Purpose: This paper aims at developing a conjectural framework explaining the effect of performance management on the organizational effectiveness with reference to the third sector. Methodology: For the development of the theoretical framework, the researcher has adopted a process consisting of two stages. The first stage is the review of literature and the other is development of the theoretical framework with the help of system dynamics. Findings: With special attention drawn towards contingency theory, the researcher proposed a theoretical framework with the help of system dynamics modeling illustrating the effect of contingency variables on performance and effectiveness on a non-profit organization. The strengths and weaknesses both of a contingency theory are discussed in the paper. The researcher also has drawn attention as to how a changed and improved performance management and controlled structure could help in identifying better performance management practices in the non-profit organizations. There are four area’s that act as a gauge to test and measure the effectiveness of the organization which has been suggested and clearly stated by the researcher in the paper. The researcher also proposes plans and ideas that could be used and empirically tested in the upcoming studies in the near future. Research Implications: The paper is a conceptual work which would further give birth to different future empirical research prospects. The model used in the paper can be cross validated in any survey consisting of a large population sample by using Confirmatory factor analysis and structural equation modeling. Practical Implications: This paper would assist the future researchers in developing an understanding towards the concept of performance management and its tools. How performance management is put together with the distinctive features of the non-profit organizations for optimizing the effectiveness of the each organization. Originality: A combination of various approaches across numerous disciplines, this piece of writing highlights the concept of performance management system from the perspective of the contingency theory and throws light on the effectiveness of various non-profit organizations using system dynamics modeling for easy and better understanding. The paper is conceptual in nature. Methodology adopted is system dynamics modeling to come out with various propositions to be tested in future.
Cite this article:
Aarti Sharma. A Study on the effect of Performance Management and its effect on Organizational Effectiveness with special reference Third sector organizations using System Dynamics: A Contingency theory approach. Research J. Humanities and Social Sciences. 8(2): April- June, 2017, 109-115. doi: 10.5958/2321-5828.2017.00016.X