Program evaluation includes performance measurement to assess overall organizational effectiveness. The term "organizational effectiveness" refers to the extent to which an organization achieves its vision and mission. In the for-profit sector, effectiveness is mainly measured in terms of profit. In nonprofit organizations, effectiveness cannot be measured exclusively in financial terms, because the raison d'etre of nonprofit organizations resides in the achievement of their social purpose (vision, mission). Inputs, outputs, and outcomes are examples of indicators that are used for performance measurement in nonprofit organizations.

Performance Measurement

Performance measurement refers to the ongoing collection and reporting of data regarding the efficiency, quality, and effectiveness of programs, projects, and activities of an organization in the context of its vision and mission statements. As a process of regular data collection and reporting, performance measurement provides nonprofit organizations with unique opportunities to monitor progress and take corrective actions when necessary.

Efficiency: Efficiency assesses the relationship between the outputs of a program and the inputs used to produce them. Efficiency measures whether a program makes the best use possible of its resources. In other words, efficiency measures the level of productivity or the best value of a program. Efficiency is measured through (a) a ratio of inputs divided by outputs (e.g., cost per unit of services; dollars spent per client) or (b) a ratio of outputs divided by inputs (e.g., average case load per case manager; number of clients served per $100).

Quality: Quality measures the extent to which the outputs of a program meet a level or standard. Quality is always viewed in comparison to other similar programs and is based on criteria that are conventionally accepted. The quality of a program is measured through the number or proportion of outputs that meet or exceed a standard related to the implementation or operation of such a program (e.g., percentage of requests or applications processed within a standard timeline of 30 days; percentage of clients who completed treatment according to program guidelines).

Effectiveness: Effectiveness measures the extent of achievement of the organizational mission through program outcomes. Effectiveness is about whether a program has produced the best result possible. Effectiveness is measured through the ratio of outcomes to inputs (e.g., cost per client for job placement; total staff hours per ex-offenders transitioned to normal life in the community).


Program evaluation is conducted to measure the performance of an organization on various factors related to its mission, goals, and objectives. Program evaluation concerns input, output, and outcomes. The input includes the financial resources used to implement a program or project. Performance indicators from program evaluation are an integral part of effective strategic planning and financial decisions of nonprofit organizations. Therefore, program evaluation is directly related to decisions that will influence the financial sustainability of an organization.

Program evaluation confirms whether the programs of an organization are efficient and effective or not. Findings from program evaluations are used in strategic planning and in budgetary decisions. Analysis of findings from program evaluation reveals the performance of specific programs and helps make evidence-based financial allocation decisions to either continue or discontinue a program. For example, if an underperforming project or a program run by a nonprofit organization no longer helps satisfy a critical need and is not included in a key programmatic area, there is no justification for allocating resources to it. However, such decisions must be based not on assumptions or anecdotes, but on objective performance data obtained from program evaluation reports.

Program evaluation provides information that can help strengthen the commitment of board members and staff, and the support of external stakeholders, such as donors, public officials, and community members. Commitment of internal stakeholders and support of external stakeholders can serve as positive seeds for the financial sustainability of a nonprofit organization.

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