Performance measurement : Examining the applicability of the existing body of knowledge to nonprofit organisations

Purpose – Nonprofit performance measurement is receiving increasing academic and practitioner attention, but the design of nonprofit measurement systems has received limited consideration. This is in contrast to the well‐established body of knowledge that focuses on performance measurement in private and public sector organisations. The purpose of this paper is to ascertain whether this body of knowledge can be used to inform the design of nonprofit performance measurement systems. Design/methodology/approach – A case study approach was taken to examine the performance measurement practices used in six nonprofit organisations and their associated funders and regulators. A total of 24 managers from 18 organisations took part in the study. Findings – The study found underdeveloped and resource intensive performance measurement systems in the majority of organisations that were examined. The performance measurement literature from the private and public sectors advocates the development of relevant, balanced, integrated, strategic and improvement‐oriented performance measurement systems; concepts that have received limited consideration in the nonprofit literature. This research found that performance measurement system design principles developed for the private and public sectors were applicable to the nonprofit sector. Research limitations/implications – Whilst a range of stakeholders was included in the research, further work is required to validate the applicability of the findings to the diverse nonprofit sector. Nevertheless, given the dearth of operations management focused research on nonprofit performance measurement systems this study makes a useful contribution. Practical implications – The study presents empirical evidence of the myriad criteria and processes that are used to measure nonprofit performance. The paper shows that current measurement practice is detracting from the performance of nonprofit organisations. Originality/value – Despite the perceived uniqueness of the nonprofit sector, this paper shows that learning from the private and public sectors can be used to inform good practice in nonprofits. As relatively little research has been done in this area, the findings make a valuable contribution to the body of knowledge.