Performance Evaluation In A Non-Profit Organization

Unlike commercial organization which are profit orientated, there are non-profit organizations like charities, public services,etc which are expected to break-even instead of making profit. In this non-profit organization, there are no profit centres or investment centres but we will still see a decentralized environment with revenue and cost centres.

Unable to use such ratio like return on capital employed or residual income, therefore,the question for performance evaluation exercise in non-profit organization is to find generally accepted practices/measures. Some organizations use ratios based on:

• cost per unit of service to measure performance eg cost per patient treated in a hospital, administratin cost per $ funds raised in a charity
• non financial ratios like percentage(%) growth in membership of an association or members per 1,000 populatio for a political party.