La Evolución Biológica

One of the potential outcomes of achieving performance is the recognition of staff for their contributions to that performance, thus stimulating a discussion of the

appropriateness of providing performance based incentives. Performance based compensation is a popular method of aligning owner and manager objectives in the for-profit arena and the following discussion gives some insight into its relevance for nonprofits. The level of management compensation is a vexed issue for a nonprofit organisation. Convention accepts that it should be of a level to attract well

credentialed staff, but not at a level which would divert scarce resources away from the core purpose of the organisation and thus the remuneration decision is a key board role.

The issue of incentive compensation was the subject of an empirical study by Gray and Benson (2003) which attempted to determine key drivers of executive

compensation including incentives. Their study was conducted through completion of questionnaires sent to Small business Development Centres (non-profits who are responsible for providing training and consulting to small businesses and

entrepreneurs). They formulated several hypotheses regarding the drivers of incentive compensation. Their definition of compensation excluded incentives such as equity, bonuses and other non salary components. Their definition of performance, as has been well established throughout this chapter, was difficult due to the

multidimensional facets of the organisations, but was determined by the authors to be client satisfaction. Their findings indicated that there was significant correlation between organisational size; the experience and education of executives; and gender (among other factors which are less relevant to this study) and the level of executive compensation. However, there was no correlation between executive compensation and performance as, measured by client satisfaction. In fact, there was a significant negative correlation between organisational size and performance.

They re-visited the definition of performance given the multidimensional feature of nonprofits and found some support for a correlation between executive compensation and performance as measured by resource efficiency.

Speckbacher (2003) also considered whether incentive schemes were appropriate for the nonprofit. He advocated that incentives are not universally supported in the for- profit literature (Gibbons, 1998 cited in Speckbacher, 2003) and as such are much more problematic in a nonprofit firm. The reasons he advanced were firstly, that the multidimensional measures in nonprofits created problems in determining the level of management performance; and secondly, there were greater intrinsic motivations in the nonprofit firm, an example of which is that employees may often accept lower salaries to work for an organisation whose mission they espouse.

Summary

As highlighted earlier in this chapter, determination of performance is one step into an evaluation of organisational effectiveness. The discussion on organisational

performance presented some key insights into both performance models and performance indicators.

Speckbacher (2003) described three models of determining performance, firstly, the technical model, which focussed on the relationship between inputs and outputs; secondly, the property rights model, with the rights having a value and therefore the issue became one of determining to whom those rights would accrue, management or owners; and thirdly, a stakeholder view, whereby stakeholders make tangible or intangible investments to the firm with an expectation that their claims will be fulfilled. The property rights view was a driver for increased monitoring in line with an agency theory approach while the stakeholder view necessitated a multi-

dimensional performance measurement system. Speckbacher (2003) recommended the balanced scorecard as a way to facilitate this accountability.

Other models focussed on multiple performance criteria were discussed. Krug and Weinberg (2004) developed a model entitled Mission, Money, and Merit specifically for nonprofits. This model enabled evaluation of programs in line with three key criteria: 1. how they contributed to the mission of the organisation; 2. how they contributed financially in terms of reducing the deficit; and 3. how they contributed in terms of performance quality.

Sowa, Coleman Selden and Sandfort (2004) proposed a multi-dimensional and integrated model of nonprofit organisational effectiveness (MIMNOE). This model had two focuses: management effectiveness and program effectiveness. These were further broken down into performance measures or outcomes.

Financial Performance and some suggested financial measures was addressed by Ritchie and Kolodinsky (2003) and Herzlinger (1994). These measures addressed various strategic aspects of the organisation but were significant in that they were

easily operationalised. Finally, a brief discussion of the relevance of performance based compensation in a nonprofit context was discussed.

The potential limitations of any performance measurement model are the ease of operationalisation of the model. While Speckbacher (2003) recommended the

Balanced Scorecard as a legitimate multi-dimensional model, there was no attempt to operationalise it. Similarly, Sowa, Coleman Selden and Sandfort (2004) presented a model which was conceptually strong and made an attempt to define measures. However, this raises the issue of credible performance measurement. This study will refer to both subjective measurement and objective measurement both in this chapter and in chapter seven. For the purposes of this study, objective has been taken to mean verifiable in line with its use in Friedman and Phillips (2004). Subjective was taken to mean based on perceptions and value judgements. The point needs to be made that neither objective nor subjective is superior to the other and both are prevalent in the literature for nonprofits and for profit organisations. However, the deficiencies in the performance models are the reliance on perceptual measures where objective

measurements are also available. It appears endemic in the studies reviewed in much of the nonprofit literature that results are garnered through surveys and interview and thus relies on subjective data. This approach ignores the role of document analysis as a source for performance data and this study aims to redress this gap.