Performance measurement and performance reporting are both important aspects of how a charity discharges its accountability obligations, but have been investigated separately in the past (Connolly & Dhanani, 2009; Connolly & Hyndman, 2003). Various performance measures, such as output and outcome measures, are used to measure the efficiency and effectiveness of organizational performance in the not-for-profit (NFP) sector (Barman & MacIndoe, 2012; van der Heijden, 2013). While the adoption of outcome measures has been found to be coupled with funding requirements (Benjamin, 2012; Zimmermann & Stevens, 2006), NFPs, including charities, are struggling to balance their funders’ requirements for performance information with the reality of the challenges faced in providing the required information (Buckmaster, 1999; Salamon, Geller, & Mengel, 2010). The existing literature on performance reporting suggests that it is important for charities to disclose performance information to meet the information needs of their external stakeholders (Connolly & Hyndman, 2003, 2004, 2013b). Nonetheless, a relevance gap has been identified, since the information disclosed does not always meet the information needs of charities’ stakeholders (Connolly & Hyndman, 2013a, 2013b). Although this relevance gap appears to have been reducing over the years, performance accountability is not yet discharged in an adequate manner in the charity sector (Connolly & Hyndman, 2013b).

In response to a call to consider both the performance measurement and reporting practices of charities (Connolly & Dhanani, 2009; Connolly & Hyndman, 2003) and the extent to which these practices address the information needs of stakeholders (Connolly & Hyndman, 2013b), this study addresses this research gap in a New Zealand context by adopting a case study approach. Forty-six semi-structured interviews were conducted to explore the perceptions of twenty-five internal stakeholders (board members, managers and staff members) of two case study charities, and twenty-one external stakeholders (government funders, philanthropic funders, beneficiaries and volunteers). Neo-institutional Sociology (NIS) concepts of institutional isomorphism, decoupling and institutional work are employed to theorize this study.

The findings of this study reveal that the case study charities not only conform to external institutional pressures in measuring and reporting information to gain legitimacy in the eyes of their stakeholders, but also undertake various forms of institutional work aimed at preserving their charitable purpose and missions in the face of external accountability demands. Both government and philanthropic funders actively engage in forms of institutional work to promote and cultivate what they consider appropriate performance reporting behaviours in the New Zealand charity sector, while enforcing the provision of performance information that meets their information needs.

This study contributes to the NFP accountability literature in regard to three issues: key stakeholders’ information needs, performance measurement, and performance reporting. In regard to stakeholders’ information needs, this study contributes to the prior literature (Carman, 2009; Connolly & Hyndman, 2003, 2004, 2013a, 2013b; Williams & Moxham, 2009) by identifying that key stakeholders (regulators, government funders and philanthropic funders) in the New Zealand charity sector perceive a clear need for background, financial and performance information, and impose various reporting mechanisms to enforce the provision of this information. However, compared to England and Wales, New Zealand’s charity sector regulations are at an early stage of development in respect of their emphasis on performance measurement and reporting.

Regarding performance measurement, a combination of mimetic and normative pressures was identified as influencing the adoption of outcome measurement mechanisms. This differs from prior research that has identified only funders’ mandates as the driving force behind outcome measurement practices (MacIndoe & Barman, 2013; Moxham & Boaden, 2007; Thomson, 2010). In addition, two forms of decoupling process (policy-practice and means-ends) were identified as means of coping with problems in the studied charities’ outcome measurement practices. These problems include resource constraints, staff resistance, dishonest feedback from beneficiaries, misunderstanding of the funding contract, and misalignment between contractual requirements and charitable missions. In regard to performance reporting, this study contributes to the prior literature (Connolly & Hyndman, 2003, 2013a, 2013b; Carolyn Cordery, Baskerville, & Porter, 2010) by identifying additional reporting mechanisms and examining internal accountability (Ebrahim, 2010) in the context of New Zealand charities. For example, informal disclosures were identified as a means by which one charity gained trust from its government funders, adding a new dimension to our understanding of the government funder/charity accountability relationship. Both studied charities also used various reporting mechanisms to disclose performance information to their internal stakeholders. This discharge of internal accountability has been largely unexplored in the prior literature.

This study also contributes to the theory and practice of performance measurement and reporting by NFPs, including charities. By drawing on the concept of institutional work, a recent development in NIS, this study has contributed to theory by identifying how the day-to-day institutional work of actors, within both charities and their key external stakeholders, can shape performance measurement and reporting practices. Concerning practice, this study provides useful insights into the practices and responses of New Zealand charities at a time when the regulations and legislation governing charity reporting are changing to require more performance information from the majority of charities.