Unlike for-profit companies, which usually rely on profit and share prices to evaluate how well they are performing, nonprofit organisations have to develop creative, yet reliable approaches to help them assess how they are doing. It is often tempting to let things roll along year after year, hoping that since the organisation is busy providing services, it must be meeting its goals. That kind of approach takes no account of the effectiveness of services and often leads to organisations serving themselves rather than the clients and community.
Measuring performance is particularly important for organisations that apply for funding, need their funding renewed, or seek donations and support from the community. It is a means of being accountable to funders and the community and a practical way to ascertain the need for change.
The board is ultimately responsible for measuring organisational performance
Performance measurement means using indicators and measures to monitor, evaluate and establish the:
- appropriateness of the organisation’s services;
- effectiveness and impact for clients and the community; and/or
- efficiency of the organisation
Performance measurement is all about your organisation ensuring that it is producing the outcomes and results that are worthwhile and valuable to the community. It involves managing issues such as waste and fraud, and providing a sense of purpose and satisfaction to your stakeholders, so they are more engaged and happy to support your ongoing efforts.
Your Strategic Plan is the best place to begin when measuring organisational performance. This is where you have written your key strategic goals and priorities. Finding out how well you are doing in meeting these goals is a good indicator of how well the organisation is doing overall.
- What are the organisation’s strategic goals?
- How are we going to know if we are achieving those goals?
- What data, information or evidence will tell us how we are doing?
- Will this information make sense and tell us what we need to know?
Do not rely solely on your Strategic Plan for indicators of success or challenges. You should decide on a range of performance measures to inform your governing board about the health and growth of the organisation.
Unfortunately, there is no generic set of performance measures or basis for setting standards for these measures. Therefore, your organisation will need to devise its own measures to best inform you how well your specific organisation is performing.
Collecting and reporting on statistics is helpful, but often only provide clues to performance. Similarly, written quotes and reports can provide clues, but not the whole answer. To ensure you have the whole story it is usually helpful to collect a range of quantitative or qualitative data before making any final conclusions about organisational performance.
Here is an example: You might decide that there are a number of ways in which you could measure how well your organisation was meeting the goal: “Recruit, train and utilise the support of volunteers.” You would need to find out:
- how many volunteers you recruited within the last year
- where they were referred from
- what training was offered to the volunteers
- if they were they satisfied with the training
- how long volunteers stay with the organisation
- what roles they play
- what processes the organisation has in place to receive feedback from volunteers
To answer these questions, you will need to gather a whole range of statistics, quotes and reports from various managers, staff and volunteers in your organisation.
Some organisations think that measuring performance and outcomes is too difficult because there is too much subjectivity involved. This attitude does not recognise that doing the wrong thing, or the right thing badly, is a big waste of resources. Measuring your performance will help you gain understanding and confidence about what you provide to the community and how effectively you are achieving your goals.