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The Similarities and Differences Between the Public and Private Sectors: Koch Industries Versus the U.S. Postal Service Victoria Brodzenski American College of Education The Similarities and Differences Between the Public and Private Sectors: Koch Industries Versus the U.S. Postal Service Public and private sectors have different aims and objectives. They are regulated by differing philosophies, with unique factions managing their dealings and activities. Organizations in the private sector have more freedom of operations, whereas public organizations are controlled by governmental checks and balances. This paper identifies the similarities and differences in the leadership traits, situational characteristics, and leadership behavior of Koch Industries from the private sector and the United States Postal Service from the public sector.
Private Sector: Koch Industries Koch Industries, Inc., is a privately-owned corporation. Brothers Charles and David Koch together control 88% of the corporation’s interests, and the remaining 12% is held in private trusts. Koch Industries owns a varied collection of companies, has yearly revenues of $115 billion, and is present in about 50 countries (Facts About Koch Industries, n.d.). The collection of companies employs approximately 120,000 people in a wide variety of industries. Koch Industries also trades in minerals, energy, securities, financial instruments, and other commodities. The organizational structure of Koch Industries is hierarchal in nature (Facts About Koch Industries, n.d.). Koch Industries focuses on success “through maximizing long-term economic profit for customers, shareholders and society” (Koch Industries, n.d.).
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The corporation employs a management philosophy called Market Based Management (MBM), which is described on the corporation’s website as “a value system and framework that inspires a culture of principled entrepreneurship” (Koch Industries, n.d.). The management system framework expects all employees to do business in a “lawful, ethical and environmentally responsible manner and focuses on the unique knowledge and skills of individual employees”. Public Sector: The United States Postal Service (USPS) The USPS is a public organization with a core function of providing the safe, dependable, and inexpensive delivery of mail and packages to every address in the United States, its territories, and its military installations across the globe. It is the nation’s second-largest civilian employer.
As of 2017, it employed 644,124 personnel and reported $12.9 billion in retail revenue in 2017; it would rank 37th on the 2017 Fortune 500 list if it were a private company (Postal Facts – U.S. Postal Service, n.d.). Although it is a government organization, The Postal Service does not receive taxpayer money for operating expenses and depends on the sale of postage, services, and other merchandise to subsidize its operations. The USPS is overseen by Postmaster General/CEO, who is appointed by the President of the United States, with the approval and counsel of the Senate. There is a top-down hierarchy in place within the organization. The Postmaster General/CEO is primarily responsible for making major business decision and running the overall operations and resources of the USPS, with others in the organization carrying out the Postmaster’s directives within their respective departments.
Similarities Both organizations have a hierarchical structure and appear to be managed in a top-down manner, which is consistent with Fiedler’s Contingency Model and was expected since both are business organizations. The USPS and Koch Industries are both expected adhere to laws that govern businesses and operate ethically. Neither organization receives taxpayer funding, and both rely on sales-generated revenue to finance operating costs. There is a social responsibility focus evident in each organization’s online presence, and both are involved in philanthropic endeavors. Differences The most obvious difference between the two organizations is the way in which the top officers are appointed. Koch Industries was founded by Fred Koch and the controlling interest in the corporation will remain with two of his sons until their deaths or its sale (About Koch Industries, n.d.), whereas the Postmaster.
General is appointed by the Executive Branch of the United States government and serves until replacement or retirement. Koch Industries is much more diversified in its revenue generation than the USPS and focuses on serving private customers and investors rather than the general public. Koch Industries also appears to use some Hersey-Blanchard Situational Leadership Model principles, e.g., adapting leadership styles to fit the knowledge and skills of employees, in its Market Based Management approach. Conclusion More similarities than anticipated were encountered when comparing Koch Industries and the USPS. Because the two organizations were in different sectors, it was expected that there would not be many similarities between the two.
The similarities were structural, financial, and ethics-related in nature. Fewer differences than expected were encountered as well. While there were more differences than there were similarities, the list of differences was much shorter than anticipated. The most significant differences between Koch Industries and the USPS were the ways each organization’s top officers are appointed and the ways in which those officers’ employment or responsibility is terminated. The most interesting difference was the use of Hersey-Blanchard principles in the Market Based Management approach used by Koch Industries. The differences in level of diversification and customer segments were expected and not surprising. Overall, the comparison was interesting and informative and provided insight into the operations of organizations within both sectors.
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