How KPIs Help Measure Nonprofit Performance

Key performance indicators (KPIs) help a nonprofit determine progress, identify areas for improvement and make sound data-informed decisions.

According to Change Management Insight, KPIs determine “financial stability, operational efficiency, program effectiveness, stakeholder engagement and social impact.” KPIs enable nonprofit leaders to evaluate whether their strategies are moving in the right direction.

KPIs in the Workplace

Aligned with a nonprofit’s mission and goals, KPIs track key data points and involve stakeholders in evaluating short- and long-term objectives.

In my nonprofit career, work performance measurement using KPIs has been a mixed bag. I have worked for four universities. In each case, there were limited KPIs. These indicators were primarily fundraising related. I also worked for two health care institutions. One institution provided the most complex KPI system I’ve ever experienced, while the other health care institution disregarded KPIs completely.

In the institutions where I was employed, the ultimate payoff for individual performance was a pay increase of 2% to 4% on average. There were no individual incentives for outstanding achievement against KPIs standards. You were part of an organizational team, and the team was judged against organizational KPIs. I constantly sought to achieve KPI success individually, as I knew it affected team results.

Examples of KPIs

According to Hive, nonprofits track various KPIs to measure their progress toward achieving organizational goals. These KPIs span several areas, starting with donations — both the total amount received annually and donor retention, which tracks the ongoing support of contributors over time. They also monitor program impact, including the number of people served annually, the percentage of program goals achieved and the overall effectiveness of their programs.

The Value of SMART KPIs

I strongly recommend using the SMART framework (Specific, Measurable, Attainable, Realistic and Timely) when setting KPIs. Consistently tracking and measuring KPIs is essential to ensure accuracy and effectiveness. Examples include annual revenue, total donations, fundraising return on investment and new donor acquisition. These metrics provide a clear picture of your organization’s financial health and fundraising performance.

Research by Constant Contact indicates that nonprofit KPIs take the uncertainty from measuring your success. Nonprofits should utilize financial KPIs to track revenue and expenses, such as gifts secured. Use marketing KPIs to communicate with donors and the community you serve and seek conversions by channel.

Personnel KPIs should be employed to track people within their organization using KPIs like employee/volunteer satisfaction rate. Community KPIs provide a numerical measure of a nonprofit’s outreach programs by indicating the number of beneficiaries served. The KPIs chosen by your nonprofit should parallel your organizational annual goals.

Why Is the Use of KPIs Important?

Using measurement tools such as KPIs to track progress is an important focus for nonprofits internally while driving external impact. A question regarding my organizational KPI system was recently asked of me by a local corporate CEO. This company is key to the success of a major program sponsored annually by our organization.

Each year, this company donated gifts in kind, cash gifts, employee volunteer time and leadership advice, and counsel and guidance totaling more than $150,000. As CEOs should, he was reviewing the impact of the vast resources his company was donating each year. He asked me tough questions about our community impact and organizational KPIs.

I explained our KPI system and showed him local plus statewide statistical impact information that validated the role our organization plays in the state of Indiana. The CEO wanted to validate his continued corporate investment in our partnership. Without proven and verifiable KPIs and measurable results, we could have lost this important corporate partner. He was satisfied that his company was making a sound investment by supporting our nonprofit through our KPI program! The CEO wanted to make sure we had the right KPIs in place that made sense for his company and us.

For your nonprofit to be successful, consistently measure your nonprofit’s work performance, implement and utilize a comprehensive KPI system that makes sense for you, plus measure your organizational KPI performance metrics on a continual basis.

Make KPI adjustments where needed. You need goals and objectives to measure success or failure of your nonprofit organizational performance on an ongoing basis. If you do not have a KPI system or need to modify an existing KPI system, review best-in-class nonprofit KPI systems. Make sure your KPI system is balanced, mission-focused, operating soundly, monitored on a continual basis and can meet the test of external review by outside stakeholders.

The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.