The not-for-profit sector as a whole has traditionally been somewhat laggard in measuring and improving its organizational performance. In part, this is because workers often see their aims as somewhat less visible and quantifiable than the profits and dividend payments and share prices that the business sector focuses on – but it’s not only your mission that needs to be monitored, it’s also your administration, and that’s not fuzzy at all.
A performance measurement program involves the creation of an information feedback system by which management identifies, monitors and takes action to improve selected key performance indicators that track your organization’s primary performance areas. On the administrative front, these performance areas are things like sales, customer relations, finance, and/or personnel — bottom-line oriented numbers that have to do with profitability and productivity.
Not-for-profit performance indicators measure service effectiveness and accomplishments in one of two main categories. As a beginning, you will need to be able to track your program inputs (which quantify the efforts or resources expended in the program) and your outputs (which quantify the services provided).
Based on that, you will need to track
efficiency measures (which compare your inputs with your outputs), and
outcome (or effectiveness) measures (which quantify the actual effect the organization’s efforts have on your objectives)
You will need to know both, and you will need not to confuse the two.
First of all, check to see that your input and output measures are adequate.
You will already be keeping track of the purely financial aspects of the enterprise, at least at the organization-wide level; you will be able to account for your income and expenditure and will be able to draw up a balance sheet once a year. This may not be enough. Is your accounting sufficiently timely to warn you about rapid changes in your circumstances? Are you able to break down the organization-wide costs and donations so that you can see the effect of individual programs and sub-programs?
What about the non-financial resources used in operating a program or providing a specific service? Are your staffs costs allocated to particular programs, or are they just aggregated? If you rely heavily on volunteers, do your records capture the necessary statistics on donated hours and efforts? Are you able to quantify whether your volunteer support has gone up or down?
Does your organization keep records of its outputs? These might be, for example, the number of meals provided by a soup kitchen, the number of clients seen by a community legal service, the number of plays staged – whatever it is that you do, you will want to know whether you are doing more or less of it.
Output is not the same as outcome, and if you mistake the two then you could be in for trouble. If, for example, you have as your output measure the number of clients seen by your service, and if you decide that that is the figure you want to see rise, you will be placing pressure on your staff to alter that figure – perhaps by seeing more clients for less time in less depth with less success.
However, whether your output measures do track your mission adequately or whether they don’t, it would still be hard to argue that it wouldn’t be better to get the same output with fewer resources. If you direct your attention to the input/output ratio it may be possible to make savings. After many years of squeezing the voluntary sector until the pips squeak you may find that there’s no scope for people to work harder without simply accelerating burnout, but you may still be able to find new ways to do things (particularly if you consult staff at the pointy end), or you may perhaps decide that certain traditional practices aren’t after all necessary, or you may be able to seek better prices from your suppliers.
The real point of looking at efficiency measures, however, is to track change. Are you doing better this year, or this quarter, than last? Are you drifting back? Is the cost of recruiting a member going up or down? How much does it cost you to raise $100? What is your cost per client, or per meal, or per student? Remember, too, that this figure will help you in your fundraising; it’s always better to say “Donate two meals” or Provide a year’s education for a child than to say “Donate ten dollars” or $20 a month.
It’s also a very good thing to have a common standard of measurement to be able to compare different programs, or different departments, or to compare your organization with others in comparable situations.
Efficiency measures help you manage your organization; effectiveness measures – the measures that tell you how well you are succeeding at achieving your mission – help you shape and direct it. If you were promoting better health practices for people with asthma, for example, you might manage an efficiency gain by handing out more pamphlets this year than last year, but your mission statement doesn’t say anything about pamphlets. You get a gain in effectiveness only if people with asthma are in fact now healthier than they were – and it’s because of you. That kind of measure is a lot harder to devise and a lot more work to collect. Efficiency can be tracked through objective data that can be easily extracted from your organization’s existing accounting and information database; actual outcome measures may involve subjective evaluation of data that may not be that readily quantifiable and will probably require a separate evaluation system.
There are thus a range of things you can measure, and a very wide range of measurements to choose to fit your needs. Any measure you choose, however, must have certain qualities. Measurements should be
Meaningfully related to the goals of the organization — Don’t measure things just because you can measure them.
Linked to the responsibilities of a particular person or section — Someone should be able to act on the findings; if it ends up being nobody’s business in particular, you haven’t gained…
Acceptable to the organization — Which is why it’s not a good idea to use the same measures for rating the organization and for rating staff members’ performance; that only leads to nervousness and resistance.
Timely — If a measurement takes so long to collect and process that the organization has moved on, it’s not much help.
Cost-effective — Measurement is a resources issue, and grants and funders aren’t always willing to cover the costs. Review your measures regularly to be sure you’re coming out ahead.
Comparable — As far as possible you want to be able to compare your results across your organization, with other organizations in your area, and with industry benchmarks.
Simple — It’s not always possible to have straightforward, immediate, and transparent measures, but that’s the goal to aim for.
Deciding on your performance indicators should be part of the strategic planning process. Once you’ve decided on your mission, your goals, and your strategies you will need to design measures that will let you track your progress towards them. These measures will then need to be built into your administrative procedures, your budgeting, your staff duty statements, and your planning review processes.