How Hitting Goals Can Damage Your Nonprofit’s Value

We have heard several interesting things recently from different interesting people:

Bob Merrill, the Leukemia and Lymphoma Society: “Read this book—“The Blue Line Imperative: What Managing for Value Really Means.” It will challenge the idea of managing to KPIs.”

Ryan Grosenick, Turnkey’s in-house analyst: “At certain levels of engagement, certain behaviors seem to ‘turn on,’ like activating to fundraising.”

Amin Tehrani, Revunami: “No, I don’t think it is a good idea to push Facebook fundraising as the desired outcome of a social media campaign. The real question is how do we create an engaged community which will do Facebook fundraising as a natural course of their engagement with the nonprofit?”

My email platform provider: “If your clients keep emailing people who don’t open their emails, we will shut down your ability to email before we all get blacklisted.”

All these comments really mean the same thing. Each individual metric we track and try to improve upon is a KPI. And if we just try to improve KPIs, we will fail at accomplishing our missions because we are focused on the wrong things.

Why is focusing on KPIs bad? The management theory espoused in “The Blue Line Imperative” is an approach to management that emphasizes long-term value creation, rather than short-term target acquisition. “Short-term target acquisition” = KPI = your email open rate, your registration numbers or your retention numbers.

The authors of “The Blue Line Imperative” believe that most organizations squander value by focusing on short-term indicators, rather than their mission—and in our case, our relationships with our constituents. To use an example we, frankly, use to death: How often have we seen a nonprofit install a registration fee on a peer-to-peer event, fully transactionalizing the relationship? We know it will hurt the relationship with constituents in the long run, but we do it anyway because we need a guarantee of a certain amount of money now to meet goal. Revenue = KPI. Or how often have we dropped four more emails because we were off of our goal? Email delivery = KPI. Or to support Amin’s thought, did I push you to fundraise on Facebook for me when we just aren’t in that close of a relationship? Activation to Facebook fundraising = KPI.

Ultimately, according to the authors, value equates to your constituent’s happiness. “No matter what products or services we strive to create, our overall purpose is the same: delivering happiness…” The book goes on to make compelling (and intellectually-dense) arguments to support this perspective. KPI-driven companies are described as “red-line” organizations, which focus heavily on KPIs, often leading them down destructive, short-sighted paths.

We offer this—the metrics that drive our efforts in the nonprofit sector are tied to specific tools, which create KPIs. If email open rates are poor, we focus on getting email open rates up. If fundraising is poor, we focus on increasing the level of fundraising. If acquisition of new donors is low, we focus on bumping up acquisition. If social media interaction is low, we post more. If retention is poor, we focus on luring them back.

These efforts are often owned by different departments, using different strategies. This in and of itself is problematic. What is more problematic is this: We don’t consider the thing that drives all of these separate KPIs—the relationship we have with our constituents. We make noise that we do. But if we are focusing on things like email opens and clicks, and trying to fix this or that KPI, we are not focusing on the happiness and satisfaction of our constituents. We are just thinking about the KPI.

The authors of “The Blue Line Imperative” emphasize that it is crucial to resist this temptation.

Preventing this situation from arising requires a change in culture—and a clear shift to make your organization into a ”learning” one. Learning organizations are often referenced in leadership literature these days. They are characterized by an emphasis on experimentation—every activity is subjected to open-ended questions on how they can be improved. Every experiment is monitored with tangible data—KPIs. KPIs stop being targets and become indicators of success or failure. They become information that is used to adapt and improve, to learn from, not reflections of a specific individual’s (or department’s) performance.

How do you know if your organization is a candidate for this kind of change? Ask yourself the question that the authors ask in executive seminars: “How many of you have taken actions that you knew would destroy value, even if they allowed you to hit an assigned target?” If your answer is yes, it’s time for you to start thinking about following “The Blue Line.”