In any economy there are two types of sector which operate one is public sector enterprises which are managed and run by government of the country and other is private sector enterprises which are managed and run by private entities. In order to understand both the terms better let’s look at differences between public sector and private sector –
- First and noticeable difference between the two is that private sector companies operate in order to earn profits and the primary goal of such organizations is wealth maximization of its shareholders and owners, however as far as public sector companies are concerned their main motive is not profit rather their goal is to maintain a mix of profit and social welfare of people.
- Public sector entities are big because of huge investment made by the government and therefore one will not find small public companies whereas in case of private companies there is no fixed criteria they can be as big as elephant or as small as ant and hence when it comes to size public sector entities are uniformly huge.
- Jobs in public sector entities are secure because they are government jobs and hence as an employee one does not have any job insecurity, however in case of private companies there is always this fear that if company is not doing well then they will resort to job cuts and hence there is always this job insecurity no matter how big the company is and hence when it comes to job security then public sector companies are ahead then private counterparts.
- In public sector companies the pay structure is fixed, work is of monotonous nature and therefore chances of quick growth is very less whereas in case of private companies if one is talented then sky is the limit and therefore when it comes to growth and pay private sector companies win hand down, however attrition rate in case of private sector entities is much higher as compared to public sector entities.
- Public sector companies in most of the cases enjoy monopoly because they operate in those sector which require huge capital or are natural resource based so for example defense, railways. Coal mining, power sector are some of the sectors which are run and operated by public sector companies whereas in case of private sector they do not have any monopoly and they have to compete with both public sector as well as private sector companies.
- Future of public sector companies is dependent not on their work or management but it is dependent on current government and its policies which in turn leads to inefficiencies as workers know no matter how hard they work result is not in their hands which ultimately results in bureaucratic culture creeping in government sector enterprises whereas in case of private companies their future is dependent on top management and workers and therefore harder they work better will be the results and hence in a way it motivates them and that is the reason why private sector enterprises are more efficient then public sector enterprises.
As one can see from the above that public and private companies are very different from each other in almost everything whether its scale of operations, work culture, pay scales, motive etc…., however they both are important for the well being of economy of the country.