WHY THE PRIVATE SECTOR PERFORMS BETTER THAN THE PUBLIC SECTOR
- The private businessman’s main motivation is profit
The private businessman never invests his money in a project just to break-even or makes losses. For this reason, private sector institutions are characterised by strict supervision, prompt provision of facilities that will promote output and hence profit, revision of incentives to workers etc. In most public sector institutions, on the other hand, the profit motive is secondary. This results in poor supervision and consequently poor output.
- Failure of a private venture can sometimes be embarrassing
Many private businessmen, because of the competitive nature of private business, do not want to be ‘defeated’ by rivals. The failure of a business venture in which substantial amounts have been invested sometimes carry a social stigma which all wise private investors want to avoid. Most public sector institutions, on the other hand, are viewed by the employees as ‘no man’s business and as such the workers are not strongly motivated to ensure the success of the institution.
- No state subvention for private sector institutions/businesses.
The state does not normally support private businesses financially. The absence of this government subvention compels the private entity to make sure it makes profit to stay afloat and even pay taxes to the state. This is not the same in the public sector. Many state-owned enterprises continue to enjoy government subventions even when they continue to make losses. Since they have nothing to lose, they just keep piling debt onto the books.
- Recruitment of staff
Private establishments often pay greater attention to expertise and qualification in the recruitment of top level personnel to ensure that the job is properly performed. They are prepared to offer incentives to obtain qualified accountants, sales managers, etc. In the public sector, expertise and competence are sometimes ignored for reasons of nepotism, blood ties, etc. This does always arguer well for productivity.
- Lack of political interference
In the private sector, there are no issues of political interference in the operations of the company or entity. This allows for smooth operations that positively affect the bottom-line. This is not the case in the state-owned institutions. Political interference in the public sector often affects management efficiency and the output of workers.