Performance measurement in non-profit organizations

Abstract

In for-profit companies, the definition of objectives and the measurement of their achievement are facilitated by the fact that they are predominantly of monetary nature. The income measurement facilitates indeed the process of control, as it relates to the results obtained with the inputs used to achieve them and allows both the overall assessment of the company's performance. It also allows benchmark between possible management alternatives (Santi, 2002). Conversely, for mission-oriented organizations such as the NPO, the measurement of management effectiveness is complicated by the difficulty of demonstrating their impact on the social dynamics in which they want to intervene (Sowa et al., 2004). Plus, the difficulty resides in finding quantitative and measurable indicators, which express the degree of achievement of the institutional mission. This technical difficulty has weakened the level of measurement of missions within nonprofit organizations (Sawhill, Williamson, 2001). Despite the difficulties pointed out, performance measurement is important for NPO (Drucker, 1990). It allows indeed to assess whether the strategies implemented have been able to increase the corporate institutional advantage, which depends on the social value produced by the NPO, on the safeguard of the operational and administrative balance, and on the social legitimacy achieved (Monteduro, Hinna, 2005). NGOs are facing the fact that the ethical-social motivation and technical professionalism their work was mainly based on in the past, are nowadays not sufficient any longer. NGOs have to evaluate how to employ effectively and efficiently their limited financial and non-financial resources, while the dynamic and risky working environment in which they operate leverages the assessment and enhancement of their strategies and performance. Hence, in order to meet the various demands of stakeholders and guarantee success, NGOs need to build, develop and implement realistic performance measurement and management systems. NGOs performances need to be managed and evaluated taking into account the project's performance, the needs of beneficiaries, the internal effectiveness, and the agenda of donors. To genuinely understand the issues related to performance measurement in NGOs, we tried first to go to the roots of the phenomenon. We tried to understand indeed to what extend the concept of performance and of measurement were incompatible with the missions of non profits. Then we focused on the implementation of the indicators and the concrete impact it had on the overall organization.