A long-standing popular belief holds that there are fundamental differences between public agencies and private agencies or firms. This belief has the further implication that management in public agencies is in some essential ways different from management in private firms. Specifically, the implication is generally that public management is a more difficult task, operating under a broader range of internal and external constraints, than is private management. Is this time-honored belief accurate, or are the similarities between public and private management greater than their differences? This is the core question that the following discussion will explore and seek to answer.
Public agencies are brought into being by the state, and exist to serve the interests of the state. In a federal state, agencies may be created by, and in the service of, some subdivision of the national state (such as an American state government). Even in a unitary state, specific public agencies may be several layers removed from the political leadership, and be more responsive to their particular public constituencies than to the directives of the national leadership. Nevertheless, the general rule may be considered valid that public agencies exist to serve state interests. In democratic societies, at least in principle, the state structure itself exists to serve the broad public interest, and state agencies tend to show some responsiveness to perceived public interests.
Private firms and agencies, in contrast, exist to serve some private interest. The vast majority of private agencies are business firms, which exist to make money for their owners, whether these are a few proprietors or a large body of stockholders. A division of a firm may be well removed from direct purview by the owners, but it is ultimately answerable to them. Private non-profit agencies exist for some other purpose than making money (e.g., to serve a charitable or ph...