Performance and Productivity in Public and Nonprofit Organizations - Case Study Example

Full topic and Section # of Contents Contents 2 Introduction 3 Body 4 Importance and challenges in generating output 6 Other forms of Performance Evaluation 8 Further problems in the evaluation processes 9 Conclusion 10 Bibliography 11 As awareness for global human needs and humanitarian priorities improve, we see visible solutions to various alternatives. Not for profit organizations are one of those businesses that pertain to a different set of goals than from other organizations. This gives them a much different approach towards their goal than profit oriented organizations. Their performance measures run in terms of output which could be any material or immaterial output. Facing problems of rising costs, competition, publicity, and finding other means of financing is a growing challenge for NFPs today. Such goals require they follow a particular legal scrutiny within their organizational structure and strong leadership that utilizes its resources to achieve that goal. Introduction A not for profit organization begins its role generally for an altruistic purpose, and is centered on the motivations of their entrepreneurs1. Hence it can be deduced that most of the effort towards the organization’s goal is led by leadership of the entrepreneur. Not-for-profit organizations may be registered are corporations but they do not issue shares, so they are either headed by an entrepreneur, a board of governors, board of trustees or board of directors. Not for profit organizations also enjoy the benefit of tax exemption, a common liberty from most governments to encourage such organizations. Nevertheless these organization are also closely checked by the government through three modes of governance2: 1. Government oversight A government service that makes sure there is no expropriation of currency in non-profit firms. They oversee NFPs to ensure their money is sticking to their mission only. 2. Media oversight The media in the general course of business does the effective work of a watchdog in terms of looking out for fraudulent activity in any sector. Their responsibility to bring publicity makes NFP a part of their agenda well. 3. Board and Donor oversight NFPs have a Board of Directors or Donors who are part and parcel of the company serving as owners. As they all commit to a common interest, the Board also ensures they are meeting their target mission effectively and their money is being properly spent. Besides these external forces of performance measures, there is are ways to measure performance internally like other organizations. For not for profit organizations they face much more difficulty while measuring their performance because their bottom-line is no longer in terms of money. Since their objective is generally to meet some socially desirable need of a community or its members, none of them can be quantified perfectly3. As important as performance measure is for the prosperity of any organization, each NFP organization develops its own criteria for developing performance. Body When a need for performance measurement was recognized, businesses small or large started to follow various ways to calculate the best way to define performance measurement. One of the most popular and effective performance measurements is the balanced scorecard that took each and every attribute the business and was ranked which led to a concluding and comprehensive result. These measurements are crucial for prioritizing most important performance factors. Most of these attributes were either quantified in terms of currency or in terms of points. NFP’s have varying criteria depending on the nature of their mission. In 1998 the Independent Sector published ‘Outcome Measurement in non-profit organizations: Current Practices and Recommendations’4. They surveyed some NFP’s and learnt that: 83% collected data on at least some outcomes related to results achieved 44% used outcome data for program improvement 36% used outcome information for fundraising 51% collected feedbacks from clients and other stakeholders 14% used trained observers Fewer had either a properly trained staff for performance measurement or they still faced a major issue in performance measurement5 The research results indicate that very few organizations knew how their performance measurements should be prepared. Recommendations following the report elucidate that NFP’s should consistently collect data about their outcomes over a fixed time period depending on the nature of business. Secondly such data should be collected from both ends, as to the client’s end as well as from staff. Thirdly information should be collected of those outcomes that reflect performance or customer satisfaction overall. By outcomes we mean that how a NFP programs affects clients during and after the participation in their programs6. The study compels to conclude that gathering information is a necessary measure to minimize chance of error in performance measurement. The reason why outcomes only are a suggested performance factor is because that is the only quality that reaches the target population and directly affects funds of NFPs. Importance and challenges in generating output NFPs not only face pressures of meeting demand of growing output but also the increasing cost of generating that particular output. Labor-intensive services compel them to face varying costs which are already disproportionate to income7. NFPs face this challenge by looking out for means of generating profit from commercialism that generally meets the same target market but runs apart from their mission. NFP museums open glitzy retail shops that help up generate a large amount of profit that engage in operations. Hospitals launch health clubs swimming pools and gymnastic equipment to help generate profit. Universities engage in research alliances with private firms that allow them fund for their progress and other operations for their service. Commercialism coupled with tax exemption gives NFPs an edge over their for profit counterparts to develop funding at a better pace. These alternatives are legal and help curb from varying costs and greater demand of output, as their fundraising activities are directly proportional to their degree of output. Competition apparently is another problem that is recognized among NFPs which is directly related to their fundraising activities and their performance evaluation. This arises when NFPs get more commercialized and their outputs begin a measure of competition among other NFPs despite the fact of their altruistic nature. Commercialism makes them less distinctive among for profit private firms but are coming in growing number owing to their tax exempted and humanistic perspectives in business8. Competition is a positive problem as well as it motivates NFPs to be more distinctive between each other and further focus on their mission. Competition and lack of sufficient financing from the government compels NFPs to find ways to generate income through less philanthropic means. They develop cooperation with for profit private firms that also assist in fundraising activities and other means on generating income for their funds. Demand for more skillful staff increases their cost and without skilled workers they are not as cost efficient as they can be, as it is essential for NFPs to hire professionals that also conform to the same ideology that the NFP follows. Performance measurement becomes an essential practice for NFPs in order to help them focus on more effective means of generating the particular output. Future success of NFPs depend not only on quality of its social and economic activities, but also on communicating performance to the multiple and diverse stakeholders9. They must answer 5 basic questions in order to ensure they gather authentic data for their performance measurement: 1. Stakeholder satisfaction 2. Strategies to meet stakeholder satisfaction 3. Processes required to fulfill the strategies 4. Clear understanding of capabilities in current structural setting 5. Contribution from stakeholders If NFPs deliver the output that approximates to their mission as closely as possible, they meet a primary objective of their performance assessment. A good representation of performance assessment increases public trust. Creating public trust and interest is another way of assuring donors that they and the NFP are meeting a mutual goal. Criteria for good performance measures10 Meaningful Responsibility linked Organizationally acceptable Customer focused Balanced Timely Credible Cost effective Compatible Comparable Simple Other forms of Performance Evaluation11 Since NFPs have a subjective bottom-line in running their business, they may employ any other means of reflecting their terms of performance over a period. Process Evaluation: Process evaluation recognizes a specific set of activities that reflect performance and directly related to mission objectives. They can be routine activities and occasional programs launched the by the NFP. This also involves leadership function, how the boards of directors govern the organization, and how they set goals and responsibilities among their resources. They are reasonably accurate for internal analysis and perform frequently enough to quantify the factors. They may not be comparable to other NFPs as they could vary in scale and coverage. Input Evaluation: Input means the initial investment or the investment made before a program or any activity launched that is meant to bring an intended output. For example it can be measured by the amount of money that was invested in terms of currency or human hours. It would not work for those NFPs that are working without initial investment due to their nature of business. Subjective Evaluation: This evaluation includes subjective program measurements through observation. They are called subjective because they can vary from any perspective and depends highly on the expertise of the observers. The guarantee of their expertise brings value to the evaluation, however may not be consistent due to the influences from various factors such as marketing or payroll. Statistical Evaluation: Routine information is gathered and collected in a statistical format that assists in comparing from past to present about the pace and quality of work followed. They require short term analysis of each activity between fixed periods, ensuring whether they meet improvement in effectiveness or whether they match the expected output. This evaluation may be effective for internal analysis but it is nearly in isolation from progress of other NFPs12. Sample Survey Evaluation: A sample of a target group of respondents is taken as part of evaluation. The respondents represent the population that is mainly in concern of the NFP. This can be done on a wider scale to ensure accuracy. They are expensive and time-consuming; however they have strong weightage as they are in direct interaction with the clients of the NFP whose satisfaction is one of the ultimate goal of existence of any NFP. For this evaluation it is important for the respondents to be well informed and be a good representation of clientele of the NFP. Respondents however may be generally ill informed people about the NFPs plans or current activities which therefore also dilute the purpose of performance evaluation13. Further problems in the evaluation processes Technical problems: Generally outcomes and compared to the inputs that were invested before the planned activity, which is called a process evaluation. Problem shows when these outcomes are affected by external reasons such as depreciating value for money or global recession. These external factors are difficult to detect beforehand, hence not quantifiable during evaluation. Secondly, not all NFPs have proper information collection methods commonly due to affordability issues and less skilled people to do the evaluation14. Once these problems are properly addressed, it is important for NFPs to follow an accepted logical model and how its results should be used in decision making. Human problems: Human problems occur when representation of results are influenced by bias. Workers generally attempt to present their work in the most positive light acceptable which could lead to inaccurate representation of outcomes. Another reason for inaccurate representation is ambiguity in the information. There is ambiguity because most NFPs have a very subjective nature of work which are not or cannot be tested on a logical model15. Conclusion While collecting all the problems faced in developing a performance analysis for NFPs starting from defining their purpose and expected outcome to the results of processes. The most common issue in my opinion is the subjectivity of the outcomes for NFPs. As NFPs are a newer concept than common profit oriented businesses we tend to compare performance evaluation in terms of how profit oriented companies do which is nearly an irrelevant comparison. NFP require having a different model which should have no influence of comparison and have a separate procedure of defining how all subjective performance factors can be evaluated. be routine activities and occasional programs launched the by the NFP. oy any other means of reflecting their terms of perfo Bibliography Berman, E. M. Performance and productivity in public and nonprofit organizations. Cutt, J. a. Accountability and Effectiveness Evaluation in Non-Profit Organziations . Fazal, S. (n.d.). Common Problems Faced by Non Profit Oranizations. Retrieved August 17, 2009, from EduBook: http://www.edubook.com/common-problems-faced-by-non-profit-organizations/2674/ Glaeser, E. L. Governance of not-for-profit organizations. Lagerstrom, M. Performance Measurement & Management Control Systems. Ekonomi Hogsskolan, Lunds Universitet. McNamara, C. (n.d.). Retrieved from Free Management Library : http://managementhelp.org/evaluatn/outcomes.htm Morley, E., Vinson, E., & Hatry, H. P. (n.d.). Outcome Measurement in Nonprofit Organizations: Current Practices and Recommendations. Independent Sector . Pooja Mirchandani, C. J. (June 2006). Performance Measurements For Not-for-Profit Organisations. The Chartered Accountant , 1754. Smith, G. S. Managerial accounting for libraries and other not-for-profit organizations. SocyBerty. (n.d.). A Not for Profit Organizations Dillemma. Retrieved August 17, 2008, from SocyBerty: http://socyberty.com/organizations/a-not-for-profit-organizations-dilemma/ University of Arizona Library. (n.d.). Retrieved from www.library.arizona.edu Weisbrod, B. A. To Profit Or Not to Profit: The Commercial Transformation of the Nonprofit Organizations. Cambridge University Press. Read More