Can nonprofit top managers improve financial performance? Financial performance measurement systems in NPOs facing financial difficulty

Nonprofit organizations facing financial difficulties are considered to enhance financial performance measurement systems and improve financial performance by using detailed performance information. Case studies point out that the backgrounds of top managers, such as their academic achievements and job experience, have a strong effect on the enhancement of financial performance measurement systems and the use of detailed performance information. However, there are few quantitative studies that examine the effect of nonprofit top manager characteristics on the use of financial performance measurement systems. The goal of this study is to reveal the relationship between financial performance measurement systems, top manager characteristics, and improvement in financial performance. To this end, we analyze the questionnaire and financial performance data of Japanese nonprofit elderly care providers (social welfare corporations) using multiple regression analysis. The research results show that nonprofit top managers with extensive experience tend to use detailed financial performance measurement systems when their organization is in financial difficulty. On the other hand, top managers with medical/welfare degrees tend not to use detailed financial performance measurement systems even if the organization faces financial difficulty. In addition, when top managers have extensive experience, they can improve the financial performance of nonprofit organizations by using detailed performance information