In recent years, calls for greater accountability, concerns about quality, funding constraints and the development of a contract culture have created demands for more sophisticated performance measurement strategies. Donors and governments increasingly emphasise effectiveness and sustainability. As a consequence, NGOs are under pressure to invest more in evaluating their work and measuring its impact (Lawrie 1992; Hailey and James 2003). According to Paton (2003), non-profits today operate in an environment permeated by ‘expectations of measurement’. This has lead to an increasing interest in how best to design and apply new performance measurement frameworks.
The search for appropriate and effective ways of measuring performance in a variety of different contexts and cultures has raised a number of questions, including: • Is it possible to use such frameworks in the increasingly complex and changing environment facing many development agencies today? • Is it possible for such frameworks to be both credible and cost-effective? • What are the operational challenges in applying performance measurement systems in NGOs and other humanitarian organisations? • What are the issues and potential trends that may affect their development and application over the next few years?
As a result, new evaluatory strategies are being introduced that account for differing contextual and cultural differences. Across the private, public, and non-profit sectors, new performance measurement frameworks are being developed that reflect their differing needs.
This paper offers an overview of the background to these developments and assesses some of the challenges facing those implementing new performance measurement systems. We conclude by suggesting that the success of such systems depends on the way they are applied, and whether they can be used in a cost-effective and credible manner. All the evidence suggests that successful evaluation and measurement strategies depend on significant investment to ensure they are of operational value. Performance measurement systems should be seen as a valuable investment rather than a burdensome cost, if they are to be effective and credible.