Performance Theory and Nonprofit Organizational Effectiveness

This abridged article reports on a review of the literature of performance theory and its relationship to the effectiveness of nonprofit organizations. Specifically, the article explores the challenges in defining organizational effectiveness in the Third Sector due to the wide disparity in the size, scope and mission of nonprofit organizations. The following theoretical models, and their application to the Third Sector, are explored: Agency Theory, Resource Dependency Theory, Group/Decision Process Theory, Stakeholder Theory, Institutional Theory, Policy Governance Theory and Contingency Theory. The review indicates there is not a single theory or hypothesis capable of meeting the challenges of nonprofit governance. Regardless of theory, model or framework of governance deployed, nonprofit organizations must identify their own unique challenges and define appropriate solutions