PSU vs Private Sector Corporate Management

This article was written on December 2010.

The Public Sector Undertakings (PSUs) are establishments – public limited companies registered under Company’s Act 1956. They are ‘Sarkari’ units. The word ‘Sarkari’ implies two things to the common man. One, it is highly reliable; come what may, money if anything due to you, you will always receive it; but maybe a bit later. Second, since it is Sarkari, be ready to put up with delays. Delays for anything; a few minutes delay in the departure/arrival of trains, buses or flights or a minor public interest litigation, could defer any action by even a decade or even cancellation of the scheme and refund of application money without interest of course for the period gone by.

The other entities, privately owned corporates could be one of the two extremes. One, the highly reliable, dependable, efficient companies like Tata’s and Birla’s, which assure you of value for money. Or the other end of privately owned enterprises where the company itself may doubt its existence until it is proved by a third party either way.



The public sector companies working systems are derived from Government systems. In the absence of their own Rules, these companies are governed by Government Rules. These are driven by Rules and are highly restrictive in nature because of which these systems allow less freedom to the officials. The members are expected to comply with instructions and work according to rulebook rather than operate the systems with prudence for the benefit of those for whom they are intended. In these systems, the operators even before think of the work assigned to them, are required to file reports to their superior bosses. The ‘reporting’ culture takes precedence to the working. The bosses outline work to be achieved in a sequence, they seek personal attention, they want the achievement to be credited to them and failures to be assigned to the grass root level staff. Every successor thinks differently from his / her predecessor.

The public sector culture produces records in volumes in prescribed formats. Even the formats are fixed that hardly there have been changes in them. Orders are issued. Copies are marked and distributed. Meeting notices are issued. Meetings are held. Minutes are prepared and action taken reports are filed. Funds are allocated and distributed. Utilization certificates are filed. But none of the above motivates any official to bring an element of freshness into the system.

Even the newly created departments are fully ‘equipped’ with and begin with these requirements such as security staff, Dak section, security copy, Cash section, General Section, Gate pass, identity cards, visitors pass, file movements registers, working hours, public holidays etc. It is not possible to ignore or deviate from these restrictions. In fact, the project has to provide for these essentials first and plan for the actual project later.

Responsibilities are not carried out. There are good bosses and bad bosses. In case of failures, punishment comes in the form of transfers. A disjoint culture exists. Personal assistants are attached to officers and their terms do not extend beyond months or years. The subordinate knows that the boss is expecting transfer and hence does not attach himself to him/her beyond the mundane office routine. The boss also knows that the subordinate is getting promoted and moving and therefore does not get entangled in any issues. Office work is limited to dialing telephone numbers, placing the ‘Dak’ on the table and forwarding the ‘Dak’ and typing letters and memos. Ideally, this is good for temporary offices. People do not know and want to know the sensibilities of their colleagues. Telephones are transferred to the boss without a feeling.

No records are kept for the work carried out by a section as a matter of production/productivity.

They also operate under a system governed by a large number of watchdogs set up by a large number of monitoring and control mechanisms. They are accountable to institutions such as Central Vigilance Commission, Central Information Commission, Department of Public Enterprises, Department of Personnel, Pensions, CAGs, and Parliamentary Committees etc. These statutory bodies practically dominate the thought process of officials of PSUs and from the time a scheme is conceived, it is subjected to what is allowed or what is not allowed by these bodies. On the contrary private sector companies are free to frame, modify, amend and abolish their own policies as per their requirement.

PSUs are also required to comply fully with the provisions of a large number of statues prescribed by various constitutional authorities whereas the private sector can frame its own policies.

Mainly, in the recruitment of personnel, wage compensation, promotions, dismissal, disciplinary action, employee welfare schemes etc personnel policies are modulated by Service Rules introduced in English systems.

Materials procurement, disposal policies are designed and modified by private corporate houses as per their needs. They can centralize/decentralize operations as per their requirement. In PSUs, the framing of policies, modification of policies etc, are required to be approved by the concerned administrative ministries. Policies are difficult to be got approved, equally or more difficult to be got amended by the controlling ministries.



In privately managed enterprises, it is easy to plan projects, get the budgets laid out and go ahead with the implementation. In case of cost overruns, it is easy to seek additional budgets sanctioned including budgets for newly planned items.

On the contrary, in PSUs, though cost overruns are a matter of daily routine, the proposals for additional budgets are never sought in time and sanctioned without bickerings. By the time the process of approval is gone through, it is time for seeking next phase of additional budgets.


HUMAN RESOURCES – choice of key personnel

Private enterprises have the freedom to hire men of caliber and motivate them to perform. The key officials who hire the employees are the one who will work with them and therefore, they know the job requirements of the officials and also they can evaluate a candidate as per their requirements. They can hire and fire as per their requirements. In PSUs scenario, the team assigned to work on any project is drawn from a number of sources and are expected to work until each one of them is to move to his next preferred location.

The number of years of service put in by personnel who matter at the helm of affairs in a PSU is low as compared to that in privately managed enterprises. The unity of thought and command and continuity in management philosophy lends a helping hand in the realization of the goals of the institution.

The group leader in PSUs often has less freedom to choose from and has to remain content with the group available at his disposal, having little freedom to hire or fire.

The groups have a longer operational duration from the commencement of a project to commission in case of a private enterprise. This ensures a fair understanding amongst the group members. On the contrary in PSUs, the composition of the execution team changes with a high turnover of personnel for various reasons. In a few cases, it has been observed that the personnel posted in some PSUs are there because of their personal preference rather than professional attainments or keenness to work in these projects.

By suitably rewarding the officials who by virtue of long association with private corporate houses, the managements obtain immense benefits. People joining as junior level management officers have risen to become heads of divisions and companies.

Remuneration, i.e. Pay-scales and allowances in PSUs for various positions are pre-determined and comparatively lower as compared to that offered by corporates in private sector. This deters qualified, experienced and capable candidates from joining such positions in PSUs.

In view of above Key Positions remain vacant in PSUs for a considerable time and their filling has not been possible for a long time.



In Privately managed corporates, officers at all levels are encouraged to spot, identify and bring out talent amongst the pool of human resources available at their disposal. There are no provisions in PSUs for application of such motivational tools in PSUs. Progress in a career is more regulated by seniority and Performance Appraisal Systems.

Materials Management

The process of materials procurement in PSUs is governed by Global Tender process. This is to ensure the fair and transparent method of procurement. However, this reduces flexibility in the hands of officers of PSU. Their counterparts in privately managed Corporates enjoy the more flexible process in the choice of vendors giving due weight to quality, rates, timely supply of materials, payment terms.

The process of tendering is seen as a tamperproof transparent system for Government and PSUs. It. however, is credited with avoidable procedural delays in cases of time-bound completion of projects.

Similarly, the process of disposal of unwanted scrap, metal parts, and other reusable scrap is also required to be completed in a procedure-oriented process in PSUs whereas, in private corporate houses, these are disposed of expeditiously.

The above is seen as affecting the timely execution of projects by officers concerned.



Brilliant professionals, when employed also carry on with them, an initiative to conduct small experiments involving Research and Developments. Private Corporates identify such personnel and offer them a free hand in these activities, which also results in the improved productivity. PSUs, however, offer relatively less scope in these areas and such people lose interest in their work.



The PSUs serve as model industrial units of the Government of India for implementation of provisions of statutes relating to social objectives such as; Provident Fund, Employees State Insurance, Schools and Colleges, Recreation facilities, Housing facilities for employees, Group Insurance, Health Clinics and Medical Care, Leaves, Reservation in employment as per Government quotas, providing employment for Differently abled persons etc. However, it has also been seen that entrepreneurs with philanthropic noble vision such as Modis, Tata’s and Shriram’s had created provision of such facilities even before there were no laws to that effect.



Disciplinary action as per law against erring employees is a long drawn process. In privately managed enterprises the action is taken immediately and the fear of loss of job coupled with the loss of reputation and its likely effect on a new assignment serves as a deterrent. In PSUs, the time taken for taking action such as inquiries is a long drawn process. Despite the availability of all legal options, the officials are rarely punished. Thus the prevalence of more and more and more legal and vigilance cases in PSUs as compared to privately managed corporates.


Be the first to comment on "PSU vs Private Sector Corporate Management"

Leave a comment

Your email address will not be published.