There’s a great deal your nonprofit organization can glean from the operations of a successful for-profit business. In particular, learning to measure the performance of your nonprofit can help you shape your programs and improve your nonprofit’s overall effectiveness.
Implementing a performance measurement program requires the development of an information feedback system. By this we mean a system that allows the management to identify, monitor, and take action to improve select KPIs (key performance indicators) that relate to the primary performance areas of the organization.
In this post, we will discuss how to identify these performance areas for your nonprofit, and how to implement your own performance measurement system based on your mission statement.
Don’t Try to Measure Everything at Once
It’s important that you drill down into the performance areas that truly matter to your nonprofit. Trying to measure everything and anything will only lead to information overload.
For most for-profit businesses, the areas of interest typically include sales, customer relations, operations, finance, and personnel. You may have noticed that a number of these performance indicators are bottom-line oriented, or tend to influence and impact profitability and productivity.
More often than not, this kind of information can be quickly and easily accessed by running reports in an accounting system.
However, if your nonprofit organization is to evaluate how well it is doing in achieving its mission-driven goals, it will need to devise a way to measure the overall effectiveness of its programs and services.
In essence, your performance measurement system needs to be able to determine whether or not the not-for-profit programs and services provided by your organization are having the desired effect, as promised by your mission statement.
How to Measure Nonprofit Effectiveness
The performance indicators we recommend nonprofit organizations use to measure service effectiveness and accomplishments typically fall into one of the four following categories:
- Input measures which quantify the efforts or resources expended in an activity or program.
- Output measures which quantify the volume or level of services provided or delivered.
- Outcome measures which quantify the actual effect an organization’s efforts have on its objectives.
- Efficiency measures which compare the amount of inputs with output or outcome quantifiers.
And once you have identified the performance indicators relevant to your organization, you can then look at the process of implementing your performance measurement system.
This can be broken down into the following basic steps:
- First, clearly identify the organization mission and its mission related objectives.
- Then define the main performance areas that have a significant impact on whether or not, and how well, the organization achieves these objectives: service accomplishment, client relations, fundraising, community image, etc.
- Next, develop and map a system of key performance indicators organized by the above determined performance areas: meals served, beds occupied, cases treated, local literacy rate achieved, client satisfaction level, etc.
- Finally, implement the new performance measurement system, including procedures which require ongoing monitoring and reporting.
Put Your Mission Statement to Work
Most nonprofit organizations have a mission statement, but many don’t take the time to evaluate it.
The process of developing a performance measurement system provides an excellent opportunity for you and your management team to gauge whether your organization is on track to meet its mission goals.
At every step in the measurement process, the input of employees, program managers, accounting staff, and the board of directors is vital for developing practical, realistic, and workable measures for which management and staff can be held accountable.
What’s more, the identified measures or indicators should be incorporated into an overall performance measurement system. This should cover all the key performance areas of the organizations and allow for periodic monitoring, reporting, and reevaluation.
Do You Need Help Measuring Performance?
If you’ve come to the end of this post with the realization that you need to start tracking your nonprofit’s performance, then we can help.
By facilitating the process and helping with its maintenance, Checkbox can put your nonprofit on the path towards a more effective and efficient output.
Contact us today if you feel your organization would benefit from a performance measurement and performance improvement system.