PERFORMANCE MEASUREMENT PROBLEMS IN
PUBLIC OR NON PROFIT ORGANISATIONS
List of Acronyms
KIWAKKUKI – Kikundi cha Wanawake Kilimanjaro Kupambana na UKIMWI
NGO- Non Governmental organisations
NPOs- not for profit organisations
AIDS- Acquired immunodeficiency Syndrome
HIV- Human Imnnuodefficiency Virus
PM- Performance measurement
Table of Contents Page
1.0 Introduction 4
2.0 An Introduction to KIWAKKUKI 5
4.0 Difficulties encountered in Performance Measurement
by KIWAKKUKI 6
5.0 CONCLUSION 13
References 14
1.0 INTRODUCTION
This paper will examine the difficulties encountered with Measuring performance of Non-profit Organizations. It will give some conceptual definitions and introduce the organisation to be discussed and then move on to present the difficulties involved with performance measurement. Performance measurement can be defined as a system of assessing progress of the organisation against defined goals and objectives. It shows to what extent has the organization performed over a certain period.
It gives a picture of what has been achieved and what needs to be improved and also it gives reasons for successes or failures. Many organisations keep policies which guide this kind of measurement to avoid bias and increase objectivity and to ensure steps are taken accordingly. This has to be conducted with the values of being fair, objective and consistent. Among other things, it provides an indication of how strong or weak the organisation is. The methodology varies between for profit organisations which measure finances and non profit organisations which measure the quality of work done. Actually, it is more complicated to measure performance of non profit than that of for profit organisations. Non profit organisations according to (Wikipedia the free encyclopedia)
are organisations that are legally constituted organizations whose objective is to support or engage in activities of public or private interest without any commercial or monetary profit. The organisation presented here is my own organisation known as Women Against AIDS in Kilimanjaro, popularly known by its Kiswahili acronym KIWAKKUKI.
The organization is working within the mandate of the NGO act of 2002 including the stipulations for financial accountability.
Kaplain (1999) shares that the Managers and constituents of non profits are increasingly concerned about measuring and managing organizational performance, Financial measures alone are not sufficient to motivate and evaluate mission accomplishments New performance measurement and management approach include the use of balance score card to the non profit.
Palmer (2005), gives the two principle roles of performance measurement systems which are, firstly, to ensure that organisations are held accountable for their performance and actions; and, secondly, to help improve performance and facilitate learning. These two roles are often at odds with each other, and tensions are provoked around this “accountability-learning dichotomy”.
2.0 An Introduction to KIWAKKUKI
KIWAKKUKI has been operational in Kilimanjaro region since 1992
KIWAKKUKI’s Vision is “A Community taking appropriate measures to eradicate HIV and contributing efforts to mitigate AIDS Impact.” Whereas its
KIWAKKUKI’s Core Values include Voluntarism Unity, respect, sharing, recognition of talents, love, transparency, accountability to each other, collaboration and Team work. It is a membership organization with more than 6,000 members coming form all parts of Kilimanjaro region.
KIWAKKUKI like other non profit organisations performs performance measurement in order to catch up with the competitive nature with other organizations. Therefore KIWAKKUKI keeps learning to maintain the good market it has in the community. Another reason is that KIWAKKUKI is a fast growing organisation and needs to keep measuring the level of performance to see if new activities are having impact in the organisation. Moreover performance measurement is conducted to keep conscious of its sustainability. The results give room to empower human capacity and resources to be able to sustain itself as an organisation.
3.0 KIWAKKUKI’s Performance Measurement System
This organization has established systems in place to facilitate the performance measurement. As an NPO there is no possibility of financial performance measurement. These include the organizational goals, objectives and policies as stipulated in the various documents such as the 2007- 2011 Strategic Plan, the Annual reports and the Human resources Policy Documentation. The policy documents stipulate the methodologies to be used to process finances and also to appraise the performance of personnel handling finances from the programme officers to the head of Finance Unit in the organization. This is conducted monthly, quarterly biannually and annually and it is done in a participatory manner. The Financial Monitoring and Evaluation Framework is also used as the basic tool for giving systematic feedback on the financial position of the organization and the level of performance indicators reached.. Financial Statements depicting Income and Expenditure are produced periodically and they show the variance if any. The smaller the variance the greater the likelihood of moving towards the set indicators. Balance Sheets abide by the Accounting Standards.
Oskun, (2007) argues that in order to ensure non-profit organizations (NPO) are delivering their main mission, they should measure whether they have achieved their strategic objectives or not. Therefore, the performance management of the NPOs should be based on non financial performance perspectives. By bringing a comprehensive system to performance measurement, the balanced scorecard has been suggested to help the NPOs to motivate and evaluate the organizational performance. This has been proposed but time is not yet ripe for KIWAKKUKI to apply it.
4.0 Difficulties encountered in Performance Measurement by KIWAKKUKI
Performance measurement for non profit organization is complicated because in the absence of profit determination there is a tendency to find it difficult to identify appropriate indicators which are qualitative. In KIWAKKUKI, performance measurement is determined by several factors such as the interests of members, donors and community demand. Performance Measurement categories of indicators in my organization include, policy based non profit budgeting, Budget Forecasting policies, Accounting Recording, Reporting using income and expenditure statements, Annual cash flow external scrutiny and audit, comprehensiveness and transparency, participatory assessment. Most of these are stipulated in the organizational strategic plan,
4.1 Budgeting constraints
First of all, budgeting becomes cumbersome and repetitive because it is dependent on donor responsiveness, conditions and priorities which usually change without prior notification. This means NGO financial managers remain in suspense and the budgeting becomes unrealistic as the source of funding remains uncertain and therefore difficult to determine the accurate outputs to be measured. This means that even the budgeting policies which are set by the organization are not properly followed. However, it has been observed that one of the principal reasons why impact assessment and other performance measurement systems fail is because of the failure to invest sufficient funds and time in their design, development and implementation. The lack of suitable infrastructure to collect data or narrative perceptions or the skills to analyse this material, let alone disseminate it in an appropriate and readable manner, all work against successful assessment.
4.2 Challenges with setting goals
Secondly, is the difficulty caused by the long term nature of the realization objectives and goals due to the qualitative type of measurement. The measurability is also a challenge. Mant NPOs including KIWAKKUKI, do not allocate resources for capacity building in non financial performance measurement. Work is done with limited skills and knowledge. Moreover, there are no agreed standards for outcome objectives across the NPOs in a region or country. Furthermore, financial reporting becomes complicated by the fact that the initial budget forecast is likely to change in the course of the year since different donors reply the applications at different times and when they do so, they may have cut down the budget by far. Accountability is a very necessary item in determining that the money has been spent as per specified objective and the overall performance. Another difficulty related to the previous one is the lack of predictability and control making it difficult to set definite goals to be used to measure progress.
Moreover, Non Profit Organizations due to their nature fail to conduct some useful financial performance measures such as Trend Analysis, Ratio analysis. This is because each year there is a new list of donors and some do drop spontaneously. This is common in my organisation.
4.3 PM and Risk Control
Palmer (2005) argues that risk can be seen as either a threat or an opportunity? The subject of financial regulations and internal controls is not seen as exciting but effective internal controls and good regulations are the bedrock of good governance systems and can provide quality assurance. Internal control is all about the methods, processes and checks that are in place to ensure that an organisation meets its objectives. As the Turnbull Committee in the
KIWAKKUKI’s internal control ensures that the members’ representatives decide on payments and sign the payment vouchers and cheques. It has been praised by many external evaluators. The price involved is that the organisation has to keep tracing their whereabouts all the time to get their decisions and signatures.
Palmer feels that while commercial market forces do not apply, a democratic government requires the approval of its population. NGO’s represent an important part of democratic societies. A feature of democracy is how vibrant Civil Society is.
4.4 Constraints associated with auditing
Another difficulty is regarding the auditing which usually comes with the management letter with some recommendations for performance improvements such as advising us to adopt a certain accounting system but this may not be the one the donor likes. An example is when the auditor recommends use of accrued accounting while the donors prefer cash accounting. This interferes with the performance measurement since each approach has its own objective. There fore donor conditions and interests interfere with the measurement of performance.
4.5 Membership organisation
Another difficulty is related to the fact that KIWAKKUKI being a membership organization is obliged to conduct participatory processes from project design to performance measurement. Members come into the organization with their own interest and demands and this makes it difficult to reach a common ground at the end of each year when we have to assess our performance indicators. There are feelings that the resources are unevenly distributed between the head office and the grassroots locations where the members do a lot of volunteering work.
4.6 Donor interest
Moreover, the fact that some doors are partners, meaning that they have extra interest in supporting the institutional capacity of KIWAKKUKI, they tend to influence the performance measurement by bringing their own auditors who conduct an analytical and technical input even when we have already paid external auditors who are identified by the members at the Annual General Meeting. These KIWAKKUKI donors include Oxfam, Terre des Hommes and Bernard van Leer. These consultants sit with staff to go over the various indicators of performance mentioned above. In addition, even depreciation methods and commitments vary from one donor to another. This is time consuming. It is very challenging to account to a diverse set of stakeholders who have different and sometimes conflicting demands. Unfortunately, the donor imposition of performance measurement on NGOs is all too commonly seen as a means to placate the demands of auditors and ensure a level of accountability rather than learning and performance improvement. Many donors argue that they too are deeply concerned with shared learning and dissemination of good practice although there is a widespread belief that donors use such measures to fulfill formal requirements rather than initiate organisational learning.
4.7 Participatory performance measurement
Another difficulty if the obligation of providing feedback to the members and community which we support. It becomes difficult to reach out to everyone in order to get their input or to feedback them to fulfill this indicator. This may lead to single sided or biased results. This is different for personnel since their performance appraisal is done in a participatory manner. Participatory approaches are difficult to manage although they are effective.
4.8 Quality more than quantity measures used
Furthermore, as a service oriented organization even if we get several letters from our beneficiaries , from the central and local government, from visitors appreciating the way we ensure that resources reach the intended target communities, this useful information becomes difficult to synthesize and come up with a powerful statement of measure of the quality rather than the quantity of our work. Last year KIWAKKUKI collected more than 1 billion Tsh. and 80% of it went to beneficiaries. Therefore it is difficult to quantify our benefits using such and approach since the value for money is qualified rather than quantified.
Palmer (2005 ) argues that the most successful of NGO’s are ones that enjoy the support of the general public and raise sums of money through private and corporate donations. The late payments of grants which is seen as the major issue by NGO’s means that many have to borrow funds from banks to support their cash flows while they wait for payment. They pay bank charges. Who pays these bank charges? Well they are paid by donations from the general public. In stark terms one hundred euros given to support a starving child in
4.9 Whose objectives for Performance Measurement do NPO’s serve?
Sometimes it is interesting to note that donors may come up with their set of objectives for measuring performance and forget that the organisations have a major stock in this. In the DAC review Riddell et al. (1997: 66) noted that almost all "the Terms of Reference [for evaluations] set the scene for anticipating exceedingly high expectations of what can be achieved, particularly what can be said about development impact. Both the DAC and Danish NGO studies used nine different performance criteria to compare NGO projects. The proposed SPHERE (2000) Training Module on Monitoring and Accountability lists 10 different criteria. Most of these are in addition to what are often a quite ambitious set of objectives defined within a project's Logical Framework(2). However, unlike the contents of these Logical Frameworks there must be some doubt as to whether many NGOs knowingly sign up to all of these additional and ambitious expectations at the time when they seek approval and funding for the project. At the end of the day the performance measurement may impact the NPO greatly.
4.10 Diversity of Activities due to diversity of donors.
KIWAKKUKI has 15 donors. This has a big impact on the Performance. Several reports have to be written both financial and narrative. Several deadlines have to be met. At the same time the members and leaders also require reports which cut across donor border lines. Both the Financial manager and the Financier Accountant have to keep these sets of accountability records. These are several activities to be accomplished and they are all summarized in the KIWAKKUKI Annual Financial statement and Annual Narrative Reports. The end of year PM addresses the organizational Annual objectives while for some donors we have to address a separate set of objectives depending on projects. The results are then compiled in one report. Oakley, (1999) shares that majority of the largest NGOs tend to be generalists, being involved a wide range of development activities, across a number of sectors (Oakley, 1999). This must make the task of comparing and aggregating performance information more difficult.
4.11 Use of Monitoring tools
Some schools of thought have been critical about the way NPOs are measured for performance. Fowler has argued that the "limitations of the instruments that NGOs use to monitor, evaluate and review" (1997: 160) are one reason why NGOs have not been able to substantiate their achievements. One tool that has been handled with reservations is the Logical Framework as a planning and monitoring tool (Wallace, et al, 1997). Logical Frameworks have been useful in encouraging the identification of indicators at the planning stage, but much less so in ensuring their actual use during project monitoring or evaluation (Davies, 1997). In practice, the widespread focus on identification of indicators reflects a bias towards planning rather than monitoring and evaluating that is built into most NGOs, and other agencies. KIWAKKUKI works around this by using participatory approaches to design LFAs and the same for monitoring and performance appraisal. The indicators are designed by a team and they cut across the different modes of log frames. What matters to us is to know the impact we are making as a team.
4.12 Human resources Performance Measurement
In KIWAKKUKI personnel contracts are for one year renewable. At the beginning of each year all personnel have to declare their annual objectives and how they fit into the organizational objectives. The justification for paying them salaries is based on the participatory performance appraisal conducted annually and now planned for bi annually. This makes them to work hard to ensure the organization’s performance is excelling. Once in a while they are given incentives. This has made the organisation to be acceptable by many and the financial flow has been growing year by year.
Palmer ‘s contribution on this is that much of the success of such systems is determined by the human factor. The successful application of performance measurement systems depends on the intentions of those who commission it, as well as the resources, commitment and approach of those who design and operate it. The principal reasons why performance measurement initiatives fail are due to the poor design of the measures themselves and difficulties related to the way the overall system is implemented. Managers tend to make fundamental mistakes when choosing what to measure, and what performance indicators should be used. Some types of performance measures are inappropriate and impractical in an organisational setting, while the way they are implemented often alienates staff and volunteers. They are threatened by the processes used or the way the indicators are applied
6.0 CONCLUSION
KIWAKKUKI started with limited data base to support performance measurement. What has been in place for several years are the Narrative Annual Reports, the Audited reports and the various donor reports. The first external evaluation was conducted in 1997 and the second one was in 2001. Since then, there has been a series of External Evaluations conducted and these have been adding to our baseline information. In 2006 KIWAKKUKI conducted an evaluation of the 2001 qualitative evaluation to find out what has been implemented from the recommendations and what have been new constraints.
Moreover, NPOs work as far as performance measurement is concerned is very tasking. It requires careful planning, patience and stakeholder involvement from the very beginning. Of crucial importance is the sharing of the PF Results with the policy makers and local leaders in order to influence the importance of measuring performance in NPO since this is sometimes overlooked. Organisational learning and innovation are recognised as critical to organisational success and sustainability.
It is interesting to be reminded by some literature that performance measurement approaches are continuously criticized as insufficient and inappropriate. Therefore, various attempts have been made over the years to modify existing frameworks, use them in different ways, and create alternative frameworks. While mechanistic or quantitative measures identify only parts of reality, there are methodological difficulties with relying on qualitative evidence. There are concerns about the generalisability of such evidence, let alone worries that it is expensive to collect and interpret. We must also recognise that performance measurement and analysis is undertaken by individuals with subjective perceptions of reality and personal agendas, who may have limited skills in this area. System failure is not only caused by problems with design and implementation, but also by measurement dysfunctionality – in other words certain intrinsic difficulties inherent in performance measurement systems. This paper has tried to share a lot about my organisation and also some ideas from various scholars. It is difficult to measure performance in NPOs but we have to empower our people , our communities to do it. This is in terms of human and financial resources availability.
References
- Kaplain R.S . Strtegic (1999) Performance measurement and Management in Non profit Organisations. Wiley Interscience Journal: Roche, C. "Impact Assessment for Development Agencies: Learning to Value Change". Oxfam.
2. Oskun. A ( 2007 ) A New Approach in Strategic Performance Management in NGOs: The Balanced Scorecard.
3. Palmer, P (2005) Professor of Voluntary Sector Management, Sir John Cass
- Smithers. N Public Financial management. Performance Management
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