Actionable Metrics for Non-Profits

The non-profit sector of our economy serves a wide number of people with a variety of causes.  These causes serve at all levels of organization and social impact from local shelters, to county early education systems or your local United Way, to national - and even international - service providers.

One thing these organizations have in common is that they operate as non-profit organizations, a business with two primary objectives.  The first objective is to serve its charter to provide some service or charitable activity, and the second is to generate funding for those activities.  In the competitive landscape, which is expected in 2013 and beyond, a strategic and comprehensive approach to measurement of the health and well-being of the organization will be critical to future success.

To create a sustainable charitable organization the foundation must apply modern business principles. This includes a well communicated organizational strategy, vision, objectives, controls and feedback mechanisms at the strategic and operational levels of the organization, control costs, hit higher funding targets and often increase service offerings.

The path any foundation follows, flows through time, various economic, regulatory and taxation conditions, and should be responsive to internal as well as external factors, changing assumptions to meet customer demand and understand how to grow your charitable contributions (income).  Thus driving your foundation much like driving a car from a starting point to end point, successfully navigating all rules of the road as well as obstacles.  We succeed in the mundane task of driving through immediate feedback of driving conditions, speed limit signs, signals, dashboard indicators, sight and sound.

By observing our Key Performance Indicators (KPIs)  at an organizational level, and standard performance indicators (PIs) at the line level, the foundation can react to changing conditions, signals, gauges, sights and sounds, much like driving a car.

Ideally, the foundation will develop or review its goals and objectives at a high enough level and convey these goals to the operational level within the organization.  The operational level managers will create KPIs that align with the foundation goals, and operational managers will allocate goals for the employees who are making the calls, meeting the donors and scheduling events.

To account for both the operational side and the fundraising side of the foundation, the organization can use a modified version of the balanced scorecard approach that has up to five perspectives.  These perspectives are financial, internal process, customer, growth, and social.  Using this style of scorecard can demonstrate a holistic approach to understanding the overall health of the foundation or ministry.

By establishing a set of common metrics at each level of the organization, each layer can more quickly react to changing conditions.  Since the lower levels have a greater frequency of feedback the optimizations can occur at the proper level for the greatest impact to the foundation.  These changes can drive testing marketing hypothesis, testing service offerings quantitatively, and controlling the progress of the foundation all while gathering new metrics.

By establishing a set of common metrics at each level of the organization, each layer can more quickly react to changing conditions.  Since the lower levels have a greater frequency of feedback the optimizations can occur at the proper level for the greatest impact to the foundation.  These changes can drive testing marketing hypothesis, testing service offerings quantitatively, and controlling the progress of the foundation all while gathering new metrics.  Eric Reis, author of “The Lean Start-up”, terms this the build-measure-learn loop.  It’s based on the lean manufacturing process of small batch processing.  It is easier to correct a mistake or improve behavior when feedback is provided as close to the measured event as possible.

Actionable metrics are reported at and responded to at the operational level.  When reporting on a metric such as telemarketing calls per hour that end with a pledge (conversion rate), we might find the win ratio at less than 8%.  We obviously would like to increase this ratio.  If we have a clear understanding of why our sales closure rate is 8%, then we would attempt to fix the problem directly.  However, if we lack the knowledge, experience or understanding of why closure rates are sub-par the operations manager may perform one or more experiments to improve the conversion rate.

The idea of experimentation is meant to build on a body of knowledge and learn what works and does not work and to do more of what works and less of what is clearly not working.  When looking at our closure ratio again we could plan a split test, a marketing test where two different scripts or two different campaigns are run in tandem, over a finite period of time and compare the end results.  Our message may be better understood by one of the two groups presented with each message resulting in greater conversions than the other or prior methods.

Unfortunately, conversion rate is but one metric in the dashboard and it, by and of itself, does not tell the whole story.  We must also look at other factors such as the cost of conversion for each market test, marketing script content, call duration, or numbers of calls might be evaluated along with conversion rate.  Different target audience demographics or geographic results may also be evaluated.  With each experiment and corresponding results displayed back to the operational manager in his dashboard, the organization gains facts from which to form new ideas, while building on your body of knowledge.

The whole story of actionable metrics is one of continuous improvement not just in the financial aspect of a foundations work, but of every part of the whole.  A well communicated set of interrelated and mutually supporting objectives can benefit the entire team from the executives down to each individual contributor.  These objectives are the vehicle that is responsive to both internal controls and external factors on the operational units.  The metrics you chose to include in your feedback mechanism can drive sustainable success, increase donations and matching funds, and increase the number of people ultimately aided by the organization.

By Robert Green.

Robert Green is the owner and chief consultant with Lean Start-up Services providing strategic planning, scorecard/dashboard technologies, and data management for both for-profit and non-profit organizations.  Learn more about Lean Start-up Services at http://www.leanstartupservices.com or email Robert at [email protected]