Comparing Public and Private Sector Decision-Making Practices

Abstract

Public and private sector decision making is studied with an experiment. The study compares decision making in a tax-supported general purpose governmental agency with that done by a business firm selling to a market, using a simulation to capture differences in the preferences and practices of mid-level managers working in the two sectors. The simulation calls for participating managers to assess the risk and prospect of adopting budgets tailored to match each sector. A cognitive culture that stresses analysis, speculation, bargaining, or networking is employed to fashion a budget appropriate for a public and a private sector organization, each with a controversial and a noncontroversial budget amount. The literature on public/private differences was consulted to make predictions, suggesting that public sector managers would favor bargaining and networking and private sector managers would favor analysis and speculation. The cognitive style literature suggests that managers favor budgets constructed with an approach that is consistent with their preferred cognitive style and see less risk in the choice, except in a public setting where risk would be unaffected. The study finds that private sector managers are more apt to support budget decisions made with analysis and less likely to support them when bargaining is applied. Public sector managers are less likely to support budget decisions backed by analysis and more likely to support those that are derived from bargaining with agency people.

The decision-making process in public healthcare entities – identification of the decision-making process type

“…The differences in decision-making in the private and public sector organizations were also pointed out in the works of Nutt (1999Nutt ( , 2005:   in public organizations decision-makers must recognize the market, because it is created by state authorities, and behaviour of buyers is the factor defi ning the market for private organizations,   in public organizations, cooperation replaces competition,   in public organizations, there is greater need for consensus and simultaneous pressure to understand the mandates and commitments, and the range of choices available is smaller. In private organizations autonomy and fl exibility of an organization is limited only by law and internal needs of the organization,;   in public organizations more time is needed for balancing expectations of the users with the requirements of the authorities, which is a result of networks between the users and authorities,   in public organizations the need for opening the processes of external participation is increasing, it is diffi cult to keep the decision-making in secret,   in public organizations the need for determining public expectations regarding the way in which the service is provided is increasing because the citizens behave like shareholders and often impose their expectations concerning activities of the organization,   in public organizations, clarity of selection criteria is decreasing, there is the need to take into account the soft criteria and the criteria that will ensure equal access to the services,   in public organizations the need for bargaining over resources is increasing, decision-makers have less power enabling them to change the shape of organization, also the time to search for options for this change is more limited.…”

“…The source literature indicates that private organizations have defi nitely smoother and quieter decision-making processes (Nutt 2005). On the other hand, public organisations experience more turbulence, breaks, recirculation and confl icts.…”

How to Overcome Transformation Barriers in IT Departments of State-Owned Enterprises

“…As the external environment of a public organization is littered with political considerations and thus drives complexity (Nutt, 2006). In contrast to economic issues, which are crucial for private organizations, the views of opinion leaders, legislators and interest groups are of great importance (Levine et al, 1975).…”

Public–private joint ventures: mixing oil and water?

“…Even though public and private organizations both confront a large and complex map of stakeholders, the influence that this diverse set of actors has in each sector can vary considerably (Nutt, 2006). Public organizations are ultimately held politically accountable by citizens who may or may not actually use the services provided, whereas the private sector is in the last instance accountable to the shareholders who invest their money in businesses.…”

“…Public organizations are ultimately held politically accountable by citizens who may or may not actually use the services provided, whereas the private sector is in the last instance accountable to the shareholders who invest their money in businesses. To reconcile the demands of different stakeholder groups, managers of PPJVs must make extensive use of consultative practices that incorporate multiple viewpoints as well as analytical exercises that test how shareholder benefits can be maximized (Nutt, 2006). In the absence of such processes, tensions can arise due to differences between public and private interests, especially for private sector partners accountable both to company shareholders and the PPJV board of directors (see Shaoul, Stafford, Shepherd & Stapleton, 2012).…”