– By Lee T. Sullivan, CPA, CGMA, manager at PBMares, LLP –
For more than 25 years, nonprofit organizations have been measuring various aspects of their performance, all in an effort to improve services and prove to Board members, donors, and the general public that they were accomplishing the organizational mission.
These performance measures have focused primarily on transparency, governance, and financial accountability: how were funds raised and how was that money being spent? In recent years, performance measurement has begun to focus more on “impact.” Donors are interested in communication that demonstrates the significant or lasting changes that a nonprofit is making for community and society at large. Rather than simply measuring how funds were spent, mission-based performance analysis connects performance and outcomes to mission.
Mission-based performance measurement better enables nonprofits to assess their progress, determine future activities, and ultimately, gauge whether they are accomplishing what they set out to do. Mission-based performance measurement also allows nonprofits to communicate with staff, board members, and funders in a way that captures the link between investment in the organization and programmatic outcomes, and assures that all parties are in agreement regarding what the program is trying to accomplish and the most effective means for achievement.
To develop a sound mission-based performance measurement system, nonprofits should start by determining what outcomes can reasonably be measured, then specifying appropriate indicators for each of those outcomes. Creating a model of program inputs, activities, outputs, and outcomes can provide a helpful means for thinking through the changes program participants are expected to experience during and after the program. Nonprofits should also seek input from numerous audiences (staff, participants, volunteers, etc.) in identifying program outcomes.
The organization also will need to identify data collection procedures and methods for analysis then test each, revising them as necessary. Once implemented, mission-based performance measurements must be monitored regularly and improved as the program progresses.
Finally, nonprofits must recognize that while preferable to previous performance-based methods, mission-based performance measurement has its limitations. It does not eliminate, for example, the need to monitor resources, activities, and outputs, nor does it explain why a program achieved a particular outcome. Similarly, it is important to recognize that measuring and improving program outcomes does not necessarily improve community-level outcomes.
Mission-based performance measurement represents the latest tool to help nonprofits strengthen delivery of services. Used properly, it can give direction internally, focus board members on policy and program issues, and improve services. But it is important to also recognize that it is not the end of the line. Nonprofits must continue to adapt newer and more effective means for communicating and assuring that they are meeting their mission and, ultimately, making a difference.
The preceding is a guest post by Lee T. Sullivan, CPA, CGMA, is a Manager at PBMares, LLP and leads the firm’s Not-For-Profit team. PBMares is a regional accounting and business consulting firm serving clients throughout the Mid-Atlantic. Please contact the author at firstname.lastname@example.org or visit www.PBMares.com. This can also be found on the GuideStar Blog: http://trust.guidestar.org/2013/07/01/can-you-prove-you-are-making-a-difference.