Management in the Private and Public Sector PDF

Management in the private and public sector: differences Effective management is crucial for success in both the private and public sectors, sectors, but the approaches they take differ greatly. LM by Luca Mazzara The Origin of Management: A Management: A Historical Historical Perspec...

Management in the private and public sector: differences Effective management is crucial for success in both the private and public sectors, sectors, but the approaches they take differ greatly. LM by Luca Mazzara The Origin of Management: A Management: A Historical Historical Perspective Throughout human history, management has been vital in organizing and organizing and coordinating efforts to achieve common goals. The The management concept can be traced back to ancient civilizations, civilizations, where leaders emerged to guide and direct collective collective endeavors. In ancient Egypt and China, officials were responsible for overseeing administrative tasks and government administration. The modern concept of management, as we understand it today, today, emerged in the late 19th and early 20th centuries, as businesses businesses and organizations became larger and more complex. Pioneers Pioneers such as Henri Fayol (1841-1925), Frederick Taylor (1856-1915) (1856-1915) and Max Weber (1864-1920) developed new theories and theories and practices for organizing and managing workforces, which laid which laid the foundation for modern management principles.  Basis Henri Fayol F.W. Taylor Personality Fayol was a Taylor was a scientist. practitioner. Perspective Fayol developed the Taylor developed these principles from the principles and point of view of the top techniques keeping in level of management. mind the lower level. Unity of Command Unity of Command is Employees receive strictly followed. orders from only one superior Applicability Fayol’s principles are Taylor’s technique or universally applicable, principles are applied in as they are flexible. specific situations, as they are less flexible. Basis of formation Fayol’s principles are Taylor’s principles or based on personal techniques are based experiences. on experiments and observation. Focus The main focus is given The main focus is given on the overall on increasing administration of the productivity of organization. employees. Expression Fayol’s principles are Taylor’s techniques are Max Weber Applying the same principles from Taylor but focusing on the organogram. Weber focused on a bureaucratic management strategy Max Weber-Principles Authority hierarchy technical qualifications employment full-time jobs job roles well defined management base on rules remuneration system Definition of Management In 1954, when Peter Drucker (1909-2005) is said to have invented the concept of management with his book The Practice of Management (Harper & Brothers), the future of management seemed bright. He was a renowned management consultant who revolutionized the way people think about management. He defines management a s "the art of getting things done through people." In other words, managers are responsible for leading and directing their team to achieve organizational goals. According to Drucker, effective managers focus on aligning and leveraging the strengths of their "team". This means that managers need to understand each team member's unique skills and abilities and create an environment where everyone can contribute their best work. Drucker's philosophy has profoundly impacted the management field, inspiring countless leaders to rethink their approach to leadership. His ideas are especially relevant in today's constantly changing business environment, where organizations must be agile and adaptable to stay competitive.  The role of the Manager (Peter Drucker) According to Peter Drucker, the manager's role is multifaceted and centers on setting and achieving organizational goals by effectively using resources and people. Drucker defined five key tasks for a manager: 1. Setting Objectives: A manager establishes clear objectives for the organization, defines the required results, and communicates these goals to those responsible for achieving them. 2. Organizing: Managers design an organizational structure that enables efficient task distribution and resource allocation. They analyze necessary activities, classify and delegate tasks, and select individuals suited to each role to ensure accountability. 3. Motivating and Communicating: Drucker emphasized the importance of motivating team members and creating a collaborative environment. Effective managers build strong working relationships and foster communication across the organization, which helps engage employees and align them with organizational goals.  The role of the Manager (Peter Drucker) 4. Performance Measurement: Managers use specific metrics to assess individual and organizational performance. They evaluate, analyze, and communicate the results to improve the organization and help employees understand their contributions continuously. 5. Developing People: Managers are responsible for developing the skills and potential of their team, including their own growth. For Drucker, a manager’s goal is to make the workforce more productive and to prepare the organization for future challenges. Drucker believed that management is about serving the organization’s purpose beyond profit. Instead, it involves creating value for the customer and society, thus making management a key social institution. Organizations as Open Systems Organizations are not isolated entities but rather dynamic systems that interact with their environment. They receive inputs from the environment, transform them through internal processes, and produce outputs back into the environment. Organizations as Open Systems Public and private sector organizations Private sector organizations can be divided into those that are run on commercial principles to deliver a profit (for- profit organizations) to their owners and the so-called "third sector" (not-for- profit organizations), that is, non-public organizations with purposes other than profit, notably charitable or cooperative organizations.  Organizational Goals and Objectives Private Sector Public Sector Organizational goals are typically financially driven and Goals revolve around the creation of public value and driven and centered around profit maximization. the satisfaction of public needs. maximization. Decision-Making Process Private Sector Decisions are made with speed and determination, often by a small group of leaders. Public Sector Decision-making process is slow and deliberate, typically involving multiple stakeholders and opinions. Accountability and Transparency in Management Accountability refers to the responsibility of individuals and organizations to answer for their actions and decisions. It arises within a relationship of responsibility, where one person or body is responsible to another for performing particular services. Transparency involves open and accessible information sharing to promote trust and ethical behavior. *Transparency is necessary but not sufficient for accountability! Both accountability and transparency are essential for effective management. Accountability and Transparency Private Sector Accountability is to shareholders and the bottom line. Transparency is often limited (i.e., due to company privacy). Public Sector Accountability is to the public and government regulations (more stringent with regard to process and general policy). Full transparency is key for building trust and legitimacy. Accountability in the public sector The emphasis is on the accountability of public power, on how to make governments, their agencies and officials, more accountable to their ultimate owners, the citizens. Since governments are increasingly contracting public services to the private sector, their accountability becomes a growing pressing issue. Resource Allocation and Budgeting Private Sector (for-profit organizations) Public Sector Resource allocation and budgeting are focused on Budget cuts, resources are allocated to satisfy maximizing returns on investment and profitability. community needs, infrastructure and societal interests. Performance Evaluation and Measurement Private Sector Public Sector Performance is measured by: Performance is measures by: key performance indicators (KPIs), revenue, profits, Objectives and Key Results (KOR), customer and share prices. satisfaction, innovation, and efficiency. Transparency and legitimacy. Employee Motivation and Incentives Private Sector Motivation comes mainly from financial incentives such as a good salary, promotions, and bonuses. Public Sector Motivation comes mainly from promotion, job security, benefits, and prestige. Flexibility and Adaptability in Management Strategies 1 Private Sector 2 Public Sector The focus is on innovation, research, and The focus is on adapting to new regulations development to remain competitive and agile. and operating conditions while still meeting overall strategic objectives. Economicity, Efficiency, and Effectiveness in Management Economicity emphasizes achieving organizational goals with optimal utilization of resources. Efficiency focuses on maximizing output with minimum resources. Effectiveness measures the extent to which objectives are met. Balancing these factors is crucial for successful management. The production model of performance (Van Dooren-Bouckert-Hallingan 2015)  Problems, needs and relevance The starting point is the "socio-economic situation". Socio-economic issues (1 in previous Figure) induce a need for action by the public sector (2). In accordance with the traditional politics–administration dichotomy, politicians are expected to define the societal needs. Agenda-setting research however demonstrates that not only politicians are involved in translating issues to problems and problems to policies. Civil servants, interest groups, media and chance events also play a role in formulating needs. However, the political system’s unique role is to filter issues and to determine priorities. Following the model, these priorities are translated into objectives (3) of the organization or programme under review. The confrontation of the objectives of a policy with the needs allows assessing the relevance (7) of the pursued policies.  Outputs and Efficiency Inputs (such as financial and human resources) (4) are allocated to organizations and programmes in order to stage activities (5) that yield outputs (6). Economy (8) is the ratio of a monetary input over another input (e.g. the cost of a computer). The ratio of the input over the outputs is efficiency (9). Economists make a distinction between efficiency and productivity. Maximization of financial profit is not an objective of public sector organizations. However, public sector organizations should also evaluate their output mix. They should also consider whether they provide the right bundle of services. This assessment is intrinsically more complicated in the public sector. First, the definition of output in itself is more complex. The number of transactions between producers and consumers is not a valid way of defining public sector output. We need to consider the volume of services provided.  Outputs and Efficiency Second, the criterion for determining optimal output levels should be societal profit instead of financial profit. Outputs and efficiency are adequate conceptualizations of performance in the private sector, but unsatisfactory in the public sector. Both in public and in private organizations, outputs are expected to have effects in society. In the private sector, each individual consumption decision in the market determines and values this effec t.  The new UN frontiers: The Triple Bottom Line "Profit, People, Planet" The private sector discusses its "social role" beyond individual consumption as well. The United Nations for instance has defined a triple bottom line (TBL), which is an expanded spectrum of values and criteria for measuring organizational success: profits, people and planet. The people concept refers to fair and beneficial business practices towards labour and the community in which a firm conducts its business. The planet concept refers to sustainable environmental practices. Profit, in the TBL definition, is the economic benefit of economic activity for society. It is the lasting economic impact the organization has on its economic environment. The TBL definition of profit is clearly broader than the conventional definition of internal profit discussed above. It remains to be seen whether efforts of private companies to reflect upon their social role imply a converging trend between public and private concerns, or whether TBL and other efforts are mainly cosmetic. The response of private corporations to the financial crisis may be a test: which bottom line will come under greatest pressure? Outcomes and Effectiveness (1/2) The outcomes of public services are either collective or consist of externalities that are not taken into account by individual consumers. Unlike in market transactions, citizens do not directly attribute monetary values to services. Rather, and only in democratic societies, there is a remote and indirect assessment through political participation. Outcomes and effectiveness (2/2) Public administration scholars have disentangled the outcome concept. Outcomes can be intermediate (usually but not always in the short term) (13) or final (usually but not always in the long term) (14). The final outcomes in particular are influenced by the context (15) on which the organization or the programme has a limited or no impact. Such contextual factors can be encompassing socio-economic or ecological trends, but also policy measures from other governments. Agencies in European Union member states for instance are restrained by European regulation. Effectiveness The ratio of output over outcome is the effectiveness (12). The ratio of the input over the outcome is the cost- effectiveness (10). The outcomes of a program or an organization must address society's needs. The confrontation of needs and outcomes allows assessment of the sustainability and utility (11) of the program or organization  The depth of performance Performance has a potentially broad stretch. It includes micro, meso and macro levels. Bouckaert & Halligan (2008) call this the depth of performance (p. 18), indicating that performance can be discussed at different levels. The macro level typically includes general discussions on the performance of a country. Still, it also encompasses performance of supra-national governments (Euro zone, the OECD countries) as well as local and regional governments. The key element of macro performance is its government-wide character, irrespective of the tier of government. Micro performance is defined at the level of an individual organization and its interface with citizens and other organizations. In between macro and micro, meso performance refers to either the performance of a policy sector (e.g. education) or the performance of governing a chain of events (e.g. the food chain) or networks (e.g. an urban development project).