As nonprofits struggle to secure private contributions and government contracts, one of the most enduring questions is how funders will evaluate these organizations. Their choice of standards will matter in who wins and who loses in the sector. Because nonprofits no longer operate in isolation from business firms in many key fields such as health and human services, the choice of criteria will also determine the division of work between the sectors and have profound financial implications for the nonprofit sector's future development. While much uncertainty remains in this arena, one thing is now clear: if the prime criterion used by public and private funders turns out to be efficiency, nonprofits are in for a lot of trouble. To be successful in the future, nonprofit managers will need to move the performance conversation consciously away from narrow process measures of efficiency to broader measures of program outcomes and impact, where nonprofits may have some distinctive advantages.

Efficiency in the Business World