The purpose of this paper is to examine the influences of performance measurement (PM) on not-for-profit (NFP) organizations’ stakeholders by studying how PM practices interact with understandings of legitimate performance goals. This study invokes institutional logics theory to explain interactions between PM and stakeholders.
An in-depth case study is conducted in a large NFP organization in the UK. Managers, employees, and external partners are interviewed and observed, and performance-related documents analyzed.
Both stakeholders and PM practices are found to have dominant institutional logics that portray certain goals as legitimate. PM practices can reinforce, reconcile, or inhibit stakeholders’ understandings and propensity to act toward goals, depending on the extent to which practices share the dominant logic of the stakeholders they interact with.
A theoretical framework is proposed for how PM practices first interact with stakeholders at a cognitive level and second influence action. This research is based on a single case study, which limits generalizability of findings; however, results may be transferable to other environments where PM is aimed at balancing competing stakeholder objectives and organizational priorities.
PM affects the experience of stakeholders by interacting with their understanding of legitimate performance goals. PM systems should be designed and implemented on the basis of both their formal ability to represent organizational aims and objectives, and their influence on stakeholders.
Findings advance PM theory by offering an explanation for how PM influences attention and actions at an individual micro level.
