Government agencies should run like private businesses. It’s a comment you hear sometimes if a resident thinks that their local government is not meeting the expectations of the public in terms of output or efficiency. An inference from the statement suggests that private industry may have a better business model for performance or service delivery.

At a glance, public and private agencies appear to have some things in common. Typically, they have a policy-making body, a chief executive, a set of operating guidelines, and a pyramid-type structure of employees, as well as a mission statement, goals, and objectives. The two also have notable differences, which raises the question, how alike or how different are public and private agencies? To address the question, this article will examine some policies and practices among public and private agencies and present some empirical data to assess the relative effectiveness of those policies, and the suitability of integrating private industry practices into a public agency.

Private vs. Public

It’s helpful to recognize that there are visible differences between public and private organizations’ environments. Take a look at the common elements of a private business. It generally operates for a profit, and to that extent may be accountable to stockholders or investors. The business is typically obligated to pay taxes, and so it may employ strategies to reduce that obligation. The policy makers, or board of directors, are chosen internally by investors or shareholders, and not by the public. Free market forces affect business decisions. Private businesses compete with other similar businesses for market share of their products and services.

Public agencies are supported with taxpayer revenue. They are not profit oriented, and in fact are cautious about the amount of revenue they can hold in reserve. Operating policies are debated in a public forum by policy makers elected by the public. Fiscal practices are regulated by local, state, and federal accounting rules. The records and activities of public agencies are subject to public scrutiny. Government agencies operate within predefined jurisdictional boundaries, and do not compete for market share. Because they are not competing in the sense that private industry does, public agencies share information about operational practices and hold seminars and conferences to share business practices that may better serve their respective constituencies.

Surveying Agencies on Their Common Element

Given the differences among public and private organizations, for a basis of comparison, this article will address a feature that all organizations have in common—people. In a conventional organizational structure, the human resources (HR) department is responsible for establishing and managing the policies that govern employee behavior. To gather information about HR practices, a survey was conducted among area public and private agencies soliciting information about their HR policies.

The survey produced results from 22 public and private organizations, ranging substantially in size from fewer than 20 employees to more than 1,000 employees. Consisting of 22 questions, the survey asked about the size and type of the organization; the presence, composition, and function of their HR department; and the organization’s HR policies and practices.

The first group of questions asked if the organization has an HR department, and if so, what programs it operates. Specifically, does it have a formal onboarding program, ongoing employee training, educational opportunities for employees, cross-training across divisional or department lines, a formal recognition and reward program, and an employee assistance program? Does the organization have more defined enhancement programs, such as employee think tanks or employee retreats? 

The results revealed that in many cases, a higher percentage of public agencies provide these types of HR programs than their private agency counterparts. In the survey sampling, the public agencies are more likely to offer educational opportunities, employee reward programs, ongoing training opportunities, and formal onboarding than private agencies.

The presence of specific employee enhancement programs may be an indication of the organization’s commitment to employee development. However, the existence of these HR programs in public agencies does not necessarily imply organizational success. If they have proven to be that effective, why aren’t all organizations using them? What are observable or measurable indicators of the effectiveness or value of these programs? What are some measures to assess organizational success? The following assumptions would lead to an acceptance of the critical value of personnel management in a public agency:

• Efficient and effective public agency performance is a desired outcome and an indicator of organizational success.
• A policy-focused commitment to human resource management has a measurable positive effect on organizational stability.
• HR-driven enhancement programs increase effective and efficient employee performance.

The survey results are summarized in Figure 1. The data indicates by percentages which of the specific HR programs listed are offered in public and private agencies.

As shown, in six of the eight programs listed, a higher percentage of public agencies offer the specific HR programs. The list of programs here is not exhaustive but does represent a broad sampling of programs commonly found in organizations with an HR function or department.

If the assumptions are made that HR-driven enhancement programs have a positive effect on employee performance, what empirical measures are available to validate the claim? Further, from an external lens, what agency indicators might be attributable to employee performance?

Public vs. Private Employee Attrition

Employee stability and resultant consistency in performance are positive benchmarks of an organization’s health and sustainability. A major disruptive factor to that stable condition is employee attrition. The loss of employees with institutional knowledge; the disruptive forces of replacing employees; the time and energy required to solicit, interview, and hire new employees; and the cost of orientation and training all impact the desired condition of a stable predictable work environment.

An April 2024 news release from the Department of Labor’s Bureau of Labor Statistics (BLS) reports the following for the period of November 2023 through February 2024:

• Employee “quit levels” for all categories of private industry: 2.2% each month; four-month average of 2.2%.
• Employee “quit levels” for government agencies: .08-.09% per month; four-month average of .85%.
• Based on this data, the annualized rate for government agency quits would be approximately 10%.

Total employee separation rates for the period of February 2023 through February 2024:

• For all private industry, a range of 3.5% to 3.8%.
• For all government agencies, a range of 1.4% to 1.5%.

The survey sampling of 22 organizations is relatively small, and the BLS report is a snapshot in time, but the results tend to support the assumption that HR-driven enhancement programs have a positive effect on employee retention, thereby contributing to overall employee performance.

Case Study: Venice, Florida

An organizational tool commonly used in public and private industry to test the condition of the work environment is an employee survey. Satisfied employees tend to stay. Employees who are dissatisfied, feel unappreciated, or sense that they are not valued tend to look for other employment opportunities. To test this premise, the City of Venice, Florida, conducts an annual employee satisfaction survey. Participation in the survey is voluntary. The survey consists of 15 questions, including the following:

• I have clearly defined attainable goals.
• I have the tools and resources I need to do my job.
• I am fairly paid for doing my job.
• I have the opportunity to make a positive difference.
• I have access to sufficient training.
• My job makes good use of my skills and abilities.
• Overall, I am satisfied with my job.

A total of 58 employees, or 17% of the labor force of 351, responded to the most recent survey. On a scale of one to five (five being the most positive response) the ratings by employees range from 3.66 to 4.05 for all questions asked—very positive overall. If the assumptions about employee enhancement programs impacting organizational performance and organizational success are true, then the attrition rate should reflect that premise. Based on the data presented in the BLS April news release, the quit rate for government agencies is approximately 10% and is measurably higher for private industry. The quit rate for Venice in the current year is 6.6%.

With the proposition that private industry may operate a business model with policies and practices that would be desirable for replication in public agencies, this article is focused on the HR function of public and private organizations to compare the features of each and to analyze the suitability of transferring private industry management policies and practices into public organizations. The research demonstrates that public and private agencies both operate similar employee enhancement programs, and in a survey of area organizations, public agencies tend to offer broader employee enhancement opportunities than the private agency counterparts. So, at least as far as HR programming is concerned, public agencies can and do employ programs comparable to private organizations.

Can the assumption be made that the more expansive HR-driven employee enhancement model reduces attrition, thereby contributing to the stability of the workforce? As indicated in the BLS news release, for at least one reporting period, the government agencies reported a measurably lower “quit rate” than the private industry agencies. If these statistics are typical, should private agencies be motivated to adopt the more expansive public agency employee enhancement model? Figure 2 is a graphic illustrating some of the employee-focused policies and programs at the City of Venice. The city’s “quit rate” of 6.6% presents a compelling argument that investment in employee enhancement programs can be cost effective.

The HR employee enhancement programs offered by a public or private agency are indicators of the agency’s awareness of the critical value of a positive working environment. The structured HR programs are easy to catalog. Collectively, they reflect a management-level commitment to investing in the health of the organization through enhancements for its most valued asset—the employees. Many of the programs operated by public and private agencies have proven value. Some are interchangeable as reflected in the survey. Some of the Venice programs were adopted from private industry. The essence of an organization’s health is not found in one or two HR programs. As with many public and private agencies, stability, high performance, and low attrition are symptoms of a deeply embedded culture that enjoys success because of the value it places on employees. These programs only work because of the culture that dignifies and sustains them.

In a private sector environment driven by fierce competition for market share among business competitors, the organization’s fiscal strategies may differ considerably from a public agency environment where the goals are high-quality and cost-effective core service delivery to a defined constituency. However, aside from the obvious differences in service and products, market competition, and fiscal strategies, there are similarities among public and private organizations. The incorporation of human resource programs into the operating guidelines are classic examples of programs that can be interchangeable.

Getting back to the question, how alike or different are public and private agencies, the answer is that they are different. Private organizations have a mission and goals particular to their specific industry. But there are enough intrinsic organizational similarities to allow for the exchange of strategies and practices in areas such as human resource management. Both public and private agencies have a greater chance of success when they invest in their most important asset—their employees.

EDWARD LAVALLEE, ICMA-CM is city manager of Venice, Florida, USA.