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Differences between Cost-Effectiveness and Performance Management - Coursework Example

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This coursework "Differences between Cost-Effectiveness and Performance Management" compares the above-mentioned notions. It is stated here that the difference between cost-effectiveness and performance management varies from their definition to their application. …
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Differences between Cost-Effectiveness and Performance Management
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Differences between Cost-Effectiveness and Performance Management The difference between cost effectiveness and performance management varies from their definition to their application. However, in most cases they are used concurrently. Cost effectiveness is being economical. This means that the amount of energy, time and money spent on an activity yields to profits or completion of a project as planned. Cost effectiveness includes the use of available resources efficiently, without wastage but giving the desired results. Performance management can be defined as the set of controls put up by an organization to measure the level of quality of a program and to measure the cost the organization incurred for program delivery (Firstenberg, 2009).
Performance management is a system put into place by the organization to monitor if the organization’s resources are utilized efficiently with minimal wastage to meet the set goals or targets of an organization. However, performance management can be done at the beginning of a project, in the course of the project and at the end of the project, unlike cost effectiveness which is mostly done after the conclusion of a project or at the end of a financial period
A nonprofit organization is one that conducts activities or charitable projects without financial gains in mind and enjoys tax exemptions from the state. For a long time it has been thought that it is difficult to measure the performance in nonprofit organizations. According to Anthony and Herzlinger (1980), they noted that the reason there exist a problems in measurement of performance in nonprofit organizations is the aspect of motivation unlike in profit making organizations where they are driven by profits. Thus, the luck of motivation leads to financial unsoundness to the nonprofit organizations.
However, there are certain elements that are essential in assessing financial soundness in such organizations. Firstenberg and Nitterhouse (1994), states that programs with measurable objectives and tasks should be created and seen to it that they are accomplished. They insist on the importance of having a budget that funds the tasks, setting time targets to meet those particular tasks and identifying managerial practices in that particular field the organization is involved in, to help in monitoring tasks and progress. Monitoring progress should be done through budget expenditures, completion of tasks and meeting objectives, meeting targets and comparison of the actual cost to the budgeted costs. This is just but a tip of the iceberg in assessing financial soundness of nonprofit organizations.
Aspects such as interference by the political arena that could cause political unrest in the state are also at play from time to time, recessions in the market place could also dent financial stability of nonprofit organization. In such occurrences, it is important that the organization plans to cut on costs by logically examining the situation at hand. The nonprofit organizations should also plan for unexpected circumstances in their initial budget. This could go a long way in ensuring that the organization maintains its sanity when it comes to financial matters.
Anthony, R. N., & Herzlinger, R. E. (1980) Management control in nonprofit organizations. Homewood, Il: Richard Irwin.
Firstenberg, P.B. (2009). The 21st century nonprofit: Managing in the age of governance. New York: Foundation Center. Read More
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