Measuring the performance of a for-profit organization is fairly straightforward; apply the metrics to gross margin, net profit margin and the like. A non-profit organization, by the very nature of its structure and intention, does not carry the same set of parameters for a measurement. As a result, alternate performance-related measurements have been created to offer significant data that is relevant in the non-profit organization world. If the non-profit does not currently have a completed business plan that will align the measurements with the objectives of the non-profit, you may utilize this non profit business plan as a comprehensive guide. In the following, we’ll offer a look at the stakeholders in a non-profit, definitions of terminology as applied to a non-profit, and the results-driven metrics that measure the activities of the non-profit.
In the structure of the non-profit, the executive team, or decision-makers, constitute the first group who will examine the metric measurements and apply next steps. In addition, there are multiple stakeholders who have a vested interest in the outcomes, some of whom are not connected to the non-profit. To gain a better understanding of the metrics and how they will be evaluated, let’s take a look at who the stakeholders may be:
Board members: The board members hold a fiduciary duty and are responsible for the well-being of the organization. The metrics indicate critical progress markers and, as such, are extremely valuable to the board. The board may require milestone or benchmark performance reviews at some point.
Employees: The employees of a non-profit are not only invested fully in their roles; they are dedicated to the cause. On both levels, their interest will apply to the measurements that offer either a notice that the organization is on track or that it needs improvement.
Potential donors: Not yet associated with the non-profit organization, but possibly ready to donate large sums, the potential donors will examine the non-profit. Many potential donors will not contribute to a non-profit if it is not financially sound or has no accountability.
Charity evaluation groups: Evaluation groups publish non-profit ratings and remarks based on, among others, the outcomes of performance and the establishment of metrics in a non-profit. The evaluation groups, such as GuideStar and GreatNonProfits, look for accountability and a pristine reputation of a non-profit when it comes time to rate each with publicized charts.
Community members: These individuals look in on the non-profit and probably consider joining at some point. They observe and share information among others, which indicates a responsibility on the part of the non-profit to offer reliable and accurate information publicly in response.
Other non-profits: The competitors to the non-profit will be closely observing the results of any metrics made public or divulged within the organization. Although the competition may not be a clearly-defined group, the non-profit organizations are all looking for donors among the same target audience, therefore, they must offer value and results to secure the trust and confidence of the donors they’ve targeted and the community at large.
Here’s a quick look at the terminology used for metrics applied to non-profits:
- Measurement: the point at which data is fixed as a single place in time.
- Results-driven metric: a look back at processes or operations that could be adjusted for improvement going forward.
- Data action: the results of data collected via action, activity, events, or other directly-associated efforts.
- Results: outcomes of data as a result of achievement or efforts within the organization.
The metrics terminology used for non-profits demonstrates the differences between performance-driven and results-driven measurements; this difference produces some of the same outcomes, but is found in the purpose and objectives of non-profits versus for-profits. If you are experienced in the study of metrics and measurements of each type, you may want to begin considering how to start a consulting business because the need for further identification of metrics in the non-profit sector is quite high.
- Fundraising Output: This measurement factors expenses and contributions against each other.
- Operating Productivity: General revenue in relation to total expenses.
- Program Results: Expenses within a particular program vs total expenses.
- Advertising Results: Cost of advertising an event vs total attendance.
- Donor Retention: Measures loyalty of donor members against those who dropped membership.
- Donor Lifetime Retention: Measures the longevity of donor activity against those who were members less than 5 years.
- Cause-Related ROI: Total cost of a cause in relation to the return on the investment.
To apply results-driven metrics to a non-profit, there are applicable metrics that will apply measurements to the activities and practices of a non-profit. Differences between for-profit organizations and non-profit organizations will always exist; however, the application of those differences will remain fractured due to the cause or motivation behind each effort.