Good work done well? -A study of the measurement of effectiveness and efficiency in Swedish charities

Abstract: Background: The increased number of contracts for public services and the media scrutiny following recent control failures have placed a focus on nonprofit organizations and their reporting of effectiveness and efficiency. Since nonprofit organizations per definitions are not allowed to distribute profits to the suppliers of capital, something else must be used as a substitute for this measure. Previous research on the subject area is limited, especially in a Swedish context, while the need for such measures appears to be prevalent. Purpose: The purpose of the thesis is to contribute to the body of research concerning the measurement of effectiveness and efficiency in nonprofit organizations and investigate how such measures are designed and used. This thesis will hopefully have some useful applications, beyond promoting understanding of the sector, for donors as well as for the nonprofit organizations themselves. Restrictions: The study is restricted to four large Swedish charitable organizations. The scope of the study is also limited to the measurement of effectiveness and efficiency, leaving out other parts of the management control system. Method: The thesis is descriptive and exploratory, using a literary survey and open interviews with representatives from four major Swedish charities. The empirical findings from the studied organizations were compared and analyzed using a relevant frame of reference in order to arrive at a conclusion. Conclusions: The process of developing measures for effectiveness and efficiency has not come far enough to produce a measure that can quantify nonfinancial value creation in a uniform way. The majority of the used measures are related to specific processes in the organizations. Some measures are also used to assess outcome on a higher level in the organizations, while no measures currently exists that provide information about an organization’s impact on society. Many of the uses identified in the frame of reference were absent in the studied organizations. Factors influencing design and use of measures are operations and activities, organizational structure, external dependencies and, in the case of use, the measures that exists. Suggested further research: Since this study has focused on charities, a similar study in other parts of the nonprofit sector, such as sports clubs or lobbying organizations, could be of interest. Finally a comparative study between nonprofit organizations in Sweden and the Anglo-Saxon countries could be of interest in order to analyze to what extent the institutional background influences the measurement of effectiveness and efficiency.