Economy, efficiency and effectiveness

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Not-for-Profit Organisation

A not-for-profit organisation is ‘… an organisation whose attainment of its prime goal is not assessed by economic measures, for example charities, statutory bodies offering public transport or the provision of services such as leisure, health or public utilities such as water or road maintenance.

Not-for-profit organisations have multiple stakeholders.

This gives rise to multiple objectives.

Organisations will need to prioritise/compromise as, very often, it is impossible to say which is the overriding objective.

In not-for-profit organisations, performance measures are difficult to define.

Their success cannot be judged against competition nor by profitability.

Hence, other methods of performance have to be used.

Value for Money

In not for profit organisations, performance is judged in terms of inputs and outputs and hence the value for money criteria of economy, efficiency and effectiveness.

  • Effectiveness is the relationship between an organisation’s outputs and its objectives. 

    It ensures that the outputs of a service or programme succeed in achieving objectives.

  • Efficiency is the relationship between inputs and outputs. 

    It is concerned with maximizing output for a given input.

  • Economy is attaining the appropriate quantity and quality of inputs at lowest cost. 

    Therefore, economy is concerned with the cost of inputs.

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