(a) Problems with performance measurement for not-for-profit organisations
Multiple objectives
The various stakeholders in an organisation may have differing or even conflicting objectives. For
BHS, the stakeholders will include teachers, unions and local businesses, who may have very
differing objectives for the school.
Measuring outputs
It may be hard to measure output in a way that is meaningful. For example, the output of BHS
may include well rounded individuals who contribute to society - this may prove challenging to
measure!
Lack of profit measure
If an organisation is not expected to make a profit, or if it has no sales, traditional financial
measures are meaningless. BHS has neither sales, nor is it expected to make a profit..
Nature of service provided
Many not-for-profit organisations provide services for which it is difficult to define a cost unit. It
may be hard to produce a single meaningful cost per unit measure for BHS.
Financial constraints
Although every organisation operates under financial constraints, these are more pronounced in
not-for-profit organisations. BHS will be constrained in its borrowing more than a commercial
organisation, indeed its charter may not allow borrowing at all. This could mean that they are not
able to finance the same initiatives as a profit making organisation.
Political, social and legal considerations
Unlike commercial organisations, public sector organisations are subject to strong political
influences. For example, the school will be required to implement government policies.
The public may have higher expectations of public sector organisations than commercial
organisations. This may be exacerbated if the public has no choice in service provider. For
example, there may be no choice for local residents, as to where they can send their children to
school without paying fees.
The school will be required, through legislation, to provide a range of services. Most commercial
organisations are not subject to such constraints. |
