Organizational theory is the sociological study of the structures and operations of social

organizations, including companies and bureaucratic institutions. Organizational theory includes

the analysis of the productivity and performance of organizations and the actions of the
employees and groups within them. Economists, business analysts and academic researchers who
study organizational theory are interested in understanding the dynamics of a successful
business.

Difference between Public and Private Sector

Public Sector

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The Public Sector consists of businesses that are owned and controlled by the government of a
country. The ownership and control of the central or state governments in these organisations are
either complete or partial. But it still holds a majority stake and makes every single decision
regarding running the entity. These organisations include government agencies, state-owned
enterprises, municipalities, local government authorities and other public service institutions.
Some of them can be non-profit organisations while others participate in commercial activities as
well. It generally focuses on providing goods and services to the general public at relatively
cheaper rates than private companies. Its main aim is to ensure the welfare of the general public
within a country.

Private Sector
The Private Sector enterprises are owned, controlled and managed either by individuals or
business entities. It can be small-scale, medium-scale or even large-scale organisations. These
get formed to earn a profit from their business operations, and they can raise funding from
individuals, groups, and the general public.
The different entities within the private sector include sole proprietorship, partnership,
cooperative societies, companies and multinational corporations. They also focus on taking care
of the needs of their customers to survive in the long run. Ever since the introduction of the New
Economic Policy in 1991 by the Government of India, almost every industry in the country has
opened up to the private sector. It has led to a phenomenal increase in the size of the Indian
economy and its growth rates.

Differences between Public and Private Sector

The main differences between Public and Private Sectors are as follows:

Public Sector Private Sector

Definition

Public sector organisations are owned, Private sector organisations are owned, controlled and
controlled and managed by the government or managed by individuals, groups or business entities.
other state-run bodies.

Ownership

The ownership of the public sector units can The ownership of private sector units is by individuals or
be by central, state or local government entities with zero interference from the government.
bodies, and this ownership is either full or
partial.

Motive

The main motive of public sector The main motive of the private sector is to earn profits
organisations is to engage in activities that from their business operations.
serve the general public.

Source of Capital

The capital for public sector undertakings The capital for private sector entities comes either from
comes from tax collections, excise and other its owners or through loans, issuing shares and
duties, bonds, treasury bills etc. debentures, etc.

Employment Benefits

Public sector units provide several Private sector units offer benefits like higher salary
employment benefits like job security, packages, better chances of promotion and recognition,
housing facilities, allowances and retirement competitive environment and greater incentives in terms
benefits. of bonus and other benefits.

Stability

Jobs within the public sector are very stable Jobs within the private sector are not very secure since
since the chances of getting sacked due to non-performance can lead to sacking. Companies can
non-performance are very low. also fire people in case of cost cutting or scaling down of
operations.

Promotions

The criteria for promotion in the public sector The criteria for promotion in the private sector units is
units is generally based on the seniority of the generally based on the merit and job performance of the
employee. employee.

Areas
 Some of the main areas that come under the Some of the main areas that come under the private
public sector are police, military, mining, sector are information technology, finance, fast moving
manufacturing, healthcare, education, consumer goods, construction, hospitality,
transport, banking, etc. pharmaceuticals, etc.

Conclusion
Any country needs both the public sector and the private sector to work at their full potential.
There are many differences between the two but a robust financial and economic system must
have an adequate mixture of companies belonging to both these sectors.

Public vs. Private Sectors: Definitions, Examples and Differences

By Indeed Editorial Team
February 23, 2021

If you are looking for employment, you may consider opportunities in both the public and private
sectors. While the public sector provides services to the public, the private sector focuses on the
interests of individual organizations and their stakeholders. When you understand each sector
and its advantages, you can determine which of the two suits your needs and interests best. In
this article, we provide definitions and examples of the public and private sectors, along with the
differences between the two.

What is the public sector?

The public sector represents the segment of the economy owned and operated by the
government. These organizations typically do not seek profit and often provide public services to
the government's citizens. Some of the advantages of working in the public sector include:

 Public sector employees typically enjoy more job stability because their organizations do
not need to meet market pressures. These employees also often perform services that are
consistently needed by the public, which can further ensure job safety.
 Individuals working for government agencies or departments often receive
comprehensive benefits packages. These benefits may include health insurance and
retirement benefits. This advantage can make it easy for such employees to move
amongst different public sector jobs while retaining similar benefits.
 Some individuals may enjoy the public sector because it can provide opportunities to
serve the community. Rather than striving to create profits, they can play a role in
improving the lives of others.

Related: A Guide to Civil Service Jobs

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Types of public sector businesses

The public sector represents businesses owned or controlled by the government. Some examples
include:

 Government agencies: A government agency is established and financed by the

government and responsible for managing and performing specific tasks. This group
contains federal, state, county and city agencies. However, the U.S. Postal Service is an
example of an independent government agency. It does not use taxpayer funding and
generates its own revenue.
 Public purpose corporations: A public purpose corporation is created by the
government to serve the public, similar to a nonprofit. A library is an example of a public
purpose corporation established by state governments.
 Public authority: A public authority is like a public purpose corporation, but it has more
power and often manages infrastructure-related projects. For example, a city or county
may have a housing authority to provide affordable housing to its residents.
 State-owned enterprises: A state-owned enterprise is created by the government and
participates in commercial activities on its behalf. The government can have full or
partial ownership of such businesses. An example of a state-owned enterprise is the
United States' Federal National Mortgage Association, commonly known as Fannie Mae.

What is the private sector?

The private sector represents the segment of the economy owned and operated by individuals and
for-profit companies. Unlike the public sector, companies in the private sector are not
government-owned or operated. Some of the advantages of working in the private sector include:

 Private sector employees typically receive more opportunities for job advancement
because the decision is based on their performance. In the public sector, such decisions
may rely on government regulations or rules.
 In terms of payment, private sector employees have more opportunities for pay raises and
higher salaries than their public sector counterparts. One reason is that some high-level
public sector jobs have income caps, while private-sector jobs do not. Like promotions, a
private sector company can increase an employee's salary based on their work
performance.
 The private sector offers greater diversity in job opportunities, allowing individuals to
find work based on their varying interests. The public sector has existing agencies and
organizations focused on providing specific public services, which may offer more
limited options.

Related: What Is the Private Sector? Definition and Examples

Types of private sector businesses

The private sector comprises many different businesses. Some examples include:
  Sole proprietorships: A sole proprietorship is an unincorporated business owned and
operated by one person. An individual who runs and owns a flower shop serves as an
example of a sole proprietorship.
 Partnerships: A partnership is a business owned and operated by two or more
individuals. For example, a law firm may have several partners that co-own it and share
its profits.
 Small and mid-sized enterprises: A small and mid-sized enterprise is defined by its
revenue, assets and number of employees. Different countries identify them differently,
as can the industries within those countries. For example, the U.S. Small Business
Administration sets size standards for businesses based on their industry or type. The
number of employees required for recognition as a small and mid-sized business can vary
from 500 to 2,000 employees.
 Large corporations and multinationals: A corporation represents a legal entity separate
from its owners, with a large corporation typically earning a taxable income of at least $1
million. A multinational corporation has operations and assets in more than one country.
Some of the most well-known companies serve as examples of large corporations and
multinationals, such as Apple, Microsoft or Disney.
 Professional and trade associations: Professional and trade associations serve specific
groups of people, typically based on their profession or industry. They often offer their
members professional services and networking opportunities. For example, the American
Bar Association serves lawyers' interests and sets standards for the legal field.
 Trade unions: Trade unions are organizations created by individuals who work in the
same profession or industry. Trade unions aim to protect and improve the rights of their
members. For example, the International Workers of the World is a global trade union
that serves various industries, while the American Postal Workers Union represents a
more narrow trade union.
Related: Q&A: What Does "Private Sector" Mean?

Key differences between the public and private sectors

The public and private sectors sometimes partner to complete goals, such as construction or
transportation projects. However, these two sectors represent some significant differences,
including:

Ownership

The most significant difference between the private and public sectors is the ownership of the
organizations within them. In the public sector, organizations are owned and controlled by the
government. Meanwhile, organizations within the private sector are owned and managed by
individuals or private companies.

Purpose

Some state-owned enterprises participate in commercial activities or make a profit. However,

organizations in the public sector tend to serve the primary purpose of benefiting the public by
providing services. In the private sector, businesses have the primary purpose of making profits.
Financial support

Organizations within the public sector receive financial support and funding from the
government. These funds may come from direct and indirect taxes. However, some public sector
organizations, such as the U.S. Postal Service, generate revenue. In the private sector,
organizations may receive some financial support but typically fund themselves using their
revenues, issuing shares or taking out loans.

Employment

Employees working in the public sector work for public agencies or local, state and federal
governments. Their salaries are typically paid for by tax dollars. In the private sector, individuals
work for a privately owned business or a publicly-traded company. The business' profits pay for
its employees' salaries.

Related: How to Build a Federal Resume (With Template)

Typical industries

Particular industries or professional fields tend to fall under one sector rather than the other. The
public sector focuses on public goods and government services, so employment areas include
public education, the armed services, public transit and infrastructure services. Individuals can
also find employment in the government, whether as a civil servant or politician. The private
sector focuses on making a profit, so its employment areas are very diverse. Some examples of
its industries include financial services, hospitality, real estate and technology.