Types of Organizations - Essay Example

Types of Organizations The private sector Private sector organizations are organizations which are owned by individuals and are operated with the aim or making profits for the owners. The role of a private organization is to maximize profits, while operating within the ethical and professional parameters of the industry in which the organization is operating in. An example of such an organization in UK is Unilever which is a manufacturer of basic consumer goods such as detergents and other household goods. The private sector is made of such businesses and companies that are run by individuals. One of the features that separate the private sector from the other sectors such as the public sector and the voluntary (non-profit) sectors is the fact that these businesses are run mainly to make profit (Tsai, 2007). In this regard, the management and operations of these firms are geared towards the central goal of making a profit for the owners. The resources available to the organization are managed in a way that produces the best efficiency in order to reduce costs produce high quality products to the customers. As Delmon (2009) says, the private sector makes a very significant and highly important part of the economy especially in countries where the free markets economic model is used. This is because the private sector provides for the majority of the employment opportunities in such economies. According to OECD (013), the private sector also plays a very big role in resource employment which helps in boosting the economy. In economies where the private sector is the main part of the economy, private wealth and resources are highly integrated into the economy and are thus used in making sure that the economy is well developed. A closer look around the world shows that in economies where the private sector is the lead sector indicates that these kinds of economies are more successful than those where the public sector is the major and leading sector. In UK and the US, the private sector makes a major part of the total economy and is responsible for a very high percentage of production and the Gross National Production. The private sector however has its own issues and problems. For instance, when not well regulated, there is always a high risk of the participants behaving in a way that will end up hurting the economy. However, there have been theories which have been developed over time some of which argue for the deregulations of the private sector, these theories argue that the government in any county does not need to regulate the private sector since the mechanisms in the private sector (interregnal competition between the various players) can only lead to a better economy as they will be striving to make to customer happy thus leading to a natural self regulation (Farquharson, Mästle & Yescombe, 2011). However, from other quarters, this theory has been disputed and some professionals think that the private organizations should be regulated because failing to do so will only lead to the private sector being unable to regulate itself thus hurting the economy. The debate about the regulation or deregulation for the private sector is a back and forth debate, however, in the past, evidence has shown no feasibility for the private sector to be fully regulates itself. This can be evidenced in the early industrial age in the United States of America where the private organizations were making mergers (Trusts) to avoid competition with each and thus be able to exploit the consumers as much as possible. To respond to these trusts and the negative results they impacted on the economy, President Roosevelt’s administration had to create the antitrust laws which are in force up until today. A more recent example of how the private sector may not be able to control and regulate itself is the previous economic recession in the United States which then spread to almost all the developed world such as Europe and Asia Pacific. These two examples are some of best examples of how the private sector is unable to regulate itself and must depend on the government to offer some level of regulation in order to sustain order and stability in the economy. The public sector organizations A public sector organization is an organization that is owned and controlled by the government usually to deliver services to the people or to regulate the delivery of services tot eh public by the private sector. An example in UK is the Water Services Regulation Authority. This organization is a regulatory organization which is the arm of the government that regulates and oversees the private sector in the water and sewerage industry. Public sector organizations are institutions and organizations, ministries and departments that are run by the government of a country. In most countries, these intuitions are run in order to provide essential services such as education, inutilities (such as water, electricity and food), roads etc (Christensen, et al 2007). The public sector also has a very important role to play even in situations where the private sector is the dominant sector in an economy. This is because the public sector protects the citizens especially in the provision of essential services such, water heating, infrastructure, health and education (Starling, 2009). Since the public sector is not motivated by profit generation, it means that the public will not have to feel the private fluctuations in the market when there are some issues in production of these essential services. The public sector makes it easy for the public to enjoy the services and goods in a stable way. The services can be delivered in affordable prices because the government does not look for profits and sometimes it even operates at a loss just to deliver these services. The public sector is characterized by the following factors; Low competency One of the main factors that are associated with the public sector is mainly its lack of competency. When compared to the private sector, the public sector seems to have much less efficiencies. This lack of efficiency can be attributed mainly because the players in this sector are not faced with competition and they are not working towards achieving profits. Unlike organizations in the private sector that must constantly work to increase efficiencies, the participants of the public sector are not geared towards any of these goals and therefore efficiencies rare not achieved. Lack of innovation The same factors that lead to low efficiencies are the same factors which lead to low innovation in the public sector. In fact, low levels of innovation and low efficiencies are intertwined in that one leads to the other. Low innovation is a major cause of the low efficiency in the public sector (Bason, 2012). The players in this sector do not feel obliged to create better solutions because they don’t have the pressure to perform better than competition. The fact that they are not looking to make any profits also makes it easier for the process of innovation and improvement to be ignored. Unlike the private sector which constantly makes innovations which are borne of constant research and development project, organizations in the public sector seems to be reluctant to invest in these processes. This is why a look around the world indicates that economies that depend too much on the public sector have diminished development (Delmon, 2009). Low quality due to lack of completion In any economy where there are parallel services offered by the public as well as the private sector, it always emerges that the private sector gives much better services than the public sector. For instance, in cases where both the government and the private sector offer education and health services the private sector offers these services better and in better qualities. However, the difference is that the private sector will charge more while the government offers their services completely free or highly subsidized services. Whether the low quality can be attributed to this is a matter of debate and in most cases the public sector has been accused of not doing enough to deliver best quality. Although the public sector has been seen to rank low in quality of products it offers, this has not been the case everywhere. In the modern world, many governments have realized the need to provide better services in their countries. In fact, the old-fashioned way of providing services without making profits can be seen to be changing with time. In most countries such as the UK, public institution are supposed to manage their finances well and if possible to deliver positive results with regard to their budgets, in this regard, they are required to make some money for the government. This new spike is creating a boost in innovativeness and creativity among these government entities (Bishop, Connors & Sampford, 2012). Not-for-profit organizations The not-for-profit organizations also called nonprofit organizations are operated with the interested of serving the beneficiaries rather than the owners. An example is the Science and Development Network which is a resource for scientific information. The organization was founded in 2001 to close the gap between the scientific information in poor and rich countries. The better term for these organizations not is not-for-profit organizations organization because calling them nonprofit organizations would imply that they don’t make profit from their operations. These organizations actually make profit and even strive to make profit. However, instead of these profits being distributed as dividends to the people who own them, they are reinvested in the organization to meet the goals of the organizations (Oster, 1995). Most of these organizations operate like charities and all the proceeds are invested towards these charities. Employees The employees in a not-for-profit organization may be paid or unpaid (volunteer workers). The not-for-profit organization can choose to have a human resource strategy that is exactly like the private sector forms which includes proper salaries to the employees (Pynes, 2013). This would mean that the employees who work in a not-for-profit organization that pays salaries will get full compensation for work, just like one who works in the private for profit sector. Volunteers Some of these not-for-profit organizations depend wholly on volunteers for work. Volunteers choose to work for free in these organizations and don’t get paid. This helps the organization to reduce its cost which is in line with the goal of such organization because they want to make sure that all or most of the financial resources are invested towards changing the core objectives of these organizations. Hybrid HR strategy The HR strategy that is used the most by these organizations is a hybrid one which includes having both paid and non paid employees. This helps the not-for-profit organizations to have a stable HR because depending on volunteers may not give the organization permanent employees. This is especially so for operational staff, where most of the volunteers only volunteer for a short time and then leave (Borger, 2005). To have permanent employees, the organization employee the core human resources and then leave the rest of the employee needs to be served by volunteers. However, some of these employees may even have nonpaid employees even at the executive levels but these are people who may have stable income somewhere end therefore able to serve the firm in a permanent way without having to drop out to go elsewhere to supplement their income. Bonuses Most not-for-profit organizations that have nonpaid employees are more likely to pay out benefits to their employees. This helps in making sure that the employee has a source of income but at the same time without having to legally bind the not-for-profit organization to employ such employees permanent. Various not-for-profit organizations operate at very different structure and some of them may even choose to operate as Charities or Trusts which then brings in new ways of managing the organization. When a not-for-profit organization is established as a Trust or a foundation, they may benefit from some tax exception and this makes them to save a lot on their revenues. Reference list: Bason, B. (2012). Leading Public Sector Innovation: Co-creating for a Better Society. Bristol, UK: Policy Press. Bishop, P. Connors, C. & Sampford, J.G. (2012). Management, Organisation, and Ethics in the Public Sector. Farnham, UK: Ashgate Publishers. Borger, H. (2005). Career FAQs Human Resources Australia. New York, NY: Career FAQs,. Christensen, T. et al. (2007). Organization Theory and the Public Sector: Instrument, Culture and Myth. London, UK: Routledge. Delmon, J. (2009). Private Sector Investment in Infrastructure: Project Finance, PPP Projects and Risks, Page 961. Alphen aan den Rijn, HL: Kluwer Law International. Farquharson, E. Mästle, C.T. & Yescombe, E.R. (2011). How to Engage with the Private Sector in Public-private Partnerships in Emerging Markets. Washington, DC: World Bank Publications. OECD. (2013). OECD Reviews of Innovation Policy OECD Reviews of Innovation Policy: Sweden 2012. Paris, NY: OECD Publishing. Oster, S. (1995). Strategic Management for Nonprofit Organizations: Theory and Cases. Oxford, UK: Oxford University Press. Pynes, J. (2013). Human Resources Management for Public and Nonprofit Organizations: A Strategic Approach. Hoboken, NJ: John Wiley & Sons. Starling, G. (2009). Managing the Public Sector. Stamford, CT: Cengage Learning. Tsai, K. (2007). Capitalism Without Democracy: The Private Sector in Contemporary China. Ithaca, NY: Cornell University Press. Read More