7 differences between public and commercial companies


It would seem that the advantages and disadvantages of working for public organizations in comparison with commercial businesses are obvious, but it is not that simple, as they are more nuances than meets the eye. Some of these nuances are presented on HR-tv.ru by Ekaterina Ovchinnik, Intercomp Russia and CIS HR Director.

Екатерина Овчинник, директор по персоналу Интеркомп
Ekaterina Ovchinnik
HR Director Russia and CIS
According to official sources, 18 million of people or 25% of Russia’s working-age population work in the public sector today. This is a fairly high percentage compared with other developed countries. So why do Russian people choose to work for the state sector? It is not only because there are jobs there, but also because the public sector offers:
  • stability (guaranteed jobs and payment of wages);
  • professional prestige and status;
  • job satisfaction for fulfilling an important social function.
Although in recent years internal cultures in commercial and public organizations have tended to converge, some differences still remain.

We work with both commercial and public organizations, and in this article, I would like to share what we have learnt from working with both organizations: what you should know and what to look for when joining a commercial or a public company.

1. It is customary in public organizations to observe formalities, including when communicating with colleagues. Each employee is addressed by name and patronymic, especially management. It would be extremely improper to address a colleague only by name at a meeting, public event or in the presence of senior management. On the other hand, it is customary in commercial organizations to address even senior staff by name only as this is considered to be a sign of trust and team spirit.

2. In many commercial organizations, especially IT and consulting companies, there is a tendency to grant flexible work schedules to employees or to allow working outside the office several hours a week. Such practices improve staff mobility and increase labor productivity while at the same time preserving employees’ quality of life.

For example, if an employee needs to prepare a presentation, write a software program, it is not important for the employer where the employee will be doing this task – in the office, in a park or at home – as long as the assignment is done well and in due time. This is true for many types of work although not those which are time-based.

Workplace discipline is stricter in the public sector. If the workday starts at 9:00, then it is necessary to arrive earlier and be ready for work already at 8:55.

3. It is always implied that people working in public companies practice their profession as per the education they received. For example, it is necessary to obtain a teacher training degree to work as a teacher in a school. This is even more so following the introduction of amendments to the Russian Labor Code concerning professional standards.

Commercial companies have not set such requirement for the time being.

4. Anyone employed in the public sector should be ready to work in a rigid hierarchical structure with a strict chain of command and clear coordination system. That does not sound too bad, but the downside of this system is that it can in practice translate into irregular working hours and additional duties with no compensation. This violation of personal space and the psychological pressure from management or the organization as a whole increase pressure on employees which cannot be “shaken off” after the end of the day.

5. People working in public companies must be prepared to many points of procedures. For example, the system of professional appraisal. Let’s say you have worked as a junior school teacher for 20 years. It would seem that by this time you had become a confident professional worthy of trust from both children and parents. Your first students have already graduated from universities, started their own family, and you might even teach their children now. It is not that cut and dry, though, as your professional expertise will be assessed every 5 years, and you will have to pass a strict open (public) appraisal process.

Such professional appraisals may result in demotion, salary reduction and even dismissal. Applicants for senior positions also have to go through a strict open (public) appraisal process. Moreover, senior positions are filled by appointments so people can both be appointed and removed from their post.

Staff appraisals are also in place in commercial companies although not all. Their purpose is to develop professional skills and assist with employee career growth. The difference between the appraisal system in public companies and that in commercial companies is more than noticeable.

6. The obvious advantage of working in a public company is to receive an official salary fully declared with guaranteed pension. The heads of many institutions try to keep their staff with all sorts of allowances, bonuses and other payments, which, in addition to their small official rates, can in the end add up to an offer worthy of market level.

Many commercial companies still pay “gray” salaries although there is a clear trend towards “whitewashing”, i.e. paying officially declared salaries. So public companies are for a number of factors more attractive than commercial companies, in particular, because they offer “white and regular payment of wages” which is considered to be better than even much greater “gray and inconsistent payment of wages”.

7. Another undoubted advantage of working in a public company is the social benefits offered to employees, in particular, free or significantly discounted vouchers to health resorts, health centers, theaters, children’s camps, children’s New Year party, free travel for summer vacations and similar benefits allowing cutting down on expenses and enjoying varied leisure time. Social benefits in commercial companies are usually more limited and on average consist of voluntary medical insurance and some compensations such as, for example, for meals and travel.