Organisational performance measurement in the third sector

Effective organisational performance measurement supports the long-term viability of third sector organisations. It provides its many stakeholders, including funders, with critical information about the value for money received and beneficiaries, about the quality of service provision. However, there is limited empirical and theoretical research on how third sector organisations measure their organisational performance. An exploration of how Scottish third sector organisations in social care measured their performance was undertaken in order to further understanding of the field. Extant literature focused on the key drivers for addressing approaches to organisational performance measurement by third sector organisations as being: accountability, legitimacy and improvement. Building on this literature, this thesis employed expert interviews with key third sector stakeholders, group interviews with members of inter-organisational stakeholder networks and observations of the same groups. The findings suggest that the paradigm of organisational performance measurement in the third sector is, at times, shifting away from a dominant mechanistic accountability, where the performance requirements of funders typically take precedence, towards a more holistic approach in which organisational performance forms part of an organisation’s ecosystem. This research makes a theoretical contribution to the field of organisational performance in the third sector by responding to calls to apply stakeholder theory to this area of research, particularly in the context of a multi-stakeholder service delivery environment. The evidence showed that the salience status of key stakeholders may be shifting from high power to that of increasing their legitimacy, and third sector organisations are working normatively to prioritise the performance requirements of their beneficiaries. This is taking place in an environment in which there are institutional failings of regulation and commissioning. The key drivers of organisational performance were the organisational mission, an evaluative organisational culture and peer led, inter-organisational stakeholder networks. In order to ensure a fit with culture and mission and to manage the inherent complexity of performance, third sector organisations are driving organisational performance measurement towards a crossroads in its own history as it diverges towards an embedded, evolved, sustained approach, away from a focus on compliance and towards a more collaborative outlook.