"Measuring performance is a complex issue for nonprofit organizations. Unlike in for-profit organizations, financial indicators do not tell the bulk of a nonprofit's performance story. Moreover, it can be difficult to distill complex social sector work into straightforward quantitative metrics, which is how most people think of KPIs. Among many questions, this distillation raises for leaders: How do we define strong performance for ourselves versus/and how do our various funders and other stakeholders define it?"
"How do we develop and socialize performance indicators that are meaningful for our staff and board? What systems will we use to collect evidence of progress on our performance indicators? How will we use the performance indicator data we collect to foster continuous learning and adaptation? How do we ensure that KPIs don't have counterproductive results or incentivize behaviors that don't in fact lead to stronger work?"
Measuring performance in nonprofits requires more than financial metrics because finances do not capture the full mission-driven impact. Translating complex social-sector work into quantitative KPIs is difficult and can misrepresent progress if not carefully designed. Leaders must define performance in ways that reflect organizational and stakeholder expectations, develop and socialize meaningful indicators with staff and boards, establish systems to collect evidence, and use data to drive continuous learning and adaptation. KPIs should be created for each core strategy and for functional areas such as people, culture, and fund development to signal meaningful progress without incentivizing harmful behaviors.
Read at Non Profit News | Nonprofit Quarterly
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