What is the difference between private sector, nonprofit sector, and public sector? How are they managed differently? Solution Public Sector Public sector companies are run and governed by the federal, state, or local governments. There can be two types of such companies - the government departments (e.g. police, post, rail, hospitals and so on) and companies owned by the governments (e.g. banks, manufacturing units). The basic objectives of the government departments are serving the citizens and not profit making. The basic objectives of the companies owned by the government (i.e. government is the majority shareholder) can, however, be profit making. The government departments raise money from the tax paid by the taxpayers while the revenue and profit of the government-owned companies can come from selling products and services. Public sector companies are managed primarily by the government through its large chain of command, stringent and commonized policies, and the government officials. There is often hardly any relationship between the reward and performance and so it is difficult to motivate the employees of the public sectors to perform as per the expectations. Private Sector Private sectors companies are those owned and managed by private entities (individuals, groups, or companies). Again, there can be two types of such companies - the private limited and the public companies. For the private limited companies, the shareholding is closely held by the owners. For public companies, the shares are quoted in the share market and are open for purchase to the general public. Both the types of companies\' primary objective is profit making. Public companies are however come under more severe regulator\'s scrutiny as being listed in the share market. They need to approve their major decisions from the shareholders before implementing them. So, they are managed by the shareholders (at least by principle). On the contrary, the private companies can make decisions with the owners\' approval only. The management of private companies seems apparently easy. The public companies, however, have greater access to funds from the shareholders and owners. Non-profit sector Non-profit sector companies are created for purposes other than making profits. There can be two types again - public non-profits and private non-profits. The profits earned by these companies are not accumulated in the form of reserves and surpluses but invested in some charitable purposes. Public non-profits receive their funds from the donations of citizens and enterprises. Private non-profits arrange funds primarily from the dedicated donors or investment income. As far as management of these organizations is concerned, there is no clash of reward vs. performance as that in case of the public sector. The management can be very effective. The cash outflow can be in terms of salary paid to the employees. The only difference with profit- making firms is that the profit for these fi.

1. What is the difference between private sector, nonprofit sector, and public sector? How are they
managed differently?
Solution
Public Sector
Public sector companies are run and governed by the federal, state, or local governments. There
can be two types of such companies - the government departments (e.g. police, post, rail,
hospitals and so on) and companies owned by the governments (e.g. banks, manufacturing units).
The basic objectives of the government departments are serving the citizens and not profit
making. The basic objectives of the companies owned by the government (i.e. government is the
majority shareholder) can, however, be profit making. The government departments raise money
from the tax paid by the taxpayers while the revenue and profit of the government-owned
companies can come from selling products and services. Public sector companies are managed
primarily by the government through its large chain of command, stringent and commonized
policies, and the government officials. There is often hardly any relationship between the reward
and performance and so it is difficult to motivate the employees of the public sectors to perform
as per the expectations.
Private Sector
Private sectors companies are those owned and managed by private entities (individuals, groups,
or companies). Again, there can be two types of such companies - the private limited and the
public companies. For the private limited companies, the shareholding is closely held by the
owners. For public companies, the shares are quoted in the share market and are open for
purchase to the general public. Both the types of companies' primary objective is profit making.
Public companies are however come under more severe regulator's scrutiny as being listed in the
share market. They need to approve their major decisions from the shareholders before
implementing them. So, they are managed by the shareholders (at least by principle). On the
contrary, the private companies can make decisions with the owners' approval only. The
management of private companies seems apparently easy. The public companies, however, have
greater access to funds from the shareholders and owners.
Non-profit sector
Non-profit sector companies are created for purposes other than making profits. There can be
two types again - public non-profits and private non-profits. The profits earned by these
companies are not accumulated in the form of reserves and surpluses but invested in some
charitable purposes. Public non-profits receive their funds from the donations of citizens and

2. enterprises. Private non-profits arrange funds primarily from the dedicated donors or investment
income. As far as management of these organizations is concerned, there is no clash of reward
vs. performance as that in case of the public sector. The management can be very effective. The
cash outflow can be in terms of salary paid to the employees. The only difference with profit-
making firms is that the profit for these firms is not getting accumulated.