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Strategic Management Q3 Pubic and Private Sector Differences

1. Alford essentially rejects the extremity of the distinction between public and

private organizations based on ownership. He instead offers the concept of a continuum of publicness and privateness. Critically evaluate the usefulness of this approach in identifying the implications for how organizations are managed (April 2011).
2. Identify and discuss some of the principal differences between public and

private sector organisations and the implications for how these organizations are managed (April 2010).
3. Since the early 1980s, the public sector in an extensive number of countries

has experienced considerable change influenced by a range of theories collectively termed New Public Management. Identify and assess a number of the reforms suggested by the theories of New Public Management (August 2010)

Public Sector Reform Some of the most radical of the reforms have taken place in the pubic administrative systems. These reforms have been collectively labeled New Public Management. A considerable number of factors led to the process of public sector reform and the introduction of strategic planning in the Irish Public Sectors. Common criticisms of public sector bureaucracy Critique of Bureaucratic Public bureaucracies were overly concerned with their own needs rather than those of the consumer. Seen as focused on roles, responsibilities and procedures and not particularly good at working in teams and collaborating to achieve a common purpose. Seen to define itself by tasks and resources and not by results. Seen as focusing on controlling costs but not adding value. Seen as unwilling to change and adapt in order to become more responsive to the needs of the citizens. Seen as control oriented not empowering those working at the front line who were in a position to respond to the needs of the citizen. Examine your own organistion and think about the extent to which the criticisms apply? Is your organization citizen or customer focused? Does it encourage people to work in teams? Is there a focus on results or is the focus on processes? In what way does it add value? Is the organization responsive and adaptive to changing circumstances?

New Public Management Applied In attempting pubic sector reform, governments of various countries used many different tools this can be summarized as an attempt to make government more businesslike. Emphasis was placed on: Entrepreneurial government public agencies were encouraged to earn rather than just spend resources. Power of leadership emphasis placed on senior bureaucrats being leaders rather than just administrators. Reliance on markets efforts were made to have the price mechanism of the free market have a greater influence on public sector service provision. Focus on results rather than emphasizing rules and procedures, efforts were made to focus on results rather than process. Decentralising power in order for organisations to be more responsive to their clients/citizen needs, front line staff were asked to be able to be both approachable and reactive to the people they came into contact with. Overall, the approach was summarised as steering not rowing. Different countries experimented with different types of reform. The types of reforms instituted can be classified as Structural Reorganisation at the Centre involves increasing or decreasing the number of department or ministries, with the purpose of developing responsibility and accountability to lower levels of the bureaucracy. Decentralisation involves breaking down or transferring functions from the centre to smaller agencies or lower levels of government. Privatisation and off-loading involving changing public service provision from the public to the private sector and the transfer of public property from public to private hands.

Technical Reforms Perhaps one of the most important areas of reform. These reforms largely related to personnel. Technical reforms involved a shift in emphasis from administration (rules, regulations, proper procedure) to management (getting the job done, the service delivered, and done and delivered well). Performancerelated pay and tenure contracts are a major part of these reforms in many countries. Strengthening the Governments Hand This involved the reduction of civil service input into policy making and the facilitation of stronger government control over the public service. The creation of senior executive service position was one example. They provided advice to the government on a contract basis. (Examine Org give examples of reform in your own organisation) Pubic and Private Differences In the early attempts to reinvent government, Osborne and Gaebler (1992) tried to de-emphasis the difference between public and private sectors in order that public sector organizations would move away form the more traditional, Weber-type organization and become more business-like. Are public and private organizations sufficiently similar for strategic management lessons developed mainly in the private sector to be implemented with ease in the public sector? Private Sector Organizations produce what the people/market wants. Public Sector Organisations have three broad purposes:
1. The provision of a fundamental legal framework 2. Addressing market failures; and

3. Ensuring some sense of equity among citizens

Wilcocks and Harrow (1992) identify differences


Dimension of Public Organisation difference Source of authority The ultimate source of authority in a publicly owned organization is the statutory framework and parliamentary regulation Private Organisation The ultimate source of authority in a private organization is the board of directors Examples The Department of Education Operates under several pieces owned Of legislation including the Education Act (1998). There are no such equivalents In the private sector. Although companies are subject to the Requirments of the Companies Act 1963-2006. In the private sector, The majority of public sector the culture around Organization decisions are open decision making is to public scrutiny under the relatively secret with provisions of the Freedom of a stress on business Information Act, 1997. Most confidentiality to private sector companies wish to protect competitive keep their decisions private to advantage and pricing protect their competitive strategies. advantage and companies are only subject to minimum disclosure under the Companies Act 1963 Private organizations Public Organisation a health, have profit as their Educated safe population with primary goal. sufficient resources to live is the main concern. Private make a profit. The primary resource Most core public services such as base for private health, education, social welfare and organization is from security are financed through the operational returns and Exchequer. However, in the private borrowing sector, organizations almost to recoup the cost of their operations from sales or borrowings. Performance in the While in the private sector, private sector can organisation can use measures of largely be tied down profitability and the level of sales to mainly,financial as indicators of their success in the \ measures. market place, many public sector Outputs, as opposed to organizations are faced with the Impacts, or outcomes, problem of trying to measureor are often the focus of assess their success in areas that are performance indicators difficult to quantify or evaluate such

Openness of decision-making

Government and public agencies have to operate in relative openness in their decision-making and especially so since the advert of the freedom of information culture.

Primary Goals

Resource Base

The Primary goals of public organizations are are social goals, e.g. safe streets, health, etc The primary resource base for public activity is from public taxes

Performance Indicators

Performance indicators are not easily designed or agreed among the various stakeholders. The primary concern when it comes to the public sector is often the outcome or impact the service has as opposed to the immediate

effectiveness

in the private sector

as social mobility in education, safety in relation to policing.

Pubic and Private Sector Continuum Alford (2001) argues that public and private sector organisation are not two distinct entities that are either purely public or private but sit somewhere on a continuum between these two extremes see diagram pg 50. The distinction between public and private is about more than just ownership and includes such factors as the social dimensions of the goods and services produced. While few people would consider it desirable that the state owns a taxi service, for example, almost all would expect the state to provide and fund a policing service and the administration of justice. However, certain industries, including the taxi industry, are regulated in ways that other industries are not. That is because there is a perceived public value that can be achieved without state ownership clean, honest, and dependable taxis. In a conceptual sense, regulation makes an organisation slightly more public. Alford suggests that depending on the extent to which an organization is purely public or purely private different approaches to strategy are required. He seems to suggest that the closer an organisation is to the private sector end of the continuum, the less difficult it is to apply the theories and models of private sector strategic management, and vice versa. Many publicly owner organizations operate in markets where there are private sector operators e.g. ESB Supply or Bord Gais. They are owned by the state but operate as private companies to the extent that they seek to make a profit and compete with private companies that generate and sell electricity. Do we need Pubic Sector approaches and their applicability to the Public and Non-Profit Sector ???????

McKevitt outlines some of the fundamental differences between public and private sector goods and services, concentrating on core public services of health, education, wealth and security (HEWS). Non-marketability McKevitt points out that not all goods and services are marketable, in other words, they are goods and services that cannot be sold to individuals, (to achieve a socially optimal state, such as health care provisions for dealing with a contagious disease. Differential information The second major characteristic of core public services is where the provider of a service has a body of knowledge that the consumer or citizen does not. Examples here include people who provide health care, apply the law or provide education. Interdependence This is where people have a concern for others (as well as themselves) or wish to show solidarity with others. They wish collaborative action to be taken to address the needs of others such as disease prevention, relief from absolute proverty, inclusion into society through a basic education, etc. This highlights the importance of political dimension in the provision of such services. Professionalism HEWS has significant differential information characteristics and this means that most services are delivered by especially trained and socialised people that we commonly call professionals doctors and nurses in health, teachers in education, solicitors and barristers and the police in law, etc. Because of the power which results from this asymmetry in information or knowledge, we have different expectations of professionals than normal business managers. Also with professionalism , quite often the product (or service) and activity of production are the same; there is no prior testing.

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