Not-for-profit KPIs

Just as businesses in difficult times have turned to tools to assist them in addressing efficiency and to implement change, not-for-profit organisations are doing the same. Demand on charities’ services by end users is increasing continually and their funding streams are under pressure. Boards are also under scrutiny to demonstrate good practice in governance, while pushing to make changes to accommodate the new environment they find themselves operating in. It is therefore not surprising that the tools used in business, such as key performance indicators (KPIs), are rapidly translating into the charity world. The basic rules for creating powerful KPIs are simple; they must:

  • Measure activities and outputs that are crucial to the organisations success
  • Be capable of being measured
  • Be meaningful (i.e. capable of being influenced) by the team using them.

The selection of the right KPIs may not be easy but it is crucial. If the right set of parameters are identified, it will allow an organisation to make decisions based on clear facts and evidence, rather than opinion and habit. This can be a vital difference between success and failure in an organisation that is looking to adapt to a changing environment.

Using the KPIs in tandem with target setting, the monitoring process is simplified and can be communicated quickly and clearly to those who are working towards achieving those targets. For those who are not involved in the day-to-day activities, typically the board, the KPIs will represent a clear and focused report on the activities.

By concentrating on factual information about the important areas of the charity, both the executive team and the board are focused on the key areas that will allow them to implement change and to achieve the strategic aims. This is absolutely vital as charities need to do more with less resource.

The most important thing to remember in designing the KPIs for your charity is that less is always better. It may take some time and effort to arrive at the KPIs that are most meaningful for your charity or team, but make sure that you do not try to measure and monitor too many things. The danger is that the monitoring can become the main focus and expensive in terms of time and money – this defeats the whole purpose.

It is important to ensure that the charity can review the measurements over a period of time so that trends can be examined. The results will provide evidence to the operation teams about the progress and also provide a shorthand overview to the board about progress on the strategies being implemented.

The details will also be useful in describing the activities of the charity in the annual report. If the information is factual and aligned to the strategies of the charity, it will demonstrate the purpose with which those aims are being followed.

For the board, the use of KPIs is a mechanism to oversee the operational work being done and provides simple summary information to enable tracking. Governance is a key issue for charity boards. Not only is there a need to apply good governance, they must also be seen to be doing so – and here the use of KPIs is an effective tool. KPIs give a level of understanding to the board that is not always easily achieved by those not involved on a day-to-day basis. It allows them to challenge as targets and parameters are set at the beginning of the process.

Nick Brooks is a Partner at Kingston Smith LLP

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