Just like for-profit businesses, nonprofit organizations use performance assessment metrics to determine whether they are hitting their goals or not. However, performance assessment for nonprofits is very different than for normal businesses. There are many different factors, indicators, and processes that nonprofit organizations have to deal with that for-profit businesses do not.
Performance metrics are not only different between for-profit and nonprofit organizations, but they also vary from nonprofit to nonprofit. The metrics that are used depend on the organization and its specific needs, goals, and capabilities. With many different types and sizes of nonprofits come many different ways to assess performance.
Being as effective and efficient as possible is not just in the best interest of your organization, but it also directly benefits the communities that your organization serves with its mission. Utilizing performance metrics within your organization will help you reach your goals and, ultimately, benefit those communities you are seeking to help. This article will lay out how your nonprofit can assess its performance by implementing key performance indicators and utilizing data to increase effectiveness as an organization.
Key Performance Indicators – What They Are and Why They’re Important
Key performance indicators (KPIs) allow organizations to measure their performance toward a certain set of goals. KPIs are implemented by both for-profit and nonprofit organizations as a way to determine what is or isn’t working within an organization. There are a variety of areas within an organization whose performance can be measured using KPIs, including membership, marketing, fundraising, and more.
Utilizing KPIs is important for all nonprofit organizations. Even if your organization is doing well, there is always potential to do better. If you are not using performance metrics and analytics to assess your organization, then you are missing out on the chance to grow as well as prove that you are actually making an impact. If your performance analytics show that your organization is making a meaningful impact in its mission, that knowledge will help bring in more resources and talent, which will ultimately help your nonprofit to be more sustainable.
Additionally, how will your nonprofit know the extent of its impact and whether it is making a difference or not if you are not evaluating your performance? Doing so will also help with donors and foundations who usually want to know that their donations and grants are making a positive difference.
To implement KPIs in your own nonprofit organization, your board members will set out the goals and purpose of the performance assessment. This means that the board will determine what the crucial performance metrics are for your organization and your current goals. There’s no point in measuring something that does not apply to your nonprofit’s mission, so your board will shape KPIs specific to your situation.
Now that we’ve discussed what KPIs are and why they are important to your organization, let’s discuss the two main types of KPIs and how each can be an effective measuring tool for your nonprofit.
Leading vs. Lagging KPIs
There are two main types of KPIs: leading and lagging. While they are different, they both have a place in your performance assessment and, used together, will help your organization evaluate its most important areas.
Leading KPIs measure your organization’s progress toward a certain goal and the likelihood of reaching that goal. Here are a few examples of leading KPIs:
- Donor Retention Rate
- Year over Year Donor Growth %
- Year over Year Donation Growth %
Lagging KPIs, on the other hand, measure your organization’s actual performance on a goal by reporting on results. Examples of lagging KPIs are:
- Average Donation Size
- Online vs. Offline Giving
- Number of Recurring or Repeat Donors
As you can see, both leading and lagging KPIs provide your organization with critical information that will help illuminate your performance in your chosen areas. Utilizing both types of KPIs is essential to gaining a complete view of your organization’s progress.
Next, we’ll give examples of KPIs you can implement in the different areas of your nonprofit’s operations to assess performance within those areas.
As mentioned earlier, not all KPIs will be relevant to certain nonprofits and their situations. The KPIs used for an organization vary on a case-by-case basis. Your nonprofit will also want to implement different KPIs across the various areas within the organization, like fundraising. Here are some of the most useful KPIs for key areas within your nonprofit:
- Fundraising KPIs
- Donor Retention Rate: This KPI measures the total number of donors who made contributions both this year and last year, divided by the total number of donors who gave last year
- Average Donation Size: This is the total monetary amount of gifts your organization has received divided by the total number of gifts
- Recurring or Repeat Donors: The total number of donors who donate more than once in a single year
- Online vs. Offline Giving: This measures the percentage of donors who make contributions online vs. offline
- New Donor Acquisition Rate: This is the number of new donors gained in a year divided by the total number of donors from the previous year
- Gifts Secured: This KPI measures how many total gifts your organization received within a specific period of time, such as a month, three months, or a year
- Fundraising ROI (Return on Investment): This is the total amount of money your organization spent divided by the funds you raised
- Marketing/Communications KPIs
- Donation Conversion by Channel: Also known as Donation Page Conversion Rate, this KPI is used to measure the donation conversion rates for all of your organization’s various channels (social, email, organic, etc.). Look at specific channels and calls to action (CTA), then take the number of donors who took an action on the channel and divide it by the total number of donors prompted by the CTA, then multiply by 100
- Appeal Conversion Rate: This is the total number of appeals, such as general donation requests, that your organization sends divided by the total number of donations received in response to that appeal
- Landing Page Conversion Rate: This KPI uses a tool like Google Analytics to track the number of visitors to your page that end up making a donation. To calculate your rate, take the total number of visitors to your donation page and divide it by the total number of donations made, then multiply by 100
- Amplification, Applause, and Conversation Rates: These KPI metrics deal with your organization’s social media presence. Your amplification rate refers to the total number of shares, retweets, or any kind of reposts your content receives. Your applause rate details the number of likes your content gets. Your conversation rate refers to the number of comments and replies to your content
- Social Media Traffic: This measures the traffic on your website or blog driven by your social media platforms
- Email Subscribers: This is the total number of people who subscribe to your mailing list
- Email Open and Click-Through Rates: These KPIs measure the number of people who actually open your emails and then the number of people who clicked on links within those emails
- Financial KPIs
- Year-Over-Year Growth: This is the percent your organization increased its revenue or budget in comparison to the year before
- Operating Surplus/Deficit: This KPI helps your organization determine whether its financial resources are sufficient/flexible enough to support its mission. To do this, compare the organization’s expendable net assets with its total expenses
- Liquid Unrestricted Net Assets (LUNA): LUNA refers to your organization’s unrestricted net assets that could easily be converted to cash. Keeping track of this is important because it also relates to funds within your organization that are available for things like new opportunities, protecting against downturns, and supplying working capital
- Program Efficiency: To determine how efficient a program is, compare your program expenses against your total expenses
- Human Resources KPIs
- Employee Retention Rate: Your employee retention rate measures the rate at which employees leave your nonprofit organization within a certain period of time (months, quarters, years, etc.). To determine this rate, take the total number of employees who stayed at your organization during the given time period divided by the number of employees at the start of the time period, then multiply by 100
- Employee Satisfaction Rate: Related to the employee retention rate, the employee satisfaction rate measures how satisfied employees at the organization are by using Net Promoter Scores (a scale of 1-10 of how likely the employee is to refer someone else to work there) or informal chats to determine if employees are satisfied at the organization
- Percent of Performance Goals Met: You need to set goals in order to measure this KPI. From those goals, determine things like the percentage of critical performance your employees met, the percent of tasks they completed, and the percentage of goals they abandoned or found unattainable
- Absenteeism Rate: This KPI measures the amount of time employees missed work for various reasons, like sick days, etc. To determine this rate, take the number of absent days per employee and divide by the total number of working days, then multiply by 100. The total number of absent days per employee is then the total number of absent days divided by the total number of employees
- Program Delivery KPIs
- Number of Beneficiaries Served and Program Attendance: This is the number of people served through your programs over a certain period and also the number of targeted beneficiaries who attended any of your programs
- Beneficiary Satisfaction Rate: This KPI determines how satisfied your organization’s beneficiaries are by asking them questions such as how they feel and how satisfied they are with the programs
- Pre and Post Scores: These KPIs are also referred to as outcomes and are generally a change in knowledge, understanding, skills, and abilities in your organization’s beneficiaries. These can be measured by supplying questionnaires before and after the program
- Membership KPIs
- Member Retention Rate: This KPI is your organization’s number of active members for the current year and the previous year, divided by the number of active members last year
- New Member Acquisition Rate: Your new member acquisition rate is the number of new members in a year divided by the number of members from the previous year
- Member Churn Rate: This is the rate at which your organization is losing members
- Members Renewed This Year: This KPI is the percentage of your organization’s members that have renewed their membership this year
- Ratio of Membership Dues Income to Non-dues Income: This is a comparison between the revenue generated from membership dues and the revenue generated from other fees beyond membership dues
Your organization will not need to implement all of these KPIs in order to assess its performance, but these are some of the examples of metrics you can measure to help evaluate your organization’s efforts.
While KPIs are one of the most effective and easy to implement tools to assess your performance, there are other options and resources that can also help your organization evaluate its efforts. The Council of Nonprofits lists many of these other resources on their website to help your organization.
Evaluating performance is much more difficult for nonprofit organizations than for-profit businesses due to a lack of funds and limited employees. Donors and foundations can help nonprofits in their assessment efforts by asking how they can help collect better data to improve the performance of the organization.
If your organization has already implemented KPIs, then you are off to a good start! But, consider some of these other evaluation indicators that can help illustrate your effectiveness. If your organization hasn’t used KPIs as measurement tools before, consider talking to your Board of Directors about it so your organization can start assessing its performance and understanding the true impact it’s having.
By Dom Lincoln