Efficiency analysis for nonprofit organizations using DEA

Abstract

Purpose The purpose of this study is to provide models to analyze the efficiency of programs and efficiency of fundraising to apply the models to non-profit organizations (NPOs) in Korea and to draw out improvement points of inefficiency using data envelopment analysis (DEA). Design/methodology/approach Using DEA, this study analyzed the program efficiency and fundraising efficiency of 22 Korean NPOs in the field of humanitarian assistance. Findings Of 22 NPOs, 15 were identified as being efficient in the program efficiency and 7 of 15 NPOs were found efficient in the fundraising efficiency. In all, four organizations were found efficient in both the program and the fundraising efficiency. Using CCR and BCC model, this study proposed the cause of inefficiency and state of returns of scale. Practical implications This study presents non-profit efficiency evaluation models regarding program efficiency and fundraising efficiency. This study provides the inefficient DMUs with their reference set of efficient DMUs to improve efficiency and the cause of inefficiency, whether the inefficiency is because of the pure technical inefficiency or the scale inefficiency. This study also indicates the state of variable returns to scale to propose the way of improving inefficiency by controlling the scale of inputs. The methods and the results of this study can serve as a model for researchers and practitioners to follow when evaluating efficiency in the NPOs. Originality/value This study has the value of performing the empirical studies of efficiency analysis of Korean NPOs and providing non-profits with the model of efficiency analysis in programs and fundraising activities and basis for establishing strategies to improve both efficiencies.