There has never been a lack of information for the measurement of private sector or public sector performance, but little is available to the nonprofit sector to guide effective performance through a system of measures.

This is very likely because nonprofits are not required to provide the multitude of filings that have become routine for the public and private sectors for many years. This article will serve only to whet the appetite (hopefully) for nonprofits to increase internal measures that will strengthen adherence to ethics, governance, and accountability standards.

The type of measures to which we refer are typically called ‘metrics.’

In order to be effective, a systematic series of metrics needs to be carefully defined, measured, and acted upon. Among the most obvious mistakes that organizations (of any type) make are the lack of specificity of the measure, its relationship to specific goals and objectives, and the ability to make comparisons of data over time. In other words, if the manner of measure changes every year, then the organization has no reference point (prior year data) with which to make current year data relevant. Another serious mistake (and a very common one) is the tendency to measure ‘outputs’ instead of ‘outcomes’ which tend to mask the true effectiveness to mission by the nonprofit.

Several issues should be noted:

1.    Data is not the same as Information.

2.    Measurements must be tracked over time to provide relevance.

3.    Only ‘outcome’ measures can judge performance.

So, where does a nonprofit begin? Who within the organization should identify data, outputs, goals, and objectives by which to measure performance?

The nonprofit should begin with its mission statement; if the mission statement does not contain the specificity that enables the creation of obvious goals and objectives, together with fundamentals of ethics, governance, and accountability, the quality of the mission statement needs to be addressed first. However, for the purposes of this article, it is assumed that an adequate mission, goals, and objectives are available to guide the measurement process.

The ‘who’ can vary widely among nonprofits. Ideally, the organization would be strong enough to have a senior staff that can handle the daily operations and the executive director could be the ‘who’ that tracks the measures. In still larger organizations, the board of directors may appointment a ‘Performance Committee’ to track and review the performance measures. But, for the purposes of this article, let’s take the worst-case scenario: staff is already bare bones, daily operations are a challenge, and fundraising is at crisis stage. Who has time to measure?

The primary thesis of this article is that you cannot afford not to measure, so in our worst-case scenario, this duty would fall on the already overworked executive director.

However, the attitude towards the benefit of measures determines the willingness and ability to make it happen. We argue that a nonprofit cannot afford not to measure! Why? Because the system of measures becomes the very data that tells donors and grantors your organization is on mission and making a ‘measurable’ difference through its programs in the community. Let’s face it, no nonprofit can afford to be viewed any other way, given today’s economic challenges.

How are ‘outputs’ defined differently from ‘outcomes’ and why does it matter? Well, an organization that consistently measures itself with outputs does itself a huge disservice: it suggests to donors and grantors that it cannot measure its outcomes. For example, if a jobs training organization enrolls 100 laid off workers, that is an ‘output’ and is an interesting number to track, but the measures become meaningful when the ‘outcomes’ are reported: of the 100 individuals enrolled in training, 75 remained in the program from start to finish, 60 achieved certification, and 50 are still employed after 12 months.

See how data becomes information?

And, how relevance over time is important?

After 5 years of collecting only ‘output’ data, an organization could report that it has enrolled (or, more commonly referred to as ‘served’) 1,000 laid off workers and that demand has consistently been rising for its program. But what if the program is non-performing? Non-performing relative to what? Relative to its ‘outcomes’ for example: over the 5-year period, graduation rates have increased 20%, job rates have increased 50%, and those served by the program who are still employed after 5 years is 80%. Data has now been turned into useful information!

This example vividly shows the power of metrics – as many as can be reasonably introduced into the nonprofit’s operational system of measures – in order to give the nonprofit a clear performance edge when competing with its peer groups for increasingly limited funding.