Nonprofit organizations, including those in the social services sector, face several potential challenges in determining how to most effectively use performance measures to demonstrate success. Frequently, the metrics tracked don’t necessarily demonstrate an organization’s impact in the most effective way or don’t always describe an organization’s progress towards meeting its goals.
With the right tools and accurate data, nonprofit performance measurement can provide critical components to help nonprofit leaders showcase their efforts and demonstrate success to their funders and other constituents. The right nonprofit performance measures can also help nonprofits increase their capacity and improve their return on investments.
If you’re a nonprofit leader, you know that finding performance measures that are useful and attainable is not always an easy task. Nonprofit return on investment can be hard to quantify and even harder to prove. However, it is possible to find nonprofit performance management metrics that enable your organization to show that effective management practices are in place, successful financial performance is being achieved, and the efforts of staff and volunteers are the right activities to achieve your mission.
The value of performance measurement
The first metric nonprofits should consider is their efficiency at mobilizing resources. As nonprofits range drastically in size, scope, and domain, sometimes simple metrics like funds raised or members served can be distracting, drawing attention away from the most pressing issues informing a nonprofit’s mission and the most critical challenges at hand.
According to a report by McKinsey & Company, these metrics could include “fund-raising performance, membership growth, and market share.” The current standard for nonprofits of categorizing expenses into programs, fundraising, and administrative overhead speaks to these metrics. And these practices also contribute to the idea of a common outcomes management framework that is becoming more visible and informative within the nonprofit arena.
The second type of metric is, to most nonprofit leaders, the most straightforward—measurement of what staff are doing with their time. An understanding of organizational inputs, not just in terms of money, but also in terms of time, is critical for being able to draw the connection between efforts and outcomes achieved.
Fortunately, as case management software has improved, collecting this type of data has become substantially more straightforward. With point-of-service options, employees can now track their activities in real time. This, in turn, increases effectiveness and accuracy, and ultimately helps demonstrate impact.
The ability to track progress toward achieving your mission is the most important component of effective management and measurable impact for nonprofits. Often easier said than done. While it might make sense to reframe or narrow one’s scope to make such measures more quantifiable, often this is not practical or reasonable to expect of nonprofits. This is especially true for those organizations whose goals center around effecting meaningful social change.
Collecting evidence, on a large scale, can help demonstrate that social change is correlated with a nonprofit’s mission and connected to their efforts. However, as a standard of measurement, this type of research is typically costly, both in terms of time and money.
So what can organizations do? While some organizations turn to micro-goals to help segment a mission into measurable pieces, there is another part of the puzzle that is often overlooked. Creating measurable, actionable micro-goals is important, but having the right tools and strategies for measuring these outcomes is key. And further connecting these outcomes to efforts while being able to adjust organizationally to stay in alignment with the broader mission is critical for success.
Selecting nonprofit performance metrics is an important first step, but remember that no single metric can solve all of your organization’s operational challenges. Finding the right nonprofit performance measures takes time and effort, and there’s no one-size-fits-all answer to the challenge. However, by leveraging technology, your ability to keep an eye both on the end goal and on the smaller, incremental steps along the way, your organization can thrive in both improving efficacy and continuing to attract valuable funders to the cause.