below.
- Public sector organizations are established by statute or a similar vesting document passed by the government or other law making bodies. Therefore, managers cannot change them according to the changing conditions. On the other hand, directors of a private sector organization may determine its objectives and change them whenever necessary.
- Output of a private sector entity can be valued by the paying customers and therefore can be incorporated in its objectives, missions and decision criteria. It may not be possible to allow the market to determine the income of a public sector entity.
- When a private firm fails to meet the aspirations of its stakeholders, it can result in serious consequences which can lead to even closure of the firm. In the public sector, disbelief can be suspended for long periods, with the result that some stakeholders’ aspirations are ignored.
- Private sector firms should earn a satisfactory return on investment otherwise the investors might withdraw the investment in the firm. Public sector organizations still consider that their capital is free and therefore, the need to earn a return is always ignored.
- Public entities do not expect profits. They are established not for profits but to achieve different objectives of the society. But, can these organizations operate without identifying and satisfying the needs? Can they operate without adequate investments in resources and therefore can they refrain from attracting funds? Can they continue if the value of their outputs is less than the value of their inputs? No. Certainly not. So, is the expression not-for-profit somewhat misleading? Profit is the legitimate reward for the commitment of funds. Then, why should all these organizations not seek a profit may be in a different name?
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