Time to Hit the Refresh Button – KPIs and Metrics for Nonprofits

January 30, 2018 | Article

With 2018 upon us and hope still present for many New Year’s resolutions, you might consider spending time to refresh your organization’s success measurements.

What Is Success?
How do you know if your nonprofit is making a difference? Despite the myriad of books and articles written on this topic, many nonprofits are still uncertain how to measure, or even what to measure, to evaluate their success in accomplishing their mission.

As Marc J. Epstein, coauthor of the book “Measuring and Improving Social Impacts: A Guide for Nonprofits, Companies, and Impact Investors” says in this Forbes article, “If an organization is unclear or does not communicate clarity on what they specifically want to achieve, it will be more difficult to measure whether their activities or other factors caused changes. So the clarity is critical for both achieving and measuring success. Once they have clarity on objectives, they can focus on whether the sequence of activities they plan to perform can logically be expected to create the desired impacts.”

In other words, first identify what success looks like, then make a plan that will get you there, collecting information along the way to evaluate whether your nonprofit's progress is actually getting you closer to success. All of this is referred to variously as "outcomes measurement," "performance management," or simply "evaluation."

Why Measurements Are So Important
In an environment of increasingly limited resources, those nonprofits that can demonstrate that they are truly making an impact will be the ones most likely to attract resources and talent, and therefore be most sustainable. And, of course, measuring outcomes is not just about attracting resources to your nonprofit; it's about the mission. Your nonprofit will only know that it is indeed helping individuals, solving problems in communities, and protecting the environment etc., if it is evaluating its performance.

As this McKinsey & Company article discusses, there are three types of performance metrics to consider. Two of the three types of metrics are relatively easy to create: those that measure the mobilization of resources (membership growth, fundraising performance, market share) and those that track the activities of staff (number of people served, number of projects completed). It’s the third metric – measuring the success of an organization in achieving its mission – that can be considerably more difficult to create.

Determining Success Can be Complex
To effectively measure mission-success, a nonprofit must first be very clear in what success looks like. For example, a nonprofit with the mission of raising people out of poverty through work might measure success by counting the number of people participating in its training programs and then being placed into jobs. But is initial placement into employment the final outcome of their mission? Should achievement of mission also consider long-term employment (five years or more) as a measure of success? And then to take this one step further, should success include the measurement of whether that individual’s children gain employment to fully embrace the movement of a family from poverty into the workplace?

As you can see, clarity of purpose and mission is critical to determine measurements for success. If you’d like assistance in your discussion of success metrics, within the management team or with your audit committee or board, please contact our team.

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