Question

What are all the differences between Public Sector and Private sector organizations in terms of finance, control, structure, and objectives?, and how do both private and public sector tourism related organizations contribute to the macro economy?

At least 200 words, please. I need this answered as soon as possible. Thanks in advance!

Answer 1

Financial management in the public sector and private sector differ significantly. Let us potray the differences between Public Sector and Private Sector.

Financial Management

Accounting methods used in both private and public sector financial management differ significantly. For instance, in the private sector, financial managers and accountants are bound by the Generally Accepted Accounting Principles, or GAAP, methodology for accounting. This is a set of practices, such as the double-entry accounting method, used to ensure financial accuracy and uniformity. In the public sector, these methods may also be used, but it is not that unusual to deviate from them, as well. This is seen in areas such as budgeting where public sector financial managers are not necessarily bound by accrual accounting methods.

Both public and private sector budgeting requires creativity and vision. However, because of their different contexts, this creativity manifests in different ways.

Control

Private sector budgeting requires a financial manager to be quick, responsive, and occasionally ruthless to make sure his company stays profitable. Public sector budgeting requires its financial managers to be diplomatic, flexible in their thinking, and incredibly persistent. To this end, the latter type of financial manager often will possess a Masters of Public Administration as part of their educational background.

Structure

The decision-making process between public and private sector financial managers are closely related to the context of operation. In private sector financial management, decisions are generally made from the top and are filtered down through the hierarchy of the business as the financial manager hands off the orders or directions to those below him on the company food chain. In public sector management, it is not so simple. Public sector financial managers often have to work with political constituencies and navigate between competing interest groups. Important financial decisions are often rendered by creating coalitions and support. Decisions cannot typically be handed down and passed off to the next in command without some type of public sanction or approval.

The ways in which employees are hired differs in both sectors. In the private sectors, managers have the ability to hire quickly depending on the business cycle and the need for more personnel. A longer process is involved in hiring employees in the public sector because it can take several years to create a new position and several months for an existing position to be filled. Similarly, the firing of employees in both sectors is subject to different time frames. Private sector managers can fire and offer severance packages to employees at any time while public sector managers encounter a good deal of bureaucratic red tape, requiring extensive documentation and making the removal process more complex and time-consuming.

Objectives

Generally speaking, the goal of any company in the private sector is to generate the highest profits possible. In this arena, a financial manager must always keep an eye on the “bottom line,” or a minimum level of profitability. Financial managers in this sector are usually given a lot of authority to help them achieve profitability.

Alternatively, government organizations are usually created to service a specific and pressing need, such as school systems educating children, or sheriffs’ offices taking care of law enforcement. Because the purposes of these organizations aren’t profit, the financial manager needs to make sure he or she is using the public’s money as efficiently as possible.

Tourism is characterized as being a sector that stands out as one of the business activities with the greatest potential for worldwide expansion, and as an engine for economic growth. If at the national level, the appeal of tourism is significant, on the local level this sector presents itself as an essential tool in regional development, as a means to avoid regional desertification and stagnation, stimulating the potential of more undeveloped regions. In such a competitive sector as tourism, companies should develop synergies and achieve competitive advantage. In this context, public-private partnerships play an important role in r

egional development. Public-private partnerships (PPPs) may be seen as a cooperative alliance between the public and private sectors, in different areas of intervention which are traditionally inherent to the public sector, but without embracing a complete privatization process. With PPP the tourism related organizations can perform better and therefore contribute more to the macro economy. With PPP, following determinants help the sectors to analyse and contribute more

1. Cost Reduction
2. Risk Share
3. Improve Service Levels or Maintain Current Service Levels
4. Earnings Improvement
5. More Efficient Implementation
6. Other Economic Benefits