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Key Performance Indicators for Nonprofits

best practices board finances foundation reporting Oct 26, 2023

Key Performance Indicators for Nonprofits

     In my 25 years of serving nonprofits, one of the most important things that I've been able to participate in has been helping boards develop and then utilize Key Performance Indicators to evaluate the effectiveness of their programs. You've probably heard of KPIs, (key Performance Indicators), but In my world, because I work with a lot of faith-based Christian organizations, we like to call them Kingdom Performance Indicators. They’re the criteria that help you to measure weather your organization's mission, goals, objectives and impact have been achieved. KPIs are essentially about stewardship, which is why I want to  share my tips for utilizing this powerful stewardship tool in your nonprofit.

Define Specific and Measurable Indicators

     Which Key Performance Indicators will you actually use? Are your indicators truly measurable? I'll give you two examples today. The first one might be just the numerical growth and the size of a program. I share that because sometimes, in ministries, your first goal may be to simply increase your reach. In this case, you may have a KPI that reflects a percentage of numerical growth. For example, in a ministry area like young adults, you may be investing more resources into developing a young adults ministry, so your KPI might be measuring how many people are coming and the growth rate as a percentage. 

     Here's another example: If you operate a private school, you want to assess how students are performing academically. What's their academic achievement? Well, a helpful KPI may not just be academic achievement, but, more specifically, growth in achievement. For instance, how do spring math scores compare to fall math scores? I love using academic growth as an indicator because it can better capture the progress of students who aren’t high achievers, but whose academic proficiency is still growing relative to their starting point.

Gather Your Key Performance Indicator Data

     Once you’ve identified your Key Performance Indicators, it’s time to begin gathering your data. How exactly will you measure your Key Performance Indicators? If you know how to measure it today, you’ll know how to measure it tomorrow. Will you measure attendance? Are you assessing qualities that might be better measured through interviews or focus groups? However you choose to gather your data, be sure your approach is as systematic and consistent as possible, so your data will be accurate and reliable. 

Analyze Your Key Performance Indicator Data

     Once you have data, it’s time to analyze it.  This is a valuable time to bring in other voices, throughout this KPI process. This particular step is a great point to pause and ask others, “What do you see in these results? What do these results tell us? What do these KPIs mean?” If they're meaningless, then they're not measuring the right things. If they're meaningful, KPIs can give you some incredible insight into progress you’ve made or needs for adjustment. 

Communicate Your KPI Results

     When you’ve analyzed your data, be sure you're communicating those results, not just to your board, not just to executive leadership, but to everyone in the organization.  You may even want to communicate your results with other key stakeholders like the people that are being served or even your donors. Annual reports can be very valuable places to communicate this information as a tangible measurement of impact throughout the year. (Read more about what to include in your annual report here)  This communication can really help to ensure everyone's on the same page by motivating you to take any needed action and creating a level of transparency and accountability that ultimately builds trust. 

Take Action

     Remember, your Key Performance Indicators should not only provide information, but actionable information. Sometimes the result of a KPI indicates a need for change. Perhaps you need to make those program adjustments. Maybe there's some coaching or some employee development that needs to happen for those leading programs. Sometimes, the change that is needed is simply more resources. Maybe that area needs some more staffing or they need some volunteer attention, or they need more money to make something happen or buy something that will help them in what they're doing. 

     In closing, I want to encourage you to focus on your strengths. I think the biggest benefit of KPIs is that they really help you to see what you are doing well. Sometimes we get so focused on what we’re not doing well and what needs to stop. Don’t forget to also ask the questions, “What are we doing well?  Where are we seeing impact?  Can we do more of that?” While KPIs can measure things that are financially related, they can also quantify things that are totally unrelated to finance. So, if there's anything I can do to help you as you think about those KPIs for your nonprofit, feel free to book a strategic consult with me today, and I'll be happy to brainstorm a plan that might work for you.


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