Clients: Not-For-Profits: Measurement of performance

Business enterprises can usually readily evaluate overall performance by measuring profitability. Since most nonprofit organizations do not have a profit motivation, there is no single performance indicator comparable to a business enterprise's generally accepted benchmark of profit. Instead of measuring profit, the focus is on information in the financial statements about the nature and relationship between resource inflows and outflows and information about service efforts and accomplishments.

Measuring a nonprofit organization's performance and results can be more complex than for a business. Depending on the nature of its goals, a nonprofit organization may have to determine what to measure, what indicators to use, and how to gather data. In addition, different programs and activities within the same organization may require totally different measurement standards, indicators, and data. The different and more complex measurement for nonprofit organizations is reflected in features such as financial statement presentation of changes in classes of net assets, functional presentation of expenses, and disclosure of the nature of restrictions on net assets.

Copyright Blythe Paperless 2011