Using the BSC as the starting point, the purpose of this paper is to present a theory on nonprofit performance management and describes how an overall performance index (OPI) was empirically developed to assess the strategic performance of a nonprofit organisation (NPO).
A conceptual model was developed from the literature. This was refined into a testable theoretical model using case studies. Thereafter, the theoretical model and an accompanying measurement model on OPI were validated using quantitative data (n=223) collected from a sample of healthcare NPOs in Australasia.
The measurement model was found to be a good fit to data. The model parameters (weights) pertaining to the OPI represent six PM dimensions (Mission; Strategy; Organisational Capabilities, Infrastructure and People Development; Financial Health; Processes; and Stakeholder Satisfaction) and 13 sub-dimensions. These parameters provide a tenable scoring system to assess the strategic performance of a NPO.
The parameters (hence the scoring system) were estimated from data collected from a particular sector (healthcare) and a region (Australasia).
The findings can be used for comparative benchmarking (e.g. by managers and major donors) of NPOs, better governance and to initiate major performance improvement initiatives.
This study is the first empirical study that has been undertaken to develop an OPI for NPOs. The findings can be readily used by the practitioners.
