Bureaucracy Vs Private Sector
Simplistic comparison is inherently flawed.
Prologue: Revisiting Perspectives on Public vs. Private Sector Performance
Originally published in April 2018, this article is being presented once more, with the concluding paragraph appropriately revised to capture the current context. The aim remains to foster a nuanced understanding of the differing roles, challenges, and expectations that define the public and private sectors in India. By revisiting this comparison, we invite readers to reflect on the transformations that have occurred over the years, acknowledging both the enduring truths and the new realities that shape our collective discourse on governance, accountability, and efficiency in both realms.
As similar or different as two sides of a coin
The performance of public and private sector is often compared in India. The framework is generally that if the MBAs in the private sector can produce efficient and profitable enterprises, why can’t the IAS officers and other “public sector professionals” do the same in Government Departments and Public Sector Undertakings (PSUs)? The implication, although not always very explicit, is that the IAS officers, in general, are inefficient, lethargic, risk-averse and corrupt, whose career philosophy is claw their way up by becoming sycophants of self-seeking politicians.
Wither accountability?
It’s also argued that there is no accountability whatsoever in the public sector scenario, whereas in the private sector the deadwood is immediately jettisoned, leaving only the efficient and performance-oriented executives to progress upwards and rise to the top. It is quite frequently advocated that the corridors of powers as well as huge Public Sector behemoths ought to not only to be manned by the private sector management-cum-subject specialists but that even the modern management practices and philosophy should be transplanted from the private to the public sector1 .
Comparing Apples and Oranges
However, we fail to appreciate that the working scenario in the two sectors is fundamentally different and what might be regarded as an award-winning innovation in the private sector, if transposed as a clone into the public sector without a detailed examination and scrutiny, may well lead to initiation of departmental/ vigilance proceedings. Some such practices like paying commissions and incentives etc. might even be a criminal offence in the PSU arena.
Public Sector is inherently constrained
Public Sector entities, whether in the nature of Government Departments or Commercial undertakings, including the PSUs, are “State” within the meaning of the Article 12 of the Constitution of India. And, the Constitution casts certain statutory, nay constitutional, obligations on the “State”. For instance, Articles 14 and 16 are not applicable to the private sector. Thus, the Public Sector is inherently constrained, on account of these constitutional provisions, when it comes to recruitment and promotion (including the aspects of reservation in favour of SC/ STs, which we otherwise support from an equity perspective) as well in granting performance-linked pay or bonus to the employees who are truly outstanding.
In the start-up scenario and even in the established private entities, granting sweat-equity is a widely prevalent tool to acquire and retain good human-resources. Where the 100%, or at worst a majority, of the equity is owned by the Government, such an incentive is unimaginable. Even on the side of firing and retrenchment, the Public Sector is limited by the provisions of Articles 310 and 311 of the Constitution and often the deadwood continues to burden the organisation till their retirement. Further, in routine administrative matters like transfers and postings, the bureaucrats are under formal and informal pressure of the political executive and thus even in this aspect, the human-resource management is sub-optimal and below the desirable or achievable level of efficiency and effectiveness.
Profit the Supreme Motive in Private Sector
Whether we like it or not, profit is the supreme motive in the private sector. There’s nothing to be apologetic about it, since the maximisation of the shareholder-value is the ultimate objective, lip service to Corporate Social Responsibility notwithstanding. In Public Sector, the objectives are multiple and often in conflict with each other. For instance, in the State Transport Undertakings, while it is sought to maximise profit, one of the objectives is also allowing free and concessional travel to various categories of passengers. Similarly, non-preferential and loss-making rural routes may have to be plied as a social objective. Then there could be unstated objectives, by which the top management is assessed by the political executive. In a few cases, the stated objectives may really be merely a rhetoric and everyone knows that these are merely to be placed in the Citizens’ Charter and that no one needs to be serious about them. In such a scenario, one cannot very rationally or objectively assess the performance of a Public Sector Enterprise, which is quite difficult and complex. Thus, it’s much easier for the Private Sector to be driven by a mission, whereas the public sector is more likely to be governed by rules and procedures.
Decision-making levels
In private sector, the levels of decision-making are crystal clear. The managerial and financial powers are delegated in a highly transparent manner and everyone in the organisation is familiar with the same. In the public sector or governmental functioning, the “rules of business” may delineate similar policies and procedures but often concurrence of independent units and Departments such as Finance, Law or Personnel may be required. The departmental decision-making is subject to, apart from the normal supervision by the political executive, by the Parliamentary and Legislative oversight through their Committees. Then, of course, the presence and working of the 3C’s — CAG, CVC and the CBI affects, rather constrains, the decision-making in the ministerial or departmental scenario. External pressure groups, political parties and Press also affects the public-sector decision-making. Then, of course, is the presence of the judiciary — it may be instructive to recall here that the Writ jurisdiction of the High Court lies only against the “State” and no qua the private parties. All this makes the decisions, slow, conservative and sub-optimal. The private sector is not subject to any of these restraining circumstances. It may thus be very unfair to compare the decision-making in the two sectors, in terms of speed and quality.
Policy and Implementation Disconnect
In the Private Sector, those formulating policies or making decisions are also, in general, responsible for their implementation. In the Government, policies are usually formulated at a very high level and generally the concerns and constraints of the cutting-edge staff or stakeholders are not taken fully into account. Moreover, the failure of the policy can very easily be attributed to poor implementation and thus the framers of the faulty policies are seldom questioned or called on to account.
Seeking a Balanced Perspective on Sectoral Performance
Asserting that the performance of IAS officers and other civil servants should be directly compared to that of private sector professionals is fundamentally unfair—akin to comparing apples with oranges. More critically, suggesting a simplistic and naive solution as a panacea for all the challenges facing the public sector—merely transplanting private sector policies and practices to the public sector—is an oversimplification of complex issues. This is not to claim that IAS officers and their counterparts in the civil service are beyond reproach or that their performance cannot be improved. Indeed, there is always room for enhancement, achievable through incremental steps if all stakeholders, including the bureaucracy and the political executive, treat it as a pragmatic and earnest priority.
Private Sector not the Epitome of Efficiency and Probity
The recent failures of private sector startups, once celebrated as unicorns, due to management missteps, greed, or outright fraud—including high-profile cases like Sahara Pariwar, IL&FS, Jet Airways, and the Kingfisher Group—underscore that the private sector is not necessarily a bastion of managerial efficiency or a model of financial propriety and commercial prudence. Therefore, before levelling criticism, it is vital to consider the unique constraints and challenges inherent to the public sector’s operational environment
Much like the New Public Management (NPN) espoused under the reign of Margaret Thatcher in Britain during the 1980s.