Measuring the success of your not-for-profit organization through key performance indicators (KPIs) can be confusing and time-consuming, especially when there are hundreds of metrics to choose from.
It is important to choose meaningful KPIs that reflect your mission, growth goals and stakeholder expectations. In addition, you will need to establish a baseline metric for each KPI that is founded upon accurate and timely financial data.
In other words, selecting and monitoring KPIs requires some groundwork and discussion about which KPIs are best for your organization, and then a process for monitoring and analyzing them over time.
How to Select KPIs for Not-for-Profits
Selecting KPIs for not-for-profits is a little different than selecting them in a for-profit business. A KPI is a measurement of how well an entity is fulfilling stated goals to claim a larger share of the market. However, not-for-profits typically select KPIs that can measure mission fulfillment and societal impact as well as revenue growth.
Some KPIs can certainly address revenue, for example, when measuring financial health or program and fund development success. KPIs should also address intangible areas of growth and mission fulfillment.
Not-for-Profit Financial KPIs
Here are some common financial KPIs for your not-for-profit to establish and analyze regularly.
Annual Revenue and YOY Growth – A total annual revenue KPI is supported by the year-over-year growth KPI, which is calculated as a percentage of total revenue.
Overhead Costs – The overhead expense KPI is calculated as a percentage of annual revenue. It can also apply to major fundraising campaigns or programming to track significant increases or decreases in administrative or logistics costs. This is an important KPI to help your organization demonstrate stewardship and stakeholder transparency. In addition, this KPI can help you determine which programs and/or fundraising events deliver better financial outcomes compared to others.
Operating Surplus/Deficit – Maintaining an operating surplus in a not-for-profit can help the organization weather changing financial or economic issues. Many not-for-profit leaders try to maintain an operating reserve of at least three months of expenses, including payroll. This KPI can help you monitor a surplus or deficit in reserves and stay vigilant with cash flow.
Program Efficiency – This KPI measures program expenses separately from total expenses of the organization. It offers more detail about how efficient you are at delivering programs and services for mission fulfillment, which is beneficial for stakeholder and donor communication as well as marketing.
Not-for-Profit Donor and Campaign KPIs
If your organization is dependent on donors and fundraising, then these KPIs can help you track campaign success and donor behavior.
Donor and Donation Growth – Set a KPI for the entire organization and/or a separate KPI for each major program/campaign/event. You can track year-over-year growth of donations, increases in number of donors and/or increases in size of donations.
Fundraising ROI – When you have a limited budget, it is essential to evaluate dollars raised compared to dollars spent on fundraising efforts. This KPI can help you assess ways to lower costs in areas such as advertising, supplies, catering, venue and other administrative costs. You may also determine that the cost of the program or event is no longer delivering adequate ROI, which will support fundraising planning.
Donor Retention Rate – With this KPI, you can measure connection to and longevity with your supporters. It takes more time and money to reach new donors, and therefore recurring donors are an asset for delivering efficient programming and services. You want to see this number increase over time and then remain high. If you are aware of donor retention issues, then you can proactively address them. A related KPI is pledge fulfillment when you rely on subscriptions or annual donor/member pledges.
Not-for-Profit People KPIs
There are certain people focused KPIs that help a not-for-profit meet mission goals. Here are some of the most common KPIs in this category.
People Served/Attendance – Tracking the number of people served by your organization or the number of people who actively attend events can demonstrate mission fulfillment in a big way, especially as these numbers increase. Establish a baseline early and make sure that someone is responsible for tracking and monitoring this KPI per program or event. These metrics are also critical for supporting future government funding requests, grant writing and fundraising efforts.
Volunteer Retention – By monitoring this KPI, you can determine best practices for attracting and retaining well-trained volunteers. Avoid high volunteer turnover because it will result in higher logistics and administrative costs and less program efficiency.
Employee Satisfaction and Retention Rates – Without a consistent and highly trained staff, organizations will struggle with mission fulfillment, timely communications and reputation management. Your internal staff can include leaders, administrative, programming and financial team members. Conducting surveys and checking in with staff regularly can improve satisfaction and retention if their concerns are handled in a timely manner. If your organization struggles to retain financial staff, you might consider outsourcing your accounting and KPIs to a CPA firm experienced in not-for-profit accounting. Choose one that is independent of your audit needs.
How to Monitor and Analyze Not-for-Profit KPIs
When carefully chosen, KPIs can tell a story about the relative health of your organization at different times of the year. All team members should be part of a regular review process to remain accountable to the organization’s goals and mission objectives. Some KPIs will be leading indicators, and some will be lagging; consistent monitoring will support accurate analysis.
When analyzing KPIs against the baseline and your goals, view them separately but also in the macro view. For example, if you notice a decline in attendance as well as volunteers, it could be a program issue or an organizational issue. You will need to analyze the source of the decline through market investigation and employee feedback.
Take action with the data you collect. KPIs identify opportunities for change and optimization. When you have accurate and timely accounting, then your KPIs are a clear window to management and mission success.
Let us know if you have questions about selecting, adjusting or analyzing KPIs for your not-for-profit organization. LvHJ offers Client Accounting and Advisory Services (CAS+) to support financial measurement and monitoring of your organization’s health and opportunities.
Sources:
https://insightsoftware.com/blog/15-best-non-profit-kpis-and-metric-examples-for-2021-reporting/
https://donorbox.org/nonprofit-blog/kpis-for-your-nonprofit#2
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