Measures of success for a nonprofit organization

When profits do not count

Very hot summers in Pakistan have become even harsher due to budget shocks and aftershocks. The ever rising inflation rate and lurking fears of ever increasing taxes have muffled all citizens alike. In such a stressful and unpredictable environment, it becomes more challenging for nonprofit organizations to continue their services at the same pace because they rely mainly on donations and charity for their functioning.

When the financial situation is unstable, it negatively impacts the donation inflow, making things difficult for nonprofits. This is why in recent times, measuring and reporting success of an NGO to stakeholders and donors becomes all the more crucial.

Before we discuss the success parameters for an NGO, it is important to understand that management and functioning of nonprofits is significantly different from for profit organizations. Corporate entities are basically concerned with manufacturing products, making consumers satisfied and generating profits. On the contrary NGOs are concerned with extending services, addressing social issues and advocating for the unrepresented. Their goal is to achieve the highest level of services to the disadvantaged population in the most efficient and transparent way.

In corporate entities the efficiency of executives is measured in terms of sales and profits. Usually, they also have a share in the profit in the form of bonuses or incentives, therefore they put in their best efforts to increase the profits. On the other hand, in NGOs leaders connect with the organization through passion. The leadership role in a charitable organization calls for a delicate balance between financial management and unconditioned commitment towards the service delivery of the organization. The operational heads mostly get far less remuneration than in the corporate organizations, but their affiliation with the mission of a nonprofit keeps them committed.

This vast difference in objectives, management approach and leadership style eventually reflects in the institutional culture. Corporate organizations primarily focus on sales reports, financial matrices and key performance indicators. Nonprofit organizations, on the other hand, adopt a more community-oriented approach. This is why, unlike most corporate workers, the NGO staff works for the cause beyond the call of duty by advocating for the cause after working hours and even on weekends. The community-oriented approach strongly reflects in the organizational culture.  The teams work for shared goals, having a strong feeling that they are contributing towards organizational vision and mission.  Over the years I have observed that once people develop a commitment with the mission of a nonprofit organization, they tend to spend longer years there which contributes to the credibility and quality of that organization. A seasoned and dedicated team is a catalyst in the sustainability and long term impact of a NGO.

Corporations usually have a well-defined audience and target customers. On the contrary, NGOs have to engage on multiple levels with a wide range of stakeholders and audiences including but not limited to government. departments, donors, funding agencies, beneficiaries, academia, researchers, policy makers, advocacy agencies, media, and so on. Therefore, nonprofit leaders and team members require strong communication skills and empathy along with other characteristics.

If for-profit and nonprofit organizations are so different, how can both be run or evaluated in the same fashion by the same professionals? As chief executive officer of a well-established nonprofit organization I am faced with this challenge quite frequently. I have seen that those management professionals who lack practical experience of working in a charitable organization find it hard to fit in the environment of an NGO. Therefore, they fail to grasp the scope of work, objectives, working environment, roles of team members and meaning of “SUCCESS” in a charitable organization. This leads them to suggest disoriented and inappropriate measures of success.

Marc J. Esptein has written a book named Measuring and Improving Social Impact: a guide for nonprofits, companies and impact investors. In this book he argues that the first step for measuring success is to clearly define the objectives of different activities. If nonprofits are clear about the objectives of different projects and activities, measures of success can be devised logically and quite easily.

I remember when I was studying public management at LUMS, one of my teachers once said that despite all efforts for sustainability, nonprofit organizations will always need support from community and donors. Firstly because they work for the most marginalized segments of the society, secondly the corporate sector would already have taken over the sector if there was any margin to make a profit. This is why NGO management is a highly specialized area that requires passion, patience, team building, in fact it requires an altogether different management approach for success.

Staff retention and training are among the most effective strategies that lead to success. Experienced, satisfied and well-trained staff is more efficient and positively contributes to improved quality of services. Therefore, when measuring success of a nonprofit, use staff retention and satisfaction as an important organizational key performance indicator.

In nonprofit quarterly, Richard Larkin wrote about use of outcomes to measure nonprofit success. While talking about measurement conundrum he emphasized that inputs, outputs and outcomes can be used as three measures to evaluate the effectiveness of an NGO. Inputs include both financial and non-financial resources used for activities, outputs describe the quantity and scale of activities while outcomes are relevant to the satisfaction of target beneficiaries.

April Anthony, a senior advisor at Armstrong McGuire consultancy, has been working on nonprofit success for years. She wrote in an article that measuring success for a nonprofit organization has become more important in recent years but it is not the same as evaluating success of a corporate organization.

Every nonprofit has its own scope of work and mission. Although it is not possible to suggest universal success measures for all nonprofits, the following organization key performance indicators (KPIs) can be adapted according to organizational needs. The KPIs include approval of clients or service users, satisfaction of donors and supporters, making more friends through donors and supporters, volunteer programs, organizational transparency, engagement of government agencies, relationships with other nonprofit organizations, innovation & research, and awareness raising activities.

I remember when I was studying public management at LUMS, one of my teachers once said that despite all efforts for sustainability, nonprofit organizations will always need support from community and donors. Firstly because they work for the most marginalized segments of the society, secondly the corporate sector would already have taken over the sector if there was any margin to make a profit. This is why NGO management is a highly specialized area that requires passion, patience, team building, in fact it requires an altogether different management approach for success.

In the end I would like to quote Robert Louis Stevenson, because I feel that his following lines actually represent a nonprofit success model – “Don’t judge each day by the harvest you reap but by the seeds you plant.”

Nabila Chaudhry
Nabila Chaudhry
The writer is a freelance columnist

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