Measuring Organizational Success in Nonprofits

Introduction

The ways to measure success in a for-profit business are fairly well established and time-tested. Economic metrics such as profit and loss, cash flow, and customer satisfaction are commonplace in even the smallest operations. The measurements are simple because the focus is simple: Have more money coming in than you have going out. While this works well in a for-profit business, it does not translate terribly well into the nonprofit human service sector where the return on investment is generally not quantifiable into dollars and cents.

Nearly all nonprofits track performance metrics such as administrative costs, the number of persons served, activities performed, amount of funds raised, etc. Measuring activity in these areas is certainly an important management tool, however, it provides very little insight into how well the organization is moving towards its mission. The very nature of human service nonprofit missions often complicate measuring success in that the mission statements tend to not lend themselves to easy quantification.

One of the challenges that often presents itself when success is difficult to measure is that we begin measuring the wrong things and these metrics become and end in themselves, as opposed to a means to the end of accomplishing the organization’s mission. One example of an often misused metric in human service organization’s is the number of persons served. While the number of persons served certainly is indicative of the reach of the organization it does not always indicate movement towards fulfilling the mission. If the mission is ending hunger, the number of people who received meals does not tell us anything about what kind of progress is being made towards resolving the larger problem. This metric becomes problematic when we view it alone as a measure of success because inevitability leads us to focus our efforts on increasing the number of people served when increasing the number of people served doesn’t solve the overarching problem. That is not to say that the number of people served is not an important metric, just not one that we can use to determine our movement towards mission accomplishment. It is worth mentioning here that an organization must have carefully and thoughtfully worked through a process to define its vision, mission, and values before attempting to measure success. One cannot measure progress without a clear understanding of where they are going.

Human service leaders must think through ways to measure their organizations success in three categorical areas: 1) organizational capacity; 2) activity around supporting goals; and 3) movement toward mission. While the items measured may change depending on the specific organizational context these broad categories, discussed in detail below, will prove reliable measures of an organization’s success. Organizational leaders can keep their teams moving forward towards success by thoughtfully and carefully building out an evaluative system that accounts for each one of these categories in a substantive and comprehensive way.

Organizational Capacity

Organizational capacity metrics measure the organization’s ability to carry out its mission in a consistent and sustainable way. This includes measurements of leadership, management and operations, community engagement, service, and evaluative capacities. These are the items that provide the organization with a foundation from which to strategically build-out operations that move it towards the achievement of its mission. Measurement along these lines should be based on ideas such as sustainability, reliability, and consistency to ensure that the organization can make steady progress forward over time. Metrics in this category would include: amount of funds raised, debt to income ratios, etc.

Activity Around Supporting Goals

Activity metrics are a simple and intuitive group of measurements and are the most commonly pointed to as evidence of organizational success. These metrics often take the form of number of attendees in meetings, amount of informational material distributed, number of persons served, etc. These simple metrics can be invaluable as a management tool but, if used improperly, can derail an organisation’s progress towards its mission. It is easy for leaders to adopt and unhealthy focus on activity metrics, creating pressure to create activity without much thought about what the activity is building to. There is no doubt that forward progress requires activity, however, activity for its own sake is a waste of time and energy. Activity must be measured through the lens of how it moves the organization towards it overarching goals of movement toward mission, which we will discuss next.

Movement Toward Mission

Measurements in this category are imperative to measuring success in any organization, particularly nonprofits, yet little thought is often given to this area. This kind of metric is difficult to create, in the context of nonprofit human service organizations, given the nature of the work they typically seek to accomplish. Taking the time on the front end to find ways to specific, measurable indicators how effective an organization is in accomplishing its overall mission crucial. It will take time and effort but will provide leaders with a tool to effectively manage the work of their team and will contribute greatly to the overall effectiveness of the organization.