Private Boards vs. Public Boards: What's the Difference?

Public administration, like business administration, is concerned with how an organization should be set up and run to do its job effectively. Below are the main differences between public and private management on six grounds: conditions, goals, resources, performance measurement, motives, and responsibility.

Conditions

Public administration is characterized by a unique style of relations with the public and the media, determined by the reasonable desire of the public to know through the media everything that happens in state and municipal institutions. The systems of political (through political parties and political leaders) and functional (through lobbying activities of interest groups) representation have a significant influence on the goals and results of the activities of state organizations.

Goals

For business management, the main and sometimes the only goal is profit. For public administration, the plans are diverse and, if their source is politics, are of a generalized nature, they are difficult to quantify: stability, law, order, ensuring defense, reducing social inequality, fighting poverty, etc. If we are talking about economic goals, the state is called upon to solve those problems that cannot be solved through the use of the “invisible hand of the market.” For example, such tasks include regulating the activities of enterprises or providing services under a natural monopoly (energy, utilities, and postal services), as well as controlling suppliers that have significant informational advantages over consumers (health, education).

Resources

In contrast to the voluntary-contractual nature of the relationship between business partners, government agencies have the right to coerce within and based on the law. The resources of municipal bodies can also be formed through the legal withdrawal of part of the income of citizens and organizations through taxation.

Performance measurement

At present, there are practically no unambiguous conclusions about the standards for evaluating and measuring the productivity of state and municipal employees. In contrast, various criteria for assessing performance – financial revenue, market share, performance, and productivity indicators for managers’ remuneration – are established in private business and are often assigned to a specific managerial position in a particular period ahead. Therefore, management in public organizations is sometimes compared to digging a hole, where the result is always relative. In contrast, a business can be compared to cutting a tree, where the result is final and obvious.

Motives

In public administration, the leading financial source is the state or municipal budget, which is distributed representatively, i.e., political bodies. Hence, a situation is possible when the main motive is to satisfy not the client but those who provide (distribute and redistribute) financial resources. In the private sector, financial sources flow not from distribution but from entrepreneurial activity. Therefore, there is a direct relationship between commercial success and the quality of the service provided to the client. However, the provision of services by a public sector institution, the nature of these services, and the way they are provided in most countries do not depend on the dictates of the market but are determined based on a political-administrative assessment of social and economic priorities.

Responsibility

In private management, there is usually a well-defined responsibility for the consequences of decisions and actions. Their ill-conceived decisions and ineffective actions can lead to the ruin of the owners of the company and its bankruptcy. In public administration, responsibility is blurred between many organizations up to the president and parliament, and the ineffectiveness of government actions can, for example, lead to an increase in the budget deficit and public debt, which by no means the bankruptcy of the state and the official (official).

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