Post Office Box 800 Willem Alexanderdreef 2 9700 AV Groningen 3871 CK Hoevelaken
www.stichtingzuidafrika.org
Performance Measurement in
Development Assistance Organizations
A Performance Measurement Framework for the South Africa Foundation’s
Holiday School Project
Groningen, January 2006
University of Groningen
International Business & Management Dorien Steegen
Student number: 1281674
Preface
This thesis is about performance measurement in development assistance organizations. The idea to write about this topic was born in April 2005 and stems from a preference for development aid. It is intended for anyone who is interested in this topic and who wants to know more about the issue of performance measurement in development assistance organizations.
When I started writing my thesis, I found out that it was a very actual topic. Many newspapers were full with articles about transparency and accountability of charities. As will be demonstrated in this thesis, performance measurement may help to improve transparency and accountability. The question was now how to write my thesis? The more I got involved with the literature, the more worthy it became to examine it. But to what degree was this achievable? At this point Mr. Schweigman provided me a helping hand. I would like to thank him for guiding me into the right direction and for the helpful advice and feedback he gave.
After several months of theoretical literature review, I wanted to collect information from NGOs in the Netherlands to learn more about performance measurement in practice. Unfortunately, many NGOs were quite reserved in providing information about their performance measurement methods. They were not willing to give me the information, or clear-cut performance measurement methods were simply not present.
De Internet Explorer-browser starten.lnk Fortunately, I also received an email from the South Africa
Foundation. This foundation asked me to assist in developing a performance measurement method. My enthusiasm for this project was raised immediately. In September I visited the founders of the South Africa Foundation, Martje & Ricus Boerma. They showed me many pictures and also a short video of one of their projects. In October they came to Groningen and we had our second conversation together with Mr. Schweigman. After that conversation, they left to South Africa and our contact was continued only by e-mail. Despite the lack of face to face contact, the guidance from the South Africa Foundation has been a very valuable contribution to this thesis. I would like to thank Martje Boerma-Nooij for her valuable tips and comments and for answering all my questions.
Besides the guidance, I would like to thank my mother, Wies Steegen, for reading through this thesis and for her comments about my style of writing and spelling. I also want to thank everybody who has listened to my story about performance measurement in charities and who has been thinking along with me.
Management Summary
Sponsors are getting increasingly more skeptical towards charity. They question whether the donated money is actually reaching the people who need it. Millions of euros have been collected via 555 for emergency situations like for example Kosovo and the Tsunami. But what has happened with that money?
Besides these short-term emergency situations, also the effects of the long-term development assistance are questioned. Many people have doubts about the effects of development aid and about the effectiveness and efficiency of development assistance organizations themselves.
It is clear that institutions are accused of a lack of accountability and transparency. They are being asked to become more transparent and to demonstrate both the effectiveness and efficiency of their projects. Implementing a clear-cut performance measurement method can help these institutions to enhance transparency and accountability. Additionally, performance measurement may improve the internal workings of the organization. The goal of this thesis is therefore to explore the issue of performance measurement in development assistance organizations.
In general the goal of development assistance is to improve the living standard of poor people and to reduce poverty. Conventional development assistance organizations are focused on the long-run poverty reduction and development. Performance measurement can be defined in different ways. According to the OECD, performance measurement is “the measurement of the inputs, outputs and outcomes”. To explain the relationship between inputs, outputs and outcomes, the ‘Logical Framework Method’ (LFM) will be introduced.
Performance measurement is a rather difficult and complex task in development assistance organizations. This is because there is no market mechanism and because there are many different (political) interests involved. In development assistance organizations, performance cannot be judged by means of financial indicators like profit and return on capital. Instead, non-financial indicators may be more practical in judging about performance.
Applying the LFM/BSC/CSF framework to the Holiday School Project
The goal of the second part of the thesis is to develop a customized performance measurement framework for the Holiday School Project of the South Africa Foundation. After analyzing the South Africa Foundation and the Holiday School Project, the combined LFM/BSC/CSF framework has been applied. Indicators had to be established by which the short/intermediate- term performance of a Holiday School could be measured. The short/intermediate-term performance of a Holiday School is judged by taking five areas into account: finances, stakeholder satisfaction, internal business processes, learning & growth and creativity. For each area, Critical Success Factors, objectives, Key Performance Indicators (measures) and targets had to be established in order to make performance measurement possible. By measuring the performance in these five short/intermediate-run areas, the long-term performance can be measured.
Finding the CSFs, objectives, KPIs and targets
It appeared that the former set of objectives and of the Holiday School Project did not sufficiently meet the SMART requirements. In order to make performance measurement possible, the set of objectives had to be adjusted. The new set of objectives had to be in alignment with the strategy and objectives of the SAF and with the strategy and mission of the Holiday School Project itself. In addition, the objectives had to reflect the CSFs of the Holiday School.
In order to find these CSFs, several Holiday Schools have been analyzed. The LFM was applied in order to structure the main elements of the process in terms of input, throughput, output and outcome. The BSC was applied in order to look at the Holiday School from different perspectives. After identifying where in the process (LFM) and in which area (BSC) strengths and weaknesses were present, the CSF method was applied to identify the CSFs for the Holiday School Project. For each intermediate-term area of the combined LFM/BSC/CSF model, one or two CSFs were established. The adjusted objectives of the Holiday Schools were derived from these CSFs. Each objective was then accompanied with one or more Key Performance Indicators (KPIs) and targets to judge whether the objective has been achieved or not. An overview of the CSFs, the objectives, the KPIs and the targets can be found in Appendix E.
The short/intermediate-term performance of a Holiday School can now be measured by using the adjusted set of objectives, KPIs and targets. The long-term performance is dependent on the short/intermediate-term performance in the five different areas. Performance is assumed to be sufficient when the areas of stakeholder satisfaction and internal business processes show a high performance. For each additional area that reaches high performance, long-term performance will increase.
Conclusions & Recommendations
The final performance measurement framework rests in particular on the following eight CSFs: 1. Having an efficient process
2. Being good in raising additional South African funds 3. Having the most important stakeholders satisfied
5. Being good in providing a high number of varied, nice and educative activities/workshops/outings 6. Being good in increasing the number of participants
7. Being good in decreasing the number of problems
8. Being creative good in thinking about new activities, workshops and outings
Abbreviations
BSC Balanced Scorecard
CBF Centraal Bureau voor Fondsenwerving CSF Critical Success Factor
IMF International Monetary Fund
ISO International Organization for Standardization KPI Key Performance Indicator
LF Logical Framework
LFM Logical Framework Method NGO Non Governmental Organizations NPO Non Profit Organization
ODA Official Development Aid
OECD Organization for Economic Co-Operation and Development PM Performance Measurement
Contents
Preface………. 2 Management Summary ………. 3 Abbreviations………. 6 Contents……….. 7 List of Figures……… 11 Introduction……… 12Part I: Performance Measurement in Development Assistance Organizations A Theoretical Perspective 1 DEVELOPMENT ASSISTANCE……….. 16
1.1 Human Development………. 16
1.2 Millennium Development Goals……… 16
1.3 Different Sorts of Development Assistance………... 18
1.3.1 Official Development Assistance………... 18
1.3.2 Foreign Direct Investment……….. 20
1.3.3 Private Development Aid (NGOs and others)……… 20
1.4 Arguments in Favor of Development Assistance……….. 21
1.4.1 Economic reasons……….. 21
1.4.2 Political reason………21
1.4.3 Moral reasons………..21
1.5 Arguments against Development Assistance……… 21
1.5.1 Economic reasons……….. 21
1.5.2 Political reasons………... 22
1.6 Conclusion………. 22
2 NGOs - DEVELOPMENT ASSISTANCE ORGANIZATIONS……… 23
2.1 Defining NGOs………. 23
2.2 Development Assistance Organizations – Development NGOs………24
2.3 Different Stakeholders’ Interests………... 25
2.4 Criticism on NGOs……….... 25
2.5 Trends in the NGO sector……….. 26
2.6 Conclusion………. 27
3 PERFORMANCE MEASUREMENT………... 28
3.1 Defining Performance Measurement………. 28
3.1.1 The definition of performance measurement in an industrial setting………. 28
3.1.2 The definition of performance measurement methods for Development NGOs… 28 3.2 Why measure performance in Development NGOs……… 29
3.3 Performance Measures………... 29
3.4 Performance Information Sources………. 31
3.5 Efficiency & Effectiveness………... 32
3.7 Smart Requirements………... 33
3.8 Conclusion………. 33
4 THE COMPLEXITY OF PM IN DEVELOPMENT ASSISTANCE………. 34
4.1 Performance Measurement in Development NGOs……….. 34
4.2 The Purpose of PM in development NGOs……… 35
4.3 Existing Guidelines for Development NGOs……… 36
4.3.1 The CBF: Centraal Bureau voor Fondsenwerving ……… 36
4.3.2 ISO Standards……… 36
4.4 The Complexity of Performance Measurement in Development NGOs………... 36
4.4.1 The absence of the market………. 37
4.4.2 Different stakeholders………... 38
4.4.3 Additional problems……….. 39
4.5 Conclusion………. 40
5 THEORY BASED PM FRAMEWORKS FOR NGOs……… 41
5.1 The Logical Framework Method……… 41
5.1.1 Visualizing the Logical Framework………... 41
5.1.2 Advantages and disadvantages of the Logical Framework Method……….. 43
5.1.3 NGOs and the Logical Framework Method……….. 43
5.1.4 The Logical Framework Method as project management tool………. 44
5.2 The Balanced Scorecard………. 44
5.2.1 The four perspectives of the Balanced Scorecard………... 44
5.2.2 Advantages and disadvantages of the Balanced Scorecard……… 46
5.2.3 NGOs and the Balanced Scorecard……… 46
5.2.4 The Balanced Scorecard as project management tool……….. 48
5.3 The Critical Success Factor Method…... 49
5.3.1 Critical Success Factors, Key Performance Indicators and targets……… 49
5.3.2 Advantaged and disadvantages of the Critical Success Factor Method………… 50
5.3.3 NGOs and the Critical Success Factor Method……….. 50
5.3.4 The Critical Success Factor Method as Project Management Tool……… 50
5.4 Combining the LFM, the BSC and the CSF Method……… 50
5.4.1 Explanation of the model……… 52
5.5 Conclusion………. 53
Part II: Performance Measurement in Development Assistance Organizations A Practical Perspective Designing a PM Framework for the South Africa Foundation’s Holiday School Project 6 RESEARCH DESIGN……….... 55
6.1 Research Context……….. 55
6.1.1 The call for accountability………. 55
6.1.2 The South Africa Foundation & the Holiday School Project………... 56
6.1.3 The apartheid in South Africa……….... 56
6.2 Research Objective………. ……….. 57
6.3 Research Questions ………... 57
6.3.1 Sub-Questions concerning the South Africa Foundation………... 58
6.3.2 Sub-Questions concerning the Holiday School Project……….. 59
6.4 Type of Research ……….. 62
6.5 Data Collection & Analysis ……….. 62
6.6 Research Framework: Repeating the Chronological Steps of the Research………. 62
6.7 Research Quality Issues………. 63
6.7.1 Reliability………... 63
6.7.2 Credibility……….. 63
6.7.2 Transferability……… 64
7 THE SOUTH AFRICA FOUNDATION………. 65
7.1 History & Background………... 65
7.2 Mission, Goals and Strategy ………. 66
7.3 Activities ……….. 67
7.3.1 Holiday Schools……… 67
7.3.2 After-School Activities……… 67
7.3.3 Sponsor Parenthood………... 68
7.3.4 Study Finance /Bursaries……… 68
7.4 Stakeholders ……….. 68
7.5 Judgment of the Complexity of the Organization ……… 69
7.6 Practical Requirements & Objectives of the South Africa Foundation…..……… 70
7.7 Conclusion………. 70
8 HOLIDAY SCHOOLS……….. 71
8.1 History of Holiday Schools……… 71
8.2 Mission, Goals and Strategy……….. 72
8.3 Holiday School Stakeholders……… 73
8.3.1 Most important stakeholders……… 73
8.4 The Process of Organizing a Holiday School……… 74
8.4.1 Inputs of the Holiday School: preparation phase……… 74
8.4.2 Throughput of the Holiday School: actual operation………. 75
8.4.3 Output of the Holiday School………. 76
8.4.4 Outcomes of the Holiday School: Effects………. 76
8.5 Analysis of Holiday Schools: Identifying Strengths & Weaknesses ……… 77
8.5.1 Applying the LFM: identifying strengths and weaknesses……… 78
8.5.2 Applying the BSC: identifying strengths and weaknesses……… 81
8.6 Identifying Critical Success Factors……….. 84
8.6.1 Applying the CSF Method……… 84
8.6.2 An extra area: creativity………. 85
8.7 A Judgment of the Complexity of Holiday Schools……….. 85
8.8 Choosing the Appropriate Approach………. 86
8.9 Conclusion………. 87
9 CUSTOMIZING THE LFM/BSC/CSF FRAMEWORK FOR THE HOLIDAY SCHOOL PROJECT………. 88
9.1 Strategic Context……… 89
9.2 The Intermediate Scorecard Variables………... 89
9.3 Financial Results……… 90
9.3.1 Relationship with the other areas……… 90
9.3.2 Goals related to the financial area……….. 90
9.3.3 Critical Success Factors for the financial area……… 90
9.3.4 CSF 1: being good in raising additional South African Funds……….. 91
9.4 Stakeholder Satisfaction Results……… 94
9.4.1 Relationship with the other areas……….. 94
9.4.2 Goals related to the stakeholder satisfaction area……….. 94
9.4.3 Boundaries: which stakeholders……… ……… 95
9.4.4 Critical Success Factors for the stakeholder satisfaction area……… 95
9.4.5 CSF 1: Being good in satisfying the most important stakeholders……… 95
9.4.6 Overview stakeholder satisfaction results……….. 98
9.5 Internal Business Processes Results………... 98
9.5.1 Relationship with the other areas……… 98
9.5.2 Goals related to the area of internal business processes……… 99
9.5.3 Critical Success Factors for the internal business processes area……….. 99
9.5.4 CSF 1: Having good communication and relationships………. 101
9.5.5 CSF 2: Having a high number and variety of activities, workshops and outings... 103
9.5.6 Overview internal business processes results……… 105
9.6 Learning & Growth Results……….. 105
9.6.1 Relationship with the other areas……… 105
9.6.2 Goals related to the area of learning & growth……….. 106
9.6.3 Critical Success Factors for the learning & growth area……… 106
9.6.4 CSF 1: Being good in attracting more participants……… 107
9.6.5 CSF 2: Being good in resolving problems………. 108
9.6.6 Overview learning & growth results……….. 113
9.7 A fifth area: Creativity………..………. 110
9.7.1 CSF 1: Being creative in thinking about new activities, workshops & outings… 110 9.7.2 Overview creativity results……… 111
9.8 Information Availability………. 111
9.9 The Strategic Scorecard………. 112
9.10 The Final Performance Measurement Framework for Holiday Schools……… 112
9.11 Conclusion……… 113 Final Conclusion………. 114 Recommendations……….. 116 Discussion……… 117 Appendices……….. 119 A: Research Framework………... 119
B: Organized Holiday Schools……… 120
C: Analysis of Different Holiday Schools……… 122
D: Adjusted Set of Objectives……….. 125
E: CSFs, Objectives, KPIs and Targets………... 126
F: Final Design of the Customized Performance Measurement Framework……….. 128
List of Figures
Figure 1.1: Net Official Development Assistance as a percentage of GDP Figure 1.2: ODA in the Netherlands
Figure 1.3: ODA in real terms in the Netherlands in US $ Million Figure 1.4: ODA as percentage of GDP in the Netherlands
Figure 1.5: FDI in 2003 in South Africa (1 Euro is approximately 8 Rand) Figure 1.6: Allocation of private gifts in the Netherlands
Figure 2.1: Proportion of overall income received by NGOs from their national government Figure 5.1: The Logical Framework
Figure 5.2: The Balanced Scorecard
Figure 5.3: The Balanced Scorecard for NGOs
Figure 5.4: A model combining the LFM, the BSC and the CSF method Figure 5.5: Differences between the three approaches
Figure 6.1: Example of intermediate performance measures Figure 8.1: The increasing number of organized Holiday Schools Figure 8.2: The Logical Model of the Holiday School (1)
Figure 8.3: The daily program of a Holiday School Figure 8.4: The Logical Model of a Holiday School (2)
Figure 8.5: Holiday Schools and the four perspectives of the BSC
Figure 8.6 Critical Success Factors derived from the strengths and weaknesses Figure 9.1: An abridged version of the model provided in Chapter 5
Figure 9.2: Accounts on the Holiday School’s financial statement Figure 9.3: Summary of the financial area
Figure 9.4: Summary of the customer satisfaction area Figure 9.5: Variety and number of activities per week/day Figure 9.6: Summary of the internal business process area Figure 9.7: Example encountered problems
Introduction
Despite progress in recent decades, the extreme poverty prevalent in low-income countries is a critical problem facing the global community. There is an extremely wide gap in capita income between the low-income developing economies and the high-income developed economies in the world today. The by far best example is of course Africa. Sub-Saharan Africa (Africa without Egypt, Libya, Tunisia, Morocco and Algeria) is the poorest continent on earth; 700 million people only have €0.60 to spend per day. In addition, there are many other indicators than income statistics to show the poverty in low-income countries. For example the high infant mortality rate; in Sub-Saharan Africa 105 out of 1000 newly born babies die before reaching the age of one, while this is only 5 out of 1000 in high-income OECD countries. The escape from such misery through economic development should be the common goal of low-income countries. Several success stories have already been recorded. The Newly Industrialized Countries (NICs) in Asia, like Korea, Taiwan, Hong Kong and Singapore have experienced a remarkable growth. Right after WWII these countries had per capita income levels comparable with the low-income countries today, while they now have reached the ranks of high-income economies.
Official Development Assistance (ODA) helped these countries to grow and to develop. Official development assistance is also given to the current low-income countries. International financial institutions like the IMF and the World Bank make high amounts of money available by way of loans or donations. Also Non-Governmental Organizations (NGOs) like Oxfam, Cordaid and MSF (médecins sans frontières) are of significant importance. They mainly establish projects to improve the living standard of the impoverished people. These projects are focused on for example health and education.
Many companies and individuals support development assistance organizations because they do ‘something good’. However, the last decade development institutions are being asked to become more transparent and to demonstrate both the effectiveness and efficiency of their projects. Some people question the effectiveness of development aid and some question the effectiveness and efficiency of development institutions. Therefore, many institutions incorporated ways to improve performance measurement and thereby enhancing transparency, efficiency and effectiveness.
Structure of the thesis
This thesis is about performance measurement in development assistance organizations. The thesis is divided into two parts: a theoretical part (Chapter 1-5) and a practical part (Chapter 6-9).
The objective of the first part of the thesis is the following:
In part I, different concepts will be explained and operational definitions will be provided. The concepts of development assistance (Chapter 1), development assistance organizations (Chapter 2) and performance measurement (Chapter 3) will be explained and discussed. Questions like what is development aid, what are development assistance organizations and what is performance measurement will be answered. Chapter 4 deals with the special character of development institutions that may complicate performance measurement. Chapter 5 forms the last chapter of the theoretical part. In this chapter, performance measurement frameworks which appeared to be best suitable for NGOs will be reviewed and evaluated. These are the Logical Framework Method (LFM), the Balanced Scorecard (BSC) and the Critical Success Factor (CSF) method. These frameworks will be combined into one LFM/BSC/CSF framework, which will form the basis for the practical part of the thesis.
In the second part of this research, the South Africa Foundation will be examined. The South Africa Foundation is a Dutch charitable organization which is active in poor townships in South Africa. It organizes and supports cultural, social, health, educational and employment projects in South Africa. The foundation was formally established on the 17th of April 2000 and it originates from a privately initiated project in 1998. One of the main activities of this foundation is to establish Holiday Schools for children between 5 and 16 years. Holiday Schools are holiday programs organized by volunteers to keep children of the streets in a safe environment. The Holiday School project is the central focus of this thesis and will be given more attention than the other projects of the South Africa Foundation. The function of the second part of the thesis is to show how the combined LFM/BSC/CSF framework, developed in part I, can be applied in practice. For that purpose, the framework is applied to the Holiday School Project.
The objective of the practical part of the thesis is the following:
Chapter 6 first describes the research design and methodology of the research at the South Africa Foundation and the design of the customized performance measurement framework. Chapter 7 contains a description of the foundation and Chapter 8 deals with the Holiday School Project. In Chapter 9 the customized performance measurement framework will be provided.
Appendix A visualizes the different steps of the research. The purpose of this figure is to show how this research is built up and how the different parts relate with each other. The model does not show any measurable links; rather it describes the chronological steps which are taken in the research.
“To develop a customized, basic, feasible and manageable performance measurement framework or method which can be used by the South Africa Foundation and the organizers of a Holiday School to assess and improve the performance of a Holiday School”.
Planning
PART I
Performance Measurement in Development Assistance Organizations:
A Theoretical Perspective
This part entails a literature research on the topic of performance measurement in development NGOs. An introduction will be given to the concepts of Development Assistance, Development Assistance Organizations and Performance Measurement.
1
DEVELOPMENT ASSISTANCEDevelopment assistance is a very broad concept. In general the goal of development assistance is to improve the living standard of poor people and to reduce poverty. Development assistance involves many sub-goals, which eventually may lead to this more general goal. There are antagonists and proponents of development aid. This chapter discusses the most common arguments in favor and against development aid.
The Netherlands is one of the most generous countries of the world. Per year approximately 47% of the inhabitants donate money to charity. Only 6% of the inhabitants have never given money to a charity institution (Wegener, 2004). In this chapter the concept of development assistance will be defined and explained.
1.1 Human Development
According to the United Nation’s development rapport, ‘‘development is about creating an environment in which people can develop their full potential and lead productive, creative lives in accordance with their needs and interests’’ (UN Development Report, 2004) The most basic capabilities for human development are to lead a healthy and long life, to have access to resources that are needed for a decent standard of living and the people have to be able to participate in the life of a community.
Economic development is something different than economic growth because it combines growth with an improvement in living standards. Development is a much broader concept because it takes into account the GDP distribution and for example the degree of poverty in a particular country or area. The term ‘human development’ describes economic development in an even broader sense because it involves economic and social choices of individuals and nations.
1.2 Millennium Development Goals
The eight goals are:
1. Eradicate extreme poverty and hunger 2. Achieve universal primary education
3. Promote gender equality and empower women 4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/Aids, malaria and other diseases 7. Ensure environmental sustainability
8. Develop a global partnership for development
1.3 Different Sorts of Development Assistance
Development assistance (also development aid, international aid, overseas aid or foreign aid) is assistance given by developed countries to support economic development in developing countries (Wikipedia, the Free Encyclopedia, 2005). It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term. Development aid is composed of three separate areas:
1. Governmental (Official Development Assistance) 2. Foreign investment (Foreign Direct Investment) 3. Private (Non Governmental Organizations and others). 1.3.1 Official Development Assistance (ODA)
According to the OECD, Official Development Assistance can be defined as: “a measure of donor flows that are for the promotion of the economic development and welfare of developing countries” (OECD, 2005). In the 70s different highly industrialized countries made an agreement to spend at least 0.7% of their GDP to development assistance. This agreement is called the ODA-norm (the official development assistance standard). Unfortunately, many countries are not meeting the standard of 7%. As can be seen in the figure below, only Norway, Sweden, Denmark, Luxembourg and the Netherlands comply with this standard. In the Netherlands almost 4-milliard euro is spent on development assistance. This amount is 0.74% of our GDP.
The total amount of Official Development Assistance to developing countries increased to $78.6 billion in 2004. This is the highest level ever. In 2002 the total ODA increased with 4.3 % and in 2003 the rise in real terms was 4.6%. Several factors account for this rise in real terms. Contributions to international organizations increased, aid to Afghanistan and Iraq increased, gross debt relief grants fell and the net lending fell (OECD, 2005).
The Netherlands is among the world’s leading aid donors. The government donates large amounts of aid to NGOs (almost 20% of the total expenditure on aid), which have total autonomy in choice of projects. Another large part of aid funds is bilateral aid, which is given directly to developing countries. Dutch aid which is passed to e.g. the UN Development Program and international financial institutions like the IMF and the World Bank is called multilateral aid. Together these amounts form the Official Development Aid of the Netherlands. The policy priorities are basic social facilities, health care, the environment, and aid to least developed countries. Other priorities are emergency relief, programs for the private sector, and international education (Wikipedia, 1998).
In the Netherlands ODA in real terms is also increasing since 2002 (see figure 1.2). However, in percentage of GDP the ODA is decreasing from 0.84 to 0.74. This is below the target of 0.85 which the Dutch government intents to maintain. If ODA as % of GDP decreases but in absolute amounts increases, GDP must have been increased by more. According to the OECD, the Netherlands ODA in 2004 was below its target as India repaid all its outstanding Dutch aid loans (OECD, 2005). India started to repay its outstanding loans since 1994. In 1996-1997 external debt payments reached a peak. Also the Dutch aid loans were repaid. They decreased from 1.1% of the total external debt of India to 0% (Government of India, 2003). The Netherlands intends to maintain its target of 0.8% of GDP, on average, over the period 2004-2007.
Year 1999 2000 2001 2002 2003 2004
ODA in US $ M 3134 3075 3155 3135 3980 4235
ODA as % of GDP 0.79 0.82 0.82 0.84 0.80 0.74 Figure 1.2: ODA in the Netherlands
Source: OECD, Aid Statistics, 1999-2004
ODA as % of GDP 65 70 75 80 85 1999 2000 2001 2002 2003 2004 Year ODA as % of GDP
Figure 1.3: ODA in real terms in the Netherlands Figure 1.4: ODA as percentage of GDP in the
1.3.2 Foreign Direct Investment
Foreign Direct Investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset (Wikipedia, 2005). There are different types of FDI. One type is ‘Greenfield’ investment, which implies direct investment in new facilities or the expansion of existing facilities. Another type of foreign investment is by means of mergers or acquisitions. This occurs when a transfer of existing assets from local firms to foreign firms takes place. Mergers and acquisitions are the main mode of investing in less developed countries.
Private sector development is increasingly regarded as indispensable for developing countries to grow. Fortunately, more attention is given to the role of FDI and FDI flows to less developed countries are expanding. Less developing countries aim to attract as many foreign investments as possible since this can create more employment and stimulate the economy. However, less developed countries can reckon upon a low market share only and relatively low economical growth which makes them less attractive.
The Netherlands is among the largest investors from Western Europe. The figure below represents the FDI numbers for South Africa in 2003 in real terms. As can be seen the Netherlands is ranked fourth, which indicates that it invests a large proportion of its GDP in South Africa.
Country FDI in South Africa in Million Rand 2003
United Kingdom 188.411 United States 29.521 Germany 22.858 Netherlands 19.066 Malaysia 10.043 Japan 7.127 Switzerland 6.102
Africa (other parts) 4.659
France 4.069
Other 14.582
Total 303.438
Figure 1.5: FDI in 2003 in South Africa (1 Euro is approximately 8 Rand) Source: www.reservebank.co.za
1.3.3 Private Development Aid (to NGOs and others)
NGOs in the field of: Million Euro Percentage
Churches & Philosophy of life 1.178 23%
Sport & Recreation 930 18%
Culture 619 12%
Health 601 11%
Social goals 568 11%
International Aid 483 9%
Environment, Conservation & Protection of Animals 317 6%
Education & Research 304 6%
Remaining (non specified) 222 4%
Total 5.222 100%
Figure 1.6: Allocation of private gifts in the Netherlands Source: www.geveninnederland.nl/kerncijfers
1.4 Arguments in Favor of Development Assistance
The popular assumption is that aid works (Wikipedia, 2005). However, the question whether development assistance is really helpful is often being discussed. For both sides one can find arguments. Arguments in favor of development assistance can be divided into economic, political and moral reasons.
1.4.1 Economic reasons
The most important reason why countries ask for development assistance is for the purpose of economic development and growth. E.g. supplementing the lack of domestic resources or enabling infrastructure changes like dams and roads.
1.4.2 Political reasons
Sometimes development assistance is used to maintain a power balance. Foreign aid in the form of military goods is sometimes given to avoid a fall of the existing government. Also in the cold war this kind of aid was provided; aid was donated to maintain the power balance between the NATO and the Soviet Union within Africa.
1.4.3 Moral reasons
Many people believe that richer countries have a moral responsibility to provide development assistance for the poorer countries.
1.5 Arguments Against Development Assistance
Recently, some studies have tended to support the pessimist view that development assistance has no effect on the speed with which countries develop. Arguments against development assistance some arguments can be divided into economic and political arguments.
1.5.1 Economic reasons
otherwise be funded by the domestic private sector for commercial reasons. Another economic reason is that development assistance may distort markets and that it funds inefficient infrastructure projects. Sometimes foreign exchange gaps of a particular country are being filled with the help of foreign aid. This interferes with the market mechanism and can lead to a distortion of interest rates and exchanges rates. Also regarding infrastructure projects development aid is not always considered to have a positive effect. Funding infrastructure may give benefits like reducing unemployment. There is however a danger that the whole project will collapse when development assistance stops because it has become too dependent on development assistance.
1.5.2 Political reasons
Many people claim that development assistance falls into the hands of corrupt officials, which will only lead to even higher income inequality. Another political argument against development assistance is that it leads to a culture of dependency. Poor countries have to develop and grow using their own capabilities and not depend upon funding from richer countries. A final argument against development assistance is that is focused on the wrong sectors. Aid is provided in sectors that are considered to stimulate economic development. A possible cause is that other sectors will lag behind because they are receiving less attention. This will eventually lead to higher income inequalities between sectors.
1.6 Conclusion
This chapter discussed and explained the topic of development assistance. In brief, development is about reducing poverty and improving living standards. The assumption is that development aid works, but the question whether it is really helpful is often being discussed. Development aid can be divided into three areas: Official Development Assistance, Foreign Investment and Private Aid. Considering these three areas, it appeared that the Netherlands is among the most generous countries of the World. In the next chapter, private aid from NGOs will be discussed.
2
NGOs: DEVELOPMENT ASSISTANCE ORGANIZATIONSThis paragraph is about non-governmental organizations (NGOs) and development assistance organizations. First a definition of a NGO will be given, followed by the main strengths and weaknesses of NGOs. The main differences between NGOs and private commercial organizations will be discussed and also the main criticism on NGOs will be considered. Since not all NGOs are development assistance organizations, a separate part will discuss these development organizations more deeply.
2.1 Defining NGOs
The institutional structure of free markets can be divided into three main sectors: the public sector, the private sector and the non profit sector. The public sector consists of government entities, agencies and state-owned enterprise that are under compliance with legality control. Companies in the private sector operate under free market competition and are controlled by ownership interests. The last sector entails non-profit organizations and is also known as the ‘third sector’ (Torres and Pina, 2003). Organizations in this sector are known as non-profit organizations (NPOs). This sector is less defined in comparison with the private and the public sector because it includes different entities like charity, religious or educational entities. Organizations in this sector have been characterized by having complexity in their aims and in the way they may affect society.
The term NPO is often interchangeably used with the term NGO, which means ‘non-governmental organization’. However, they are not the same. NPOs can be either governmental or governmental. A governmental organization is for example the Federal or State Government. A non-governmental organization is organized outside of institutionalized political structures to realize social objectives. Another difference between NPOs and NGOs is that NPOs can include a very wide range of organizations, including museums, universities, and hospitals that focus on services and rarely engage in advocacy. By contrast, NGOs always have an important advocacy mission (James, 2000). The World Bank defines NGOs as "private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development" (World Bank, 2000). Although the definition ‘non-governmental organization’ can technically include for-profit organizations, the term is generally restricted to social, cultural, legal, and environmental agencies with noncommercial goals. The definition of the World Bank is rather specific. It includes characteristics of NGOs that are especially focused on (human) development. The focus of this thesis is on development NGOs so therefore the definition of the World Bank is appropriate to use in this thesis.
NGOs are usually financed by a variety of sources. Traditionally membership provided the main source. Nowadays sources like grants from the government, funding from private organizations and funds from private donors are getting more important (Paul, 2000). Globally, NGOs are estimated to receive a quarter of their funds directly from the government. In the Netherlands this amount is much higher. As can be seen in the figure below, the Novib receives 70% and Cordaid 63%.
Figure 2.1: Proportion of overall income received by NGOs from their national government Source: INTRAC, NGO Policy and Funding Bulletin, May 2005
2.2 Development Assistance Organizations – Development NGOs
The term NGO is very broad and entails many different kinds of organizations. Most development assistance organizations are non-governmental organizations. These are NGOs working on aid projects. In the field of development assistance, NGOs range from large Northern based NGOs like Care and Oxfam to community self-help groups in the South. Within the group of NGOs, there are many organizations that are providing aid. NGOs involved in aid projects are private, voluntary, non-profit organizations with generous and humane motives. There are many different aid organizations all over the world. They have different aims, goals and strategies. In the Netherlands different groups of aid organizations can be distinguished. They have their focus on for example: health (Artsen Zonder Grenzen, Aids Fonds, Leprastichting, Flying Doctors), childcare (UNICEF, Liliane Fonds, Save the Children, War Child), emergency situations (the Red Cross, Mensen in Nood, Medair), human rights (Amnesty International, Humanist Committee on Human Rights) and poverty reduction & development (NOVIB, Terre des Hommes, Cordaid). These organizations have in common that they all work in low-income countries and that their activities have a direct or indirect effect on the welfare of poor people.
Development assistance organizations are often perceived to be in a better position to help the poor than for example governments or large financial institutions. This is because they are viewed as being more human, less bureaucratic and more flexible. They are also considered as being cheaper, more efficient and non-political. Many believe that NGOs are more capable of responding to emergencies and are more able to integrate into the local life of the people. NGOs are also perceived to be more honest and equitable in their disbursement than governmental aid and they are seen to be addressing poverty directly. Because of these reasons, aid provided by NGOs is more popular than via international organizations or via a bilateral governmental relationship.
Development assistance organizations differ from private commercial organizations in many aspects, which influence effectiveness, results and performance. The most important difference is of course that the ultimate goal of business for NGOs is not to maximize financial performance, but to produce valuable social results. For private commercial organizations the generation of the revenues is directly related to the success and performance of the organization. In these organizations, financial measures easily provide a performance scorecard to measure or evaluate performance. For NGOs, performance measurement is much more difficult because the organization is built around varied and complex missions (Taylor, 2003). Further differences that are related to performance measurement will be explained in Chapter 4. A separate chapter is devoted to this topic because this is the main focus of this thesis.
2.3 Different Stakeholders Interests
Development NGOs have different stakeholders whose interests may differ. The definition of the term ‘stakeholder’ has evolved to mean a person or organization that has a legitimate interest in a project or entity. Stakeholders of development NGOs are for example: shareholders, employees and board of directors, donors, beneficiaries, governments, partner organizations, the public and the media. These stakeholders have varying degrees of power and access to information and they have different interests. Shareholders for example give more importance to transparency and good governance, while beneficiaries give more importance to the quality of the projects. The stakeholders may also have different views and interpretation of impact. For performance measurement, this means that different stakeholders may want to use a different set of indicators. More information on this problem will be given in Chapter 5.
2.4 Criticism on NGOs
Many argue that development aid doesn’t have a substantial impact. They point to some weak characteristics of NGOs: the limited financial and management expertise, the limited institutional capacity and the possible low levels of self-sustainability (World Bank, 2000). Another problem within NGOs is the lack of inter-organizational communication and coordination and the lack of understanding the broader social or economic context. For these reason many people criticize the effectiveness of NGOs. However, these criticizers do not look at the strengths of NGOs. Most NGOs have a high level of field-based development expertise and they are capable of innovating and adapting to certain circumstances. They have a long-term commitment and emphasis on sustainability and they are cost-effective because funds are scarce.
Other criticism on NGOs has to do with the power of the state. Many projects or services are provided by NGOs instead of the state. Some authors argue that NGOs are undermining the power of the state. Also governments and international organizations sometimes find NGOs a nuisance or even threatening to their interests (Paul, 2000).
Some critics are concerned that NGOs speak in too many and consequently conflicting voices. There are many competing NGOs in the same policy field and they all want to have the most influence. This can eventually lead to weak political action, which undercuts political effectiveness.
Other criticism is related to the empowerment of NGOs. The ultimate goal of development assistance is that the poor will get direct control of their own lives. However, some authors believe that NGOs simply take the right to make decisions for the poor and hereby impose their own perspectives.
The final criticism that will be posed here is the fact that NGOs are often accused of being unaccountable. Many people question the effectiveness of these organizations and they want these organizations to be more transparent.
This paragraph gave an overview of the main criticism on NGOs. However, NGOs are often seen as very valuable for social interventions. Certainly in the Netherlands this is true. In the Netherlands many NGOs receive large amounts of money from the government to support these humanitarian projects. The influence of NGOs for human development seems to be beyond any doubts and much progress can already be seen. Eventually it is important that humanitarian projects are sustainable, no matter whether the state or an NGO provides it. Coordination and cooperation between the government and NGOs is therefore very important.
2.5 Trends in the NGO sector
2.6 Conclusion
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PERFORMANCE MEASUREMENTIn this chapter the concept of performance measurement (PM) will be defined and explained. Different definitions of performance measurement will be provided and the purpose of performance measurement will be discussed. In addition, the concepts ‘performance measures’ and ‘performance information sources’ will be introduced.
3.1 Defining Performance Measurement
3.1.1 The definition of performance measurement in an industrial setting
There are many different definitions and meanings of performance measurement. There is no universally accepted term for measuring an organizations’ performance. Many authors argue that performance measurement is the major condition for improving organizational performance. Some authors simply define performance measurement as the assessment of an organizations’ performance. Others are convinced that performance measurement is concerned with collecting information to determine whether an organization has achieved its goals and objectives. Yet another group says that performance measurement is just a comparison of actual returns against a pre-specified benchmark. Neely defines performance measurement as ‘‘the process of quantifying the efficiency and effectiveness of a particular action’’ (Neely, 1995, p. 80). Efficiency is the ratio output/input and it is a measure of how well the resources are being utilized. Effectiveness refers to the results of the company and how well customer requirements are being met.
A broader definition is provided by the US General Accounting Office: “Performance measurement is the ongoing monitoring of program accomplishments, particularly progress towards pre-established goals” (United States General Accounting Office, 1998). It is typically conducted by program or agency management. Performance measurement may address the type or level of program activities conducted (process), the direct product and services delivered by a program (outputs), and/or the results of those products and services (outcomes). A program may be any activity, project, function or policy that has an identifiable purpose or set of objectives.” This definition entails additional information like who conducts performance measurement and which type or level of programs can be addressed.
3.1.2 The definition of performance measurement for development NGOs
3.2 Why Measure Performance in Development NGOs?
If you can’t measure it, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it! (James Harrington, 1987)
Performance measurement has many beneficial uses. It is mainly used to set goals and standards, detect and correct problems, manage describe and improve processes and recording the achievements towards the objectives. By means of performance measurement, inside is gained into the effectiveness and efficiency of projects, processes and people. With this information it can be determined whether organizations are achieving their mission and meeting their strategic objectives.
The purpose of performance measurement is thus to obtain information about an organization’s performance. Performance measurement in general has two functions: assessing and improving the internal functioning of the organization and improving accountability. Performance measurement has a positive effect on business results (Martinez, Kennerly and Neely, 2002). Performance measurement can for example lead to a better development of managerial capabilities and effective communication and thereby improving strategies. A general consensus is emerging in OECD member countries that performance measurement improves the quality of management by helping officials make better decisions and use resources more effectively (Diamond, 2005). Another reason to measure performance is that it may improve the accountability and transparency towards different stakeholders. This is because the analysis of performance provides the public with objective information on the organization’s results.
Managers of development NGOs often encounter problems in determining whether they are providing value for money or whether the organization is improving. Consequently, development assistance organizations often fail in justifying their results (Wise, 1995). To avoid this problem, development NGOs can put measures of performance in place. Unfortunately, many NGOs claim they carry out evaluation activities, but only a few NGOs attempt to assess the performance of the organization as a whole (Murray, 2003).
3.3 Performance Measures
Performance measures are used to determine whether improvements are necessary and whether the improvement efforts are making progress. Without performance measures, managers will not know if the operations are contributing to effectiveness and efficiency, when interventions are necessary, how the performance compares with other units or organizations and how the performance has changed over time (Hyndman and Anderson, 1998). Implementing performance measures will produce objective performance information which safeguards the interests of different stakeholders.
“Performance is the proficiency of an agency or authority in acquiring resources economically and using those resources efficiently (input-output) and effectively (output-outcome) in achieving performance targets”.
Performance measures give information about the products, services, and the processes that produce them. They help to understand, manage, and improve what an organization does. Effective performance measures say something about:
• How well the organization is doing • If the organization is meeting its goals • If the organization’s customers are satisfied • If the organization’s processes are in control • If and where improvements are necessary
Performance measures provide the management with information which is necessary to make sensible decision. Performance measures are always tied to a goal or to an objective. Targets of most performance measures can be grouped into one of the following six general categories (US General Accounting Office, 1998).
Effectiveness: A process characteristic indicating the degree to which the process output (work product) conforms to requirements. (Are we doing the right things?)
Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost. (Are we doing things right?)
Quality: The degree to which a product or service meets customer requirements and expectations. Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be established to define what constitutes timeliness for a given unit of work. The criterion is usually based on customer requirements.
Since using all categories of performance measurement may be too complicated, only the categories efficiency and effectiveness will be used. A tool which incorporates both measures for efficiency and effectiveness is the Logical Framework Method, which will be described in Chapter 5. This method can be used to analyze business processes. It visualizes business processes in terms of input, throughput, output and outcome, which are together are called the ‘information sources’. By means of the information sources, the performance measures efficiency and effectiveness can be calculated. Before discussing the LFM in Chapter 5, more in-dept information is provided about the information sources and effectiveness and efficiency.
3.4 Performance Information Sources
Performance can only be measured if the right information is available. A project’s input, throughput, output and outcome are the performance information sources of a project. These information sources enable managers to calculate the project’s economy, efficiency and effectiveness. Each project has its own information sources which make it possible to construct a Logical Framework (LF) of the project, which shows the causal relationship between the project’s objective and the project’s outcome. The information sources are necessary to measure the efficiency and effectiveness of the project.
Inputs are the resources available to perform a task. They flow from outside the organization into the
organization. These resources can include: funding, guarantees, human resources, training and for example equipment. Very important resources are the funds that are raised by the NGO. Money might well be the most valuable resource because it is the most useful. It requires the least work to make it fit the final goal of the organization. However, also very important and often underestimated are the contributions made by volunteers in the form of time and material. Also the personnel and the buildings of an organization can be seen as inputs. Input information can be obtained by quantifying the resources of the organization.
Throughput information can be obtained by analysing the transformation process of the organization.
Throughput is synonymous with the production process; it includes all the processes and half-finished products. It involves the activities within the boundaries of the organization. These activities are for example food- or aids projects. Also the activities of for example the accountant or the secretary can be seen as throughput.
Output is synonymous with products or services produced by the organization. According to the
OECD, ‘outputs are the products, capital goods and services which result from a development intervention; may also include changes resulting from the intervention which are relevant for the achievement of outcome’ (OECD Working Definitions, 2005). Information about the output involves a measure of the amount of service provided. Output consists of the final products or services that are provided by the NGO. Output crosses the boundaries of the organization and the beneficiaries can be seen as the final destination of the output. For a health project the output might for example be the number of clients who have been vaccinated.
Outcome refers to the long-term effects that are achieved as a result of the generated output.
incidence of disease. Information about the outcome is often hard to obtain because of different reasons. It is often difficult to measure the final effects of a program because it may be influenced by different contextual aspects. It also takes time to see the real outcomes or effects of a certain program. For development NGOs intended outcomes may be similar to the Millennium Development Goals. Intend outcomes are for example a lower poverty, a higher level of education and a lower rate of child mortality. The desired long-term outcome should fit the cusomer expectations and requirements. This is called practicality. The customer expectations and requirements refer to the expectations of the beneficieries of the project or organization. When the long-term results of the organization do not fulfill the wants and needs of the benficiary, carrying out the project is useless.
The information sources are accompanied with a couple of indicators which measure project results relative to project objectives. Input indicators measure the quantity or quality of resources provided for project activities. Output indicators measure the quantity or quality of the goods or services created or provided through the use of the input and finally outcome indicators measure the quantity and quality of the results achieved through the provision of project goods and project services.
3.5 Efficiency & Effectiveness
The second part of this thesis entails the development of a performance measurement framework for a project of a Dutch foundation active in South African townships. Performance of this project will be judged by taking into account two categories of performance measurement: effectiveness and efficiency. These categories will therefore receive some more attention. The concepts will be translated into operational terms to make them ready for use in the practical part.
Efficiency indicates how efficient the organization is using its resources regarding the produced
output. It is often based on the relationship between inputs and outputs and goals. It may quantify the outputs and inputs of an organization and expresses the two as a ratio. Efficiency indicators usually represent the ration of input needed per unit of output produced.
Effectiveness indicates how effective the organization or a certain project has been. It implies the
relationship between output and outcome and goals. It determines the relationship of an organization’s outputs to what an organization is intended to accomplish on the long-term. It implies the degree to which the long-term outcome objectives are actually realized as a consequence of the production of outputs. Effectiveness indicators usually represent the degree to which outputs affect outcomes. Again, the previous example of the health project can be used to ecplain this relationship. The health project is effective if the output leads to the desired result. This will be the case if the vaccinations (output) lead to a reduced incidence of disease (oucome). The effectiveness of the project will be higher when the same number of vaccinations leads to a higher reduction of disease or when a lower number of vaccinations leads to the same level of disease reduction.
3.6 Other Indicators
organizational characteristics. A R&D organization for example, will probably be concerned with learning capabilities. Consequently, indicators will be established which are more focused on these capabilities.
3.7 SMART Requirements
Performance can thus be judged by performance indicators and performance measures. Every organization will establish its own performance indicators to determine whether its objectives have been achieved or not. According to business wisdom, these objectives and indicators should meet a number of criteria referred to as SMART: Specific, Measurable, Achievable, Relevant and Timely (Alblas, 2002).
Specific: Indicators and objectives need to be specific and to relate to the conditions the project seeks
to change.
Measurable: Quantifiable indicators and objectives are preferred because they are precise, can be
aggregated and allow further statistical analysis of the data.
Achievable: The indicator (or information) and objective must be achievable at reasonable cost using
an appropriate collection method.
Relevant: Indicators and objectives should be relevant to the management information needs of the
people who will use the data. Field staff may need particular indicators that are of no relevance to senior managers, and vice-versa. Information must be sorted, screened, aggregated and summarized in different ways to meet different managers' needs.
Timely: An indicator needs to be collected and reported at the right time to influence many
management decisions. There is also no point choosing indicators that can only tell you at the end of a project whether you succeeded or failed in meeting certain objectives. They may be lessons learned but the information comes too late for project personnel to act on.
3.8 Conclusion
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THE COMPLEXITY OF PERFORMANCE MEASUREMENT IN NGOSThis chapter is about the complexity of performance measurement in development NGOs. In the introduction was mentioned that development NGOs are increasingly pressured to install performance measurement systems. There is a sense that development aid does not seem to work very well and also the efficiency and effectiveness of development NGOs are doubted. This chapter elaborates more on this issue and explains why several development NGOs have already introduced formal performance measurement systems. First a little bit of history of performance measurement is provided which is related to development NGOs. The chapter continues with an outline of the most common problems related to performance measurement in development NGOs.
4.1 Performance Measurement in Development NGOs
Before the 1980s, performance measurement was mainly based on financial measures. Financial measures are for example: capital structure, market share, liquidity and overall ROI (Return on Investment). In the 1980s many authors criticised this method of performance evaluation. There was a growing realisation that financial measures alone could not be the only criteria for success (Kennerley and Neely, 2002; Kaplan 2003). Some academics and practitioners criticised the short-termism and the lack of strategic focus (Martinez, Kennerley, Neely, 2002). Others argued that financial measures were more internally than externally focused and that they didn’t take competitors or customers into account (Kaplan and Norton, 1992; Neely and Adams, 2002) and that financial measures lack strategic focus and inhibit innovation. In sum they all believed that non-financial measures were more important for performance measurement because they could better reflect changes in the competitive circumstances and strategies of modern organisations.
4.2 The Purpose of PM in development NGOs
During the past decade, many international development assistance organizations have introduced formal performance measurement frameworks to increase the transparency and effectiveness of their policies and programs (Kohli, 2002). These efforts are a direct response of three major forces.
1. The public support for development aid is gradually decreasing. There have been intense debates about the efficiency of past official development aid. Another related problem is that domestic budget constraints make it difficult for political leaders to promote large development assistance. However, the circumstances vary from country to country. The Netherlands, together with other Nordic countries and Japan, were still able to sustain relatively high levels of development aid.
2. There is a questioning of the efficiency of development assistance organizations. Many development assistance institutions have come under much criticism during the past decade. There are heavy doubts about the degree of funds that is actually spent on the official goals of the organization. A very good example is Foster Parents. This organization lost much support because of a negative media attention.
3. The Millennium Development Goals. These millennium goals are designed to reduce poverty by half in the year 2015 and to achieve gains in health and education. For the poorest countries these goals seem far out of reach. However, the idea behind the development goals is to make the global development efforts more effective by creating synergy between various development assistance institutions and to provide stakeholders with measures by which to judge these efforts (Kohli, 2002). Also for development NGOs performance measurement fulfills two functions: assessing the internal working of the organization and improving accountability. Performance measurement is sometimes seen as a method to make non-financial information transparent. The importance of PM for development NGOs is also shown by a citation of Wise. He argues: “performance measures are needed to allow the charity sector to justify its existence to the public at large and to the government of the day. Unless performance measures are in place, it is difficult for the sector as a whole to counter criticism or for the individual charities to refute accusations of poor management and ineffectiveness” (Wise, 1995: p.10)
