McKinsey & Co., the consulting group, published a paper on nonprofit measurement back in 2001. Working closely with the Nature Conservancy for five years, as well as closely observing 20 other large nonprofits, they wrote “Measuring what matters in nonprofits.” (Numbering was added by me):
Every organization, no matter what its mission or scope, needs three kinds of performance metrics—
1) to measure its success in mobilizing its resources,
2) its staff’s effectiveness on the job, and
3) its progress in fulfilling its mission.
The specific metrics that each nonprofit group adopts to assess its performance in these categories will differ; an environmental organization might rate the performance of its staff by whether clean-air or -water legislation was adopted, a museum by counting how many people visited an exhibition. But any comprehensive performance-management system must include all three types of metrics. Financial metrics, such as the percentage of revenue spent on overhead and administration, are also important management tools, but since the law requires organizations to report them, they are excluded from this framework.
These metrics are far too vague to be useful. The examples they give do provide some illumination: examples of the first measurement “could include fund-raising performance, membership growth, and market share.” That is, measurements of how an organization does its job within a community – both generating revenue and in outreach (members served, market share, etc.).
Examples of metrics for “staff performance” are “the number of people served by a particular program and the number of projects that an organization completes.” That is, how well does the staff perform within the constraints of its defined purpose, be it within a program, the number of programs, etc.?
The third metric, they note, is the most difficult to measure and, perhaps, the most important. The metric of fulfilling its mission has to do with how narrowly the mission is defined. The examples they give are Goodwill, which tried to raise people out of poverty through work: "A hand up, not a hand out." “Goodwill can therefore measure its success simply by counting the number of people participating in its training programs and then placed in jobs. Its affiliates offer many programs besides those for job training, but all are linked to the core purpose of providing the poor with employment.”
They cite various other cases, from the very broad goals of the Girl Scouts and the American Cancer Society to the more narrowly defined missions of the Chesapeake Bay Foundation and Jump$tart Coalition. In each case, they show how impact can be measured.
These suggestions are wonderful and appear quite useful and valid. Why, nine years later, are we still hearing about the percentage of overhead being spent on the dollars? Or worrying about the dollars spent on fundraising? Why, if this has been thought out in such detail, has the paradigm not shifted? Not much has changed, though the article asserts it has:
“ Many nonprofit organizations, such as the Chesapeake Bay Foundation and the American Cancer Society, have successfully used well-publicized performance targets to influence public opinion and the policy agenda of government.”
If so much has changed, why did the IRS revise the 990s two years ago that nonprofits have to fill out? There is even more emphasis now on the financial metrics they briefly mentioned (overhead, administration) – rather than these other metrics. When will these performance measures be something that the government wants reported for maintaining and achieving nonprofit status?
Not much has changed in nine years, despite many good ideas.