Do you already know what are the differences between Public and Private Administration? Public and private companies are the essence of a country’s economy and each one manages its resources differently.
As an entrepreneur, you need to understand the differences between the two steps and what their scope is in companies.
For this reason, today I will describe the differences between public and private administration, taking into account certain aspects.
For this, I present the following points:
- What is Public Administration?
- What is Private Administration?
- Differences between Public and Private Administration.
- In summary
To start, I want us to see together 4 basic things you should know about public and private administration. Notice:
It is important that you know the differences between public and private administration and how it works in your company.
What is Public Administration?
The public administration is in charge of managing the contact between the citizens and the public power, not only in the bureaucratic institutions of the State, but also in the state companies, in the health entities, in the armed forces, in the police, the firemen, the postal service and national parks, among others.
Public administration refers to the functions that are carried out in government institutions, in order to satisfy the needs of the group.
Its functions include providing support to activities carried out by private companies.
On the other hand, it will be in charge of providing means for the fulfillment of public policies, which have been planned by the State.
Public management is key to the country’s economy and it supports the activities of the private administration
What is Private Administration?
It is the science in charge of the functional processes of the company, to comply with what is established in strategic planning.
Private administration, unlike public administration, seeks to maximize benefits and decrease costs in operations.
Because companies must maintain or increase their competitiveness in the market, they need to innovate and satisfy the needs of their customers. This is the only way to guarantee that the company is sustainable over time.
Differences between Public and Private Administration
Private administration, unlike public administration, seeks to maximize benefits
The differences between these types of management are not absolute, since there are companies whose capital is mixed and therefore also their management.
On the other hand, a public company may become private through a privatization process; and a private company may go public through nationalization.
To better explain the differences between public and private administration, we will take into account certain aspects.
The resources they manage:
Private administration is going to focus on managing capital that belongs to owners, private investors and shareholders.
In case of any economic problem, the state is not obliged to solve it, since those responsible are private individuals.
The main way to earn income in private administration is through the sales of your product or service.
On the other hand, the public administration manages the capital that belongs to the state, therefore, it should be governed by the principle of accountability. This means that the administrator must indicate in which games he used the assigned monetary resources.
The resources in the public administration come from the taxes of the citizens of the country, distributed by the organs according to national planning.
An example of public administration is EMASESA, located in Seville, which is dedicated to supplying water.
According to its objectives:
Private companies seek to maximize their profits and minimize their costs, since this translates into greater benefits for the owners of the company.
In addition, the private administration is oriented to satisfy the needs and expectations of people (a target market), through the products or services for sale.
Contrary case of public companies, whose fundamental objective is to benefit society.
Apart from this, it seeks to guarantee the rights of people and regulate the conduct of society.
An example of public administration is that carried out in customs companies, whose purpose is to control the entry and exit of goods into the country, that is, it establishes regulations.
In private companies, decision-making is the responsibility of the company’s board, administrators and shareholders. These will be in charge of enforcing strategic planning, in order to guarantee the success of the organization.
In public administration, decision-making is closely linked to the current government. The decision-making of public administrators is of low impact, since the great changes will have to go through the government and its legislative power.
Public administration affects the entire country, since its functions are oriented to benefit or regulate the conduct of the entire society. Without it, public policies would not be properly executed.
On the other hand, the private administration has as its field of application the private capital company, but will rely on the public administration to carry out its activities. For example, permits, inspections, payment of taxes, among others.
Because private companies need to increase their level of competitiveness, they need to promote innovation in the processes at each level.
This is one of the great differences between public and private administration, since innovation in the public administration is almost nil, since decision-making lies with the State.
In this sense, since public management does not seek to generate competition, it is not common for them to focus on improving their services, therefore they are less innovative.
Conclusion on Difference Between Public and Private Administration
The administration applied in the public and private companies is not the same, although both use the functional process in their operations.
The most notable difference between public and private management is the way of obtaining its resources. In the private one they are obtained from the sales generated by the organization, but in the public one they come from the taxes of the citizens.
While private management seeks to maximize benefits, public management is oriented to benefit society.
I hope this information has been useful to you.