Public vs. Private Sectors: Definitions, Examples and Differences

Incoming US presidents appoint up to 4,000 highly qualified individuals from a variety of backgrounds to serve on teams that will lead and execute their administrations’ priorities. Many of those individuals will come from the private sector with a strong willingness to serve their country but little to no government experience.

While building insights on moving from the C-suite in the private sector to a role in the public sector in the United States, McKinsey interviewed the following former US federal employees; they spoke in a personal capacity and not as representatives of any agency or department:

The differences in serving in the private and public sectors are immense. In the US government, the customers are around 330 million citizens. The stakeholders are different. Rules and laws are different. Even the language people use is different. And the media and regular congressional hearings add an additional layer of oversight and accountability: the words and decisions of public-sector leaders are scrutinized by both the public and numerous oversight bodies. In such a unique environment, US government leaders must find ways to maximize impact for all Americans—particularly the most vulnerable.

To help incoming US federal leaders (especially those coming from the private sector), we have put together four directives based on our experience in working with public-sector leaders and on in-depth interviews we conducted with former government officials who transitioned from the private to the public sector (see sidebar: “A panel of experts”).

What is the difference between the public sector and the private sector?

Private Sector vs. Public Sector

Types of public sector businesses

The public sector represents businesses owned or controlled by the government. Some examples include:

What is the public sector?

The public sector represents the segment of the economy owned and operated by the government. These organizations typically do not seek profit and often provide public services to the governments citizens. Some of the advantages of working in the public sector include:

What is the private sector?

The private sector represents the segment of the economy owned and operated by individuals and for-profit companies. Unlike the public sector, companies in the private sector are not government-owned or operated. Some of the advantages of working in the private sector include:

Types of private sector businesses

The private sector comprises many different businesses. Some examples include:

Key differences between the public and private sectors

The public and private sectors sometimes partner to complete goals, such as construction or transportation projects. However, these two sectors represent some significant differences, including:

Ownership

The most significant difference between the private and public sectors is the ownership of the organizations within them. In the public sector, organizations are owned and controlled by the government. Meanwhile, organizations within the private sector are owned and managed by individuals or private companies.

Purpose

Some state-owned enterprises participate in commercial activities or make a profit. However, organizations in the public sector tend to serve the primary purpose of benefiting the public by providing services. In the private sector, businesses have the primary purpose of making profits.

Financial support

Organizations within the public sector receive financial support and funding from the government. These funds may come from direct and indirect taxes. However, some public sector organizations, such as the U.S. Postal Service, generate revenue. In the private sector, organizations may receive some financial support but typically fund themselves using their revenues, issuing shares or taking out loans.

Employment

Employees working in the public sector work for public agencies or local, state and federal governments. Their salaries are typically paid for by tax dollars. In the private sector, individuals work for a privately owned business or a publicly-traded company. The business profits pay for its employees salaries.

Typical industries

Particular industries or professional fields tend to fall under one sector rather than the other. The public sector focuses on public goods and government services, so employment areas include public education, the armed services, public transit and infrastructure services. Individuals can also find employment in the government, whether as a civil servant or politician. The private sector focuses on making a profit, so its employment areas are very diverse. Some examples of its industries include financial services, hospitality, real estate and technology.

FAQ

What is the difference between public and public sector?

The public sector describes government-owned entities such as the USPS and public schools. Private-sector services include retail, hospitality, aviation, construction, and financial services.

What are examples of private sector?

Police, military, public roads, public transit and public education are examples of public sector agencies. Public enterprises and nonprofits which, like agencies, deliver programs, goods or services, but are independent of the government and may have sources of revenue in addition to public funding.

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