Posted On July 5, 2020
Non-profitorganizations are institutions that generally operate very differentfrom other organizations in the public market in that even the filingof returns is very different. There is therefore the aspect ofcompetition for resources in the market with huge companies. Most non- profit organizations are in the market to perform humanitarianduties where they do not publish their income and profit statementsbut their success is measured based on the social impact on peoplearound. competition for resources, human capital, financiers andother issues in the market are therefore paramount. stiff competitionfrom the market forces them to edge competitive ways to stay afloatin the otherwise turbulent market.
Thischapter concerns itself with the aspect of nonprofit organizationsand the environment in which they operate. The environment in whichthese organizations operate is one that is evidently very competitivein all aspects. The aspect of the board of directors, donors, mediaattention and all another aspect of operations are very competitive.There is the need to edge a competitive advantage for the non-profitorganization to survive in the market in which they operate. Althoughnot pointed out in the chapter, there are various frameworks used bycompanies to beat competition in the market. Porter`s five forcesmodel is an example of a theory employed in coming up with thecompetitive nature of business environment. Threat of new entrantsfor example is an aspect that the business need to explore to come upwith the way forward in overcoming competition.
Performanceevaluation is the basis of an organization differentiating itselffrom others. The performance evaluation is very important especiallyfor the external stakeholders who in one way or the other areconcerned with the funding and running of the organization.Stakeholders concern themselves with the performance of anorganization to make their decisions regarding the organization tosupport it in the competitive market. Financiers otherwise referredto as donors will in the first place analyze the social impact of thenon – profit organization to the community around the area. Therationale in this case is that most donors will support a firm thathas a positive impact on the lives of individuals around them. intheir competition mantra therefore, the non – profit organizationshave the duty to ensure that they serve the interest of external andinternal stakeholders at heart. An organization with the humancapital welfare at heart is an institution that can easily thrive inthe market.
Thechapter introduces three main components of performance evaluationnamely managing performance, measuring performance and maximizingperformance. Under the management of performance, non-privateorganizations need to be accountable for all their actions.Accountability is, therefore, a key issue in all the operations of anon-profit organization. Income tax laws and federal laws need to beadhered to and accounted for by the management of the organization.Self-regulation is another aspect of performance evaluation where forinstance reporting is done to board regularly. This according to thischapter improves the accountability of a firm. There is the need fordisclosures through public transparency. Disclosures are veryimportant for the purposes of gaining public trust. This could beimproved through using external rating agencies. External ratingagencies have the advantage of ensuring that biasness is eliminatedin trying to establish the best performing organizations. conflictsof interest are therefore avoided in this case and the performanceevaluation is credible for stakeholders in the market to establishthe character and status of the organization.
Measuringperformance entails trailing how funds, for instance, have been usedin trying to raise capital. In raising funds therefore, the expensesincurred should never be excess of the funds collected. This a logicmanner of business and a return need to be earned at the end of theday. Use of performance ratios aids a lot in arriving at the realfigures. There is the need as stipulated in the chapter of socialreturn on investment ratio in this activity. This measures the socialimpact of funds spent on changing lives. Finally, there is the needto measure goals through benchmarking. Peer firms are used to measurethe goals attained. Goals set also need to be measured against theachieved goals. Peer firms in the market perform in a manner that arival firm would borrow from to ensure they are at par or evenperforming better. Benchmarking of the peer firms in the market is ahuge step towards realizing the performance a non – profitorganization.
Maximizingperformance is the final bit of the chapter which has six componentsdefining it. According to this bit, results need to be resultsoriented as opposed to action oriented. Actions are never specific.The chapter also points out that the mission statement is veryimportant. It is therefore from this statement that performance needsto be set and measured as it is the guiding statement of anyorganization. External performance is therefore very critical ingaining a competitive advantage over other firms in the industry.