Multiple Objectives

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Objectives of Not-for-profit organisations

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.

Unlike commercial organisations, public sector organisations are subject to strong political influences. For example, a decision to close a local hospital in an effort to save costs is likely to be less acceptable to the public than the closure of a factory for the same reason.

There are other problems with performance measurement of not-for-profit organisations:

  1. Measuring outputs

    Outputs can seldom be measured in a way that is generally agreed to be meaningful. 

    Do good exam results alone indicate good quality teaching?

  2. Lack of profit measures

    If an organisation is not expected to make a profit or has no sales, are indicators such as ROI and RI meaningful?

  3. Nature of service provided

    Many not-for-profit organisations provide services for which it is difficult to provide a cost unit.  

    What is the cost unit for the local council?

  4. Financial constraints

    Financial constraints are more pronounced in not-for-profit organisations.  

    Raising finance by a local authority is subject to strict control by central government.

  5. Political, social and legal influences

    Public sector organisations are subject to strong political influences.  

    The public may have higher expectations of these organisations.  

    They are subject to more legal requirements.

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