Sunday, January 27, 2013

Analyzing Public vs. Private Sector Objectives

Eduaro Porter, of the New York Times, published an interesting article analyzing how organizations, whether they be public or private, can most effectively meet their business goals. The article focuses on British Petroleum (BP), a company that has been in both the public and private sector, as an intriguing case study. Below is an excerpt from the article, discussing the trade-offs BP faced in managing its business goals in both the public and private sector.
While in government hands, British Petroleum paid too little attention to profitability, constrained by its need to please elected officials who often cared more about keeping energy cheap and employment high. But in private hands, it may have cared about profits far too much, at the expense of other objectives. “BP veered from being a company that made sure nothing blew up to one focusing on cost-cutting at all costs,” Professor Fisman said.
The author argues that the private sector works best when objectives are clearly defined, and goals are tied to profit. However, where objectives are harder to define and more complex, making it more difficult to match profits with objectives, the public sector may be the best solution to achieve business objectives. I highly recommend reading the entire article, which can be found here.


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