Measuring Performance in Nonprofit Organizations
For-profit businesses surround every milestone with several metrics to determine how the business tracks against its goals. But when it comes to measuring performance in nonprofit organizations, we tend to fall back on the amount of money raised as the only metric that matters.
There aren’t significant differences between assessing a for-profit organization’s performance over that of a nonprofit, though. “Really the biggest difference, across the board, is that return on investment versus return on an impact,” Beverly Brooks Thompson, managing director at Carter Global, shared in a webinar on performance measurement in nonprofit organizations. “What change do they want to see? What problem are they trying to solve?”
Nonprofit KPIs don’t have to be limited to your financial statements. The best benchmark for success is measuring the impact you’ve actually had against the goals you set out to achieve. Here’s how to look beyond fundraising efforts to get to the heart of success at your nonprofit organization.
More Than Dollars Raised
There are more effective ways to gauge success than simply evaluating a dollar amount. Success is also expressed in your performance and processes.
Where for-profit businesses are beholden to company owners and shareholders to produce a return on their investment, the nonprofit sector operates differently. “They're really set up by the government as the public trust,” Thompson said. “The U.S. government gives us some tax opportunities to make sure that people can invest.”
To measure success, you have to look beyond donation growth to the processes those donations fund and the larger impact they have on the organization’s mission. That includes your talent management processes, such as hiring practices and HR policies. Assess your talent practices against your strategic plan to determine the impact of your processes on your mission.
Even for your fundraising team, there’s much more to evaluate than the amount they’ve raised. These team members can be evaluated similarly to how you’d evaluate a sales team.
You can ask several questions to assess your fundraising team’s performance: “How many visits are you having? Did you visit with identified people? Did you visit with donors who are qualified?” Thompson said. “You're not just visiting to visit, for example. Are you cultivating those folks in meaningful, tactical ways?”
Compare the asks made, the total number of donors and the number of people expressing interest without donating against actual conversion rates, for example.
The actions your team takes, and the quality of those actions, are vital measures for assessing the success of your fundraising team in are ally proactive way. Comparing these performance metrics against the money raised can help you identify which actions were most successful so you can develop best practices and refine those metrics moving forward.
Set Meaningful Metrics
Money isn’t the only indicator of success. In fact, looking at financial statements alone can warp your perceptions of success. “Dollars raised versus overhead is a terrible metric,” Thompson said. Some organizations, like medical nonprofits, are going to have much steeper overhead costs than others.
Looking at the numbers alone can make a nonprofit seem as though it’s failing, which can become a self-fulfilling prophecy. To maintain the enthusiasm and support of your donor base, you have to share success stories about the impact your organization has on the community it’s committed to serving.
A nonprofit dedicated to offering occupational therapy to kids with special needs, for example, can have a much greater impact by sharing those stories than simply spouting off numbers.
“I want to hear donor stories. I want to hear stories from the populations that you serve. And I want to hear from that physical therapist doing the work,” Thompson said. “You can tell stories in a hundred different ways, and it's not just about the money. It's about what that money does to serve the people that you're trying to serve.”
Of course, to back up the stories you tell, you do need to provide data. Since measuring success must always come back to the organization’s mission, use that as the starting point for setting metrics.
“What I'd really like to see is, ‘How many kids had an occupational therapy appointment? How many kids who come from underserved populations, who wouldn't have the ability to pay for that, got served by your organization?’” Thompson said.
Demonstrating the tangible impact your nonprofit has on the community is the most effective performance measurement system. To measure your nonprofit’s success, turn your attention to the actions that actually drive forward your mission. Financing is a big part of that, but it’s not the only signifier of success — or even the most important.
“How many people did you serve based on the mission, vision, values and (what we call in nonprofits) the case for support?” Thompson said. “What is the problem that you're trying to solve that private philanthropy could help you solve in a much more meaningful way?”
By painting that picture for the community through your website, messaging on social media and live open house events, you can attract even more donors committed to funding your cause.
Apply Clear Criteria for Success
Before you can create an impact, though, you need ahigh-performing workforce to drive those results. To assess workforce performance, you need to set clear criteria indicating success in each role —always connecting those criteria back to your mission. Having well-defined and aligned criteria in place will help you make better talent decisions and make it easier to wrap concrete metrics around performance management.
Managing people requires a unique skill set. For example, just because someone is a high performer doesn’t mean he or she is capable of managing a team. So what criteria do you need from an effective people manager? Identifying those criteria starts with defining their priorities.
Managers are supposed to give their team members any resources they need for their jobs, eliminate their obstacles and let them do their work. Determine clear metrics and numbers to wrap around those qualities. “Make sure that they understand what those standards are,” Thompson said, “give them the tools to do their job and then get out of their way.”
You can use 360 feedback and employee surveys to learn how successful managers have been in removing roadblocks, for example. Convert what you find into a percentage, and you have a clear data point for measuring management’s success. The more you do this, the more clearly you’ll see what the baseline is for each role, giving you tangible metrics to measure performance against.
Set clear criteria to hold your HR team to a high standard, too. Recruiting and retention can make or break your organization, so be sure to collect meaningful criteria from your customers, including both employees and candidates.
Surveys can help you pinpoint which metrics are most important to track. It may come down to your culture, your processes or your rewards —whatever your workforce values most highly about their experiences working at your organization.
“Did you survey the person that you hired and ask them…what was important to them in that decision-making?” Thompson said. “Are you checking with them year after year to see how you're doing on that?”
Maintaining the best talent, and helping that talent grow and thrive in your organization, are essential criteria for delivering impact to the community.
Provide Direction for Growth
With clear criteria for success in each role, it’s much easier to articulate paths for growth, especially in professional development. This helps you hold everyone to a higher standard, which ultimately produces better outcomes for your organization.
Certifications can play a big role in professional development while also elevating the work. Thompson, for example, holds a Certified Fund Raising Executive (CFRE) credential, demonstrating her ability to deliver results. “We, as a profession and the world of nonprofits, have really done a tremendous amount of due diligence to make sure that people are highly skilled and professional within their chosen field,” Thompson said.
Other industries have these credentials, too, and giving employees opportunities to achieve certification in their field validates their expertise and helps them perform better. HR team members can pursue several HR certifications through organizations such as HRCI, SHRM and ATD.
Certifications also help you take a chance on talent that has the right transferable skills but doesn’t hold official certifications or degrees in the field you need. You can hire these candidates on the condition that they achieve relevant professional certifications during their tenure.
Find the certifications that would be most beneficial for each employee and make sure they have the resources to achieve them.
Always Return to the Mission
The mission is always the most important benchmark for success, and it has to flow from the top. This is especially important to keep in mind when recruiting and evaluating board members. “If the leadership is not mission-aligned, you can be certain that sooner or later that organization is going to come off the rails,” Thompson said.
Find board members passionate about your organization and its mission. “No matter how much money that they're raising, how much impact they're having, that organization is going to come out of alignment in someway, shape or form if leadership is not aligned with the heart of the mission, ”Thompson said.
When you prioritize the right things, measuring performance in nonprofit organizations comes easily. Don’t make it about the money. Stay focused on your mission, and the metrics will tell your success story.