Private And Public Sector Management Differ Only Context Accounting Essay

This abstract concludes to Boyne ‘s ( 2002 ) paper as the get downing point an attempt is shown by me which support on the undermentioned statement, “ Private and public sector direction differ merely in context, but this difference is important ” and underpin the theoretical perceptual experiences with aid of empirical literature of the topic. The theoretical part will cover some theories related to public sector and private sectors and unsophisticated differences to explicate the related construct such as simple definitions, ownership issues, control issues etc. While the empirical part will includes reappraisal of literature on public and private sector direction and their difference. The paper indicates that there is important degree of difference in the populace sector direction and private sector direction although in the current scenario the populace sector adopted the managerial technique of private sector as a New Public Management in which public sector direction have to cut the cost every bit good as better the public presentation. This uplifted the overall public presentation of the public sector but still in comparing to private sector populace sector is missing behind in doing net income as an illustration British Gas.


The focal border among the private sector and public sector can be effortlessly understood by traveling through their formal unit ownership. Nonmarket units possessed by authorities and authorities owned corporations ( authorities control and ordinance ) are those that come under public sector ownership. For the ownership of any entity it is indispensable to hold an economic ownership instead than bulk ownership. The allotment to public and private sector of different entities such as public-private partnership, joint ventures, societal insurance financess etc. can be unequivocally done by comparing to criterions of ( IPSA ) international public sector accounting standard. The private and public sector is different in the context although today for some sections the private and public sector are holding the same map such as in wellness attention sector etc. but still they differ in many ways.

In United Kingdom the economic system is divided in two major sectors which are explained below ;

1. Private sector and

2. Public sector


The private sector is defined as the part of the domestic economic system which comprises the private endeavors. This embracing two simple sections the family sector and the corporate sector which besides include NGO ‘s and therefore it is besides indulge in apportioning the larger part of resources within the state, usually as the in private owned endeavors ( POE ) are incorporated by jurisprudence Kanamori T. , & A ; Zhao Z. , ( 2004 ) . This sector of the economic system comprises all the concern and families which are owned by single or stockholders in the western economic system this sector is approved to be dominant sector and the remainder left is termed as public sector Brabanti, V.J. M. , ( 1995 ) . This sector is farther divided into five major groups:

Exclusive bargainers: The concern which is run managed and controlled by an person or by a individual individual is a exclusive proprietary signifier of administration and proprietor of the house is exclusive owner Kauffman, E.M. ( 2008 ) .

The partnership: This construct came into being to get the better of the jobs and bounds of exclusive proprietary. In this signifier of concern fundamentally two or more than two people join to organize partnership concern with the common aim to gain net income. The individuals are known as spouses and the house is known as partnership house. Partnership is apt for one-year return of income, employment revenue enhancements such as Social security, Medicare revenue enhancements, income revenue enhancement withholding, federal unemployment ( FUTA ) revenue enhancement, lodging employment revenue enhancements and strike revenue enhancement while an single spouses are apt to pay income revenue enhancement, estimated-tax, self-employment revenue enhancement ( 2010 ) .

Cooperatives: this is a type of society is run and controlled by group of peoples with a common involvement of gaining net income, success and direction. The group may be the manufacturer, worker or even clients FSA ( 2010 ) .

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4.Private limited company: it is fundamentally for little and average endeavor and normally tallies by little group of people with common involvement. They have their ain aims and ends and other pre decided involvement of members normally profit. They have a limited liability to the stockholders and portion ca n’t be listed on stock exchange ( 2011 ) .

Public limited company ( PLC ) : this is a company with a limited liability that is over ?50000. It is the company which quote their portions on stock exchange.


The corporation and authorization involved in the public sector may fluctuate from state to state. The limit position of public and private chiefly depends upon the development path of single province. Though still the populace sector is defined as the part of the domestic economic system which is concerned with supplying basic goods and services that are non provided by private sectors or private sector do non hold authorization to supply them. It includes national every bit good as province authorities and their bureaus and other authorities organic structures ‘ European committee ( 2009 ) .


The Ownership Concept

It is really important to understand the ownership construct of public and private sector. It refers to the right of the owner to command the unit or belongings and to pull off it in the manner he wants these actionable rights are protected by jurisprudence. Here unit is considered as anything such as existent estate, land, organisation, and plus fiscal and non-financial both.

If the criterion of allotment among two sectors is ownership than a four manner economic system division tabular array is given:

The Concept of Control

If the construct of control is ill-defined for corporations, than the focal border between the populace sector and private sector would be brumous. As economic ownership is a legal ownership therefore it is possible that internal policies of private sector could be regulated by authorities or even authorities can be a policy compositor. So it is of import to separate and understand the construct of control.

Harmonizing to the International Federation of Accountants ( IFAC ) , the corporation is under control of authorities in the status when authorities has the power to administer the operating and fiscal policies of that corporation so as to give good benefit by it, in this the accents is chiefly on the fiscal control IFAC ( 2008 ) .

The construct of regulating the private endeavor by authorities is determined by several facets like if in any endeavor the portion of the authorities increased by 50 % of the entire portion of that endeavor, it will be classified as a populace sector endeavor. Whereas in an organisation in which authorities does non keep bulk of portions but have people stand foring in the board of manager or for execution of specific policies when it necessitate authorities direction or intercession than the entity will be under the control of authorities and will be included in public sector.

Typical control set uping figure

Further the control construct could be explained in several points so as to do it more apprehensible. For this the control is divided into two major groups:

The power component: in which some entity ( authorities ) have an authorization to modulate the operating and fiscal policies of other unit. Conditionss given below:

Majority of vote: when an entity ain bulk of ballots straight or indirectly on other entity.

Authority to engage and fire associate: when an entity have the authorization to engage and fire the member of other entity.

Projecting bulk ballot: when an entity have the authorization to command or to project bulk of ballots in the meeting of board of managers or general meeting of any entity.

Assorted powers: these include points such as power on make up one’s minding the budgets, determinations and other legal bids.

The benefit component: in this an entity ( authorities ) has a commanding power on another entity or entities to give benefit from that entity:

Devastation power: when an entity has the authorization to liquefy any entity and acquire optimal benefit from it than the ulterior one is controlled by the earlier.

Authority to command plus and liabilities: when an entity has an authorization to administer the plus and liabilities of any entity than the ulterior entity is under the control of earlier.

Assorted benefits: this comprises benefits like rubric to the net equity or assets IFAC, ( 2008 ) .

Literature reappraisal

Comparing both sectors in general

The private sector vends goods and services for their gross. They have to confront the competition among themselves because clients ever have assortment of options among which they can take to purchase Vroom, G. , & A ; McCann, B.T. , ( 2010 ) these units fundamentally run to maximize their net income. The public sector units besides deliver goods and services. But besides relates two major differences:

They do n’t precisely hold any competition therefore they enjoy the monopoly and besides clients neither have options nor any pick to purchase or non Econ ( 2004 ) .

The finance of these sectors is under the control of elective officers, legislative assembly or board of managers Brown, J. , & A ; Jacob, M. , ( 2011 ) . The basic duty of the populace sector is to present the public good and cardinal factor for them is how they can present the goods within the budget got.

The comparing of hazard and wagess

Both the sectors are really different in context of hazard and wages

The chief purpose of the private sector is to minimise the cost and maximize the net income. If one unit can successfully cut down the production cost than it is in front of other who lack behind cutting cost Elder, K.L. , & A ; Garman, M.R. , ( 2008 ) .In instance of public sector if it continue with the current programme the hazard will be really low as it serves the rudimentss to consumer and people are at no topographic point to negociate hence public sector continues to bask monopoly type of competition but another type of hazard exist in public sector if incorrect determination is taken the effects in public sector will be really bad because they have to make everything in their given budget every bit good as they even can non halt at that place production as it is necessity for the public Gary, H. , & A ; Wolff, P.E. , ( 2004 ) .

Motivations to determination shapers and answerability

In public sector the determination shapers like directors does non largely acquire paid etc. as a positive motive conditions they do something good for organisation or non but negative motive is ever present their as if incorrect determination is taken in private sector it affects the industry badly. But in the instance of private sector the determination shapers are motivated positively by wagess and negatively by salary tax write-off or demotion both Kondalkar, V.G. , ( 2006 ) . In instance of private sector answerability is ever limited to the internal board or internal upper governments. But the public sector is accountable to the populace for every determination taken by the company.

Organizational Environment

Taking Boyne, G. , A. , ( 2002 ) as an presenting point to the organisational environment: There are several circumstance involved with public organisations.

The complexness nature: An organisation has to confront assortment of unanticipated state of affairs from stakeholders and different governmental bureaus

The permeableness nature: “ Private sector head executive or boards of managers, may disregard most components demand for direct impact to the policy preparation and execution procedure ” Ring, P. , & A ; Perry, J. , ( 1985 ) . In contort to this a Public organisation gets extremely influenced by Public Behaviour, hence their director have to maintain good control & A ; see it that the organisation series good to public.

The instability nature: Due to political instability a Public organisation has to alter its policy from clip to clip Burt, L. , ( 1998 ) which brings a immense circuit in operation of the organisation in short tally.

No competitory force per unit area: In a Market Public organisation enjoys the maximal portion and sometime full market portion. Due to which there is no sense of competition which acts as de-motivator for most of the clip. The value of growing and invention Michigans and quality of the merchandise become dead.


In the private sector, organisational construction flexible joint on three basic groups which refers to as managers, stockholders and officers. The proprietors of the private sector unit are the stockholders of that unit though they do non straight pull off the personal businesss of the company but control through indirect manner by projecting their ballots to either chosen or take the managers of the company or vote for any farther head concern affairs. They can function the company as a manager or as an officer. The board of managers are the chief determination shaper of the company they fundamentally take large determinations and appoint the other officers who can travel through the twenty-four hours to twenty-four hours activity of the concern Guinnane, T. , ET. Al, ( 2006 ) . This appointive officer under the supervising of board of managers who keeps an oculus on the twenty-four hours to twenty-four hours activity specifically to smooth the concern so that it can run more slickly.

The populace sector is either fiscal or non-financial therefore it comprised into three different economic sectors these are authorities, fiscal and non-financial GFSM ( 2001 ) .

Public Corporations

A public corporation could be defined as a legal entity created to execute governmental maps and produce goods for market under the authorities control. That is farther divided into two sub division fiscal and non-financial Lienert, I. , ( 2009 ) .

General Government

The General authorities produces goods which are necessities or of import to keep the life criterion, these productions are chiefly a non-market based goods. The general authorities comprises two different portion in it the first one is normal general authorities unit and 2nd is all non-profit establishment ( NPI ) both of these are funded and administrated by authorities Spiller, K. , ( 2002 ) .

The populace sector

Beginning: Figure 2.2, IMF, 2001.

Harmonizing to Boyne, G.A. , ( 2002 ) the administration Structure followed in the populace sector could be seen in three derivative ways:

Bureaucratic: Public administrations have really formal process to take any major measure. In contrast private administration is non so formal and they have more hazard pickings inclination, therefore their growing is really aggressive Lan, Z. & A ; H. Rainey ( 1992 ) . They work in a much more effectual and expeditiously compared to Public administration. As the processs of Public administration are really formal and drawn-out, it adds on the de-motivator.

Red-tapism: Harmonizing to Bozeman, B. , & A ; Scott, P. , ( 1996 ) the Red Tape can be regarded as a bureaucratic side consequence which implies an un-necessary and damaging compulsion with regulations of results. Red Tape is a comprehensive which refer non merely to regulations and procedures themselves but to the holds and subsequent annoyance caused by formalisation and stagnancy.

Lower fringy liberty: In Public administration directors have really less freedom in managing state of affairss. But the positiveness it has that people have more joule security there type of administration. The processs are so drawn-out to make anything or acquire any opportunity Meier, K. , & A ; O’Toole, L. , ( 2002 ) . Peoples tend to avoid so till the lost extent. In contract private administration troughs have tonss of freedom at work, they can develop different schemes for work, which they thing is more suited. They besides function in a reasonably organized mode as they work in a tightly structured hierarchal administration.

Regulation and control

If the populace and private sector have to be separated or distinguished on the footing of ordinance and control than there will be the visibleness of the difference among them. For the private sector there is no regulative jurisprudence in being relating to which they can run under their ain corporation control but in instance of public sector every procedure is done under jurisprudence Lyon, M. , ( 2004 ) .

Particular statute law: — this considers to be adopted to present specific type of public endeavor. With the general legateship which is common for every type of endeavor. In most instances where there are some particular jurisprudence has passed for specific type of companies or organisation which indicates the legal right of authorities that exercising to command the endeavor.

State endeavor Torahs: — the undermentioned Torahs are mend to present the wide model for every public corporation and to stipulate the right of the province David, E.M. , & A ; Gregory, J. , ( 2003 ) . The province endeavor jurisprudence is exercisable even if it holds portions less than 50 % that means the declared jurisprudence applies traveling beyond the line of shareholding.

The public endeavor jurisprudence Djibouti 1998 describes public endeavors as an endeavor in which legal entities such as province authorities holds portions more than 50 % of the entire portions, the chief motivation was found ideological non economic efficiency dominant motivation was ideological instead than economic efficiency Cook, P. , & A ; Kirkpatrick, C. , ( 1998 ) . Harmonizing to jurisprudence it is clear that the public sectors are related to ministry and are mend to clear up that all schemes and policies related determination are to be taken by the regulating board instead than province, hence the Djibouti clearly declares the jurisprudence which makes public sector visual aspect unambiguous Lienert, I. , ( 2009 ) .

Organizational ends

The organisational ends in public sectors harmonizing to Boyne, G.A. , ( 2002 ) the populace directors have multiple ends to accomplish. As they have the duties to fulfill all stakeholder.

A Public Organisation typical ends, like quality one history ability. This attack does non be in private sector, as their lone end is to do net income Farnham, D. , & A ; Horton, S. , ( 1996 ) . This is the ground why Public administration has to set in excess attempt to keep balance with in their ain administration and cover efficaciously with conflicting aims.

As we know Politicss has great impact on Public administrations so the many ends of the administration are obscure. In puting of ends, directors have no function to play ; this is besides a ground why Public administration is non that efficient like private administration.


There is a immense difference between the aims of private sector and public sector Mohnot, S. R. ( 1993 ) . The private sector ‘s aims are considered as “ over-riding ” as the private sector is ever seeking to bring forth with of point of position to stretch the distance between house entire gross and entire cost as a consequence stockholders get a large dividend Glinskaya, E. , and Lokshin, M. , ( 2005 ) . In order to derive a competitory advantage today private sectors have started the policy of plus maximization instead than gain maximization therefor these house increased the quality of their merchandise and besides increased their market portions. Private houses besides have aims to better their image so they do many activities to demo themselves as socially active since it attracts clients.

The aims of the public sectors is concerned to supplying instead than gain maximization taking British gas as an illustration they are supplying gas to people although traveling through terrible loss ( 2006 ) . The chief focal point is on the supplying the client service to every people without caring about loss. Although in 80s and 90s the authorities really sold public-service corporation companies such as British Telecom, British Gas, and electricity board to the private sector. Today the chief purpose of public sector is to supply merchandise and services with improved quality and decreased cost.

The managerial values

Public director are believed to be less moved by moneymaking stuff is tic offer like fiscal records. Hence public presentation related wage, bonuses etc. are improbable to heighten staff committedness or better organizational public presentation.

Public director tend to be more public friendly and have a alien desire to salvage public. There Public administration take attention of Public public assistance to a great extent. The sorts of service or merchandise they serve, is indispensable and concern a immense subdivision of the society.

Last in a Public administration the degree of committedness is really low. This is chiefly because of formal lengthy processs, everyone has really limited power in their custodies and no wagess are given to actuate their staff and many more. It is Exacts face-to-face for private administration.

So, it is obvious that public and private administration differ in many ways. This difference acts as barrier in the transportation of direction technique.

In recent times public sector administrations has seen a dramatic restructuring along the values of managerialism. Public sector has witnessed a recent restructuring which is based more on managerial pattern than the bureaucratic dependance.

Harmonizing to Kimber, M. , & A ; Maddox, G. , ( 2003 ) , cardinal features of managerialist patterns have included decentalisation, public presentation, efficiency and answerability, outcome based focal point etc. whereas public sector organisation are based on bureaucratic theoretical account.


During the last two decennary there has been a immense economic reform in order to assent more from public sector through following the direction technique of private organisation Cook, P. , & A ; Kirkpatrick, C. , ( 1988 ) this managerial reform is particularly for New Zeeland and UK. Although the point of view and aim of the private sector is really distinguishable to the populace sector as public sector tallies for finishing the societal demands of the state while private houses runs for their commercial net income Tooley, J. , ( 1999 ) the populace sector have to accomplish the mix mark of net income and societal both therefore they are in the center of societal and commercial aims Laporte, R. , & A ; Ahmed, M.B. , ( 1989 ) . In the decennary the populace sector has adopted the new technique which comprise of technique followed for private sector direction this is a intercrossed technique and this pattern distinguishes as NEW PUBLIC MANAGEMENT ( NPM ) Levy, R. , ( 2010 ) .

Reasons for the alteration

In early 80s most of the developed and developing states has felt the economic and financial force per unit area on their authorities Ewins, R. , ( 2003 ) . This emphasis occurred as the consequence of instability in the external trade, shortages by the public sectors, growing in the duties etc. and this emphasis farther act as the milepost for this reformation and restructuring of public sector. This besides prepared developing states to reshape their authorities function Polidano, C. , ( 1999 ) . NPM is the measure taken to command the financial shortages, for denationalization and restructuring of public sector.

The following ground which delivers from public harmonizing to public pick theorists the populace started knocking the populace sector since they are incapable to present the public goods and services due their inflexible disposal and red-tapirs within the organisation. The disposal is felt easy, due to batch of regulations hinderance at work etc. That supports the disposal to look for options Larbi, G.A. , ( 1999 ) . Some other grounds which can be taken into consideration are the globalisation of the economic system, modern information engineering etc. so as to be in the same gait as other.

Phases of NPM and its cardinal constituent

Due to the inordinate force per unit area for the alteration in the direction policies, this pushed states into five different phases of NPM. They are:

Remodelling and polishing the bringing procedure to public,

Reconsidering and redesigning the function of authorities with mention to public sector,

Reframing systems of public presentation, everyday and accountability of the sector,

Reformation and relocating the organisations and their constructions and

Stimulating the adult male power and organisational public presentation Bonina, C.M. , and Cordella, A. , ( 2008 ) .

NPM has been taken as the package of direction technique and attacks. And most of them are taken from private sector Ferlie, E. , et Al. ( 1996 ) . Harmonizing to Pollitt, C. , ( 1990 ) , it is an ideological idea used in the private sector and now adopted by public sector.

The major mechanisms of NPM are:

Decreasing bureaucratisms by merely decentralizing the office procedure that means assigning the work into different-different sectors. This besides involves diminishing the axial rotation of political relations from production and bringing procedure. When there is less involvement of political relations in the sector than the work will non impede and public will bask efficient and uninterrupted installations from public sectors.

The public sectors have now adopted the latest hierarchy of organisational construction that is level organisational construction this type of construction is more flexible and quickly processed in this construction the sectors are moulded around unambiguous process Kondalkar, V. , G. , ( 2006 ) .

The old bureaucratic construction

Beginning: Kondalkar, V. G. , ( 2006 )

The new Flatter Organizational Structure


Major knocks of NPM

The separation among support and buying of services: Implementing the separation procedure clearly between significantly demoing the demands paying for the services supplying manus on manus. This really means that through NPM ways open for the authorities in which they provide finance for the services but in existent services are provided by private sector Mises, L.V. , ( 1944 ) .

Decentralising: Within public bureaus, all degrees of direction should be segregated so that they may be semi-autonomously and should me more responsible towards the function they are largely involved in. This manner the top direction will hold freedom to work more sharply with a greater penetration.

Budget: and fiscal control should be decentralized and entrusted to some independent units like budget Centres and passing units etc. This type of allotments gives some flexibleness to directors to see alternate methods of guaranting the proviso of required services

Devolving budgets and fiscal control to decentralised units ; making budget centres/spending units. Deputation of fiscal duty gives directors some leeway to see alternate methods of guaranting the proviso of needed services.

There should be a cap on budgets and more transparence in accounting, which should affect combination of end product oriented budgeting and doing directors more cognizant of the balance between operations cost and the capital invested. This manner the directors are cognizant of the capital invested by the company at all degrees and are more concerned with the company finances apart from the things which are their core competences.


In this assignment I have attempted really ambitious and ambitious thing to make. And I do believe that I made some part to the literature reappraisal and moralss of the subject. The research aim which is taken in this assignment was lead to double results. The first thought was to mensurate the extent of important difference between public sector direction and private sector direction and the 2nd aim is to research the degree of denationalization, grounds and the managerial technique of private sector adopted by public sector this besides include the analysis of New Public Management. The literature reappraisal is peculiarly concentrating on the impact of the New Public Management and the difference among private and public sector.

In this research it has been found that the traditional public sectors have batch of loopholes in it. As it has to supply services which are of import for human being but they are non able to supply in the manner it has to be. This is because of typical bureaucratic construction of traditional populace sector where as private sector ever provide good installations due to being more flexible it is possible for them. But in last two decades the populace sector improved there direction technique with following the private direction technique and blending it with public sector objectives the New Public Management came into being this make the populace sector to work in the better manner as they have now objective to supply the services and goods to public in improved manner, more expeditiously with cost decrease.

Due to the political control of curates and other high profile leaders in the populace sector the ethical consideration go more of import to construct up the structural frame work of any public sector environment. The survey of moralss in instance of public sector has increased late and this is wholly non surprising. The major ground for this is the deficiency of trust of common public in public sector authorities organisations. The populace sector has the most complex type of environment and construction where directors are supposed to make best public presentation and make all work within the given budget these things made it more complex in nature Cooper, T.L. , ( 1998 ) .

At the terminal it can be said the NPM technique has uplifted the public sector public presentation up to the grade but the direction due to obvious grounds can ne’er fit up to the degree of private sector as private sector works for net income maximization while public sector runs to supply goods and necessities which is of import for the populace in that instance they can non halt or decelerate down their production in any fortunes. So public direction and private direction differ from each other, and can non run on the equal gait.