It is difficult to measure the performance of non-profit organizations. The reason is, for non-profit organizations profit is not a measure. However, there is a need for accountability.
Non-profit organizations are funded by donors and sponsors to create and operate social programs. These donors and members of the public would require that they get value for money. That is, money is not wasted.
Two methods are used to measure the performance of non-profit organizations.
- Social program measurement and,
- Planning, Programming, Budgeting Systems (PPBS).
The social program measurement is carried out by a public auditor to verify a non-profit organization’s level of compliance with relevant laws and its cost control measures.
The auditor also compares actual results with those expected.
PPBS is an effective performance measuring approach to allocate resources to achieve their objectives. It is a decision making approach that works in four stages :
- Review objectives of the organization,
Identify programs to achieve objectives of the organization,
2. Identify and evaluate alternative approaches to achieve specific program,
3. Select appropriate program on the basis of cost-benefit principles.
4. A non-profit organization that chooses the PPBS approach will need to capture its objectives in a long term corporate plan.
This is necessary because their objectives may not fit into the existing structure.
PPBS make it mandatory for the management of non-profit organizations to specify their services.
Compliance makes the evaluation of the worthiness of the social program possible.