Using Performance Measurement to Improve Nonprofit Decision-Making
Performance measurement is a critical component of decision-making. Nonprofit organizations have the responsibility of fulfilling important missions. Performance measurement can help nonprofits make better decisions, meet their challenges, and achieve their missions.
To learn more, checkout this infographic created by Rutgers University’s Online Master of Public Administration.
An Overview of Performance Measurement
Performance measurement is an indicator that organizations use to determine the likelihood of achieving specific goals. However, the parameters used to define this metric/indicator vary depending on the desired outcome. For starters, many executives use performance measurement to determine the level of individual and organizational efficiency, which in turn enables them to evaluate the achievability of pre-determined goals and objectives. In addition, decision makers use performance measurement to track timeliness at the workplace and ensure that tasks are completed within the scheduled time, thereby improving customer satisfaction due to better service delivery.
Performance measurement is also used to measure and evaluate the quality of an organization’s services/products. In fact, many organizations now benchmark their products/services against their competitor’s offerings and industry key performance indicators (KPIs). For example, KPIs widely used by web-based entities include churn rates, daily active users (DAUs), monthly active users (MAUs), cost per install (CPI), and lifetime value (LTV).
Another area where performance measurement is widely used is in measuring operating efficiency at individual and organization-wide levels. This approach enables organizations to determine the likelihood of hitting productivity goals. For instance, most organizations expect project managers to be well versed in tracking and improving project efficiency. For this reason, productivity is probably the biggest beneficiary of performance measurement. Although productivity parameters vary, they generally revolve around measuring the value extracted from product/service offerings after accounting for capital, labor, and distribution costs.
Some companies use performance measurements to evaluate employee safety. This is important because employers across the US are subject to workplace safety regulations applicable nationally or at state and local levels. Finally, organizations use performance measurements to evaluate the effectiveness of diverse initiatives. For instance, measuring market-product/service fit. Remember shipping products/services that do not solve/suit consumer needs translates to financial losses that could lead to organizational failure if the problem is not resolved adequately.
Nonprofit Sector in America – Key Statistics
As of December 2013, the US was home to 1.41 million registered non-profits according to figures published by the Internal Revenue Service. In total, these organizations injected $905.9 billion to the US economy or 5.4% of the country’s gross domestic product (GDP), meaning the industry is a significant economic driver. In 2014, non-profits generated $358.38 billion in private donations from businesses, individual, charitable organizations, and foundations. The American populace is also highly charitable with 25.3% of adults saying that they volunteered at an organization in 2014.
Why Nonprofits Should Take Performance Measurements Seriously
Non-profits, more than other organizations, must adopt the performance measurement philosophy because most are accountable to donors. For example, it is unlikely donors will give money to non-profits that do not follow financial accountability best practices. With this in mind, performance measurements can help non-profits keep track of donations, operational costs, membership growth, churn rates, individuals reached/served, and visitor traffic. These metrics alone can paint a very realistic picture of mission success or failure. If these metrics lean towards failure, decision makers can take corrective steps/action before things get out of hand.
Nature Conservancy, one of the leading and largest conservation nonprofits, says its core mission is protecting biodiversity ecosystems spread across the world. Currently, it has a presence in 34 countries where it is responsible for preserving approximately 55 million acres of unique and natural environmental habitats. It also boasts of 1,049 members, which is impressive considering it had just 28 members in 1971. In spite of Nature Conservancy’s gallant efforts, these ecosystems face a bleak future since research has shown that biodiversity across the world is falling at an alarming rate. The situation is so bad some wildlife species are on the brink of extinction.
Tips for Measuring Mission Success
Thanks to performance-related data analytics, Nature Conservancy was able to develop better operational approaches to the challenges it is facing. To start with, it pivoted its focus from land conservation and membership growth to developing and promoting initiatives related to biodiversity conservation. At the same time, it began championing vigorously for the ramping up of wildlife research efforts. Take note animal-based research requires careful coordination because it involves multiple parties including wildlife scientists, donors, and regulatory authorities in some cases. For example, researchers studying animals in their natural habitats may have to liaise with park management and wildlife oversight bodies. In addition, the Nature Conservancy has taken the lead in fighting for robust wildlife protection especially endangered animal species.
A good example of an endangered species is the White Rhino that has been hunted so ruthlessly there are less than five of these gentle beasts remaining in the world. This case study shows clearly the importance of developing and implementing performance measurements. Failure to do so makes it impossible for an organization to determine with a high degree of accuracy whether it is on track to achieve its goals/objectives. Moreover, nonprofits should proactively narrow their mission goals. Adopting this approach eases the complexity of measuring and keeping track of organizational objectives. What’s more, nonprofits should invest in research with the aim of evaluating the suitability and sustainability of their objectives. This should be complemented by organization-wide efforts geared towards accomplishing a common objective. Another effective strategy is developing micro-level goals to increase the likelihood of success at the macro-level. When combined with the right management style and talent, performance measurements should enhance decision-making processes at nonprofits substantially.
Virtually all modern nonprofit organizations have access to huge amounts of data that they can leverage to improve service delivery, employee productivity, and encourage efficient use of the available resources. Luckily, nonprofits can use performance-based metrics to measure and evaluate the progress/viability of different undertakings. In fact, Nature Conservancy has used this approach to streamline its operations and ensure that all initiatives align with its core mission.