Assessing Organizational Performance: Exploring Differences Between Internal and External Measures

Differences in judgments of public service performance across stakeholder groups have often been noted, but have rarely been tested. We measure the extent of these differences between and within internal and external stakeholders. The evidence shows that internal groups usually overestimate the performance of their organizations. We then develop and test a model of inter-organizational variations in the extent of this overestimation. The statistical results show that performance overestimation is more likely in small organizations with geographically dispersed clients, and in organizations that adopt fashionable management practices that are associated with higher institutional legitimacy.