Challenges faced by non profit organisations in developing performance Essay

Challenges faced by non profit organisations in developing performance measurement systems - Essay Example profits, and the metrics that measure the efficiency, such as revenue, productivity, rejection, manpower costs, and marketing costs are known and measuring these parameters is possible (Emerson, 2009). Non-profit organisations (NPOs) are organisations that have a social impact mission; they take up charity work, and some are cooperatives, created for the mutual benefit of a community. Such organisations may earn profits from their activities, but these profits are redistributed among people they serve (Drucker, 2005). In the case of NPOs, implementing PMS is different since the objectives are not to make profits but to increase social benefits or help community members, served by the NPO. Implementing PMS in NPOs therefore becomes a challenge since the standard metrics of revenue, cost, market share, productivity, etc., have different values (Poister, 2003). This paper critically reviews the literature on effective PMS, examines the differences in PMS requirements of for profit and NPOs and discusses the implications to ensure that PMS are made effective for NPOs. An important aspect of NPOs is that they need to be efficient, since they operate with a limited budget, and many of them hire people, who must be paid wages. Performance management systems are different for profit oriented and NPOs, and the systems depend on products, and markets addressed, objectives of the organisation, and nature of operations. However, certain common elements are observed in both types of organisations. Differences are seen in the manner in which metrics are identified and evaluated (Bradach, et al, 2008). This section critically examines the literature on PMS and tools used to implement the practice. While the objectives of for profit and NPOs are different, both must be effective, utilise resources efficiently and meet their goals. A very important aspect of PMS is that it is a comparative tool, and this means that performance is measured with reference to a benchmark; else, the