Performance Measurement In Not-For-Profit Organisations

Question 1

Not for profit organisation

Answer 1

-> an organisation who’s primary purpose is anything other than to make a profit
-> primary purpose is to provide public service

Question 2

Public sector organisations performance characteristics and issues

Answer 2

-public sector poses challenges problems of performance control
1. Multiple stakeholders
2. Multiple potentially conflicting objectives
3. Performance/output subjective and difficult to quantify
4. Financial ratios inappropriate (how to assess effective use of funds)
5. Impact of political influence

Question 3

Assessing effective use of funds value for money (3Es)

Answer 3

1. Economy = monitors the effective control over input resources
2. Efficiency = getting out as much as possible for what goes in. ‘Doing things right’, assess the extent to which the operation is maximising its output in relation to its inputs
3. Effectiveness = getting done what was supposed to be done. This is an output measure that measures what the organisation achieves in relation to its objectives.

Question 4

Benchmarking

Answer 4

-> a continuous, systematic process for evaluating the products, services, and work processes of an organisations
->organisational improvements
1. Internal
2. Functional
3. Competitive
4. Strategic

Question 5

Internal benchmarking

Answer 5

-> comparing operating limits within the same organisation

Question 6

Functional benchmarking

Answer 6

-> internal functions (production/sales) are compared with those of the best external practitioners of those functions, regardless of the industry they are in

Question 7

Competitive benchmarking

Answer 7

-> working with direct competitors to improve performance

Question 8

Strategic benchmarking

Answer 8

-> longer term approach to improving business performance

Question 9

Benchmarking advantages

Answer 9

1. Comparisons are carried out by managers who will implement any changes rather than outside consultant
2. Managers are only being asked to achieve what others have
3. By copying competitors their competitive advantages are eliminated
4. Overall performance improves

Question 10

Benchmarking disadvantages

Answer 10

1. Implies only one best way of doing business
2. Yesterdays solution to tomorrows problem
3. Catching up exercise
4. Depends on accurate information from other companies which may be difficult to obtain

Question 11

Zero based budgeting (ZBB) three steps

Answer 11

1. Define the decision packages
2. Evaluate and rank the packages according to their benefit to the organisation
3. Allocate the resources available
   -> question approach is essential

Question 12

ZBB ADV

Answer 12

1. Identifies and removed waste
2. Encourages a fresh approach
3. Required detailed, up to date knowledge of the business
4. More realistic
5. Encourages prioritisation
6. Better use of resources

Question 13

ZBB DIS

Answer 13

1. Time consuming and costly
2. May cause suspicion when introduced
3. Places too much emphasis on the short term
4. Ranking can be problematic

Question 14

Enhancing performance management effectiveness

Answer 14

• involve all stakeholders
• assess all key objectives
• retain flexibility and review regularly
• benchmark independently

Question 15

Definition & principle of ZBB

Answer 15

-> is a method of budgeting which requires each cost element to be specifically justified as though the activities were being undertaken for the first time. Without approval the budget is zero