An Introduction to Metrics for Nonprofit Leaders

“Metrics” is a catch-all term for measuring the effectiveness of an enterprise. Metrics have long been commonplace in the for-profit world — and nonprofits are beginning to jump on the metrics bandwagon, too. In a world of rising demands and shrinking resources, anything that promises to boost productivity and improve outcomes is attractive.

metrics can help nonprofit leaders improve effectiveness and efficiencyPerhaps more critically, in today’s environment donors often prefer to give to organizations and causes that can readily show good results. Thus, metrics-focused organizations are better positioned to attract money from donors, foundations and government agencies.

Traditionally, metrics focused on financial results, answering questions such as how much money is being spent, where costs are on the rise, and how much money a group receives from donors and government entities, to name just a few. That hasn’t changed — if anything, nonprofits have become much more bottom-line focused in recent years.

However, in today’s world, metrics also look at qualitative issues:

  • What does the organization aim to bring to the community, and how well does it deliver on that promise?
  • What do clients want? What can the organization do to better meet those requirements?
  • What are the organization’s strengths? Where does it need to improve?

Getting started

A variety of factors have made it easier to adopt a metrics program, which used to be primarily the province of large IT organizations and enterprise resource planning (ERP) units.

A metrics program starts with simple data gathering, which any employee or volunteer can do. Once the data is entered into the organization’s database, the ever-increasing power of today’s computers makes it possible to calculate results quickly. Such data gives your organization a much clearer picture of how it is performing and the decisions you need to make to improve operations.

Guidestar, a nonprofit organization that gathers statistics on nonprofits, points out that many organizations focus heavily on measuring overhead costs versus their deliverables: clients served at a shelter, or the number of meals delivered to the elderly, to cite two such examples. To be truly effective, a metrics program needs to be organization-wide and continuous — thus producing voluminous data.

You’ll also need to take into account that some organizational missions involve much greater expenditures on overhead than others. One example of a high-overhead setting would be a nonprofit medical clinic: staying up with healthcare technology is usually quite costly.

Stumbling blocks to overcome

Despite some progress, nonprofit organizations lag their for-profit counterparts, according to Blackbaud, a supplier of software and services to nonprofits, which reports that while organizations and boards might agree on the necessity of measuring outcomes, the majority say they lack the talent and technology to perform metrics analysis. Just 29 percent of organizations surveyed have a written technology plan.

“Given the zero-sum game that most nonprofits play with respect to time and money, the development of organizational performance measures often takes a backseat to mission-specific work,” the report noted. In addition, “nonprofits lack the means to benchmark themselves against like organizations because so few organizations have developed quantifiable performance measurement methods.”

For guidance, nonprofit leaders might look to the B corporations (B is “benefit”) that have proliferated in recent years. B corporations have adopted the Global Impact Investment Rating System (GIIRS) to measure their companies’ social and environmental impact.

Conforming to this requirement requires such corporations to develop and employ robust enterprise-wide metrics programs — providing a useful model for nonprofits. Given their socially conscious missions, many B corporations might even share this expertise with nonprofit organizations.

Nonprofits can also look to the for-profit world for guidance. As corporate-responsibility programs have proliferated and matured over the past few decades, many nonprofits have established ongoing relationships with their corporate benefactors. Companies’ metrics systems provide a learning opportunity for nonprofits, and many for-profits might see an opportunity to build goodwill by transferring some of that knowledge to their nonprofit partners.

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