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Chapter 10
Problems associated with performance
management in NFP organisations
Problem Explanation
Assessing  Many NFP organisations
the use of (particularly public sector
funds organisations) do not generate
revenue; rather funds are invested
in them (by government for public
sector organisations).
 Need to assess if these funds are
being put to the best use, i.e. is
there value for money (VFM)?
Non-  Many of the costs are non-
quantifiable quantifiable in monetary terms,
costs and e.g. what is the cost of cutting
benefits healthcare funding for a particular
cancer drug?
 The same is true of the benefits,
e.g. what is the benefit of using the
money saved from the above to
increase the number of lifesaving
organ transplants?
Multiple and  Multiple stakeholders give rise to
diverse multiple objectives, e.g. doctors in
objectives a hospital will want a good work-
life balance whereas patients will
want to be seen quickly and
demand quality care.
 Objectives are very diverse
depending on the NFP
organisation in question, i.e. there
is not one primary objective to
maximise shareholder wealth – the
objectives of, say, a relief charity
will be different to those of a
school.
Impact of Long-term objectives may be
politics sacrificed for short-term political
gains, e.g. hospital funding may be
prioritised in areas in the public focus.
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Possible solution
Assess VFM:
 the 3Es (Section 3)
 benchmarking against
similar activities
 appropriate performance
measures
 VFM studies or internal
audit work.
Cost benefit analysis (CBA),
i.e. try to quantify in
monetary terms all of the
costs and benefits
associated with a decision
(difficult but one possible
solution).
 Prioritise the objectives
of the organisation, e.g.
patient care prioritised
above work-life balance.
 Make compromises, e.g.
doctors remunerated
generously for time
worked.
Difficult – need to
encourage politicians to
have a long-term focus.