Decision making in organisations: A comparison between the private and public sector


  • Ingi Rúnar Eðvarðsson
  • Ása Líney Sigurðardóttir



Labor market flexibility, downsizing methods, layoffs, pay-cuts.


The aim of the paper is to examine the process of decision-making among public administrators and answer the question of whether this differs from the way decisions is arrived at in the private sector. Interviews were conducted at three private companies and three public institutions. The results indicate that the administrators of public bodies and private enterprises appear to use similar methods in their decision-making process. The differences which were revealed relate to the size of the companies or institutions in question, rather than to form of ownership; i.e. the larger the operation, the more people are involved in the decision-making process. An analysis of the interviews reveals that the administrators of public bodies have a weaker mandate to make decisions than is the case in private enterprises, especially with regard to matters involving strategy. Otherwise there is little difference between small private businesses and small public institutions - their management often apply the rational approach and bounded rationality model to solve problems. The decision making process is very similar in larger private businesses and public institutions. Decisions take longer to make in public institutions where more momentous issues are involved, such as the construction of new buildings and strategy formation, in which case the process is characterised by staged decisions, often resulting in compromises between parties with contrasting interests. It should also be mentioned that many kinds of state legislation, e.g. relating to equal opportunities, information act and public employees, as well as strategies of district councils, often restrict the decision-making authority of public administrators. Such restraints do not apply to the same extent to private sector management. The consequences of the economic collapse exercised a considerably stronger impact on decision-making among public administrators than was the case with their colleagues in the private sector, although the largest private company was significantly af ected by the collapse.

Author Biographies

Ingi Rúnar Eðvarðsson

Professor at the University of Akureyri.

Ása Líney Sigurðardóttir

B.Sc. in business studies.



How to Cite

Eðvarðsson, I. R., & Sigurðardóttir, Ása L. (2010). Decision making in organisations: A comparison between the private and public sector. Icelandic Review of Politics & Administration, 6(2), 253–275.



Peer Reviewed Articles