Halfway through our six-part blog series on nonprofit outcomes, we have explored why outcomes are so important (funders insist on seeing results) and why they’re so obscure (lack of good data). In this article, we’ll address the most important subject of all: The metrics for your nonprofit KPI dashboard you can use to measure your own success in terms of outputs and outcomes.
The good news is that these metrics exist, and when tracked correctly, they put success in the clear, quantifiable terms that funders insist upon. The bad news is that defining success isn’t simple, and tracking it isn’t either. Think of your own organization: Are you certain you’re fulfilling the core mission and values, and if so, to what extent?
Success: The Most Elusive Metric of All
Answering those questions takes a systematic process. Nonprofits need to first identify which metrics define success rather than just appear impressive – e.g. program impact versus program attendance. Second, they need to devise a way to evaluate effectiveness, which often means collecting new data in new ways. The end result, the definition of success, will look different for every organization.
Two Ways to Think About Success
Nonprofits are successful two ways: by carrying out the mission and by funding it. The work they do needs to have a meaningful, measurable impact. Simultaneously, their fundraising and financial management needs to sustain the mission. Equally important, a nonprofit can’t be called successful unless it excels on both these fronts:
These metrics track if programs are working to carry out the mission of the nonprofit. Some examples include:
- The number of meals served by a nonprofit that fights hunger.
- The amount of debt reduced by a church that teaches personal finance.
- The number of books distributed by an organization that advocates literacy.
- The growth in attendance at a camp for under-served kids.
- The increase in new projects launched by any nonprofit.
The key is to focus on metrics that relate directly to the mission - both its immediate goals and overarching objectives. Identify the work that matters most, then find out if it’s working.
These metrics track if a nonprofit has the financial resources to sustain itself into the foreseeable future. Get a critical perspective on financial performance with metrics like these:
- Program Efficiency = Total program services expenses ÷ total expenses
- Revenue Per Member = Member revenue ÷ member count
- Fundraising Efficiency = Unrestricted fundraising expenses ÷ total unrestricted contributions raised
- Working Capital Ratio = Working Capital ÷ Average Total Expenses
- Liabilities to Assets Ratio = Total Liabilities ÷ Total Assets
Start thinking about which program and financial metrics speak the loudest about your own success. In our next post, we will show you how to track those metrics and what to do with the information. To get immediate guidance, download our free whitepaper, “Outcomes Metrics: Measuring What Matters in the Nonprofit World."
Time for an Honest Assessment
It’s time to replace assumptions about nonprofit performance with hard data. Only once a nonprofit knows what its impact really looks like can it set about expanding and improving on things. AcctTwo can help you make that assessment. Contact us for a fresh perspective on performance.
In our next blog in this series, we'll talk about how to go about tracking the all important data needed for your nonprofit dashboard indicators.