Does Performance Measurement Improve Strategic Decision Making? Findings From a National Survey of Nonprofit Social Service Agencies

Abstract

Nonprofits have encountered increased pressures for accountability and performance in recent years, both from their funding entities as well as the public. The adoption of performance measurement systems assumes that managers will use performance information to make better decisions. However, little research has focused on performance information use in the nonprofit sector. This study seeks to address this gap in the literature. Using survey data from several hundred nonprofit social service organizations in the United States, this article examines the extent to which reliance on various performance measures improves strategic decision making within nonprofit organizations. Authors find a positive relationship between the range of performance measures used by nonprofits and their level of effectiveness in strategic decision making. Other factors that also contribute to strategic decision making within nonprofits include effective governance, funding diversity, and education level of the executive director.