Exploring the organisational efectiveness of not-for-profit organisations: Empirical evidence from the social services sector in the Australian Capital Territory and New South Wales

There is a growing demand from Government, donors and other stakeholders for the over 600,000 Australian Not-for-profit (NFP) organisations to demonstrate their effectiveness and efficiency in a more timely and transparent manner. Studies into the NFP sector by the Australian Government Productivity Commission in 2010 and the Australian Tax Office in 2011 showed that there was minimal customer outcome and social impact measurement by Australian NFP organisations and the overall governance and accountability standards of these organisations were well below the standards of those in the For-profit and Government sectors. With most of these organisations receiving over 60% of their revenue from taxpayers and the remainder from donors and fees for service, there is an increasing focus on their accountability and governance practices.
Considerable academic research in the field of organisational effectiveness measurement of Not-for-profit organisations has been conducted over the years in the UK, USA, Europe and Australia, resulting in many conceptual models, however there appears to be limited focus on developing a practical, empirically tested, uniform organisational effectiveness measurement framework.
This exploratory qualitative research study was conducted within the Australian NFP social services segment and it obtained detailed feedback from two groups, namely the CEOs and one director from nine Not-for-profit organisations operating in the ACT and the surrounding NSW region, and the senior executives of ten stakeholder organisations, including the Commonwealth of Australia and the Australian Capital Territory Government Departments of Social Services, the Australian Charities and Not-for-profits Commission and relevant social services advocacy groups. The objective of this research study was to gain an understanding of the key issues facing the NFP social services segment and explore the performance management tools currently being used by these NFP social services organisation to measure their organisational effectiveness capability. A proposed set of organisational effectiveness measures was developed under the broad dimensions of outcomes accountability, governance and capacity and was tested empirically. Following this critical assessment of the value of these organisational effectiveness measures by all respondents, the proposed measures were ranked by all participants in the study in terms of their importance or otherwise. Twenty of the twenty-two capability measures were ranked as being between very important or important by all participants. Based on the feedback from participants and the academic literature, a final set of measures was developed to be used in an assessment of organisational effectiveness capability. This set was then adapted into a more customer friendly format with ten performance management questions for each of the organisation’s effectiveness areas of outcomes accountability, governance and capacity. Management, using independently sourced and internal data would score the organisation’s effectiveness for each of the measures. The results would be transformed into a star rating system depicting the overall effectiveness capability of the organisation.
The resultant information would be of great benefit to those customers/clients who will be using the new government customer directed care funding model, such as those involved in the NDIS, as they are now required to make a decision as to which NFP social services organisation would be the most suitable one for them to use. The ability of interested parties to easily access this assessment information would allow them to compare and contrast a number of NFP social services organisations before they need to make a final decision about their provider.
This set of organisational effectiveness measures would regularly be up- dated and then uploaded electronically onto the various digital platforms of each NFP social services organisation, such as their website. This would provide management with a valuable tool to enable a comparison of their organisation’s performance against best practice and their peers.
This assessment tool would provide a concise evidence based accountability and governance benchmarking tool that would be updated regularly and be available to all stakeholders in a transparent manner. Given the strong endorsement to this proposed set of organisational effectiveness capability measures by both groups of participants, a much larger Australian wide study could be initiated to confirm the components of the organisational effectiveness assessment framework.