Performance in the not-for-profit sector

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1 Introduction

Non-profit seeking organisations are those whose prime goal cannot be assessed by economic means. Examples would include charities and state bodies such as the police and the health service.

For this sort of organisation, it is not possible or desirable to use standard profit measures. Instead (in for example the case of the health service) the objective is to ensure that the best service is provided at the best cost.

In this chapter we will consider the problems of performance measures and suggestions as to how to approach it.

2 Problems with performance measurement

2.1 Multiple objectives

Even if all objectives can be clearly identified, it may be impossible to identify an over-riding objective or to choose between competing objectives

2.2 The difficulty of measuring outputs

An objective of the health service is obviously to make ill people better. However, how can we in practice measure how much better they are?

2.3 Financial constraints

Public sector organisations have limited control over the level of funding that they receive and the objectives that they can achieve.

The public have higher expectations from public sector organisations than from commercial ones, and such organisations are subject to greater scrutiny and more onerous legal requirements.

2.5 Little market competition and no profit motive.

3 Value for money

Non-profit organisations, such as the health service, are expected to provide value for money.

This can be defined as providing a service in a way which is economical, efficient and effective.

3.1 Performance should be assessed under each of these ‘3 E’s ‘

Economy
Attaining the appropriate quantity and quality of inputs at the lowest cost
Efficiency
Maximising the output for a given input (or, for a given output achieving the minimum input).
Effectiveness
Determining how well the organisation has achieved its desired objectives.

Definitions are marked in full: ‘economy is minimising cost’ leaves out the acceptable quantity and quality of what is bought, and scores nothing. Watch the verb too — a requirement on the difficulties of measuring performance wants data quality, subjectivity and conflicting objectives, not a further discussion of how the organisation is performing.

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